internal_revenue_service number release date index number 468a ---------------------------------- ------------------------------------------------------------- --------------------------- -------------------------- -------------------------------- department of the treasury washington dc person to contact ----------------------- id no ----------------- telephone number --------------------- refer reply to cc psi b06 - plr-143472-09 date date legend parent company a company b ------------------------------- ------------------------ -------------------------------------------------- ------------------------ ---------------------------------------------------------------------- ------------------------ company c ------------------------------------------------------------ ----------------------------------------------- taxpayer ------------------------------------------------------------ ----------------------------------------- state a plant location commission a commission b a ------------- ---------------------------------- ------------------------------------ ------------------------------------------- ----------------------------------------------------- ------ plr-143472-09 director --------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- dear -------------------- this letter responds to your request for private_letter_ruling dated date you requested that we rule on certain tax consequences under sec_468a of the internal_revenue_code of the restructuring discussed below facts taxpayer has represented the following facts and information relating to the ruling_request parent a corporation organized in state a is the parent of an affiliated_group of subsidiary corporations taxpayer also organized in state a is wholly-owned by parent and is a member of the affiliated_group company a a corporation formed in state a is wholly-owned by parent and is also a member of the affiliated_group company b a limited_liability_company llc organized under the laws of state a and wholly-owned by company a has elected to be treated as a corporation for federal_income_tax purposes company c an llc disregarded for federal_income_tax purposes is wholly-owned by company b company b through the disregarded company c is the owner of plant plant is a nuclear power plant located at location company b through and including the disregarded company c is subject_to the jurisdiction of commission a with regard to the operation and maintenance of plant and to the jurisdiction of commission b with regard to the rates charged to wholesale customers for electricity produced by plant company b through and including the disregarded company c maintains a nuclear decommissioning trust that is qualified under sec_468a qdt with respect to plant parent will undertake a series of transactions which it labels as the restructuring steps the contribution and the spin-off for the restructuring steps company b will elect to be treated as a disregarded entitly which taxpayer represents will be treated as a complete_liquidation of company b into its parent company a pursuant to sec_332 subsequently company a will convert under the laws of state a into an llc and will change its name to company a llc company a llc will elect to be disregarded for federal tax purposes and will be wholly-owned by parent taxpayer represents that the conversion of company a will be treated as a complete_liquidation of company a into plr-143472-09 parent pursuant to sec_332 as a result of these transactions plant as well as its qdt will be owned for federal tax purposes by parent following the restructuring steps described above parent will contribute company a llc to taxpayer in exchange solely for common_stock and securities of taxpayer in a transaction represented by taxpayer to be under sec_361 and sec_368 as a result of this contribution plant as well as its qdt will be owned for federal tax purposes by taxpayer immediately following the transactions described above parent will commence a spin-off the form of the spin-off will be a declaration of a dividend by parent to its shareholders a pro-rata distribution of at least a of the stock of taxpayer will be made to shareholders of parent the remaining shares of taxpayer will be distributed to a_trust the trustee of which is obligated to distribute these shares to shareholders of parent as set forth in the trust instruments taxpayer has requested the following rulings requested ruling the qdt will not be disqualified by reason of the restructuring transfers described above requested ruling the qdt will continue to be treated as satisfying the requirements of sec_468a and sec_1_468a-6t of the temporary income_tax regulations after the restructuring transfers described above requested ruling the qdt will not recognize any gain_or_loss or otherwise take any income_or_deduction into account by reason of the restructuring transfers requested ruling neither parent company a nor company b will be required to recognize gain_or_loss or take any income_or_deduction into account as a result of the transfers of the qdt as a result of the restructuring requested ruling pursuant to sec_1_468a-6t c the basis of the qdt assets will be unchanged by the transfers resulting from the restructuring requested ruling the qdt will not be disqualified by reason of the transfers resulting from the contribution to taxpayer and the spin-off described above requested ruling the qdt will continue to be treated as a qdt that satisfies the requirements of sec_468a and sec_1_468a-6t of the temporary income plr-143472-09 tax regulations after the transfers resulting from the contribution to taxpayer and the spin-off described above requested ruling the qdt will not recognize any gain_or_loss or otherwise take any income_or_deduction into account by reason of the transfers resulting from the contribution to taxpayer and the spin-off described above requested ruling neither parent nor taxpayer will be required to recognize any gain_or_loss or take any income_or_deduction into account as a result of the transfers of the qdt as a result of the contribution to taxpayer or the spin-off described above requested ruling pursuant to sec_1_468a-6t c the basis of the qdt’s assets will be unchanged as a result of the transfers resulting from the contribution to taxpayer and the spin-off described above law and analysis sec_468a of the code provides that a taxpayer may elect to deduct payments made to a nuclear decommissioning reserve fund that meets the requirements of sec_468a ie a fund that is a qualified nuclear decommissioning fund sec_468a provides that any amount distributed from a qualified nuclear decommissioning fund during any taxable_year is includible in the taxable_income of the taxpayer for that year sec_468a provides that in addition to contributions to a qualified nuclear decommissioning fund that are deductible under sec_468a there is allowable as a deduction the amount of nuclear decommissioning costs with respect to which economic_performance occurs within the meaning of sec_461 during the taxable_year nuclear decommissioning costs are defined in sec_1_468a-1t b as all otherwise deductible expenses to be incurred in connection with the entombment decontamination dismantlement removal and disposal of the structures systems and components of a nuclear power plant that has permanently ceased the production of electric energy this term includes all otherwise deductible expenses to be incurred in connection with the preparation for decommissioning such as engineering and other planning expenses and all otherwise deductible expenses such term does not include otherwise deductible expenses to be incurred in connection with the disposal of spent nuclear fuel under the nuclear waste policy act of public law an expense is considered otherwise deductible for purposes of sec_1_468a-1t b if it would be deductible under chapter of the code without regard to sec_280b plr-143472-09 sec_468a provides that for purposes of sec_4951 a qualified nuclear decommissioning fund is treated as a_trust described in sec_501 sec_1_468a-1t b provides that a qualified nuclear decommissioning fund is a fund that satisfies the requirements of sec_1_468a-5t sec_1_468a-5t a sets out the qualification requirements for nuclear decommissioning funds it provides in part that a qualified nuclear decommissioning fund must be established and maintained pursuant to an arrangement that qualifies as a_trust under state law sec_1_468a-5t a iii provides that an electing taxpayer can establish and maintain only one qualified nuclear decommissioning fund for each nuclear power plant sec_1_468a-6t provides rules applicable to the transfer of an interest in a nuclear power plant and transfer of the qualified nuclear decommissioning fund where certain requirements are met for purposes of sec_1_468a-6t a nuclear power plant includes a plant that previously qualified as a nuclear power plant and that has permanently ceased to produce electricity sec_1_468a-6t b provides that sec_1_468a-6t applies if-- immediately before the disposition the transferor maintained a qualified nuclear decommissioning fund with respect to the interest disposed of and immediately after the disposition-- i the transferee maintains a qualified nuclear decommissioning fund with respect to the interest acquired ii the interest acquired is a qualifying interest of the transferee in the nuclear power plant in connection with the disposition either- i the transferee acquires part or all of the transferor’s qualifying interest in the plant and a proportionate amount of the assets of the transferor’s fund is transferred to a fund of the transferee or ii the transferee acquires the transferor’s entire qualifying interest in the plant and the transferor’s entire fund is transferred to the transferee and plr-143472-09 the transferee continues to satisfy the requirements of sec_1_468a-5t a iii which permits an electing taxpayer to maintain only one qualified nuclear decommissioning fund for each plant sec_1_468a-6t c provides that a disposition that satisfies the requirements of sec_1_468a-6t b will have the following tax consequences at the time it occurs neither the transferor nor the transferor’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not be considered a distribution of assets by the transferor’s qualified nuclear decommissioning fund neither the transferee nor the transferee’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not constitute a payment or a contribution of assets by the transferee to its qualified nuclear decommissioning fund transfers of assets of a qualified nuclear decommissioning fund to which this section applies do not affect basis thus the transferee’s qualified nuclear decommissioning fund will have a basis in the assets received from the transferor’s qualified nuclear decommissioning fund that is the same as the basis of those assets in the transferor’s qualified nuclear decommissioning fund immediately before the distribution under sec_1_468a-6t f the service may treat any disposition of an interest in a nuclear power plant as satisfying the requirements of the regulations if the service determines that such treatment is necessary or appropriate to carry out the purposes of sec_468a conclusions based on the information submitted by taxpayer we reach the following conclusions plr-143472-09 ruling the qdt will not be disqualified by reason of the restructuring transfers described above ruling the qdt will continue to be treated as satisfying the requirements of sec_468a and sec_1_468a-6t of the temporary income_tax regulations after the restructuring transfers described above ruling the qdt will not recognize any gain_or_loss or otherwise take any income_or_deduction into account by reason of the restructuring transfers ruling neither parent company a nor company b will be required to recognize gain_or_loss or take any income_or_deduction into account as a result of the transfers of the qdt as a result of the restructuring ruling pursuant to sec_1_468a-6t c the basis of the qdt assets will be unchanged by the transfers resulting from the restructuring ruling the qdt will not be disqualified by reason of the transfers resulting from the contribution to taxpayer and the spin-off described above ruling the qdt will continue to be treated as a qdt that satisfies the requirements of sec_468a and sec_1_468a-6t of the temporary income_tax regulations after the transfers resulting from the contribution to taxpayer and the spin-off described above ruling the qdt will not recognize any gain_or_loss or otherwise take any income_or_deduction into account by reason of the transfers resulting from the contribution to taxpayer and the spin-off described above ruling neither parent nor taxpayer will be required to recognize any gain_or_loss or take any income_or_deduction into account as a result of the transfers of the qdt as a result of the contribution to taxpayer or the spin-off described above ruling pursuant to sec_1_468a-6t c the basis of the qdt’s assets will be unchanged as a result of the transfers resulting from the contribution to taxpayer and the spin-off described above while it owns a qualified_interest in plant taxpayer is eligible to maintain the qualified nuclear decommissioning fund except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above in particular we express no opinion on the tax results of either the restructuring plr-143472-09 contribution or spinoff described above under any section of the code other than sec_468a this letter_ruling is directed only to the taxpayer that requested it sec_6110 provides that this ruling may not be used or cited as precedent in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to taxpayer’s authorized representatives we are also sending a copy of this letter_ruling to director sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc tege et1-plr-109251-00 date date key firm worker dear sir or madam this is in reply to a request for a ruling to determine the federal employment_tax status of the above-named worker with respect to services provided to the firm the federal employment_taxes are those imposed by the federal_insurance_contributions_act fica the federal_unemployment_tax_act futa and the collection of income_tax at source on wages according to the information submitted the firm is a federal_agency the worker provides her services as a dental assistant under the direct supervision of a licensed dentist all of the individuals who receive dental services are the firm’s clients the services performed by the worker include the planning and conducting of oral health education programs providing chair side assistance in dental procedures assisting in the scheduling of clients in the dental clinic and maintaining daily records relative to those clients served both the firm and the worker state that the worker is required to report to the firm’s representative on a daily basis that the firm provides all tools equipment supplies plr-109251-00 and materials needed by the worker in the performance of her services both state that the worker’s services must be performed personally her hours of work are determined by the firm and her services are provided at the firm’s location both also state that the worker does not have a financial investment in a business related to the services performed and cannot incur a loss in the performance of those services for the firm the worker states that she receives instructions in dental assisting skills and that the staff dentist a federal government employee has the right to change the methods used by her to provide dental assistance services the worker also states that the staff dentist directs her in the performance of her services by changing the procedures under which her services are performed she also states that her services cannot be performed without the presence of the staff dentist the worker indicates that she does not advertise or maintain a business listing or represent herself to the public as being in business to perform the same or similar services she also represents that she does not have her own office or shop she also indicates that a license is not required to perform the services she provides to the firm the firm states that the worker performs her services for a base_year plus four optional years the firm also states that its primary function is not to provide dental care to its clients however it also states that providing such medical services on site is imperative for the safety of its operation sec_3121 of the internal_revenue_code provides that the term employee means any individual who under the usual common_law rules applicable in determining the employer-employee relationship has the status of employee the question of whether an individual is an independent_contractor or an employee is one of fact to be determined upon consideration of the facts and application of the law and regulations in a particular case guides for determining the existence of that status are found in three substantially_similar sections of the employment_tax regulations namely sec_31_3121_d_-1 sec_31_3306_i_-1 and sec_31_3401_c_-1 relating to the federal_insurance_contributions_act fica the federal_unemployment_tax_act futa and federal_income_tax withholding on wages at source respectively sec_31_3121_d_-1 of the regulations provides that generally the relationship of employer and employee exists when the person for whom the services are performed has the right to control and direct the individual who performs the services not only as to the results to be accomplished by the work but also as to the details and means by which the result is accomplished that is an employee is subject_to the will and control of the employer not only as to what shall be done but also as to how it shall be done in this connection it is not necessary that the employer actually direct or control the manner in which services are performed it is sufficient if he or she has the right to do plr-109251-00 so in general if an individual is subject_to the control or direction of another merely as to the result to be accomplished and not as to the means and methods for accomplishing the result he or she is an independent_contractor in determining whether an individual is an employee or an independent_contractor under the common_law all evidence of both control and lack of control or autonomy must be considered in doing so one must examine the relationship of the worker and the business relevant facts generally fall into three categories behavioral controls financial controls and relationship of the parties sec_31_3121_d_-1 of the regulations provides that if the relationship of an employer and employee exists the designation or description of the parties as anything other than that of employer and employee is immaterial thus if an employer employee relationship exists the designation of the employee as a partner co-adventurer agent or independent_contractor must be disregarded behavioral controls are evidenced by facts which illustrate whether the service_recipient has a right to direct or control how the worker performs the specific tasks for which he or she is hired facts which illustrate whether there is a right to control how a worker performs a task include the provision of training or instruction financial controls are evidenced by facts which illustrate whether the service_recipient has a right to direct or control the financial aspects of the worker’s activities these include significant investment unreimbursed expenses making services available to the relevant market the method of payment and the opportunity for profit or loss the relationship of the parties is generally evidenced by examining the parties’ agreements and actions with respect to each other paying close attention to those facts which show not only how they perceive their own relationship but also how they represent their relationship to others facts which illustrate how the parties perceive their relationship include the intent of the parties as expressed in written contracts the provision of or lack of employee_benefits the right of the parties to terminate the relationship the permanency of the relationship and whether the services performed are part of the service recipient’s regular business activities we have carefully considered the information submitted in this case and in view of the facts discussed above we conclude that the firm has the right and does in fact exercise the degree of direction and control necessary to establish an employer- employee relationship accordingly we conclude that the worker is an employee of the firm and amounts paid to her for services provided are wages subject_to federal employment_taxes and income_tax_withholding sec_3306 of the code pertaining to the futa provides that service performed in the employ of the united_states government are excepted from the plr-109251-00 definition of employment this letter does not constitute a notice_of_determination concerning worker classification under sec_7436 of the internal_revenue_code this ruling is directed only to the taxpayer to whom it is addressed sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours michael a swim chief employment_tax branch office of division counsel associate chief_counsel tax exempt and government entities enclosure copy of ruling letter for purposes


internal_revenue_service number release date index no department of the treasury p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si plr-105098-99 re legend date trust trust grandparent grandparent daughter daughter’s will trust a beneficiary trustee date date x corporation dear this is in response to your letter dated date in which you requested a ruling regarding the application of the generation-skipping_transfer gst tax provisions of chapter of the internal_revenue_code specifically you requested a ruling that the exempt status of trust a for gst tax purposes would not be affected by the following i the trustee’s consent to corporation’s s election on behalf of trust a ii the trustee’s execution of an electing_small_business_trust election on behalf of trust a and iii the trustee’s execution of the shareholder agreement on behalf of trust a according to your submission on date grandparent transferred x shares of corporation common_stock to trust an irrevocable_trust on the same date grandparent transferred x shares of corporation common_stock to trust an irrevocable_trust pursuant to the terms of the trust agreements both trust and trust were divided into four separate trusts of equal value for the benefit of grandparents’ four children including daughter plr-105098-99 article h of both trust and trust states that upon the death of a child the trust estate of such child as then constituted shall be held in trust for the benefit of or distributed to or in trust for the benefit of any one or more of such child’s descendants in such amount and in such manner and upon such terms and conditions as such child shall appoint by his or her last will specifically referring to the power_of_appointment conferred upon him or her article m of trust states that any trust created under the terms of trust shall terminate not later than twenty-one years after the death of the last survivor of grandparent 1's descendants living on date article m of trust states that any trust created under the terms of trust shall terminate not later than twenty-one years after the death of the last survivor of grandparent 2's descendants living on date daughter died testate on date in her will daughter exercised the testamentary_power_of_appointment granted to her under article h of trust and article h of trust by directing that the property subject_to such powers be divided into three trusts of equal value one of which is trust a for the benefit of beneficiary and her descendants article sec_3_2a a of daughter’s will provides the terms of the three trusts the trustee is to pay to a beneficiary for whom a_trust is named and his or her descendants or any one or more of them such part or all of the income and principal of the trust even though exhausting the trust at such time or times and in such equal or unequal proportions among them as the trustee believes desirable for the best interests and welfare of such beneficiary and his or her descendants in that order and as a group considering the desirability of supplementing their respective incomes or assets and all other circumstances and factors the trustee believes pertinent any undistributed_income of a_trust shall be accumulated and from time to time added to principal pursuant to article sec_3_2a b of daughter’s will if a beneficiary living at or born after daughter’s death for whom a_trust is named dies before the complete distribution of the trust then on the death of such beneficiary the principal of the trust shall be distributed to or for the benefit of such of daughter’s descendants then living or thereafter born in such proportions and subject_to such trusts powers and conditions as such beneficiary may provide and appoint by will plr-105098-99 article sec_3_2a c provides that on the death of a beneficiary for whom a_trust is named or on daughter’s death if such beneficiary predeceases daughter any principal of the trust not effectively disposed of shall be allocated per stirpes among the then living descendants of the beneficiary if any if there are no such descendants the trust estate or the part not effectively appointed shall be distributed per stirpes among the then living descendants of the nearest lineal ancestor of the beneficiary who also was a descendant of daughter and of whom one or more descendants then are living or if none per stirpes among daughter’s then living descendants each share allocated to a beneficiary for whom a_trust then held is named shall be added to that trust and each share allocated to any other beneficiary shall be retained in trust as a separate trust named for him or her article sec_3_2a e of daughter’s will provides that notwithstanding any other provision of the will on the day next preceding the end of twenty-one years after the death of the last to die of the descendants of grandparent living on date the trustee shall distribute any property then held in a_trust created pursuant to article to the beneficiary for whom the trust is named the primary asset of trust a is stock in corporation a c_corporation the corporation’s board_of directors proposes to elect to treat corporation as a small_business_corporation an s_corporation trustee proposes to consent to the s election in order to convert corporation to an s_corporation each of its shareholders must be eligible to hold s_corporation stock as of the first day of the year for which the election is to take effect trustee proposes to make an election under sec_1361 to treat trust a as an electing_small_business_trust so that it can qualify as an eligible s_corporation shareholder in an effort to ensure the continuing qualification of corporation as an s_corporation trustee intends to enter into a shareholder agreement with corporation and corporation’s other shareholders to protect the s election under the sec_3 of the proposed shareholder agreement no shareholder may transfer and no person may acquire the legal or beneficial_ownership of any share if such transfer or acquisition would cause the s status of the corporation to terminate specifically no transfer may be made to any person that is not eligible to be a shareholder of an s_corporation under the applicable provisions of the code as in effect at the time of the purported transfer in addition no shareholder may affirmatively transfer shares to a person if the transfer would cause the corporation to exceed the maximum number of persons who are allowable s_corporation shareholders plr-105098-99 sec_3 of the proposed shareholder agreement provides that no shareholder shall make any transfer of shares to any trust having multiple beneficiaries or amend any trust that owns shares to increase the number of beneficiaries unless all such beneficiaries are persons eligible to be transferees pursuant to sec_3 and immediately after such transfer or amendment the number of shareholders the corporation is deemed to have for purposes of sec_1361 would not exceed the maximum number of persons who are allowable s_corporation shareholders pursuant to that section notwithstanding any other provision of the shareholder agreement the shareholders and the corporation acknowledge and agree in sec_3 that none of the following shall be prohibited by the terms of this shareholder agreement i the addition of a_trust beneficiary due to the birth of an additional descendant of grandparent ii the exercise of a power_of_appointment granted to a beneficiary pursuant to the terms of any irrevocable_trust that is in existence on the date of the agreement and that owns shares iii the transfer of shares to any person in whose favor a power_of_appointment described in ii above is exercised or iv the distribution of shares to a a beneficiary of any irrevocable_trust that is in existence on the date of the agreement and that owns shares pursuant to the terms thereof or b to the beneficiary of any trust created pursuant to the exercise of a power_of_appointment described in ii above even if such addition exercise or distribution shall cause the termination of the corporation’s s election sec_3 provides that prior to any transfer or other_disposition of shares if the corporation in its discretion so requires an opinion of counsel to the corporation must first be received by the corporation the cost of which shall be borne by the shareholder whose shares are to be transferred or disposed of that the transferee is i eligible to be a shareholder of an s_corporation in accordance with the applicable_requirements of the code or ii that the transfer otherwise is allowable pursuant to the provisions of the shareholder agreement in addition to the other requirements of sec_3 of the shareholder agreement sec_3 provides that no transfer of shares including without limitation transfers pursuant to sec_3 shall be permitted and no purported transfer shall be effective until a permitted transferee has executed a supplemental signature page to the shareholder agreement all parties agree that upon execution and acceptance of a supplemental signature page the shareholder agreement shall be amended and the transferee shall have the rights and obligations of a shareholder under the agreement plr-105098-99 sec_3 of the shareholder agreement provides that shareholders possessing of the total voting power of all outstanding shares may at any time and from time to time agree in writing to authorize or ratify any transfer of shares which would otherwise not be permitted by the shareholder agreement in which event the transfer shall be deemed for all purposes to comply with the shareholder agreement notwithstanding any other provision of the agreement under sec_3 if a transfer of shares is required to be made pursuant to sec_3 iii or iv to a transferee who is not already a shareholder and who has not previously executed or currently refuses to execute a supplemental signature page to the shareholder agreement a non- consenting transferee certain procedures will apply the shareholders may allow the transfer of shares to the non- consenting transferee pursuant to the procedure set forth in sec_3 otherwise the shares that otherwise would be transferred to the non-consenting transferee shall instead be redeemed by the corporation for a price equal to the fair_market_value of the shares as of the valuation_date pursuant to sec_5 of the proposed shareholder agreement any purported transfer in violation of the shareholder agreement shall not affect the beneficial or legal ownership of shares section of the agreement states that subject_to any limitations on dividends or other distributions imposed by statute the corporation shall make pro_rata dividend distributions of money based on ownership of shares to pay the federal state and local income_tax on the income and gain of the corporation net of any_tax benefits produced for the shareholders by the corporation’s losses deductions and credits for the current_year and for each prior year during which the corporation’s s election was in effect that passes through to the shareholders under the applicable provisions of the code in respect of each taxable_year or portion thereof of the corporation for which its s election is in effect section of the proposed shareholder agreement provides that the corporation shall a not issue more than one class of shares b use its best efforts to avoid a termination of its s election and c in the event of a termination of the s election use its best efforts to distribute to each shareholder such shareholder’s net share of the corporation’s undistributed_taxable_income for all taxable years for which the s election was in effect to the extent permitted by law and consistent with the obligations of the corporation to creditors agreements to which the corporation is a party and other business considerations within the period when such a distribution will be considered a non-dividend distribution under sec_1371 plr-105098-99 section of the proposed shareholder agreement states that if the corporation’s status as an s_corporation is terminated inadvertently and the corporation wishes to obtain a ruling under sec_1362 each shareholder agrees to make any adjustments required pursuant to sec_1362 and approved by the corporation’s board_of directors a shareholder’s obligation to make such adjustments shall continue after the shareholder has ceased to own shares in the corporation and after the shareholder agreement has terminated except as directed by the shareholder agreement the existing trustee will continue to serve in the same manner as it previously served in addition trust a will continue to be administered in accordance with the terms and conditions set forth in daughter’s will sec_2601 imposes a tax on every generation-skipping_transfer sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides that the gst tax applies to any generation-skipping_transfer made after date sec_26_2601-1 provides an exception to this rule for any distributions from a_trust that was irrevocable on date however this exception does not apply to a pro_rata portion of any generation-skipping_transfer under an irrevocable_trust where additions were made to the trust after date in addition a modification to a_trust that results in a change in the quality value or timing of any beneficial_interest provided for under the trust instrument will cause the trust to lose its exempt status sec_26_2601-1 provides that except as provided under sec_26_2601-1 where any portion of a_trust remains in the trust after the post-date release exercise or lapse of a power_of_appointment over that portion of the trust and the release exercise or lapse is treated to any extent as a taxable transfer under chapter or chapter the value of the entire portion of the trust subject_to the power that was released exercised or lapsed is treated as if that portion had been withdrawn and immediately retransferred to the trust at the time of the release exercise or lapse sec_26_2601-1 provides a special rule for certain powers of appointment this section provides that the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment as defined in sec_2041 will not be treated as an addition to a_trust if- such power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26_2601-1 and in the plr-105098-99 case of an exercise such power_of_appointment is not exercised in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of the trust extending beyond any life in being at the date of creation of the trust plus a period of years sec_2041 provides that the term general_power_of_appointment means a power that is exercisable in favor of the individual possessing the power his estate his creditors or the creditors of his estate in the present case it has been represented that trust a was irrevocable on date and that there have been no additions constructive or otherwise to trust a after that date based on the representations made and the facts submitted we conclude that there is no change in the quality value or timing of any beneficial_interest in trust a resulting from the following i the trustee’s consent to corporation’s proposed s election ii the trustee’s election to treat trust a as an electing_small_business_trust and iii the trustee’s execution of the proposed shareholder agreement therefore items i - iii above will not cause trust a to lose its exempt status with respect to the gst tax provided that there are no additions constructive or otherwise to trust a after date distributions from trust a to skip persons will not be subject_to the gst tax except as specifically ruled herein we express no opinion as to the consequences of this transaction under the cited provisions of the code or under any other provisions of the code specifically we express no opinion on whether trust a will qualify as an electing_small_business_trust within the meaning of sec_1361 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely assistant chief_counsel passthroughs and special industries by george masnik chief branch enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------ ------------------------- ----------------------------------------- ----------------------------------- ----------------------------------- - in re ----------------- - department of the treasury washington dc person to contact ---------------------- id no --------------- telephone number --------------------- refer reply to cc intl - plr-149578-04 date date -------------------------------------- ------------------- taxpayer ---------------------------------------------------------------------------------------- ----------------------------------------------------------------------------- entity ----------------------------------- ------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------- entity ------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------- entity ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------- entity entity entity year year year cpa firm ----------------------------------- ------------------------------------- ---------------------------------- --------- ------------------------------------------- -------------------------------------------------- ------------------------------------------------ ------------------------------------------------ --------- --------- ------------- ------------- ------------- -------------- ----------------- ----------------- ----------------- in re plr-149578-04 amount aa amount bb amount cc amount dd amount ee amount ff amount gg amount hh amount ii amount jj amount kk dear -------------------- this is in response to a letter dated date requesting an extension of time under sec_301_9100-3 to file elections under sec_1 g i and annual certifications under sec_1_1503-2 for year through year with respect to dual consolidated losses attributable to the interests in entitie sec_1 through additional information was received in letters dated date and date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury 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 may be required as a part of the audit process taxpayer engaged cpa firm to prepare its consolidated federal tax returns for year and year cpa firm was engaged to review the elections and certifications and to correct any omissions and deficiencies for all applicable tax years cpa firm failed to ------------- ----------- in re plr-149578-04 advise taxpayer of the need to file any elections or certifications with respect to dual consolidated losses attributable to certain foreign branches and interests in certain hybrid_entity separate units for year taxpayer determined that the return would be prepared in house taxpayer inadvertently omitted elections and certifications required for year the interest in entity is a hybrid_entity_separate_unit as described in sec_1_1503-2 dual consolidated losses of amount aa for year and amount bb for year are attributable to the interest in entity an election was not filed for the year loss and a certification with respect to the year loss was not filed with taxpayer’s federal tax_return for year in addition an incorrect election was filed for the year loss the interest in entity is a hybrid_entity_separate_unit as described in sec_1_1503-2 dual consolidated losses of amount cc for year amount dd for year and amount ee for year are attributable to the interest in entity an election was not filed for the year loss and a certification with respect to the year loss was not filed with taxpayer’s federal tax returns for year and year likewise an election was not filed for the year loss and a certification with respect to the year loss was not filed with taxpayer’s federal tax_return for year an incorrect election was filed for the year loss the interest in entity is a hybrid_entity_separate_unit as described in sec_1_1503-2 dual consolidated losses of amount ff for year and amount gg for year are attributable to the interest in entity an election was not filed for the year loss and a certification with respect to the year loss was not filed with taxpayer’s federal tax_return for year an election was not filed for the year loss entity is a foreign_branch of taxpayer and a separate_unit described in sec_1 c a dual consolidated losses of amount hh for year and amount ii for year were incurred by entity elections were not filed for the year and year losses entity is a foreign_branch of taxpayer and a separate_unit described in sec_1 c a dual consolidated losses of amount jj for year were incurred by entity an election was not filed for the year loss entity is a foreign_branch of taxpayer and a separate_unit described in sec_1 c a dual consolidated losses of amount kk for year were incurred by entity an election was not filed for the year loss sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is in re plr-149578-04 prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section 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 in the present situation the filings described in sec_1_1503-2 are regulatory elections as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the rules set forth in sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the elections and the certifications for the dual consolidated losses described in this letter attributable to entitie sec_1 through for year sec_1 through the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the election agreement and annual certification sec_301 a a copy of this ruling letter should be associated with the election agreements and the annual certifications that are the subject of this ruling this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented in re plr-149578-04 pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to taxpayer’s authorized representatives enclosure copy for purposes cc _______________ robert w lorence senior counsel office of associate chief_counsel international sincerely


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 b02 plr-112192-13 date may legend x ------------------------------ ------------------------ state -------------- date -------------------- dear --------------- this is in response to a letter dated date submitted on behalf of x by x’s authorized representative requesting that the service grant x an extension of time under sec_301_9100-1 of the procedure and administration regulations to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes according to the information submitted x was formed in state on date x represents that it is an entity eligible to elect its classification under sec_301_7701-3 a form_8832 entity classification election was not timely filed for x to elect to be treated as an association effective on date sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the election filing_date or more than months after the election filing_date plr-112192-13 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time 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_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards by which the commissioner will determine whether to grant an extension of time to make an election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 describes the conditions under which the commissioner will grant requests for relief that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of days from the date of this letter to elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election this ruling is contingent on x filing within days of this letter all required original and amended income_tax and information returns consistent with the requested relief in this letter a copy of this letter should be attached to any such returns 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 internal_revenue_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 will be sent to x's authorized representative sincerely bradford poston senior counsel branch office of the associate chief_counsel passthroughs special industries cc


internal_revenue_service number release date index numbers -------------------------- ----------------------------------------------- ------------------------------------------------------ ------------------------------------ department of the treasury washington dc person to contact ----------------------- id no -------------- telephone number ---------------------- refer reply to cc psi b03 - plr-127553-12 date november legend x ------------------------------------------------------------ --------------------------------------- y ------------------------------------------------------------ --------------------------------------- state a -------------- -------------------- dear -------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be classified as an association for federal tax purposes facts the information submitted discloses that x was formed on a as a limited_liability_company under the laws of state x’s ultimate owner is y the common parent_corporation of an affiliated_group that files a consolidated_return x failed to file timely a form_8832 entity classification election to be classified as an association for federal tax purposes effective a law and analysis plr-127553-12 sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 entity classification election with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time 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 code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions 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 under 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-127553-12 conclusion based on the facts and representations submitted x has established that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied consequently x is granted an extension of time of one hundred twenty days from the date of this letter to elect under sec_301_7701-3 to be treated as an association effective a x must file form_8832 within the extension period with the appropriate service_center with a copy of this letter attached except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it according to sec_6110 of the code this ruling may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representatives sincerely associate chief_counsel passthroughs special industries by s james a quinn 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 number release date index nos plr-111718-00 cc ita b9 in re ein dear date this is in reference to a form_1128 application to adopt change or retain a tax_year submitted on behalf of the above- named taxpayer requesting permission to change its accounting_period for federal_income_tax purposes from a taxable_year ending to a taxable_year ending effective the taxpayer has requested that the form_1128 be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations the taxpayer's form_1128 requesting a change in accounting_period to a tax_year ending was due on or before the information furnished indicates that the application_for the change in accounting_period was filed late because of an error or misunderstanding however the request for extension of time for filing the accounting_period election was filed within days of the due_date for filing the form_1128 sec_1_442-1 of the income_tax regulations provides that in order to secure the commissioner's consent to a change in accounting_period the taxpayer must file an application on form_1128 with the commissioner on or before the 15th day of the second calendar month following the close of the short_period sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government based on the facts and information submitted and the representations made it is held that the taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government accordingly the requirements of the regulations for the granting of relief have been satisfied in this case and the taxpayer’s late filed form_1128 requesting permission to change to a tax_year ending effective for the short_period of to is considered timely filed pursuant to appendix a of revproc_2000_1 2000_1_irb_6 an additional user_fee is required in order to process the form_1128 the user_fee will be requested in a separate correspondence we will begin processing the taxpayer’s application after the user_fee is received the ruling contained in this letter is based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury 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 may be required as part of an examination process this ruling addresses the granting of sec_301_9100-3 relief only no opinion is expressed regarding the tax treatment of the instant transaction under the provisions of any other sections of the code or regulations that may be applicable thereto or regarding the tax treatment of any conditions existing at the time of or effects resulting from the instant transaction specifically no opinion is expressed as to whether the taxpayer is permitted under the code and applicable regulations to change to the tax_year requested in the subject form_1128 in accordance with the provisions of a power_of_attorney currently on file we are sending this ruling letter to the taxpayer's first designated representative and a copy to the taxpayer’s second designated representative we are also sending a copy of this ruling letter to the taxpayer this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent income_tax and accounting s heather maloy sincerely yours associate chief_counsel enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date u i l cc pa cbs br2 gl-126940-00 memorandum for associate area_counsel small_business self-employed attention stephen j neubeck date from kathryn a zuba chief branch collection bankruptcy summonses subject csed extension and installment_agreement in contravention of service policy this constitutes our response to your date request for advice on several issues pertaining to the validity of an extension of the statute_of_limitations for collection and a related installment_agreement as is discussed below our opinion is that both the extension and the related installment_agreement are legally valid this document is not to be cited as precedent issues whether an extension of the statute_of_limitations for collection until is valid given that a b the extension is for more than five years for one of the tax periods at issue and the extension was signed by the service on date if the extension of the statute_of_limitations is valid whether a related installment_agreement approved by the service on date is also valid conclusions the extension of the limitations_period is valid both as a matter of policy and legally the installment_agreement is also valid background your request for advice arises from outstanding tax_liabilities on the part of the taxpayer for tax years and the according to a memorandum from the appeals team manager cincinnati office attached to your memorandum requesting advice the taxpayer initially also owed taxes for but satisfied the liability in full on gl-126940-00 liability was assessed on and the liability was assessed on the original collection statute expiration dates cseds were respectively and on prior to the csed for either liability signed a tax_collection_waiver form_900 to extend the csed for both liabilities until on the same day he also signed an installment_agreement form 433-d covering both liabilities less than a month later on date the deputy commissioner issued a memorandum entitled installment_agreement procedures which set forth rules for dealing with both new and existing installment agreements a copy of this document was attached to your request for advice the deputy commissioner’s memorandum provided in pertinent part no irs function may enter into any new installment_agreement unless the agreement provides a payment schedule that will fully satisfy the tax_liability including interest and penalties either a within the original csed or b within years after that date if a waiver of the original csed is obtained at the time the installment_agreement is entered into if an installment_agreement would be appropriate but the liability will not be satisfied within years beyond the original csed negotiate but do not finalize the agreement until further instructions are provided memorandum of date emphasis in original the form_900 previously signed by the taxpayer was signed on behalf of the service on the same day the deputy commissioner’s memorandum was issued date a week later on date the installment_agreement was signed by the authorized service official the service_center extended the csed for the liability but failed to input the extension with respect to the liability the taxpayer has now requested a collection_due_process_hearing and the appeals team manager has asked you whether the form_900 and or the installment_agreement to which it is related are invalid because they were executed in contravention of irs policy as set forth in the date memorandum from the deputy commissioner law and analysis sec_6159 authorizes the secretary to enter into a written_agreement with a taxpayer to satisfy a tax_liability by making installment payments if the secretary determines that such agreement will facilitate collection of such liability sec_6159 pursuant to sec_6502 of the code the service generally has ten years from the date of a valid assessment to collect a given tax although the ten-year period can be extended under certain circumstances sec_6502 in this case the service sought the taxpayer’s consent to extend the csed to ensure full payment of his liabilities under an installment_agreement the taxpayer and the service purported to extend the statute_of_limitations on collection by executing a form_900 as is discussed infra no statutory limitations on the length of such extensions gl-126940-00 existed until the internal revenue restructuring and reform act rra was enacted in july of moreover at the time the taxpayer signed the form_900 on the service did not have a policy limiting extensions of the csed which could be executed via form_900 to five years beyond the original csed it was not until the date issuance of the deputy commissioner’s memorandum that any such limit was imposed on service personnel procedures of the service such as those embodied in the internal_revenue_manual are merely directory and not mandatory thus the service’s failure to comply with an internal procedural requirement does not invalidate the consent contained in this case see eg bridges v commissioner 47_tcm_716 48_tc_754 in cary a service employee altered a consent to extend the statute_of_limitations on assessment to reflect what he believed was a correction of the stated tax_year at issue after the taxpayer had signed the consent form the tax_court held that the consent was invalid essentially because it did not reflect that an agreement existed between the parties in contrast in this case the parties clearly agreed to extend the cseds to specific dates and it would be unconscionable to allow the taxpayer to afterwards repudiate a consent upon which the service has acted and relied see 37_f2d_703 3d cir thus the form_900 at issue in this case is valid we note that the extensions of the cseds encompassed by the form_900 are also valid in light of the changes to sec_6502 of the code effected by the rra which was signed into law on date after all the events relevant to installment_agreement occurred the current version of sec_6502 addresses extensions of the collection_period obtained in conjunction with installment agreements providing that collection action may be taken if- a there is an installment_agreement between the taxpayer and the secretary prior to the date which i sec_90 days after the expiration of any period for collection agreed upon in writing by the secretary and the taxpayer at the time the installment_agreement was entered into sec_6502 thus extensions of the csed obtained after the effective date of this provision date must be obtained at the time the installment_agreement was entered into the installment_agreement at issue was entered into before the rra was even enacted and the current version of sec_6502 thus does not apply the policy against obtaining an extension of the csed exceeding five years from the original csed has been added to the manual see irm it was not however in the manual at the time the service executed the form_900 and the installment_agreement at issue in this case gl-126940-00 here however germane to this situation is section c of the rra which states prior request --if in any request to extend the period of limitations made on or before date a taxpayer agreed to extend such period beyond the 10-year period referred to in sec_6502 of the internal_revenue_code_of_1986 such extension shall expire on the latest of - a the last day of such 10-year period b date or c in the case of an extension in connection with an installment_agreement the 90th day after the end of the period of such extension internal revenue restructuring and reform act of pub_l_no c 112_stat_685 the impact of this provision on the current case is that if the form_900 at issue here was not executed in connection with an installment_agreement the cseds in this case must be deemed to be the later of the original cseds or date since the original cseds were and this means that the csed for both periods would be date rather than the date contained in the form_900 the phrase in connection with is not defined in sec_6502 however this phrase is synonymous with the phrase at the time the installment_agreement was entered into which is used in sec_6502 and which is applicable to extensions of the csed which are obtained after date thus under current law the extensions of the cseds would be valid if they were obtained contemporaneously with the installment_agreement we believe the extensions obtained here are valid under this standard initially the taxpayer signed both the csed and the installment_agreement at the same time reflecting an apparent intent on his part to relate the two documents moreover although the installment_agreement was signed by the service at a different time than the form_900 the two times were only seven days apart suggesting that execution of the installment_agreement was predicated on execution of the form_900 accordingly for purposes of compliance with section c of the rra the csed at issue here was obtained in connection with an installment_agreement the installment_agreement itself is also valid since it was executed in conjunction with extensions of the cseds which as discussed above were legally valid we recognize that the appeals team manager raises a concern with respect to whether the agreement provides for satisfaction of the outstanding liabilities prior to the cseds however the failure of an installment_agreement to provide for complete satisfaction of the subject liability is not grounds for invalidating or terminating the agreement see gl-126940-00 generally sec_6159 sec_301_6159-1 not addressing whether the failure of the service to obtain an extension of the csed sufficient to guarantee full payment of the tax_liability under the installment_agreement renders the installment_agreement void or provides grounds for termination of the installment_agreement thank you for soliciting our advice on this matter if you have further questions please call nonetheless the internal_revenue_manual states that only installment agreements providing for full payment of liabilities may be granted irm


department of the treasury internal_revenue_service washington d c il tax_exempt_and_government_entities_division date jyu_ contact person identification_number telephone number lk s employer_identification_number legend a b t www v xx z b cc d dear sir or madam this is in response to your letter dated date requesting rulings under sec_4942 sec_4943 sec_4944 sec_4945 and sec_501 of the internal_revenue_code z is a private_foundation incorporated in b by its founder b z was recognized as exempt from federal_income_tax as an organization described in sec_501 of the code by a letter dated a and is classified as a private_foundation within the meaning of sec_509 z in its application_for exemption form_1023 listed promotion of conservation as its principal purpose b died in b under his last will and testament a major beneficiary of his estate was a_trust designated as x x is a qualified charitable_lead_trust providing for annual distributions to z for a period of twenty-five years after which the remaining principal will be distributed to the issue of b in the early 1980’s b was concerned about a developing need for providing food to an expanding worldwide population he selected country s as the location to achieve his goal b developed a non-exempt farm named t over the years it is one of the most productive efficient and technologically advanced farms in the area it is located the high quantity and quality of crops grown on t demonstrate how advanced agricultural methods can improve farm productivity in s and help produce food to feed its citizenry despite global underproduction the primary administration of t is conducted from the corporate office located in the capital of s the day-to-day management is conducted on site including the repayment and maintenance of farm equipment and road vehicles between and b b acquired vast tracts of land in s as part of his interest in conservation matters and food production strategies many developing countries are forced to achieve economic advances at the expense of their unspoiled environmental conditions and b hoped to minimize this effect in the region where he amassed the lands during his lifetime b donated a large part of his lands to w a national park system of s in terms of its size tis a relatively small remainder of b’s much larger holdings which were dedicated to the national park system of s as described currently t is owned by several corporations the stock of which is held by x the distribution of t from b’s estate to x was a necessary step in the administration of b’s estate the proposed distribution of t from x to z which is expected to hold t indefinitely is the completion of b’s plan thus the trustees of x propose to distribute the stock in the three corporations to z which would continue to operate t as a demonstration farm project as described above as well as initiating educational and agro-biodiversity projects described hereafter the current management of t is utilizing its best efforts to continue with the operation in conjunction with a t management is focusing on extending the development initiated with b of t as an educational and research facility specifically the management of t has embarked on the development of t as an educational resource and demonstration project in sustainable development showing how modern agricultural management in harmony with the environment can benefit the residents of s by producing greater quantities of high quality food products on a sustainable basis and simultaneously increase the educational level of the rural populace in sustainable development of agro-biodiversity a is a professor of biology at a well regarded university in the united_states he began teaching in s in as an ecologist teacher and conservation biologist a has been heavily involved in preserving the c of v a conservation area within s and located north of t a’s efforts in the 1980's and 1990’s helped to preserve the c of v and the plants and animals indigenous to that area a is a long-term advisor to v and has taught courses in biology to students of s as well as students from the united_states a’s courses have used the conserved wildland as a natural laboratory throughout s and currently his emphasis is on v where he will carry out activities jointly with t ais the recipient of prestigious awards for his work in ecology current management of t will continue with the farm operation of producing crops management is currently negotiating to construct grain drying and storage facilities on site with a view to completing the vertical integration envisioned by b by installing a complete d facility at t in the future in tandem with a and his organization students concentrating in farming and its related biodiversity development will be invited to participate in the t project and a’s field work in v these students will work closely with the experienced staff of t in all the various aspects of t and as intern apprentices to a’s staff working with v such activity includes biodiversity management and projects in pest inventory diseases field botany and novel wildland crops this supervised education will permit students to achieve more self-sufficiency as they mature to adulthood and enter the dollar_figure rural economy both formal classes and the apprenticeships internships will be used as the primary teaching tool in the future courses in agronomy efficient water management crop cultivation pest management novel crops agricultural waste biodegradation and farm management may be options available to interested students it is envisioned that an agro laboratory may be constructed on site at a later date as well as facilities in v for field education such facilities will be appropriately equipped and staffed the laboratories would experiment with the establishment of new methods and novel crops the experiments would then be tested in t and v it is anticipated that various ancillary topics would be added to the program from time to time as needed so that t could eventually become a comprehensive agricultural research_and_development facility that would play a major role in the agricultural economy of s anticipated that all of these segments would be offered initially with assistance from a management will endeavor to start with courses and apprenticeships internships of the highest initial interest and expand the scope with time it is not it is anticipated that the students will live at the farm for the school training period transportation to and from the farm together with room and board is intended to be provided to the students participating in the program surplus funds if any realized from crops grown on t to the extent that they exceed costs will be invested back into the program and or donated to conservation programs at present discussions and negotiations are underway between representatives of z v a and the s government regarding the establishment of the t agro-biodiversity project described above other organizations may be invited to participate discussions are underway with another u s public charity that has an interest in the wise use of natural_resources in comparable locales this other organization also has related facilities in s the t program is envisioned as a long-term undertaking the success and continuation of the program will be affected by a number of factors j will be used as an educational resource in a comprehensive demonstration project operated by v and z as described above it is expected that in the future situations may be encountered in which additional funding may be required it is expected that z would make grants to enable the project to continue it has been represented that in the case of grants other than to united_states public_charities z would exercise expenditure_responsibility with respect to those grants within the meaning of sec_4945 of the code however no specific grants are identified at the time of this ruling_request z has no present plan to make grants or distributions or otherwise provide additional funding for the t farm project necessary to provide funding to t it will abide by the qualifying_distribution rules under sec_4942 of the code and sec_53_4942_a_-3 of the foundation and similar excise_taxes regulations regulations if an unforeseen need should occur and z should find it x and z have requested the following rulings the t farm complex as it is now operated and as it will continue to be operated under the demonstration project described above qualifies as a program related investment as defined in sec_4944 of the code to the extent that the t farm complex is held through stock ownership in corporations such ownership constitutes holdings in a functionally_related_business as described in sec_4942 of the code z’s acceptance and holding of the stock ownership of the t farm complex will not cause z to incur liability for the excise_taxes imposed under sec_4943 and sec_4944 of the code distributions by z in support of the t agro-biodiversity project- a will advance z’s charitable purposes and will not affect its exemption under sec_501 of the code will unless made to a nonexempt controlled_entity as provided in sec_4942 of the code and sec_53_4942_a_-3 of the regulations constitute qualifying distributions for purposes of sec_4942 of the code and will not constitute taxable_expenditures for purposes of sec_4945 of the code b c law and analysis sec_501 of the code provides in part for exemption from federal_income_tax for a corporation organized and operated exclusively for charitable scientific or educational_purposes provided no part of the net_earnings inure to the benefit of any private_shareholder_or_individual sec_4942 of the code imposes a tax on the undistributed_income_of_a_private_foundation sec_4942 of the code provides that the term undistributed_income means with respect to any private_foundation for any taxable_year as of any time the amount by which- the distributable_amount for such taxable_year exceeds the qualifying distributions made before such time out of such distributable_amount sec_4942 of the code and sec_53_4942_a_-3 of the regulations generally provides that the term qualifying_distribution means any amount including that portion of reasonable and necessary administrative expenses paid to accomplish one or more purposes described in sec_170 other than any contribution to an organization controlled directly or indirectly by the foundation or one or more disqualified persons as defined in sec_4946 with respect to the foundation unless the controlled_entity is an exempt_organization meeting certain requirements sec_4942 of the code provides that the term functionally_related_business means a a trade_or_business which is not an unrelated_trade_or_business or b an activity which is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which is aside from the need of the organization for income or funds or the use it makes of the profits derived related to the exempt purposes of the organization sec_4943 of the code imposes an excise_tax on the excess business holding of a private_foundation sec_4943 of the code provides that the term excess_business_holdings means with respect to the holdings of any private_foundation in any business_enterprise the amount of stock or other interest in the enterprise which would have to be disposed of for the remaining holdings to be permitted holdings sec_4943 of the code provides that the term business_enterprise does not include- a functionally_related_business as defined in sec_4942 sec_4944 of the code imposes initial taxes and additional taxes on investments by a private_foundation that are made in such manner as to jeopardize the carrying out of any of its exempt purposes sec_4944 of the code provides in part that investments having the primary purpose to accomplish one or more exempt purposes described in sec_170 and no significant purpose of which is the production_of_income or the appreciation of property shall not be considered an investment that jeopardizes the carrying out of exempt purposes sec_4945 of the code imposes an excise_tax on each taxable_expenditure incurred by a private_foundation sec_4945 of the code defines the term taxable_expenditure as including a grant to an organization unless such organization is described in sec_509 or or the private_foundation exercises expenditure_responsibility with respect with respect to such grant in accordance with subsection h sec_4947 of the code in effect imposes sec_4941 and sec_4945 and other private_foundation provisions on split interest trusts including charitable lead trusts sec_4947 of the code in effect imposes sec_4943 and sec_4944 on charitable lead trusts where the aggregate value of the charitable interests in such trust exceed percent of the fair_market_value of all interests in such trust sec_53_4944-3 of the regulations provides that a program related investment shall not be classified as an investment which jeopardizes the carrying out of exempt purposes of a private_foundation a program-related_investment is an investment which posses the following the following characteristics the primary purpose of the investment is to accomplish one or more of the purposes described in sec_170 no significant purpose of the investment is the production_of_income or the appreciation of property no purpose of the investment is to engage in lobbying or intervention in a political campaign sec_53_4944-3 of the regulations provides that an investment shall be considered as made primarily to accomplish one or more of the purposes described in sec_170 of the code if it significantly furthers the accomplishment of the private foundation’s exempt_activities and if the investment would not have been made but for such relationship between the investment and the accomplishment of the foundation’s exempt_activities sec_53_4944-3 of the regulations provides that in determining whether a significant purpose of an investment is the production_of_income or the appreciation of property it shall be relevant whether investors solely engaged in investment for profit would be likely to make the investment on the same terms as the private_foundation however the fact that an investment produces significant income or capital appreciation shall not in the absence of other factors be conclusive evidence of a significant purpose involving the production_of_income or the appreciation of property t is currently conducted as a demonstration farm project to show how advanced agricultural methods efficiently applied help improve farm productivity and produce food to feed the people of s an underdeveloped country and qualifies as a charitable scientific and educational activity the t program centers on environmentally friendly farming practices in revrul_72_560 1972_2_cb_258 the service held that an organization formed to educate the public with respect to problems associated with solid_waste pollution was an exempt activity the ruling also considered preventing environmental pollution as a charitable activity see also revrul_76_204 1976_1_cb_152 another authority to support the exempt_purpose of t's activity as charitable is the holding of 73_tc_650 in that case the organization was practicing new forms of farming that were intended to restore the soil as well as to recreate a sound environment the court held that the organization qualified as a scientific and educational_organization similarly in 76_tc_394 the court held that an organization -7- devoted to the improvement of crop seed and the certification of crop seed was an exempt activity the operation of t as a demonstration farm project would be a program related investment within the meaning of sec_4944 of the code the primary purpose of z is the promotion of conservation the operation of t in an environmentally friendly way and the demonstration of how a farm in s may be operated consistent with the nature of the land and without the need to destroy the ecosystem promotes z's and by extension x’s charitable purpose of promoting conservation the expansion of t’s activities after the stock of t is transferred by x to z to include educational activities and the operation of the agro-biodiversity project will continue to constitute charitable activities and the operation of t to further such exempt purposes will also constitute a program related investment of z in either case currently as the operation of a demonstration farm or in the future with its expanded activities it is clear that no significant purpose for the operation of t is the production_of_income or the appreciation of property for fiscal years and the farm operations of t produced net_income of dollar_figure dollar_figure dollar_figure and dollar_figure respectively while the income from the farm operations for three of those years is not insignificant standing alone it must be considered in the context of the value of the asset and the risk associated with operations the big_number acre farm t is an investment of dollar_figure million to dollar_figure million the return on the investment is quite low less than one percent further the holding of property like t is inherently risky and requires reliance on skilled on-site management the political climate in s and the language differences create additional complications additionally with an agricultural operation uncertainties of weather make income returns undependable high annual rates of inflation and lack of marketability make it unlikely that a commercial investor would be able to realize appreciation from holding the property in the foreseeable future thus the activities of t as described above constitute a program-related_investment within in the meaning of sec_4944 of the code and sec_53_4944-3 of the regulations both in the hands of x for the ultimate benefit of z and the hands of z having established that the activities of t constitute a program-related_investment within the meaning of sec_4944 of the code in the hands of z it follows that t constitutes a functionally_related_business within the meaning of sec_4942 of the code both in the hands of x and in the hands of z after the stock representing ownership of t is transferred to z in addition it also follows that t does not constitute a business_enterprise within the definition of sec_4943 because it is a program related investment and or a functionally_related_business thus z’s acceptance and holding of stock ownership of t will not cause it to incur the excise_taxes imposed under sec_4943 nor in tandem with a an experienced ecologist teacher and conservation biologist and his organization students concentrating in farming and related biodiversity development will be invited to participate in the t project and a’s field work in v these students will work closely with the experienced staff of t in all the various aspects of t and as intern apprentices to a’s staff working with v such activity includes biodiversity management and projects in pest inventory diseases field botany and novel wildland crops this supervised education will permit students to achieve more self-sufficiency as they mature to adulthood and enter the s’s rural economy both formal classes and the apprenticeships internships will be used as primary teaching tools it is anticipated that the students will live at t for the school training period transportation to and from t together with room and board will be provided to the students participating in the program surplus funds if any realized from rice and sugar cane grown on t to the extent that they exceed costs will be invested back into the t program and or donated to conservation programs based on the facts and representations the training and educational activities proposed for z through t and a’s work with t will constitute exempt educational and scientific research activity within the meaning of sec_501 of the code therefore such activities will not affect z’s exemption under sec_501 of the code t is owned by several corporations the stock of which is currently owned by x and will be distributed to z upon receipt of a favorable ruling any expenditures by z for the operation of t a non-exempt organization would not constitute qualifying distributions within the meaning of sec_4942 of the code as a legal matter z would not be treating distributions to t or on behalf of t as qualifying distributions at least while t is nonexempt under sec_501 and owned or controlled by z or disqualified persons in respect to z as provided in sec_4942 of the code and sec_53_4942_a_-3 of the regulations even though such distributions promote z’s conservation_purpose on the other hand it is expected that z would make grants to other exempt_organizations in the future to enable the demonstration project with t to continue over the years generally grants made to united_states public_charities and foreign equivalents see revproc_92_94 c b would constitute qualifying distributions under sec_4942 and would not be taxable_expenditures under sec_4945 and would not require expenditure_responsibility by virtue of sec_4945 of the code in the case of grants to foreign organizations and u s organizations that are not public_charities z would exercise expenditure_responsibility within the meaning of sec_4945 and sec_4945 of the code accordingly such distributions and expenditures will not constitute taxable_expenditures for purposes of sec_4945 of the code accordingly we rule as follows the t farm complex as it is now operated and as it will continue to be operated under the demonstration project described above qualifies as a program related investment as defined in sec_4944 of the code to the extent that the t farm complex is held through stock ownership in corporations ownership of such stock qualifies as holdings in a functionally_related_business as described in sec_4942 of the code z's acceptance and holding of stock ownership in the t farm complex will not cause it to incur liability for the excise_taxes imposed under sec_4943 and sec_4944 of the code distributions by z in support of the t agro-biodiversity project- a will advance z’s charitable purposes and will not affect its exemption under sec_501 of the code b will unless made to a nonexempt controlled_entity as provided in sec_4942 of the code and sec_53_4942_a_-3 of the regulations constitute qualifying distributions for purposes of sec_4942 of the code and c will not constitute taxable_expenditures for purposes of sec_4945 of the code pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter this ruling is directed only to the person that requested it internal_revenue_code sec_6110 provides that it may not be used or cited as precedent this ruling does not purport to rule on any other issue or code section not addressed herein sincerely signed robert c harper jr robert c harper jr manager exempt_organizations technical group


internal_revenue_service number release date index number ------------------------ ------------------------------------------ ----------------------------- -------------------------------- in re ------------------------------------------ ----------------------------- -------------------------------- 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-101669-06 date date legend x a -------------------------------------------- ------------------------ -------------------- ------------------------- -------------- state date dear ------------ this letter responds to a letter dated december written on behalf of x requesting a ruling under ' b of the internal_revenue_code ---------------------- facts according to the information submitted x was incorporated in state on date x has one shareholder a it was intended that x be an s_corporation effective date x however learned that a form_2253 election by a small_business_corporation was not timely filed for x effective date x requests a ruling under ' b that its ' a election will be treated as timely made for its taxable_year that began on date plr-101669-06 law sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides when an s election will be effective generally if an election to be treated as an s_corporation is made within the first two and one-half months of a corporation s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year following the year the s election is made sec_1362 provides that if an election under ' a is made for any taxable_year after the date prescribed by ' b for making the election or no election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such election as timely made for such taxable_year and ' b shall not apply conclusion based on the facts submitted and representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for its taxable_year that began on date and that x is eligible for relief under ' b accordingly we conclude that x s ' a election will be treated as timely made for its taxable_year that began on date however this ruling is contingent on x filing form_2553 with an effective date of date with the appropriate service_center within days from the date of this letter a copy of this letter should be attached to the form_2553 except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically we express or imply no opinion concerning whether x is otherwise eligible to be an s_corporation for federal tax purposes plr-101669-06 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours s jeanne e sullivan senior technician reviewer branch office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes