department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division nov uniform issue list set ep ralt1 legend taxpayer a plan b sep-ira c ira d account e financial advisor f amount amount amount dear this letter is in response to your request dated date as supplemented by correspondence dated date april and date and date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he maintains retirement account balances in three separate retirement plans plan b sep-ira c and traditional_ira d taxpayer a attained age on date as provided in internal_revenue_code sec_401 taxpayer a became subject_to the required_minimum_distribution rmd rules in in accordance with the rmd rules taxpayer a was required to take a first rmd from plan b sep-ira c and ira d either by date or by date taxpayer a decided to take his first rmd in tax_year taxpayer a consulted financial advisor f and was advised to calculate the rmd for tax_year separately for each retirement_plan the rmd for plan b was calculated to be amount the rmd for sep-ira c was calculated to be amount the rmd for ira d was calculated to be amount financial advisor f erroneously advised taxpayer a that the rmd rules permit the entire amount of rmds to be taken from a single retirement_plan based on this advice taxpayer a requested that the total rmds for plan b sep-ira c and ira d be taken from sep-ira c the amounts were distributed in date date and date taxpayer a deposited all amounts in account e in september of taxpayer a was informed by the plan b administrator that he was required to take a rmd of amount from plan b a understood that the rmd distribution from sep-ira c incorrectly included the rmd amount attributable to plan b upon confirmation that the distribution from sep-ira c could only be used to satisfy the rmd for sep-ira c and ira d but not plan b taxpayer a requested that sep-ira c reverse the distribution of amount the request was denied it wasn’t until then that taxpayer on date taxpayer a rolled amount from account e into plan b on date amount was distributed from plan b as the rmd from plan b for taxpayer a has represented that pursuant to sec_1_401_a_9_-7 q a-2 of the income_tax regulations amount will be treated as included in his account balance in plan b as of the plan_year ending date for purposes of calculating hi sec_2013 rmd from plan b based on the facts and representations a ruling has been requested that the internal_revenue_service waive the day rollover requirement contained in sec_408 of the code with respect to the distribution of amount from sep-ira c and subsequent rollover into plan b sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code sec_408 of the code provides that sec_408 of the code does not apply to any amount described in sec_408 of the code received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a timely rollover was due to a mistake by financial advisor f which resulted in amount being distributed from sep-ira c in error financial advisor f has acknowledged that the advice he gave taxpayer a was in error therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from sep-ira provided all other requirements of sec_408 of the code except the 60-day c rollover requirement were met with respect to the contribution of amount into plan b on october the contribution will be considered a rollover_contribution within the meaning of sec_408 this ruling does not authorize the rollover of any amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office contact se t ep ra t1 if you wish to inquire about this ruling please please address all correspondence to at id sincerely culler wedthins carlton a watkins manager employee_plans technical group enclosures deleted copy of this letter_ruling notice of intention to disclose


department of the treasury a internal_revenue_service washington d c contact person contact telephone i d number reference t eo ra t tax_exempt_and_government_entities_division date mg 200i significant index numbers legend z dear sir or madam this is in response to m's request submitted on m’s behalf by m’s authorized representative for certain rulings on the tax consequences of certain proposed services performed for a charge under sec_512 and sec_513 of the internal_revenue_code facts the information submitted indicates that m has been recognized as exempt under sec_501 and classified as a publicly_supported_organization described in sec_509 and sec_170 of the code m's stated purposes in its articles of incorporation are as follows to receive administer and expend funds consistent with intent of sec_501 of the internal_revenue_code of in connection with the following to create operate maintain coordinate and improve public broadcasting and communications facilities and capabilities and to engage in such other related activities as may be consistent therewith m operates n and o as part of its programs and activities nis a community licensed non-commercial television station serving a 16-county region in p m states that n operates as a full service affiliate of q and is a full participant in the q national program service q a publicly supported charity exempt under sec_501 of the code is a national network of non-commercial television stations providing public access television programming and broadcasting n also produces local programs on the life and culture of the region it serves m represents that n reaches approximately y households and has approximately z supporting contributors o is a community licensed non-commercial radio station that serves essentially the same geographic region as n o’s primary program service consists of classical music news and information o is an affiliate of r and s o also produces and broadcasts a regional news and information service that supplements the r programs fulliength concerts from regional and national venues and several regular local series m states that it regularly provides various video production and satellite uplink services for hire to q state government agencies and other organizations described in sec_501 of the code m states that these services are conducted as part of its mission of educating the public m will perform the following proposed services from which income will be derived 19s onolelo4t live interviews m will regularly provide video production and satellite transmission uplink services for hire to q to conduct and broadcast live interviews of governmental officials experts professors authors and other individuals who have something to contribute to educate instruct and enlighten the public m represents that it is the main provider of uplink services within its broadcast region these interviews are often broadcast as part of other q news programs news and information m will regularly provide satellite uplink services for hire to t an agency of state government t is a communications agency operated by the state government t’s mission is to distribute news and information on events occurring at the state capital to the citizens of the state through commercial news organizations with regards to the broadcast of news and information conceming state government agencies and the broadcast m is the sole provider of uplink services in its broadcast region regional news and information for commercial television organizations m will also provide video production and satellite uplink services for hire to national regional and local commercial news organizations to a conduct and broadcast live interviews of governmental officials experts professors authors and other individuals who have something to contribute to educate and instruct the public and b produce and broadcast regional news and information to educate and instruct the public m represents that these interviews regularly appear on nightly news programs broadcast on national network commercial television state workforce training m will regularly provide video production and satellite uplink services for hire to u another agency of state government these services will be provided to produce broadcast and transmit teleconferences and other training programs for state employees m states that it will have significant participation in the creation production and execution of interactive education teleconferences provided for state employees continuing education m will provide video production and satellite uplink services for hire to via professional educational_organization recognized as exempt from federal_income_tax under sec_501 of the code m represents that it has significant participation in the production and distribution of continuing education programs used by v to educate members of the x profession throughout the state m will design the sets used by v and provide access to the use of video graphics and editing facilities regional sports events m will provide remote video production and satellite uplink services for hire to w a state interscholastic athletic association recognized as exempt from federal_income_tax under c m states that it will have significant participation in the production and broadcast of coverage of high school football basketball and wrestling championship events to the citizens of the state m will use its broadcast and production personnel facilities remote on site camera coverage and provide the play- by play and color coverage of the event applicable law sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated for religious charitable or educational_purposes sec_1_501_c_3_-1 of the income_tax regulations provides that the term ‘charitable’ as used in sec_501 of the code includes advancement of religion and advancement of education sec_1_501_c_3_-1 of the regulations provides that the term ‘educational ’ as used in sec_501 of the code relates to the instruction or training of the individual or training of the individual for the purpose of improving or developing his capabilities or the instruction of the public on subjects useful to the individual and beneficial to the community an example of an educational_organization described in the regulations is one whose activities include public discussions forums lectures panels and other similar programs such programs may be on radio or television sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations described in section c sec_512 of the code describes the term unrelated_business_taxable_income as the gross_income derived by an exempt_organization from any unrelated_trade_or_business as defined under sec_513 regularly carried on by it less certain deductions sec_513 of the code provides that the term unrelated_trade_or_business means in the case of any organization subject_to tax under sec_511 any trade_or_business the conduct of which is not substantially related -s- aside from the need of such organization for the income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis of its exemption under sec_501 sec_1_513-1 of the income_tax regulations provides that a trade_or_business is related to exempt purposes in the relevant sense only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes other than through the production_of_income and is substantially related for purposes of sec_513 of the code only where the causal relationship is a substantial one in other words the production of goods or the performance of services from which gross_income is derived must contribute importantly to the accomplishment of the organization's exempt purposes revrul_66_220 1966_2_cb_209 holds that a nonprofit corporation or station organized and operated exclusively for educational_purposes to operate a noncommercial educational broadcasting station presenting educational cultural and public interest programs is exempt from federal_income_tax under sec_501 c of the code revrul_67_342 1967_2_cb_187 holds that a nonprofit organization which produces educational films conceming a particular subject and which disseminates its educational material to the public by means of commercial television may qualify for exemption under sec_501 of the code revrul_76_443 1976_2_cb_149 a nonprofit organization that makes facilities and equipment available of noncommercial educational or cultural television programs for communication to the public via public and educational channels of a commercial cable television company qualifies for exemption under sec_501 of the code the production general_public the for to revrul_80_296 1980_2_cb_195 holds that the sale of broadcasting rights to national radio and television networks by the an organization created by a regional collegiate athletic conference made up of universities to hold an annual athletic event is not unrelated_trade_or_business under sec_513 of the code revrul_80_296 cites congressional committee reports associated with the tax act of that enacted the original unrelated_trade_or_business provisions of the code and makes clear that athletic activities of schools are substantially related to the educational functions of the schools the revenue_ruling aiso states that the educational_purposes served by exhibiting a game before an audience that is physically present and exhibiting the game on television before a much larger audience are substantially_similar analysis public broadcasting organizations as m n and o provide noncommercial educational broadcasting to viewers and listeners see in the matter of commission policy concerning the non-commercial nature of educational broadcasting stations public notice fcc date m will also provide video production and satellite uplink transmission services to produce and distribute regional news state government news and educational programming for other organizations and entities these entities include agencies of state government other educational organizations recognized as exempt under sec_501 of the code and commercial network news organizations m represents that it is the sole potential provider of satellite uplink services in its broadcast region for t m is the main provider in its region for its sec_501 affiliate q rev ruls and supra clearly indicate that a broadcasting organization such as m may achieve its educational_purposes through the transmission and production of educational programs following sec_1_501_c_3_-1 of the regulations supra it has long been established that vocational training may be carried out by sec_501 organizations see eg rev ruls 1977_2_cb_191 1972_1_cb_144 and 1976_1_cb_148 m through n and o carries out its educational_purposes through providing the citizens of a region in p through transmission and program production of news and other information services of world national state and regional content as well as plays concerts and other cultural productions and p scholastic sport events in a noncommercial advertising context the service has also accepted the view that organizations such as m exempt under sec_501 of the code may carry out their charitable purposes through other organizations including organizations not exempt under sec_501 revrul_69_463 1969_2_cb_131 for example holds that a sec_501 hospital that leased an adjacent office building and furnished office services to a for-profit medical group in order to induce the practice to carry out its professional activities on the hospital premises was not engaged in unrelated_trade_or_business under sec_513 of the code the revenue_ruling concludes that the group practice contributed importantly to the hospital’s operations and therefore the leasing and the provision of office services to a for-profit was substantially related to the performance of the hospital's exempt health care functions see also revrul_67_342 supra and revrul_81_29 1981_1_cb_329 the proposed services that m will provide will assist in producing and te broadcasting programming that will inform and educate viewers through m's video production and satellite uplink transmission services m will be providing the general_public with the opportunity to view programs of an educational cultural and informative nature on public access channels and commercial network news television programs the service contributes importantly to the accomplishment of m’s educational_purposes within the meaning of sec_1_501_c_3_-1 and sec_1_513-1 of the regulations in addition m's vocational training programs with state agencies t and u and 501_c_3_organization v contribute importantly to m’s educational_purposes pursuant to sec_1_501_c_3_-1 and sec_1_513-1 of the regulations based on the above we rule as follows the proposed service activities described above are substantially related to m's exercise of its exempt purposes within the meaning of sec_51 a of the code and sec_1_513-1 of the regulations and will not generate unrelated_trade_or_business taxable_income under sec_512 this ruling is directed only to m n and o sec_61 k of the code provides that it may not be used or cited as precedent the ruling purports to rule only on the services described herein sincerely yours signed robert c harper jr robert c harper jr manager exempt_organizations technical branch


internal_revenue_service department of the treasury number release date index numbers 00-00r81 re washington dc person to contact telephone number refer reply to cc psi b09-plr-127941-02 date date legend taxpayer decedent corporation state a date date z dear this is in response to your letter dated date and subsequent correspondence submitted on behalf of taxpayer requesting a ruling under sec_2057 of the internal_revenue_code the facts and representations submitted are summarized as follows taxpayer is the son of decedent decedent was the president and general manager of corporation a corporation located in state engaged in the business of a prior to decedent’s death all of the common and preferred_stock of corporation was owned by decedent and her four sons decedent died on date all of decedent’s common_stock in corporation passed to her four sons and all of decedent’s preferred_stock in corporation passed to her three daughters after distribution of decedent’s estate corporation was owned entirely by decedent’s sons and daughters on or about date decedent’s form_706 united_states estate and generation-skipping_transfer_tax return was filed on the form_706 decedent’s executor elected to deduct the value of decedent’s interest in corporation as qualified plr-127941-02 family-owned business interests qfobi under sec_2057 on decedent’s estate_tax_return the reported adjusted_value of decedent’s qfobi was dollar_figurez decedent’s executor deducted dollar_figure the maximum allowable deduction under sec_2057 taxpayer proposes to have corporation redeem all of his common_stock in corporation in exchange for cash and a promissory note in an amount equal to the fair_market_value of those shares determined as of the date of redemption corporation will subsequently retire the redeemed shares taxpayer has requested a ruling that the proposed redemption of all of his stock in corporation will not be considered a disposition triggering the imposition of the additional estate_tax under sec_2057 sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2057 provides that for purposes of the tax imposed by sec_2001 in the case of an estate of a decedent to which this section applies the value of the taxable_estate shall be determined by deducting from the value of the gross_estate the adjusted_value of the qualified family-owned business interests of the decedent sec_2057 provides that the deduction allowed by sec_2057 shall not exceed dollar_figure sec_2057 provides generally that there is imposed an additional estate_tax if within years after the date of the decedent’s death and before the date of the qualified heir’s death a the material_participation requirements described in sec_2032a are not met with respect to the qfobi which was acquired or passed_from_the_decedent b the qualified_heir disposes of any portion of a qfobi other than by a disposition to a member of the qualified heir’s family or through a qualified_conservation_contribution under sec_170 c the qualified_heir loses united_states citizenship within the meaning of sec_877 or with respect to whom an event described in sec_877 or b occurs and such heir does not comply with the requirements of sec_2057 or d the principal_place_of_business of a trade_or_business of the qfobi ceases to be located in the united_states sec_2057 provides that the term qualified_heir has the meaning given to such term by sec_2032a and includes any active employee of the trade_or_business to which the qualified_family-owned_business_interest relates if such employee has been employed by such trade_or_business for a period of at least years before the date of the decedent’s death sec_2032a provides that the term qualified_heir means with respect to any property a member_of_the_decedent’s_family who acquired such property or to whom such property passed_from_the_decedent plr-127941-02 sec_2032a provides that the term member_of_the_family means with respect to any individual only a an ancestor of such individual b the spouse of such individual c a lineal descendant of such individual of such individual’s spouse or of a parent of such individual or d the spouse of any lineal descendant described in sec_2032a in this case taxpayer proposes to have corporation redeem all of his stock in corporation in exchange for cash and a promissory note in an amount equal to the fair_market_value of those shares determined as of the date of redemption the proposed redemption will result in taxpayer disposing of his entire_interest in corporation to corporation because the corporation is not a qualified_heir as defined in sec_2057 and sec_2032a and because a redemption is not treated as a purchase or acquisition of any of the assets of the corporation or the stock of the corporation by the unredeemed shareholders the transaction will be considered a disposition causing the imposition of the additional estate_tax under sec_2057 cf revrul_85_73 1985_1_cb_325 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express or imply no opinion on whether decedent’s estate qualifies for the deduction under sec_2057 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to taxpayer sincerely melissa c liquerman branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number release date uilc 1397e cc tege eoeg teb tjones wta-n-115011-01 memorandum for charles m anderson manager tax-exempt_bonds - field operations from subject timothy l jones assistant chief tax-exempt_bond branch qualified_zone_academy bonds and pre-issuance private business contributions this written technical assistance is to inform you of our position regarding a question that has been raised by potential issuers of qualified_zone_academy bonds under sec_1397e of the internal_revenue_code the code in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent issue whether private business contributions received prior to the issuance of bonds can be qualified contributions that count toward the private business contribution requirement for purposes of issuing qualified_zone_academy bonds under sec_1397e conclusion if the facts and circumstances demonstrate that there is a sufficient nexus between the contribution and the issuance of bonds private business contributions received prior to the issuance of the bonds may be taken into account for purposes of determining whether the bonds are qualified_zone_academy bonds facts the issuer is a local_government the agency is the eligible local education agency under sec_1397e that established the academy the academy is a qualified_zone_academy under sec_1397e within the issuer’s jurisdiction the contributor is a private entity on date the academy accepted computers from the contributor for use by the academy at the time the issuer had adopted an official intent to issue qualified_zone_academy bonds percent of the proceeds of which would be used to provide equipment for use at the academy shortly after the contribution both the contributor wta-n-115011-01 and the agency acknowledged in writing that the contribution had been made with respect to the academy and in anticipation of the issuance of the bonds on date twelve months after date the issuer issued the bonds of the proceeds of which were reasonably anticipated to be used to provide equipment to be used at the academy before issuing the bonds the issuer designated the proceeds of the bonds to be used to purchase of equipment for use at the academy it also certified that it had written assurances that the private business requirement would be met with respect to the academy and it had the written approval of the eligible local education agency for the bond issue the certification was based on the academy’s receipt of the computers and the written acknowledgments of the contributor and the agency that the contribution was made in respect of the academy and in anticipation of the issuance of the bonds law and analysis sec_1397e provides a tax_credit to certain holders of a qualified_zone_academy_bond sec_1397e defines qualified_zone_academy_bond to mean any bond issued as part of an issue if-- a percent or more of the proceeds of such issue are to be used for a qualified purpose with respect to a qualified_zone_academy established by an eligible local education agency b the bond is issued by a state_or_local_government within the jurisdiction of which such academy is located c the issuer-- i designates such bond for purposes of this section ii certifies that it has written assurances that the private business contribution requirement of paragraph sec_1397e will be met with respect to such academy and iii certifies that it has the written approval of the eligible local education agency for such bond issuance and d the term of each bond which is part of such issue does not exceed the maximum term permitted under paragraph sec_1397e the private business contribution requirement of sec_1397e is met with respect to an issue if the eligible local education agency that established the qualified_zone_academy has written commitments from private entities to make qualified contributions wta-n-115011-01 having a present_value as of the date_of_issuance of the issue of not less than percent of the proceeds of the issue a qualified_contribution is defined by sec_1397e to include equipment for use in a qualified_zone_academy including state-of-the-art technology and vocational equipment that is of a type and quality acceptable to the eligible local education agency under sec_1397e a qualified purpose for_the_use_of the proceeds of qualified_zone_academy bonds includes providing equipment for use at a qualified_zone_academy neither sec_1397e nor its legislative_history limits when a private business contribution must be made the written commitment to make a private business contribution must be made in respect of the bond issue the code’s requirement of a written commitment from private entities is presumably to enable the eligible local education agency to assure the issuer that contributions will be made as promised this assurance already exists if as in this case the contribution is made before the bonds are issued there also must be a nexus between the bond issue and the private business contribution whether a sufficient nexus exists depends upon the facts and circumstances of the transaction the timing of the contributions and the intent of the parties are important in making this determination under the facts described above there is sufficient nexus between the contribution and the bonds the contributor donated the computers for use in a qualified_zone_academy and that is where the computers will be used at the time of the contribution the issuer had adopted an official intent to issue the bonds and the computers were contributed in anticipation of the issuance of the bonds the period of time between the time of the contribution and when the bonds were issued was within the period permitted for a reimbursement allocation under sec_1_150-2 this written technical assistance is advisory only and does not represent an expression of the views of the service as to the application of law regulations and precedents to the facts of a specific case if there are questions regarding whether the facts and circumstances in a particular case establish a sufficient connection between a contribution and a later bond issue please seek the input of this office if you have any questions please feel free to contact me at


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 ------------------------------------------------- telephone number -------------------- refer reply to cc psi b04 plr-120767-08 date date legend legend mother father residence son son trust trust date date date year modification y z dear ---------------- ------------------------------------------------- -------------------------- ----------------------------------------------------------------------------- -------------------------------------------------- ----------------------------------------------- ----------------------------------------------------------------------------- --------------------------------------------------- ----------------------------------------------------------------------------- ------------- ------------ ------------------------- -------------------------- ---------------------- ---------- ----------------------------------------------------------------------------- ---------------------------------------------------------------------- ------ ---- this is in response to your date letter and other correspondence requesting a ruling under sec_2702 of the internal_revenue_code with respect to the proposed transfer of a residence to a_trust the facts submitted are as follows plr-120767-08 prior to date mother owned residence outright on date mother deeded her interest in residence to trust trust provided that mother would retain a term_interest to possess and occupy residence for y years article v section c of trust provides in relevant part that upon the expiration of the y year period if mother is still living mother’s retained_interest is to expire and trust is to continue for the benefit of mother’s two sons son and son collectively sons trust is to terminate and be distributed to sons in complete_liquidation of trust on the later to occur of mother’s death or the death of mother’s spouse mother served as trustee of trust trust was intended to qualify as a qualified_personal_residence_trust qprt as described in sec_25_2702-5 mother reported the transfer of residence to trust on a form_709 united_states gift and generation-skipping_transfer_tax return for year as of date y years after date mother’s term_interest in residence expired and the remainder_interest in residence passed to sons on date mother in her capacity as settlor and trustee of trust with the joinder and consent of sons executed modification to modify article v section b of trust modification retains the terms of the original section b but adds a further provision that upon the expiration of the retained term mother’s retained_interest and upon the direction of a majority of the current remainder beneficiaries the trustee may liquidate the trust or provide a gift to anyone the majority of the current remainder beneficiaries so chooses of a term_interest in any real_property of the trust estate that will be occupied by the term_interest holder as their principal_residence furthermore such directions may include the conveyance by gift or sale in trust or otherwise of a term_interest in any residence that is part of the trust estate sons intend to create an irrevocable_trust trust to which they will transfer their interest in residence trust provides that sons desires to transfer a z year term_interest to possess and occupy residence to mother and father mother’s husband or upon conversion to an annuity_trust to transfer the annual annuity amount for z year sons will convey residence to trustee by warranty deed delivered to the trustee of trust from sons contemporaneous with the execution of trust the date of delivery of the warranty deed to the trustee of trust will constitute the effective date of trust mother and father will serve as trustees of trust you have requested a ruling that sec_2702 and sec_2702 will not apply to sons’ proposed transfer of residence to trust law and analysis plr-120767-08 sec_2702 provides that solely for purposes of determining whether a transfer of an interest in trust to or for the benefit of a member_of_the_transferor's_family is a gift and the value of such transfer the value of any interest in such trust retained by the transferor or any applicable_family_member as defined in sec_2701 shall be determined as provided in sec_2702 sec_2702 provides that the value of any retained_interest that is not a qualified_interest is treated as being zero the value of any retained_interest that is a qualified_interest is determined under sec_7520 sec_2702 provides that sec_2702 shall not apply to any transfer if such transfer involves the transfer of an interest in trust all the property in which consists of a residence to be used as a personal_residence by persons holding term interests in such trust sec_25_2702-5 of the gift_tax regulations provides in part that sec_2702 does not apply to a transfer in trust meeting the requirements of that section a transfer in trust meets the requirements of the section only if the trust is a personal_residence_trust as defined in sec_25_2702-5 a_trust meeting the requirements of a qualified_personal_residence_trust as defined in sec_25_2702-5 is treated as a personal_residence_trust sec_25_2702-5 provides that for purposes of sec_2702 a qualified_personal_residence_trust is a_trust meeting all the requirements of the section these requirements must be met by provisions in the governing instrument and these governing instrument provisions must by their terms continue in effect during the existence of any term_interest in the trust sec_25_2702-5 provides that in general except as otherwise provided in sec_25_2702-5 and sec_25_2702-5 the governing instrument of a qualified_personal_residence_trust must prohibit the trust from holding for the entire term of the trust any asset other than one residence to be used or held for use within the meaning of sec_25_2702-5 as a personal_residence of the term holder under sec_25_2702-5 the trust may hold certain assets listed in that section in addition to the personal_residence sec_25_2702-5 provides that a personal_residence of a term holder is either the principal_residence of the term holder within the meaning of sec_1034 one other residence of the term holder within the meaning of sec_280a but without regard to sec_280a or an undivided fractional interest in either sec_25_2702-5 provides that a personal_residence may include appurtenant_structures used by the term holder for residential purposes and adjacent plr-120767-08 land not in excess of that which is reasonably appropriate for residential purposes taking into account the residence's size and location sec_25_2702-5 provides that a residence is a personal_residence only if its primary use is as a residence of the term holder when occupied by the term holder a residence is not used primarily as a residence if it is used to provide transient lodging and substantial services are provided in connection with the provision of lodging eg a hotel or a bed and breakfast a residence is not a personal_residence if during any period not occupied by the term holder its primary use is other than as a residence sec_4 of revproc_2008_3 2008_1_irb_110 provides that rulings will not ordinarily be issued on whether a_trust with one term holder satisfies the requirements of sec_2702 and sec_25_2702-5 to be a qprt revproc_2003_42 2003_1_cb_993 provides sample trust provisions for qprts the service will recognize a_trust as meeting all of the requirements of sec_2702 and sec_25_2702-5 if the trust instrument is substantially_similar to the sample in sec_4 of revproc_2003_42 and the trust operates in a manner consistent with the terms of the trust instrument and is a valid trust under applicable local law accordingly based on the facts submitted and the representations made we conclude that sec_2702 and sec_2702 will not apply to sons’ proposed transfer of residence to trust if the trust instrument is substantially_similar to the sample in sec_4 of revproc_2003_42 and the trust operates in a manner consistent with the terms of the trust instrument and is a valid trust under applicable local law and if residence qualifies as a personal_residence as defined in sec_25_2702-5 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 specifically no opinion is expressed or implied concerning whether the transfer of residence to trust would result in residence being included in the gross_estate of mother or the gross_estate of father under sec_2036 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-120767-08 this ruling is directed only to the taxpayer requesting it sec_6110 of provides that it may not be used or cited as precedent sincerely _________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosure copy of letter for sec_6110 purposes cc


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date date legend b program c program d organization e organization f organization g program h program j organization k organization l organization m website n website p program r dollar amount s dollar amount t dollar amount u dollar amount v dollar amount w dollar amount dear we have considered your request for advance approval of your awards and scholarships programs under sec_4945 g and g of the internal_revenue_code dated date our records indicate you were recognized as exempt from federal_income_tax under sec_501 of the code and are classified as a private_foundation as defined in sec_509 you will operate a high school student scholarship program called g a teacher program called h and a classroom program called c all of your programs will be publicized through many channels including your website and various publications recipients will need to visit either m or n to apply your program under sec_4945 called g is administered in part by j the objective is for teachers mentors or other adults to work with and supervise teams of two to four eligible students taking part in a contest the goal of the contest is for teams to identify an environmental problem provide a plan to positively impact the issue and encourage the expansion or replication of the plan in the team’s community and beyond you may from year-to-year select a theme for the environmental problem contest entries must be submitted online by the team’s teacher or mentor the teacher or mentor must visit your website m to access the entry form and must complete the required information about the team the entries must be received by the prescribed deadline you and other national educational institutes will publicize the contest children and siblings of employees of j and k or their subsidiaries agencies and affiliates may participate but are not eligible to win a prize employees of j and k their subsidiaries affiliates contest administrator advertising and promotion agencies and members of the immediate families and persons living in the same household of such individuals are not eligible to be a teacher or mentor judges are selected based on subject matter expertise and project geographic relevance based on the area of project submissions judging for g happens in several ways in the first round the entries will be judged by a panel of judges from j and its partner organizations educators science professionals and l based on the following criteria environmental issue or problem will account for of the total score how well does the entry describe the negative effects of an environmental issue or problem with implications beyond the immediate community which would be regional national global and its proposed solution engagement will account for of the total score how effective was the team in generating awareness and action in others creativity and innovation will account for of the total score is the entry original and creative in its communication and does it take advantage of a variety of resources and combine them in an effective way scientific approach will account for of the total score is the issue or problem well researched and is research evidence cited in proposing a solution is the plan thoughtfully developed and clearly written including carefully specified materials and detailed sequential procedures are analyses based upon quantitative and qualitative data replication and expansion how could the solution be replicated will account for of the total score does the team give recommendations on how others could use improve upon and expand the entry content was the team successful in influencing others and or persuading them to replicate or expand on the project the judges will score each entry and select one team from each state and district of columbia each of those teams will be named the state winner in the event of a tie the entry with the highest combined replication and expansion and scientific approach score will be named the winner if an insufficient number of qualified entries is received from any state k may award fewer than fifty-one state winners each state winner will be evaluated by a second panel of judges from k and its partners using the same judging criteria the second round judges will score each state winner entry and select first second and third place winners in the event of a tie the entry with highest combined replication and expansion and scientific approach score will be named the winner if an insufficient number of qualified entries is received k may award less than the stated number of team and teacher or mentor prizes first place winners will receive r in scholarship funds which will be divided equally between the student members of the team in addition each student member will receive a two to four day expense paid education themed trip within the continental_united_states the trip would be similar to a trip to a united nations event and give the student a chance to tell their story the team’s school will receive a grant of s and a one year subscription to p the teacher or mentor will receive a free registration to a national conference which would include hotel accommodations the teacher or mentor will receive the trip as well as the student they will be the chaperones for the students on any of their prize trips the trip includes round-trip coach air fair for one person hotel accommodations activity fees meals and ground transportation second place winners receive t in scholarship funds to be divided equally between the student members of the team the school associated with the second place team will receive a grant of u and a one year subscription to p the teacher or mentor will receive a free registration to a national or regional conference along with hotel accommodations for two nights third place winners receive v in scholarship funds to be divided equally between the student members of the team the school associated with the third place team will receive w and a one year subscription to p the teacher or mentor will receive a free registration to a national or regional conference and hotel accommodations for one night state winners will receive a prize package each teacher or mentor will receive a membership to k and a prize package each school associated with a winning state team will receive a one year subscription to p after state winners have been determined at j’s sole discretion one or more of the next highest scoring entries may be awarded an honorable mention prize each member of the team will receive a prize package the teacher or mentor will receive a k prize package the school will receive a one year subscription to p scholarship funds received by first second and third place recipients must be used for tuition and fees required for enrollment fees books supplies and equipment required for all courses of instruction at the school that are required for graduation on-campus room and board or cost associated with a winner’s participation in scientific research at the institution in which the winner is enrolled within or beyond his her regular courses of curriculum scholarship funds will be given directly to the accredited undergraduate or graduate college or university the student selects in order to continue receiving the scholarship the student must be enrolled full-time and making satisfactory academic progress toward a degree the scholarship will be forfeited if returned to j due to non- enrollment of winner if not used within twelve years of winner’s high school graduation date you or the administrator will maintain detailed records of the amount disbursed to any school for any winning student the student’s remaining balance and any information received from the school regarding the student’s progress you will investigate any misuse of funds there is no prohibition on entering the contest in successive years there are two subprograms under h one of these programs is called b and the other is c the goal of the program is to provide opportunities to teachers from a broad and diverse spectrum of schools your rules state that once a recipient has attended either b or c they may not attend that same program again your employees are kept informed of the progress made by the selected teachers during their participation in the programs you will maintain any necessary information regarding the selected teachers as well as their participation in the programs b is administered in part by f b is a two week all expense paid residential professional development program for middle and high school teachers to engage in mentored research at e e is a large multi-purpose national research laboratory specializing in areas such as neutron science biological systems energy chemical sciences nuclear physics and high performance computing b provides selected teachers the opportunity to engage with top scientists and researchers on short-term research projects about current topics of national interest that are related to ongoing research at the laboratory e mentor scientists will design short term research projects on current topics of national interest that are related to ongoing research at the laboratory working in teams of to teachers will collaborate with e scientific teams to conduct assigned research projects the d program teachers at e will provide additional leadership and resources to help participating teachers incorporate research into their science and math classrooms teachers will also participate in additional educational enhancements in the form of seminars mini-workshops tours and field trips to focus and expand the research experience recipients will receive paid travel lodging and meals paid entrance fees for field trips and cultural activities as well as a stipend and grant to purchase equipment and or supplies for their classrooms e will provide each winner with a written estimate of the program’s fair_market_value for the winner to use in connection with the preparation of his her personal income_tax returns for the year that includes the program for a teacher to be selected he she has to meet certain criteria be employed as a full-time teacher in the application school year and intend to continue teaching in the immediately following school year teach science technology engineering or mathematics courses teach in any or a combination of grades through hold current state teaching certification in middle school and or high school science technology engineering or mathematics have a strong academic background in science technology engineering or mathematics have a strong desire to improve teaching and learning in the classroom through research and inquiry-based instruction have submitted at least one online third-party reference be a us citizen or a permanent resident_alien to apply teachers must go to d’s website n and complete the online application recipients will be chosen by their responses on the application form references and school and community demographics your goal is to provide opportunities to teachers from a broad spectrum of schools to include diversity in size private vs public rural vs urban and socioeconomic backgrounds of student populations and communities therefore teachers from all venues of schools and communities are encouraged to apply the judges will score various components of each candidate’s application the candidate would be scored on a scale of one to four with four being the highest based upon the candidate’s third-party references each of the candidate’s four essays would be evaluated by the judges and scored on a scale of one to ten with ten being the highest the highest scoring teachers will then be evaluated and final selections will be based upon the goal of seeking to maximize diversity the criteria such as the percentage of minority students in the teacher’s school district the type of school public vs private vs charter etc the type of community urban vs rural vs suburban the number of students qualifying for free or reduced-priced lunch would be taken into consideration in making the final selections judges will consist of educationally qualified staff from f and l at least two judges will review the applicant all judges will review the top scoring candidates and arrive at a consensus for final selection based on the diversity goals of the program recipients will be notified via email notification the teacher must decide to accept the opportunity to participate in the program and must notify f of their decision by a specified date which is approximately two weeks after the email notification c is an immersion program that promotes hands-on real-world integration in the classroom fifty teachers will be selected annually to attend a week-long professional development experience hosted at j headquarters the teachers will be exposed to leading scientists thought-leaders personalities and innovators whose work across disciplines shapes and define our world today the week will be filled with guest speakers at the forefront of the program field trips to leading institutions where the teachers will observe real-world applications of subject matter and opportunities for networking and collaborating with peers from across the nation in addition to broad- based applications each teacher will be assigned to a thematic working group that will provide additional deep-dive exposure c is administered in part by j you operate the program and will disburse the scholarships directly to the winning students selected colleges or universities will monitor such disbursements and ensure that the student is enrolled full-time and making satisfactory academic progress towards a degree at that school j supports you by administering certain aspects of the program you pay j a fee to support you by providing publicity and promotion for the program and administering certain other details of the program including collecting submissions and arranging judging j in turn retains the college board to assist it with judging the competition however ultimate operation responsibility and ownership of the program belong to you the selected teachers will receive paid travel lodging and meals during the program as well as all program fees at the program conclusion j will provide each winner with a written estimate of the program’s fair_market_value for the winner to use in connection with the preparation of his her personal income_tax returns for the year that includes the program to be eligible for the program a teacher must meet the following criteria be employed as a full-time teacher in the applicable school year and intend to continue teaching in the immediately following school year teach science technology engineering or mathematics courses teach in any or a combination of grades through hold current state teaching certification in middle school and or high school science technology engineering or mathematics have a strong academic background in science technology engineering or mathematics have a strong desire to improve teaching and learning in the classroom through research and inquiry-based instruction have submitted at least one online third-party reference bea us citizen or a permanent resident_alien teachers who are interested in c would visit your website at k to complete the on-line application form your goal is the same as for b the judges will score various components of each candidate’s application the candidate would be scored on a scale of one to four with four being the highest based upon the candidate’s third-party references each of the candidate’s four essays would then be evaluated by the judges and scored on a scale of one to ten with ten being the highest the highest scoring teachers would then be evaluated and final selections will be based upon the goal of seeking to maximize diversity thus such criteria as the percentage of minority students in the teacher’s school district the type of school private vs public vs charter etc the type of community urban vs rural vs suburban the number of students qualifying for free or reduced-priced lunch would be taken into consideration in making the final selections judges would consist of educationally qualified staff from j and l at least two judges will review each applicant all judges will review the top scoring candidates and arrive at a consensus for final selection based on the diversity goals of the program selected teachers will receive an email notification if the teacher decides to participate in the program they are asked to notify j of their decision by a specified date which is approximately two weeks after the email notification sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i ii its grant procedure includes an objective and nondiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your scholarship and award programs will be conducted as proposed with objectivity and nondiscrimination in awarding funds we determined that your procedures comply with the requirements of sec_4945 and sec_4945 of the code and that scholarships and awards granted according to these procedures will not be taxable_expenditures within the meaning of sec_4945 this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants or awards will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your grant-making procedures is a one-time approval of your system standards and procedures that will result in grants and loans which meet the requirements of sec_4945 and sec_4945 of the code this determination only covers the programs described above thus approval shall apply to succeeding programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all grant distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it section of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records a copy of this letter has been sent to your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours lois lerner director exempt_organizations enclosure notice redacted copy of letter


internal_revenue_service number release date index number ----------------------------------------------- ---------------- -------------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------- telephone number -------------------- refer reply to cc psi b04 plr-112766-09 date september re ---------------------------------------------------------- legend husband ---------------------------------------------- wife -------------------------------------------- date -------------------------- year ------- trust --------------------------------------------------------- x --------------------------------------------------------------------- --------------------------------------------- dear ---------------------------------- this responds to a letter dated date from your authorized representative requesting extensions of time under ' and of the procedure and administration regulations to allocate your generation-skipping_transfer gst_exemption to a_trust facts taxpayers are husband and wife on date husband established an irrevocable_trust trust husband transferred x to trust husband and wife each filed form_709 united_states gift and generation- skipping transfer_tax returns for year and elected under sec_2513 to treat the gifts as made one-half by each spouse however taxpayers’ tax advisors who prepared the plr-112766-09 form sec_709 failed to properly allocate husband’s and wife’s gst_exemption to the transfers attributable to each spouse taxpayers request extensions of time to make allocations of their gst_exemption to the transfers to trust in year it is represented that to date no taxable_distributions taxable terminations or any other events have occurred with respect to trust that would give rise to a gst tax_liability law and analysis sec_2513 provides generally that for gift_tax purposes if the parties consent a gift made by one spouse to any person other than his or her spouse shall for gift_tax purposes be considered as made one-half by the donor spouse and one-half by his or her spouse sec_2601 imposes a tax on every generation-skipping_transfer within the meaning of subchapter_b made by a transferor to a skip_person in general under sec_2652 and sec_26_2652-1 the individual with respect to whom the property was last subject_to federal estate or gift_tax is the transferor of the property for gst tax purposes sec_2652 and sec_26_2652-1 provide that if under sec_2513 one-half of a gift is treated as made by an individual and one-half is treated as made by the spouse of the individual then for purposes of the gst tax each spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor spouse regardless of the interest the electing spouse is actually deemed to have transferred under sec_2513 sec_2602 provides that the amount of the gst tax is determined by multiplying the taxable_amount by the applicable_rate sec_2641 provides that the term applicable_rate means with respect to any gst transfer the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under a the inclusion_ratio with any property transferred in a generation-skipping_transfer is generally defined as the excess of over the applicable_fraction the applicable_fraction as defined in a is a fraction the numerator of which is the amount of gst_exemption under allocated to the trust or to property transferred in a direct_skip and the denominator is the value of the property transferred to the trust or involved in the direct_skip sec_2631 as in effect for decedents dying and generation-skipping transfers before date provides that for purposes of determining the inclusion_ratio under sec_2642 every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the plr-112766-09 transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime is made on form_709 sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than 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 section b provides that an automatic_extension of months from the due_date of a return excluding extensions is granted to make regulatory or statutory elections whose due dates are the due_date of the return or the due_date of the return plr-112766-09 including extensions provided the taxpayer timely filed its return for the year the election should have been made and the taxpayer takes corrective action as defined in sec_301_9100-2 within that 6-month extension period requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 are satisfied therefore husband is granted an extension of time of days from the date of this letter to allocate his available gst_exemption to the transfers to trust in year in addition wife is granted an extension of time of days from the date of this letter to allocate her available gst_exemption to the transfers to trust in year we are specifically not ruling on whether the transfers by husband and wife are subject_to an estate_tax_inclusion_period under sec_2642 and the effective date of any allocation with respect to those transfers in addition we are not ruling on whether the value of the transfers on the date of the gift will be used in determining the inclusion_ratio under sec_2642 with respect to trust no opinion is expressed or implied as to the value for federal transfer_tax purposes of the gifts husband and wife made to trust or any other aspect of the transactions the allocation of taxpayers’ gst_exemption should be made on supplemental form sec_709 and filed with the internal_revenue_service center in cincinnati a copy of this letter should be forwarded to the internal_revenue_service cincinnati service_center - stop cincinnati oh for association with the form_709 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-112766-09 except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code 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 curt g wilson associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes copy of this letter cc


t c memo united_states tax_court ellwest stereo theatres of memphis inc et al petitioners v commissioner of internal revenue respondent docket nos filed date cases of the following petitioners are consolidated herewith ellwest stereo theatres inc of phoenix docket no jolar cinema docket no m i c limited docket no michigan reef development corp docket no premium films ltd docket no jolar cinema of san diego ltd docket no a j films docket no ellwest stereo theatres of fort worth inc docket no corporate investments inc docket no ellwest stereo theatres inc of kansas city docket no ellwest stereo theatres of youngstown inc docket no over several years ps made payments to related foreign_corporations without reporting the payments on form sec_1042 or withholding and paying the tax due ps sought to avoid additions to tax under sec_6651 sec_6656 and sec_6653 i r c on the grounds inter alia that the governing law was complex that they relied on accountants and counsel and that they cooperated fully with r as soon as they discovered their mistake held the additions are sustained robert e miller and edith s thomas for petitioners alexandra e nicholaides and eric r skinner for respondent memorandum findings_of_fact and opinion laro judge these cases were consolidated for purposes of trial briefing and opinion pursuant to rule a petitioners sought redetermination of deficiencies and additions to tax determined by respondent as follows ellwest stereo theatres of memphis inc docket no year deficiency additions to tax sec sec sec_6651 a a sec dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure all rule references are to the tax_court rules_of_practice and procedure and unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue ellwest stereo theatres inc of phoenix docket no year deficiency additions to tax sec sec sec_6653 a a sec dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure jolar cinema docket no year deficiency additions to tax sec sec sec_6653 a a sec dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure m i c limited docket no year deficiency dollar_figure big_number big_number big_number additions to tax sec_6651 sec_6653 sec_6656 dollar_figure big_number big_number big_number dollar_figure --- --- --- dollar_figure big_number big_number big_number michigan reef development corp docket no additions to tax sec sec sec sec sec sec year deficiency a a a a a b a dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number dollar_figure dollar_figure --- big_number big_number --- big_number big_number big_number big_number --- --- big_number big_number --- big_number big_number --- --- --- dollar_figure --- --- --- --- --- --- --- dollar_figure big_number --- --- --- dollar_figure big_number big_number big_number --- --- --- --- --- dollar_figure big_number big_number big_number big_number big_number big_number big_number premium films ltd docket no additions to tax sec sec sec sec sec sec year deficiency a a a a a b a dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number dollar_figure dollar_figure --- big_number big_number --- big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number --- --- --- --- dollar_figure --- --- --- --- --- --- --- --- --- --- --- dollar_figure big_number --- --- --- dollar_figure big_number big_number big_number big_number --- --- --- --- dollar_figure big_number big_number big_number big_number big_number big_number jolar cinema of san diego ltd docket no year deficiency additions to tax sec sec sec_6653 a a sec dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure a j films docket no year deficiency additions to tax sec sec sec_6651 a a sec dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure ellwest stereo theatres of fort worth inc docket no year deficiency additions to tax sec sec sec_6651 a a sec dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure corporate investments inc docket no additions to tax sec sec sec sec sec sec year deficiency a a a a a b a dollar_figure big_number big_number big_number dollar_figure dollar_figure --- big_number --- big_number --- big_number --- dollar_figure --- --- --- dollar_figure big_number --- dollar_figure big_number --- --- --- dollar_figure ellwest stereo theatres inc of kansas city docket no year deficiency additions to tax sec sec sec_6653 a a sec dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure ellwest stereo theatres of youngstown inc docket no year deficiency additions to tax sec sec sec_6653 a a sec dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure at trial petitioners conceded that they are liable for the deficiencies the only issues remaining for decision are whether petitioners are liable for additions to tax under sec_6651 for failure_to_file form sec_1042 annual withholding_tax return for u s source income of foreign persons in connection with certain payments they made to foreign_corporations whether petitioners are liable for additions to tax under sec_6656 for failure to withhold and deposit the federal income taxes due on such payments and whether petitioners are liable for additions to tax under sec_6653 for negligence or intentional disregard of rules or regulations findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the joint exhibits attached thereto are incorporated herein by this reference at the time the petitions were filed the principal office or agency for each petitioner was in durand michigan most if not all of petitioners were engaged in the adult entertainment business during the taxable years at issue a j films ellwest stereo theatres of fort worth ellwest stereo theatres of phoenix ellwest stereo theatres of youngstown jolar cinema and premium films no longer conduct business during the taxable years at issue all petitioners were owned in whole or part by harry v mohney mohney either directly or indirectly as one of several beneficiaries of a_trust mohney directly owned percent of the stock of corporate investments mohney and his children owned beneficial interests in the durand trusts a group of five domestic trusts which owned all the stock of michigan reef development corp the durand trusts also owned all the stock of dynamic industries ltd a domestic_corporation of which m i c limited was the wholly owned subsidiary mohney together with three family members and a business_associate named elizabeth scribner scribner were the beneficiaries of the amaranta trust a foreign_trust that owned all the stock of several foreign holding_companies all remaining petitioners were first- or second-tier wholly owned subsidiaries of two of these foreign holding_companies fun films ltd located in the turks and caicos islands and caribbean films n v whose residence for federal_income_tax purposes was the netherlands antilles among the foreign_corporations existing under the amaranta trust umbrella were also two others of significance to these cases european investments n a whose residence for federal_income_tax purposes was the netherlands antilles and petro land drilling development whose residence for federal_income_tax purposes was the cayman islands at various times between and petitioners made payments to fun films caribbean films european investments and petro land drilling development eight petitioners made only a single payment during this period each of the eight transferred funds to fun films in date canceled checks for these payments to fun films bear the word loan and the payments were characterized as loans on petitioners' books there is no documentation however that confirms the existence of a debtor-creditor relationship between any of petitioners and fun films moreover fun films has never paid interest on the loans or repaid the principal petitioners did not file form sec_1042 annual withholding_tax return for u s source income of foreign persons for any year in which the payments were made to the foreign_corporations as required by sec_1_1461-2 income_tax regs nor did petitioners withhold and deposit federal_income_tax with respect to these payments as required by sec_1442 and sec_6302 during the years at issue petitioners engaged modern bookkeeping inc modern to provide bookkeeping services and prepare their tax returns modern employed a number of accountants one of whom was tom tompkins tompkins tompkins was not a certified_public_accountant having failed the c p a examination at least once an attorney named lee klein klein provided legal services for modern and its clients in federal agents seized a large quantity of books_and_records at modern in connection with a criminal investigation in klein retained david shindel shindel a certified_public_accountant on behalf of modern and a number of its clients including two of petitioners the purpose of the retainer was to review corporate books_and_records for compliance with the tax laws the scope of shindel’s retainer subsequently expanded to include additional petitioners as the extent of noncompliance among modern’s clients became evident in the criminal investigation of persons working for or associated with modern resulted in the indictment of mohney klein tompkins and scribner for conspiracy to defraud the government by impeding the internal_revenue_service irs each was subsequently convicted of this or a related offense in or about shindel became aware that several of modern's clients were making payments to foreign companies by he had uncovered evidence of prior payments extending back several years available records concerning these payments were in some cases incomplete it is not clear however to what extent this was attributable to the earlier government seizure for example there were canceled checks payable to fun films dated date that bore the word loan but shindel found no other documentation for these transactions other_payments were evidenced by contracts leases and buy-sell agreements which shindel reviewed lacking expertise in foreign tax matters shindel made inquiries in order to determine the tax obligations arising from these payments he received the impression that tompkins who was preparing most of the tax returns at that time was not knowledgeable about the reporting and withholding requirements for payments to foreign persons nor was shindel satisfied that his clients were sufficiently sophisticated to determine the applicable_requirements he sought expert advice from two outside attorneys one a senior tax partner at a michigan law firm and the other a tax partner at a washington d c firm his consultations with these attorneys concerning the payments at issue began either in early or in late or the attorneys advised him orally of their views neither furnished shindel a written opinion shindel advised modern of the problems he had identified petitioners made no further payments to the related foreign_corporations after meanwhile the irs began an audit of several of petitioners in the audit was conducted on modern's premises by revenue_agent berniece petzold petzold in the late winter or early spring of petzold questioned shindel regarding certain canceled checks she had found that had been cashed abroad they discussed the reporting requirements applicable to these payments thereafter shindel had modern personnel compile a summary of all the payments to foreign companies that he could trace and presented it to petzold under shindel's instructions modern also prepared form sec_1042 on behalf of four petitioners to report payments made between and to caribbean films european investments and petro land drilling development shindel was unable to secure the signature of a corporation officer for any of these forms however the unexecuted form sec_1042 were mailed to the irs on date but without authorized signatures they were invalid and the irs did not file them no form sec_1042 were submitted for the payments to fun films in by the other eight petitioners this was because shindel had concluded that if these payments constituted loans no reporting would have been required notices of deficiency were mailed to petitioners on date additions to tax under sec_6651 and sec_6656 opinion an addition_to_tax is imposed under sec_6651 for failure_to_file a return within the prescribed period unless it is shown that such failure was due to reasonable_cause and not due to willful neglect sec_6651 form_1042 constitutes a return for purposes of this section sec_6651 sec_6001 sec_1_1461-2 income_tax regs the amount of the addition i sec_5 percent of the amount_required_to_be_shown_as_tax for each month that the delinquency persists up to a maximum of percent an addition_to_tax is imposed under sec_6656 for failure to make timely deposit of tax with a government depositary unless it is shown that such failure was due to reasonable_cause and not due to willful neglect for additions to tax assessed after date the amount of the addition under sec_6656 is percent of the underpayment sec_6656 for deposits required to be made after date the addition is percent of the underpayment in cases where the delinquency persists for days or more sec_6656 for purposes of both sections the delinquency is due to reasonable_cause if the taxpayer exercised ordinary business care and prudence but was nevertheless unable to perform its tax obligations in timely manner 33_f3d_589 6th cir 954_f2d_919 3d cir housden v commissioner tcmemo_1992_91 sec_301_6651-1 proced admin regs the delinquency is due to willful neglect if it resulted from a conscious decision or from reckless indifference 469_us_241 the plain language of the proviso in both sec_6651 and sec_6656 requires that reasonable_cause and the absence of willful neglect be established as of the time that performance of the relevant obligation was due see industrial indemnity v snyder aftr 2d ustc par e d wash thus whether the taxpayer acts in good_faith and with ordinary business care and prudence in attempting to comply with its obligations after the deadline for performance has passed is of little or no direct relevance to the taxpayer’s liability for the additions to tax under these sections the burden of proving reasonable_cause and the absence of willful neglect is on the taxpayer rule a petitioners advance five arguments we will consider each in turn complexity first petitioners argue that the reporting and withholding obligations that arose from their payments to the foreign_corporations involve a highly complex interrelationship among regulations administrative guidance and treaty provisions which only a very sophisticated taxpayer could reasonably be expected to comprehend complex legal provisions may reasonably be susceptible of different interpretations in some cases taxpayers have succeeded in avoiding additions to tax by showing that the deficiency resulted from an honest and reasonable misunderstanding of complex law 88_tc_654 no negligence for purposes of sec_6653 74_tc_1513 same 72_tc_1209 affd 661_f2d_76 6th cir same that tax obligations are complex does not necessarily make noncompliance reasonable however 56_tc_717 smith v commissioner tcmemo_1993_203 even if we grant that the reporting and withholding obligations involved in these cases are relatively complicated petitioners have not demonstrated that this complexity was responsible for their failure to comply no contemporaneous corporate documents were offered as evidence no corporate officers were called to testify petitioners have not persuaded us that they were not in fact aware of their obligations they have not satisfied their burden reliance on professionals petitioners argue that because of their lack of sophistication they relied on their accounting service to ensure tax compliance their accounting service failed to do its job properly nevertheless in their view this reliance was consistent with ordinary business care and prudence under the circumstances the responsibility to file returns and pay tax when due rests upon the taxpayer and cannot be delegated in general the taxpayer must bear the consequences of any negligent errors committed by its agent 365_f2d_846 5th cir 63_tc_149 abernathy v commissioner tcmemo_1992_237 there is a well-recognized albeit narrow exception to this rule when the taxpayer selects a competent tax adviser and supplies him with all relevant information it is consistent with ordinary business care and prudence to rely upon his professional judgment as to the taxpayer’s tax obligations united_states v boyle supra pincite 204_f2d_19 7th cir 178_f2d_769 2d cir in order to qualify for this exception the taxpayer must demonstrate that its tax adviser or return preparer had sufficient expertise to justify reliance 97_tc_385 affd in part and revd in part on other grounds 7_f3d_774 8th cir cf 88_tc_1086 affd sub nom 868_f2d_865 6th cir affd without published opinion 865_f2d_1264 5th cir affd sub nom 864_f2d_93 9th cir affd without published opinion sub nom hatheway v commissioner 856_f2d_186 4th cir hoffman v commissioner tcmemo_1982_380 the taxpayer provided necessary and accurate information 69_tc_966 cf 59_tc_473 and the taxpayer actually relied in good_faith on the tax adviser’s or return preparer’s judgment 54_tc_1325 kenner v commissioner tcmemo_1974_273 there is no evidence in the record that modern’s accountants and attorney possessed or reasonably appeared to possess sufficient relevant expertise to warrant reliance on their judgment the only evidence petitioners did present on this subject would support an inference to the contrary shindel testified that tompkins the accountant employed by modern to handle most return preparation had failed the c p a examination whether klein’s field of legal expertise included tax matters remains unclear no one associated with modern impressed shindel as being competent to handle the tax questions at issue there is no evidence that expert advice regarding the foreign payments was solicited by or on behalf of any of petitioners before shindel conducted his investigation the record does not establish when shindel sought and received the expert tax attorneys’ advice at one point his testimony fixes the start of his consultations with them in early and at another point in late or the form sec_1042 for the last year of payments would have been due by date sec_1_1461-2 income_tax regs there is no record of what the tax attorneys advised shindel nor to which payments and which tax years the advice related shindel’s testimony is ambiguous as to the identity of the clients on whose behalf he consulted the tax attorneys there is no evidence that petitioners solicited authorized or were cognizant of shindel’s investigations or that they were ultimately informed of the tax attorneys’ advice moreover petitioners have not attempted to prove that they supplied their accounting service with all necessary information concerning the payments and payees regarding the loans to fun films in date shindel found at modern no records besides the canceled checks moreover petitioners have not established that their failure to report and withhold tax was in fact based on advice from their accounting service petitioners have not carried their burden of proving reasonable reliance loans petitioners argue that their honest belief that the payments made to fun films in date were loans establishes reasonable_cause for failing to file form sec_1042 and withhold and deposit tax with respect to those payments it is true that loans would not have been subject_to the form_1042 or withholding requirements sec_1442 sec_881 sec_1_1461-2 and c income_tax regs however the fact that petitioners treated these payments as loans does not establish reasonable_cause unless this treatment had a reasonable basis petitioners failed to offer any evidence supporting the loan characterization they stipulated the absence of any documentation confirming the existence of a debtor-creditor relationship and to the failure of fun films to treat the transactions as bona_fide loans we can only conclude that they have not satisfied their burden of showing reasonable_cause payees’ failure to secure treaty exemption petitioners seek to excuse their failure to withhold and deposit tax on payments made to the netherlands antilles corporations caribbean films and european investments on the ground that these payments would have been exempt from withholding under the united states-netherlands income_tax convention as applied to the netherlands antilles but for the fact that the netherlands antilles corporations failed to follow certain procedures for certifying their eligibility for the exemption see sec_1_1441-6 and c income_tax regs revproc_79_40 1979_2_cb_504 there is no evidence however that petitioners decided not to withhold and deposit tax in the belief that the foreign payees had filed or would file the requisite certificates on the contrary since petitioners also failed to withhold and deposit tax with respect to payments made to other foreign_corporations that would not have been eligible for an exemption it is reasonable to conclude that the availability of an exemption under the united states-netherlands income_tax convention had nothing to do with their failure subsequent good_faith efforts finally petitioners call our attention to their cooperation with the irs to uncover the extent of the prior payments and their belated efforts to comply with the law after the errors were discovered they believe this conduct attests to their good_faith and militates against an inference of willful neglect according to revenue_agent petzold’s uncontroverted testimony shindel presented to her in a summary of payments for prior years shindel testified that he could not recall whether the payment summary was given to petzold before or after she uncovered evidence of the payments herself and questioned him about them she testified that it was she who raised the issue first compliance efforts made years after the obligations arose and only after prompting by an examining agent are not inconsistent with the inference that the original failure to comply was due to willful neglect we conclude that petitioners have not shown that their failure_to_file returns and deposit tax for the years at issue was due to reasonable_cause and not due to willful neglect accordingly we sustain respondent’s determination that they are liable for additions to tax under sec_6651 and sec_6656 additions to tax under sec_6653 respondent determined that petitioners are liable for the additions to tax under sec_6653 for the taxable years at issue sec_6653 provided for an addition_to_tax if any part of an underpayment_of_tax is due to negligence or intentional disregard of rules or regulations for taxable years through the amount of the addition_to_tax wa sec_5 percent of the entire underpayment plu sec_50 percent of the interest payable with respect to the portion of the underpayment attributable to negligence or intentional disregard of rules or regulations sec_6653 and taxable years through sec_6653 and b taxable years and for taxable years and the addition_to_tax was an amount equal to percent of the underpayment sec_6653 for taxable_year sec_6653 for taxable_year negligence is defined as the lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances 85_tc_934 the taxpayer bears the burden_of_proof rule a 58_tc_757 failure_to_file timely tax returns constitutes prima facie evidence of negligence 92_tc_342 affd 898_f2d_50 5th cir the type of evidence necessary to meet or rebut a prima facie case of negligence arising in a late filing situation is that which indicates the existence of an adequate and reasonable excuse or justification for the delinquent filing id pincite where the taxpayer’s evidence is insufficient to prove reasonable_cause and absence of willful neglect for purposes of sec_6651 the taxpayer cannot carry its burden_of_proof for purposes of sec_6653 98_tc_203 the arguments petitioners have presented to contest the addition_to_tax under sec_6653 are the same arguments that we have assessed and rejected above it would serve no purpose to repeat that discussion petitioners have not carried their burden_of_proof to reflect the foregoing decisions will be entered for respondent