internal_revenue_service number release date index number department of the treasury washington dc person to contact telephone number refer reply to cc psi 1-plr-117421-00 date date legend x state d1 d2 d3 d4 d5 this responds to your letter dated date submitted on behalf of x requesting various rulings under the internal_revenue_code facts x incorporated in state on d1 x elected to be treated as a subchapter_s_corporation effective d2 on d4 x discovered that it had been administratively dissolved by state on d3 for failure_to_file its annual corporate report from d3 to d4 x was unaware of the dissolution and continued to file form_1120s upon learning of the dissolution taxpayer immediately reincorporated in state effective d5 law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect sec_1361 of the code provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not - a have more than shareholders b have as a shareholder a person other than an estate a_trust described in subsection c or an organization described in subsection c who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock the core test of corporate existence for purposes of federal income_taxation is always a matter of federal_law whether an organization is to be taxed as a plr-117421-00 corporation under the code is determined by federal not state law if the conduct of the affairs of a corporation continues after the expiration of its charter or the termination of its existence it becomes an association see 305_f2d_844 a corporation is subject_to federal corporate_income_tax liability as long as it continues to do business in a corporate manner despite the fact that its recognized legal status under state law is terminated see 438_f2d_774 3d cir conclusion based solely on the facts submitted and the representations made we conclude the following provided that x qualified as a small_business_corporation under sec_1361 of the code prior to the administrative dissolution under state law x’s status as a small_business_corporation is not terminated by reason of the administrative dissolution and subsequent reincorporation and x will not be required to make a new election under sec_1362 the administrative dissolution and subsequent reincorporation of x under state law did not by itself result in a distribution or contribution of property for purposes of sec_301 sec_311 sec_331 sec_336 or sec_351 of the code x’s administrative dissolution and subsequent reincorporation will not affect its shareholders’ bases and holding periods in x corporation stock and x is not required to apply for a new employer_identification_number and can continue to use the number assigned prior to the state law dissolution 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 concerning whether the original election made by x to be treated as an s_corporation was a valid election under sec_1362 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative s david r haglund sincerely senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh number release date date date legend x scholarship program y dollar amount z country dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request your letter indicates you will operate a scholarship program called x the purpose of x is to recognize youth who have demonstrated exceptional conduct through community service efforts volunteerism and mentorship activities in addition to outstanding academic performance letter catalog number 58263t you will award scholarships to ten high school juniors and or seniors who have demonstrated exceptional conduct through a variety of community service efforts while also maintaining exemplary academic performance the final_decision on award recipients will be announced following your board's consideration and approval each scholarship recipient will be awarded an academic scholarship of dollar_figurey to be applied to the cost of attendance including tuition housing books and other on-campus related expenses at accredited four-year colleges and universities in the z the grant program will be publicized on your website through social media and a press release applicants must meet the following criteria to be eligible to apply for the grant be a high school junior or high school senior planning to attend an accredited four- year college or university in the z have a minimum gpa have participated in community service volunteerism or mentorship activities and be a z citizen or legal permanent resident the selection criteria to select recipients are applicant's general information community service description and sign off form letter of recommendation form description of personal statement required list of applicants extracurricular activities hobbies and interests list of the colleges and or universities the applicant has applied or will apply to applicant's transcript displaying a gpa or higher applicant's personal statement and description of financial need high school juniors and seniors are eligible to receive the grant grant winners must enroll in accredited four-year colleges and universities in the z because the grants will be paid directly to such institutions grants will be a one-time award you will pay grants directly to an educational_institution under an arrangement whereby the school will apply the grant funds only for an enrolled student who is in good standing the educational_institution will provide you with a confirmation letter after the funds were applied on behalf of the grantee confirming that the grantee is an enrolled student who is in good standing your staff will review all applications submitted and select the top applicants to present to your executive board the executive board will act as the selection committee for the awards made with the assistance of your advisory board letter catalog number 58263t you represent that you will arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversions of funds from their intended purposes and take all reasonable and appropriate steps to recover diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees' assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversions from occurring you also agree to maintain records that include the following information used to evaluate the qualification of potential grantees identification of the grantees including any relationship of any grantee to the private_foundation the amount and purpose of each grant and all grantee reports and other follow-up data obtained in administering the private foundation's grant program basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at letter catalog number 58263t internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely director exempt_organizations letter catalog number 58263t


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa apjp b01 --------------- posts-154620-05 uilc 6050i date august to associate area_counsel long island small_business self-employed attn peggy gartenbaum senior counsel from stuart murray acting assistant to the branch chief administrative provisions judicial practice branch procedure and administration information reporting under sec_6050i subject this chief_counsel_advice responds to your request for assistance dated date this advice may not be used or cited as precedent legend a ----------------------------------------------------- b -------------------------------------- c ---------------------------------------------------------------- posts-154620-05 issue sec_1 whether a which was engaged in a trade_or_business as a wholesale supplier that hired c to receive transport and deposit on a’s behalf cash payments received from a’s high-volume customer b was required to report under sec_6050i amounts exceeding dollar_figure paid_by b whether c was required to report under sec_6050i cash in excess of dollar_figure received in the course of c’s trade_or_business from b conclusion sec_1 a did not have a reporting requirement under sec_6050i for the cash received by c from b for the account of a c was required by sec_6050i to report the cash in excess of dollar_figure that it received from b in the course of its trade_or_business for the account of a facts a is a wholesaler of tobacco_products usually one of a’s employees or sales representatives collects the accounts_receivable from a client after a completed transaction payment normally is made by a client to a using either business checks or cashier’s checks one of a’s clients b however maintained a large-volume of business with a and usually paid for a’s tobacco_products in cash b’s payments regularly exceeded dollar_figure to handle the large amount of cash from b a hired an independent armored car service c to collect the cash in a safe and secure manner and deposit the cash at a’s bank there was no written_agreement between a and c only an oral agreement existed between them whereby c for a fee would pick up the cash from b on behalf of a approximately once a week c transported the cash to a’s bank where the cash was deposited directly into a’s account a never physically received or took possession of the cash that c collected from b on a’s behalf law and analysis sec_6050i provides that any person who is engaged in a trade_or_business and who in the course of the trade_or_business receives more than dollar_figure in cash in one transaction or two or more related transaction shall make the return described in sec_6050i with respect to such transaction or related transaction at such time as the secretary may by regulations prescribe form_8300 report of cash payments over dollar_figure received in a trade_or_business is the form required to comply with this provision posts-154620-05 sec_1_6050i-1 of the income_tax regulations provides that cash in excess of dollar_figure received by a person for the account of another must be reported under this section thus for example a person who collects delinquent accounts_receivable for an automobile dealer must report with respect to the receipt of cash in excess of dollar_figure from the collection of a particular account even though the proceeds of the collection are credited to the account of the automobile dealer ie where the rights to the proceeds from the account are retained by an automobile dealer and the collection is made on a fee-for-service basis sec_1_6050i-1 provides that the term transaction means the underlying event precipitating the payer’s transfer of cash to the recipient transactions include but are not limited to a sale_of_goods or services a sale of real_property a sale of intangible_property a rental of real or personal_property an exchange of cash for other cash the establishment or maintenance of or contribution to a custodial trust or escrow arrangement a payment of preexisting debt a conversion of cash to a negotiable instrument a reimbursement for expenses paid or the making or repayment of a loan a transaction may not be divided into multiple transactions in order to avoid reporting under sec_6050i sec_1_6050i-1 defines a recipient of cash as the person receiving the cash we construe the word receiving to mean actual physical receipt sec_1_6050i-1 provides that the receipt of cash in excess of dollar_figure by a person other than in the course of the person’s trade_or_business is not reportable under sec_6050i for instance an individual may be in the trade_or_business of selling real_estate but on one occasion sells an item of personal_property a motorboat is the example given in the regulations for more than dollar_figure which is paid in cash and the seller did not use the motorboat prior to sale in his trade_or_business therefore he is not required to report the cash payment under sec_6050i or the regulations because the exception provided in sec_1_6050i-1 applies in this case a is engaged in the trade_or_business of selling wholesale tobacco_products and c is engaged in the trade_or_business of providing armored car services to customers for the transportation of cash and other valuables to the extent that a or c received cash of more than dollar_figure in one transaction or multiple related transactions as part of their respective businesses a or c was required to file form_8300 with the service reporting the receipt of the cash with respect to cash over dollar_figure received from b only c actually received the cash not a specifically in the course of its trade_or_business of providing armored delivery service c received cash from b for the account of a for a fee c collected the cash and transported it to a’s bank where it was directly deposited into a’s bank account consequently c was required to make a return of information for each transaction or series of related transactions exceeding the threshold_amount posts-154620-05 a by contrast never directly received or possessed the cash that c collected and transported on a’s behalf while a engaged in potentially reportable_transactions with b in a’s trade_or_business because a never directly received or had physical possession of cash from b a was not subject_to sec_6050i information reporting for the transactions please call --------------------- if you have any further questions this conclusion will not put the service at an informational disadvantage the identification of a as the ultimate beneficiary of the cash including the depositing of the cash into a’s account was presumably reported on form_4789 currency transaction report


tcmemo_1997_178 united_states tax_court stan pyron and ruth s pyron petitioners v commissioner of internal revenue respondent docket no filed date lee h brockett for petitioners joan steele dennett for respondent memorandum findings_of_fact and opinion wells judge respondent determined a deficiency of dollar_figure in petitioners' federal_income_tax unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure after concessions the issues to be decided are as follows whether petitioners are entitled to deduct for taxable_year the portion of a loss carryforward attributable to a bad_debt deduction claimed by petitioners on their amended tax_return for the worthlessness of loans made by petitioner stan pyron to a mining company and whether petitioners are entitled to a business_bad_debt deduction for taxable_year for the worthlessness of loans made by petitioner to a mining company findings_of_fact some of the facts have been stipulated for trial pursuant to rule the parties' stipulations of fact are incorporated herein by reference and are found as facts in the instant case at the time they filed their petition in the instant case petitioners resided in florence montana during petitioner stan pyron petitioner and gerald dalton began investing in a chilean copper mine of a mining company called compania minera esperanza cme during or in the notice_of_deficiency respondent disallowed inter alia the bad_debt deduction claimed by petitioners on their return for the worthlessness of loans in the amount of dollar_figure made by petitioner stan pyron to gerald dalton a business_associate respondent disallowed the deduction on the grounds that the debt became worthless in taxable_year at trial petitioners' counsel conceded that is the correct year for whatever consequence flows from the dalton activities as is not a taxable_year before us we do not address the bad_debt deduction for the loans in the amount of dollar_figure made by petitioner to mr dalton petitioner and mr dalton formed compania minera adventura cma which leased the copper mines and the plant from cme during in order to terminate their relationship and to pay an outstanding debt that he owed to petitioner mr dalton transferred his entire_interest in cme to petitioner prior to mr dalton's transfer of his cme interest petitioner never requested or demanded from mr dalton any payment on loans allegedly made by petitioner to mr dalton petitioner advanced money to cme and or cma and alleges that such advances were loans petitioner held the power_of_attorney for cme for petitioner's advances to cme cma notes were prepared establishing interest rates and maturity dates but no repayment schedules were prepared and no collateral for the notes was given on the maturity dates of the notes petitioner did not pursue collection of either the principal of or the interest due on the notes during petitioner sold his interest in cme petitioners provided no books records or tax returns with respect to their interest in cme cma opinion the issue we must resolve in the instant case is whether petitioners are entitled to two bad_debt deductions pursuant to sec_166 for the worthlessness of loans allegedly made by petitioner to cme cma the first bad_debt deduction claimed by petitioners on their amended_return was for the worthlessness of loans allegedly made by petitioner to cme cma in the amount of dollar_figure as a result of their deduction of that loss petitioners reported on their amended_return a net_operating_loss which subsequently was carried forward to petitioners' return respondent argues that petitioner's advances were not bona_fide debt but rather contributions to capital consequently in the notice_of_deficiency respondent disallowed the portion of the loss carryforward on petitioners' tax_return attributable to the bad_debt deduction in the amount of dollar_figure claimed by petitioners on their amended_return and recharacterized such amount as dollar_figure in short-term_capital_loss and dollar_figure in long-term_capital_loss the second bad_debt deduction claimed by petitioners on their return was for the worthlessness of loans allegedly made by petitioner to cme cma in the amount of dollar_figure respondent argues that petitioner's advances were not bona_fide debt but rather contributions to capital consequently in the notice_of_deficiency respondent disallowed the deduction and increased petitioners' taxable_income respondent however did not recharacterize the amount as a capital_loss as an alternative argument respondent argues that the advances if they are considered bona_fide debt are nonbusiness bad_debts deductible only to the extent permitted pursuant to sec_166 as to both bad_debt deductions petitioners contend that they are entitled to deduct the loans as ordinary losses alternatively petitioners argue that the mining companies cme and cma are partnerships and that therefore petitioners are entitled to deduct their distributive_share of the mining partnerships' losses against ordinary_income for each taxable_year sec_166 provides in general for the deduction of debts that become wholly worthless during a taxable_year sec_166 however distinguishes between business bad_debts and nonbusiness bad_debts sec_166 sec_1_166-5 income_tax regs business bad_debts may be deducted against ordinary_income if they become wholly or partially worthless during the year in the case of the latter to the extent charged off during the taxable_year as partially worthless debts sec_1_166-3 income_tax regs to qualify for the business_bad_debt deduction the taxpayer must establish that the debt was proximately related to the conduct of the taxpayer's trade_or_business 405_us_93 sec_1_166-5 income_tax regs petitioners concede that they did not claim their distributive_share of the partnership losses on their personal returns for the years in which they were incurred and that the statute_of_limitations bars claiming this loss now petitioners however seek to adjust their basis in their investment and the notes to reflect the losses that they should have claimed nonbusiness bad_debts on the other hand may be deducted but only if they become entirely worthless during the year claimed they are moreover to be treated as short-term_capital_losses sec_166 generally a nonbusiness_bad_debt is a debt other than a debt created or acquired in the trade_or_business of the taxpayer or the loss from the worthlessness of which is incurred_in_a_trade_or_business of the taxpayer sec_166 the question of whether a debt is a nonbusiness_bad_debt is a question of fact sec_1_166-5 income_tax regs a deduction for a bad_debt is limited to a bona_fide debt sec_1_166-1 income_tax regs a bona_fide debt is a debt that arises from a debtor-creditor relationship based upon a valid and enforceable obligation to pay a fixed or determinable sum of money id for purposes of sec_166 a contribution_to_capital is not considered a debt in re uneco inc 532_f2d_1204 8th cir 91_tc_575 sec_1_166-1 income_tax regs deductions are a matter of legislative grace and petitioners bear the burden of proving that they are entitled to the deductions claimed rule a 503_us_79 292_us_435 taxpayers are required to maintain records that are sufficient to enable the commissioner to determine their correct_tax liability see sec_6001 43_tc_824 sec_1_6001-1 income_tax regs moreover a taxpayer who claims a deduction bears the burden of substantiating the amount and purpose of the item claimed 65_tc_87 affd per curiam 540_f2d_821 5th cir sec_1_6001-1 income_tax regs characterization of an advance as either a loan ie debt owed to the lender or capital_contribution ie equity held by the contributor in the entity is a question of fact which must be answered by reference to all of the evidence with the burden on the taxpayer to establish that the alleged loans were bona_fide debt rule a 74_tc_476 58_tc_1062 the taxpayer's assertion that an advance was a loan is not determinative of the issue of characterizing an advance as debt or equity see in re uneco inc supra advances to a closely_held_corporation by its shareholders are subject_to particular scrutiny as the absence of arm's-length dealing provides the opportunity to contrive a fictional debt shielding the real essence of the transaction and obtaining benefits unintended by the statute gilboy v commissioner tcmemo_1978_114 in the instant case the record consists of only the notice_of_deficiency and copies of petitioners' return amended_return and return petitioners provided no books records or tax returns with respect to their interest in cme cma additionally petitioners did not provide promissory notes evidencing the alleged loans to cma cme or books_and_records reflecting petitioners' lending activities at trial petitioner testified that he had some books_and_records in florence montana additionally at trial petitioners' counsel stated that after petitioner sold his interest in cme during the new owner threw away most of the records we first examine whether petitioner's advances to cme cma were bona_fide debt the parties stipulated that for petitioner's loans to cme cma notes were prepared establishing interest rates and maturity dates as to the first bad_debt deduction for the worthlessness of advances allegedly made by petitioners to cme cma in the amount of dollar_figure however petitioners failed to provide the notes or any other documentary_evidence and sought to substantiate the loans only through petitioner's testimony we are not required to accept petitioner's self-serving and uncorroborated testimony particularly where other and better evidence to prove the point in question should be available 338_f2d_602 9th cir affg 41_tc_593 under the circumstances of the instant case we do not credit petitioner's testimony where it is not corroborated by documentary or other reliable evidence consequently we conclude that petitioners did not establish that the advances to cme cma in the amount of dollar_figure were bona_fide debt as to the second bad_debt deduction for the worthlessness of loans made by petitioners to cme cma in the amount of dollar_figure petitioners provided no business records checks or receipts to corroborate petitioner's testimony that the amount was actually advanced it is well established that in the absence of corroborating evidence we are not required to accept self- serving testimony 99_tc_202 87_tc_74 see 19_tc_133 affd 207_f2d_857 10th cir consequently we conclude that petitioners did not establish that the advances to cme cma in the amount of dollar_figure were bona_fide debt as to petitioners' remaining arguments we conclude that petitioners have not carried their burden of proving that they are entitled to the alleged losses as we stated above petitioners provided no books records or tax returns with respect to their interests in cme or cma additionally petitioners did not provide promissory notes evidencing the alleged loans to cme cma or books_and_records reflecting petitioners' lending activities taxpayers are required to maintain records that are sufficient to enable the commissioner to determine their correct_tax liability see sec_6001 meneguzzo v commissioner supra sec_1_6001-1 income_tax regs we conclude that petitioners did not carry their burden of substantiating the amount and purpose of either of the two bad_debt deductions accordingly we hold that petitioners are not entitled to the two bad_debt deductions in the amounts of dollar_figure and dollar_figure for the worthlessness of loans allegedly made by petitioners to cme cma under the circumstances of the instant case we are not required to and we generally do not rely on petitioner's testimony to sustain petitioners' burden of proving error in respondent's determinations see 440_f2d_688 9th cir affg per curiam tcmemo_1969_159 wood v commissioner supra tokarski v commissioner supra 65_tc_87 accordingly we sustain respondent's determinations to reflect the foregoing decision will be entered under rule as we stated above in addition to disallowing the portion of the loss carryforward on petitioners' tax_return attributable to the first bad_debt deduction in the amount of dollar_figure respondent recharacterized the amount as dollar_figure in short-term_capital_loss and dollar_figure in long-term_capital_loss respondent argues that petitioners conceded on brief that dollar_figure should not be included in the first bad_debt deduction of dollar_figure petitioners' argument regarding the dollar_figure amount however was premised upon the mining companies' being treated as partnerships as we address the bad_debt deductions on other grounds we do not view petitioners' argument as a concession


internal_revenue_service number release date index number ----------------------------- -------------------------------------- ------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------ telephone number -------------------- refer reply to cc psi b01 plr-102451-09 date date legend x ------------------------------------------- --------------------------------------- state --------------- d1 d2 -------------------- --------------------- dear ----------- this responds to the letter dated date submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts according to the information submitted x was incorporated under the laws of state on d1 the shareholder of x intended that x be treated as an s_corporation effective on d2 but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective d2 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first plr-102451-09 two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under ' b however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no ' a election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and ' b shall not apply x did not timely file an election to be treated as an s_corporation under ' a x has however established reasonable_cause for not making a timely s election and is entitled to relief under ' b conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d2 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-102451-09 pursuant to the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representative sincerely dianna k miosi dianna k miosi chief branch office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ----------------------------------- ------------------------------------------------------------ ------- ----------------------- --------------------------- ---------------------- ----------------------- ------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ----------------- telephone number --------------------- refer reply to cc psi b01 plr-108717-12 date date legend trust ------------------------------------------ ---------------------------------------------------------------------- x ------------------- year1 year2 ------- ------- dear ------------------ this letter responds to a letter dated date submitted on behalf of trust by its authorized representative requesting that the service grant trust an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make an election under sec_663 of the internal_revenue_code facts trust files its federal_income_tax return on a calendar_year basis trustee of trust made a distribution in the amount of dollar_figurex the distribution within the first sixty-five days of year2 and intended to have the distribution considered to be paid or credited on the last day of year1 as permitted under sec_663 however due to inadvertence the sec_663 election was not timely filed plr-108717-12 law and analysis sec_663 provides that in general if within the first days of any taxable_year of an estate or a_trust an amount is properly paid or credited such amount shall be considered paid or credited on the last day of the preceding_taxable_year sec_663 provides that sec_663 shall apply with respect to any taxable_year of an estate or a_trust only if the executor of such estate or the fiduciary of such trust as the case may be elects in such manner and at such time as the secretary prescribes by regulations to have sec_663 apply for such taxable_year sec_1_663_b_-2 of the income_tax regulations provides that if a_trust return is required to be filed for the taxable_year of the trust for which the election is made the election shall be made in the appropriate place on such return the election under sec_1_663_b_-2 shall be made not later that the time prescribed by law for filing such return including extensions thereof such election shall become irrevocable after the last day prescribed for making it sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but not more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that trust has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 accordingly trust is granted an extension of time of days from the date of this letter to file an election under sec_663 the election should be made by filing with the appropriate service_center amended income_tax returns for year1 and year2 as necessary to include the election and properly report the tax consequences of the distribution in a plr-108717-12 manner consistent with the election having been made a copy of this letter should be attached to the amended returns except for the specific ruling above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code 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 we are sending a copy of this letter to trust’s authorized representative this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel passthroughs special industries by faith p colson faith p colson senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c date number info release date cc tege eoeg et1 - genin-103692-03 uilc memorandum for director internal_revenue_service center cincinnati oh attn technical unit from subject office of division counsel associate chief_counsel tax exempt and government entities cc tege eoeg et1 - genin-103692-03 railroad retirement act tax status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business is not an employer under the railroad retirement act and the railroad unemployment insurance act we have reviewed the opinion of the rrb and based upon the information submitted to the rrb we also conclude that is not an employer under the railroad_retirement_tax_act please take the appropriate action regarding this business will e mcleod cc


internal_revenue_service number release date index numbers ------------------------- --------------------------------------------- ---------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number ---------------------- refer reply to cc psi b03 plr-109591-13 date may x y trust state date date date date legend ------------------------------------------------------------------------------------------------------------------- --------- ------------------------- ---------------------------------------------------------------------------------------------- ----------- -------------------- ---------------------- -------------------- -------------------- dear ----------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representatives requesting inadvertent termination relief pursuant to sec_1362 of the internal_revenue_code the information submitted states that x was incorporated under the laws of state and elected to be an s_corporation effective on date facts plr-109591-13 y one of x’s shareholders died on date on date following the administration of y’s estate y’s estate distributed its shares in x to trust during the two years between date and date trust was an eligible shareholder by reason of sec_1361 x represents that trust was a qualified_subchapter_s_trust qsst eligible to make an election under sec_1361 effective date however no such election was filed on behalf of trust therefore trust was not a permissible shareholder and x’s s_corporation_election terminated on date x represents that the termination was not motivated by tax_avoidance or retroactive tax planning x further represents that from date x and its shareholders have filed all returns consistent with x’s status as an s_corporation x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation law and analysis sec_1362 provides in part that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken a so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of such corporation as an s_corporation as the case may be as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such termination such corporation shall be treated as an s_corporation or a qsub as the case may be during the period specified by the secretary conclusion based solely on the facts submitted and representations made we conclude that the termination of x’s s_corporation_election on date was inadvertent within the meaning of sec_1362 we further conclude that pursuant to the provisions of sec_1362 x will be treated as an s_corporation from date and thereafter provided that within days of the date of this letter trust files a qsst election effective date pursuant to the provisions set forth in sec_1_1362-1 with the appropriate service_center a copy of this letter should be attached to the qsst election plr-109591-13 except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion regarding whether x is otherwise eligible to be treated as an s_corporation or whether trust is eligible to be treated as a qsst this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives 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 ruling_request it is subject_to verification on examination sincerely richard t probst senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury index number u i l no washington dc person to contact telephone number refer reply to cc dom p si plr-107961-00 date date number release date legend company state shareholder a b dear this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated in a in state company has one shareholder shareholder it is represented that company has intended to be an s_corporation since its formation believing itself to be an s_corporation company has operated accordingly since b after the end of its taxable_year beginning on b however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on b sec_1362 provides that a small_business_corporation may elect to be an s_corporation plr-107961-00 sec_1362 explains when an s election will be effective generally if an s election is made within the first two and one half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on b however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of b with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours s robert honigman acting assistant to the chief branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service index no 468a department of the treasury washington dg contact person telephone number in reference to cc dom p si-g plr-104485-99 ate re request for a revised schedule of ruling amounts parent taxpayer plant location commission fund district dear this letter responds to the request of taxpayer dated date and supplemental information submitted by taxpayer for a revised schedule of ruling amounts pursuant to sec_1_468a-3 of the income_tax regulations taxpayer was previously granted a revised schedule of ruling amounts on date information was submitted pursuant to sec_1_468a-3 we understand the facts as presented by taxpayer to be as follows of go plr-104485-99 taxpayer is a wholly-owned subsidiary of parent and files a consolidated federal_income_tax return with its parent taxpayer as one of the owners of the plant has a interest in the plant which is situated in location the plant's operating license expires on using the prompt removal dismantling method taxpayer is under the jurisdiction of the district_director of the district currently the jurisdictional percentage for the commission is taxpayer proposes to decommission the plant taxpayer is obligated severally and not jointly to pay all expenditures_for operation and maintenance of the plant in proportion to its ownership_interest and is entitled to its proportionate share of the electric power produced by the plant the taxpayer represents that an election to be excluded from the application of subchapter_k of the internal_revenue_code was filed for the piant the commission in provided for decommissioning cost for the plant of the decommissioning cost for the plant is based on a site-specific study prepared by an outside firm the estimated cost of decommissioning the plant is share is decommissioning the plant the commission expressed the projected total cost of of which taxpayer's _ take into account the provisions of the energy policy act of - the commission did not the funding_period and level_funding limitation period extends from the estimated_useful_life of the plantis __ and the estimated period for which the fund will be in effect is therefore the qualifying percentage as calculated by taxpayer is sec_468 of the code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any_tax year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund o2 plr-104485 -99 is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year within months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1 468a- b a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant - sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or the ruling_amount applicable to the nuclear decommissioning fund for such tax_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 bases the schedule of ruling amounts on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a tax_year sloe plr-104485-99 sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any_tax year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier tax_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the tax_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if a any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates increases the proposed period over which the decommissioning costs of the nuclear power plant will be included in cost of service for ho plr-104485-99 oo ratemaking purposes adjusts the estimated date on which the nuclear_powerplant will no longer be included in the taxpayer's rate base for ratemaking purposes or reduces the amount of decommissioning costs to be included in cost of service for any_tax year and b the taxpayer's most recent request for a schedule of ruling amounts did not provide notice to the service of such action by any public_utility commission sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a tax_year in response to a request for a schedule of ruling amounts that is filed after the deemed deadline date for such tax_year section of the energy policy act of public law act eliminated for tax years beginning after date the investment restrictions contained in sec_468a of the code that section also revised sec_468a by lowering the tax_rate applicable to a nuclear decommissioning fund we have examined the representations and data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely on these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations the commission has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations taxpayer as one of the owners of the plant has calculated its share of the decommissioning costs under sec_1_468a-3 of the regulations taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by the commission and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund plr-104485-99 taxpayer has determined that pursuant to sec_1_468a-3 of the regulations the qualifying percentage is the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the lesser amount of the decommissioning costs applicable to such fund or the ruling applicable to this fund as set forth under sec_1 468a- b of the regulations based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts tax years year each year through the approved schedule of ruling amounts for the commission is being limited to a five year period as a result of the statutory changes made by the act the elimination of the investment restrictions and the reduction of the tax_rate applicable to income earned by the fund may result in a greater after-tax rate of return than was estimated prior to the enactment of the act by the commission which based its determinations as to the approved after-tax rate of return on restricted investments and a higher tax_rate this increased after-tax rate of return would over the life of the fund result in a balance in the fund on the last day of the funding_period that would exceed the amount of decommissioning costs allocable to the fund in order to prevent the excess accumulation in the fund this schedule of ruling amounts is limited to a five year period for the commission approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates pos plr-104485-99 a reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated earlier payments made to such fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it section 6h0 k of the code provides it may not be used or cited as precedent pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours chalus b pennyhoe charles b ramsey chief branch office of assistant chief_counsel passthroughs and special industries me


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 4-plr-117381-00 date date re legend settlor spouse daughter grandchild grandchild trustee trust state date court dear this is in response to your letter of date and prior correspondence in which you request a ruling on the application of the generation- skipping transfer gst tax provisions of chapter of the internal_revenue_code to the proposed modification to trust on date settlor created trust an irrevocable inter_vivos_trust primarily for the benefit of settlor spouse and settlor’s issue article v provides that in the event of illness accident or other misfortune happening to any beneficiary the trustees may in their sole discretion pay out of corpus sums for the care support and medical attention of settlor or any beneficiary of trust plr-117381-00 article vi provides that the trustees are to pay the net_income of trust to settlor for life under article vii on settlor’s death the trustees are to pay the expenses of settlor’s last illness funeral_expenses debts and certain specific bequests article viii provides that after the death of settlor the trustees are to pay a portion of the net_income of trust to two individuals and the remainder of the net_income to spouse article ix provides that upon spouse’s death the trustees are to pay a specific pecuniary amount to a designated educational_institution for the purpose of establishing a scholarship fund article x provides that a portion of the net_income from the remaining trust corpus is to be paid to three individuals and the balance of the net_income is to be paid to daughter at daughter’s death the trustees are to pay the net_income of trust in equal shares to the lawful issue of daughter in the event of the death of any child of daughter leaving issue his or her share of the net_income will be paid to his or her lawful issue per stirpes article xi provides that trust terminates upon the death of the survivor of spouse daughter grandchild and grandchild at the termination of trust the balance of the trust assets will be distributed to the then living lineal_descendants of settlor per stirpes the current income beneficiaries of trust are grandchild and the children of grandchild bank is currently the sole trustee of trust article iii of trust currently provides as follows the said trustees shall not be confined to legal investments for savings banks for the reinvestment of any of the funds of this trust but said trustees shall have the right to invest the trust funds or any part thereof in common stocks preferred stocks and or real_estate provided that no investment in stocks or real_estate shall be made by said trustees unless all of the qualified and acting trustees consent to such investment and provided further that from the time the said bank becomes sole trustee of this trust it shall not have the right to invest to exceed one-third of the corpus of the trust fund in stocks or real_estate but shall have the right to continue to hold all stocks and real_estate forming a part of the corpus of the trust at the time it becomes the sole trustee of this trust trustee believes that the current language of article iii prevents trustee from properly diversifying trust’s investments in order to accomplish the desired diversification trustee will petition the court for an order modifying the administrative provisions in article iii the proposed order would eliminate the restriction contained in article iii limiting investments in stocks or real_estate to no more than one-third of the trust corpus and expand the trustee’s investment powers to permit greater diversification of trust investments article iii as modified would read as follows plr-117381-00 the trustee shall have the following powers with respect to any and all property held under this trust in addition to those powers which may now or in the future be conferred upon the trustee under the laws of state general investment directive to invest and reinvest the trust funds in any kind of property real personal or mixed and every kind of investment appropriate under the then prevailing circumstances specifically including but not limited to corporate obligations of any kind preferred or common stocks shares of investment trusts investment companies and mutual funds notes real_estate bonds debentures mortgages deeds of trust mortgage participations market funds and index funds among the circumstances that are appropriate to consider in investing and managing trust assets are the following a general economic conditions b the possible effect of inflation or deflation c the expected tax consequences of investment decisions or strategies d the role that each investment or course of action plays within the overall trust portfolio e the expected total return from income and the appreciation of capital f the need for liquidity regularity of income and preservation or appreciation of capital and g an asset’s special relationship or special value if any to the purposes of the trust or to one or more of the beneficiaries in exercising the trustee’s powers the trustee shall consider individual investments as part of an overall investment strategy having risk and return objectives reasonably suited to the purpose of the trust the trustee’s investments may include stock in or any common_trust_fund administered by the trustee in making and implementing investment decisions the trustee shall diversify the investments of the trust unless under the circumstances it is prudent not to do so plr-117381-00 income-producing property to continue to hold any income-producing property that the trustee receives or acquires under this trust as long as the trustee deems advisable unproductive property to retain purchase or acquire unproductive property stock and securities powers to have all rights powers and privileges of an owner of the securities held in trust including but not limited to the right to vote give proxies and pay assessments to participate in voting trusts pooling agreements foreclosures reorganizations consolidations mergers liquidations sales and leases and in connection with such participation to deposit securities with and transfer title to any protective or other committee as the trustee may deem advisable and to exercise or to sell stock subscriptions or conversion rights real and personal property-general powers to manage control grant options on sell for cash or on deferred payments with or without security convey exchange partition divide improve repair and otherwise exploit and develop all real and personal trust property leases of trust property to lease trust property for terms within or beyond the term of the trust and for any purpose including but not limited to exploration for and removal of gas oil and other minerals and to enter into community oil leases pooling and unitization agreements you have requested a ruling that if the trustee obtains the proposed court order modifying trust to expand the trustee’s powers relative to investment decisions trust will remain exempt from the application of the gst tax as a_trust that was irrevocable on date that there have been no actual or constructive additions to trust after that date you represent that trust was created before date and sec_2601 imposes a tax on every generation-skipping_transfer section b a of the tax_reform_act_of_1986 the act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations provide that the generation-skipping_transfer_tax shall not apply to any generation-skipping_transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added plr-117381-00 sec_26_2601-1 provides that any trust in existence on date will be considered an irrevocable_trust except as provided in sec_26_2601-1 b or c relating to property includible in the grantor’s gross_estate under sec_2038 and sec_2042 sec_26_2601-1 provides that if an addition is made after date to an irrevocable_trust which is excluded from the application of chapter by b a of the act a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the provisions of chapter a modification of a generation-skipping_trust that is otherwise exempt from gst tax under b of the act will generally result in a loss of its exempt or grandfathered status if the modification changes the quality value or timing of any powers beneficial interests rights or expectancies originally provided for under the terms of the trust in this case trust was created and irrevocable before date also it is represented that no additions have been made to trust since date consequently trust is currently exempt from gst tax we conclude that the proposed modification to article iii pursuant to the court order revising the trustee’s investment powers is administrative in nature and will not change the quality value or timing of any power beneficial_interest right or expectancy originally provided for under the terms of trust in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to the taxpayer this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours george masnik chief branch office of the associate chief_counsel passthroughs and special industries enclosure copy for purposes cc


office_of_chief_counsel internal_revenue_service memorandum number release date cc ita lfnolanii postf-145178-06 uilc date date to associate area_counsel cc sb8 tho from jeffery g mitchell chief cc ita ------------------------------------------------- subject this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend taxpayer taxpayer’s address brokerage firm investment plan --------------------- ----------------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ------------------------------------- --------------------------------------------------------------------------------- x issues ------ is a flat fee paid to a stockbroker for investment services a carrying_charge under sec_1_266-1 of the income_tax regulations postf-145178-06 if the conclusion in issue is yes may taxpayer elect to capitalize this flat fee to a capital_account conclusions a flat fee paid to a stockbroker for investment services is not a carrying_charge under sec_1_266-1 because our holding in issue is no we do not address issue facts on date taxpayer and brokerage firm entered into a contract entitled investment plan under this contract brokerage firm agreed to act as a discretionary investment_advisor and a custodian for the assets held in taxpayer’s account among other things brokerage firm agreed to review and evaluate taxpayer’s investment objectives and to hire an unaffiliated manager manager to invest all or a portion of the assets in taxpayer’s account in return taxpayer agreed to pay brokerage firm an annual fee of x percent of the market_value of the assets in taxpayer’s account flat fee payable at the beginning of each calendar_quarter the flat fee is a substitute for the following fees or charges otherwise payable by taxpayer brokerage commissions payable to brokerage firm compensation payable to taxpayer’s brokerage firm financial consultant custodian charges payable to brokerage firm and a fee payable to the manager of taxpayer’s account on the year-end summary statement issued to taxpayer brokerage firm shows its quarterly withdrawals of the flat fee from taxpayer’s account each quarterly withdrawal is described as being for consulting and advisory services law sec_266 of the internal_revenue_code provides in part that no deduction shall be allowed for amounts paid_or_accrued for such carrying charges as under regulations prescribed by the secretary are chargeable to capital accounts with respect to property if the taxpayer elects in accordance with such regulations to treat such charges as so chargeable sec_1_266-1 of the income_tax regulations states that the items enumerated in paragraph b of sec_1_266-1 may be capitalized at the election of the taxpayer thus carrying charges with respect to property of the type described in sec_1 b are chargeable to a capital_account at the election of the taxpayer notwithstanding that they are otherwise expressly deductible under provisions of subtitle a of the code no deduction is allowable for any item so treated sec_1_266-1 provides that the taxpayer may elect as provided in paragraph c of sec_1_266-1 to treat the items enumerated which are otherwise expressly deductible under the provisions of subtitle a of the code as chargeable to a capital postf-145178-06 account either as a component of original cost or other basis for the purposes of sec_1012 or as an adjustment to basis for the purpose of sec_1016 as illustrative of the items for which sec_266 permits elective capitalization sec_1_266-1 provides that in the case of personal_property a taxes of an employer measured by compensation_for services rendered in transporting machinery or other fixed assets to the plant or installing them therein b interest on a loan to purchase such property or to pay for transporting or installing the same and c taxes of the owner thereof imposed on the purchase of such property or on the storage use or other consumption of such property paid_or_incurred up to the date of installation or the date when such property is first put into use by the taxpayer whichever date is later finally sec_1_266-1 states in part that any other carrying charges with respect to property otherwise deductible which in the opinion of the commissioner are under sound accounting principles chargeable to a capital_account may be capitalized sec_1_266-1 provides that the sole effect of sec_266 is to permit the items enumerated in subparagraph of sec_1_266-1 to be chargeable to a capital_account notwithstanding that such items are otherwise expressly deductible under the provisions of subtitle a of the code sec_1_266-1 expressly provides that an item not otherwise deductible may not be capitalized under sec_266 sec_1_266-1 cautions that in the absence of a provision in sec_1_266-1 for treating a given item as a capital item sec_1_266-1 has no effect on the treatment otherwise accorded such item thus items which are otherwise deductible are deductible notwithstanding the provisions of sec_1_266-1 and items which are otherwise treated as capital items are to be so treated similarly an item not otherwise deductible is not made deductible by this section nor is the absence of a provision in this section for treating a given item as a capital item to be construed as withdrawing or modifying the right now given to the taxpayer under any other provisions of subtitle a of the code or of the regulations thereunder to elect to capitalize or to deduct a given item analysis sec_1_266-1 permits a taxpayer to elect to capitalize a deductible expense if that expense qualifies under the applicable subcategory the flat fee paid to brokerage firm does not qualify under any of the first three subcategories ie sec_1_266-1 ii and iii which concern unimproved and unproductive real_property real_property whether improved or unimproved and whether productive or unproductive and postf-145178-06 tangible_personal_property furthermore the flat fee does not qualify as a tax under the fourth subcategory ie sec_1_266-1 thus taxpayer may not elect to capitalize the flat fee under sec_1_266-1 unless the fee is an otherwise deductible carrying_charge that in the commissioner’s opinion is chargeable to a capital_account under sound accounting principles therefore assuming for the purposes of this analysis that a flat fee denoted consulting and advisory services is deductible in the taxable_year paid_or_incurred we must decide whether it is a carrying_charge and if so whether it is chargeable to a capital_account under sound accounting principles the term carrying_charge is not defined in sec_266 or in its regulations but definitions of similar terms appearing in sec_163 and sec_263 suggest that carrying charges are expenses_incurred when acquiring financing and holding property for example sec_163 permits a buyer to claim an interest_deduction at the rate of six percent when the total amount of the payments under an installment contract exceeds the purchase_price of the property and the contract does not specify an annual rate of interest in these instances the excess of the total payments over the purchase_price of the property is denoted carrying charges and the amount of the taxpayer’s interest_deduction may not exceed those carrying charges similarly sec_263 defines interest_and_carrying_charges as the sum of interest on indebtedness incurred or continued to purchase or carry the personal_property and all other_amounts including charges to insure store or transport the personal_property paid_or_incurred to carry the personal_property thus under sec_263 carrying charges are charges other than interest_paid or incurred to carry personal_property see also black’s law dictionary 8th ed which defines carrying_charge as a cost in addition to interest_paid to a creditor for carrying installment credit and expenses incident to property ownership such as taxes and upkeep although the service has not ruled on what qualifies as a capitalizable carrying_charge under sec_1_266-1 it has ruled on what qualifies as a capitalizable cost under related sections for example the service ruled that undeveloped oil_and_gas leases are unproductive real_property and that a lessee may elect to capitalize delay rentals because the payment of delay rentals extends the period in which the lessee may drill wells for the production of oil_and_gas revrul_55_118 1955_1_cb_320 on the other hand the service ruled that advertising expense incurred for unproductive property and maintenance and upkeep costs attributable to improved unproductive real_property and real_property that is both unimproved and unproductive are not carrying charges revrul_71_475 1971_2_cb_304 finally the service ruled that direct reforestation costs such as planting and artificial or natural seeding are capital expenditures subject_to depreciation while indirect expenditures such as interest_paid on money borrowed to satisfy a state law requiring a deposit to guarantee natural reforestation over a specified period of years in lieu of planting or a service charge on a performance bond in lieu of a cash deposit may be treated as current deductions subject_to an election under sec_266 revrul_75_467 1975_2_cb_93 moreover in a case decided before the enactment of sec_263a the tax_court held that margin interest is a carrying_charge and that the taxpayer may not elect to capitalize margin interest under postf-145178-06 sec_1_266-1 because capitalizing interest to the basis of purchased stock does not accord with sound accounting principles 65_tc_1165 other courts also have provided general guidance concerning whether a payment is an ordinary and necessary business_expense or a capitalizable cost and thus whether an otherwise deductible expense should be capitalized under sound accounting principles for example reversing the tax_court one appellate court held that payments by a publisher to an independent_contractor for the production of a manuscript are capitalized costs 685_f2d_212 7th cir a different appellate court sustained the tax court’s determinations that monthly retainer fees paid for investment advisory services are currently deductible under sec_212 but that a one-time fee paid only if the taxpayer invested in a limited_partnership is part of the cost of acquiring that limited_partnership_interest ie a capitalized cost 722_f2d_1462 9th cir considering the previously described provisions of the code and regulations revenue rulings and court opinions we believe that the flat fee denoted consulting and advisory services is not a carrying_charge under sec_1_266-1 this flat fee is not interest_expense incurred under an installment contract but even if it were it would not be capitalizable under sec_1_266-1 purvis v commissioner supra fees for consulting and advisory services are better viewed as currently deductible investment_expenses honodel v commissioner supra consulting and advisory fees are not carrying charges because they are incurred independent of a taxpayer’s acquiring property and because they are not a necessary expense of holding property stated differently consulting and advisory fees are not closely analogous to common carrying costs such as insurance storage and transportation see eg sec_263 having decided that the flat fee denoted consulting and advisory services is not a carrying_charge we find it unnecessary to decide whether it is chargeable to capital_account under sound accounting principles case development hazards and other considerations --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- postf-145178-06 this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions lewis j fernandez associate chief_counsel income_tax accounting by _____________________________ jeffery g mitchell chief branch income_tax accounting


internal_revenue_service number release date index number - ---------------------------------- ------------------------ -------------------------- -------------------- ------------------- ------------------------ department of the treasury washington dc person to contact ------------------------------- -------- ------------- ----------------------------------------------------- telephone number --------------------- refer reply to cc psi plr-140485-06 date date -------------- ----------------------- ------------------------- legend x country date dear ------------------- correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an election to be treated as a disregarded_entity country was organized by a single owner with limited_liability on d1 x intended to be treated as a disregarded_entity for federal tax purposes effective d1 however x did not timely file a form_8832 entity classification election according to the information submitted x an entity formed under the laws of this letter responds to a letter dated date and subsequent sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 plr-140485-06 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes under sec_301_7701-3 except as provided in sec_301 b unless it elects otherwise a foreign eligible_entity is classified as an association if all members have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a sec_301_7701-3 provides that an election under sec_301_7701-3 member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member will be effective on the date specified on form_8832 or on the date filed if no such date is specified on the form the effective date specified on form_8832 cannot be more than days prior to the date the form is filed and cannot be more than months after the date on which the form is filed 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 six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for sec_301_9100-3 sets forth the standards the commissioner will use to making certain elections determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 and elect to be treated as a disregarded_entity for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 the federal tax consequences of the transaction described above under any other provision of the code except as specifically set forth above no opinion is expressed or implied as to based on the facts submitted and representations made we conclude that the plr-140485-06 sec_6110 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer on whose behalf it was requested in accordance with the power_of_attorney on file with this office a copy of this sincerely letter is being sent to x’s authorized representatives enclosures william p o’shea associate chief_counsel passthroughs and special industries copy of this letter copy for sec_6110 purposes


a internal_revenue_service department of the treasury washington oc contact person telephone number in reterence to op e ep t date ear y uniform issue list att‘n legend corporation a corporation b plan x plan y fund m dear the in reply to your ruling_request of july your behalf by this is your authorized representative submitted on proposed regarding the request was supplemented amendments to plan x and plan y april by letters dated october the following september facts and representations have been submitted by your authorized representative date and november consequences federal_income_tax of effective corporation b x a subsidiary of corporation a established effective plan are qualified under september plan x and plan y sec_401 of the internal_revenue_code each has an employee stock ownership esop feature as defined and under december plan plan e internal revenue section and y code plan the and of y x page sec_407 of the employee_retirement_income_security_act_of_1974 erisa and a non-esop feature for highly under plan x and plan y employees are permitted to make the maximum employee pre- pre-tax and after-tax contributions tax contribution_percentage is of eligible compensation_for highly compensated employees and for non highly_compensated_employee contributions cannot exceed of eligible employees compensation employee contributions which are eligible to be matched range from to for employees with more than but less than years of for employees with years or more of service and is service contributed is contributed to the esop account of each employee in addition each participating employer makes a contribution of shares of corporation each at least participating employee on active payroll who has years_of_service as of april of each plan_year twenty-five to non-esop portion amount compensated employees matched percent account common other stock esop the the the and the of to to of a under the terms of plan x and plan y employees elect to invest their contributions and account balances in a combination of several funds including fund m which consists solely of corporation a common_stock one or corporation a proposes amending and continuing plan x and plan y so that effective date fund m under the non- esop portion of plan x and plan y will be added to the existing esop portions of plan x and plan y and will constitute an esop described in sec_4975 the term esop account as used herein refers to any participant’s account established pursuant to sec_4975 of the code to which corporation a stock has been allocated of the code also effective date corporation a is amending plan x and plan y to provide that any cash dividends_paid with respect to corporation a stock allocated to the participants’ esop accounts will be distributed to participants as follows plan x and plan y will provide that on of each the esop dividends are paid that the amount of such dividends may be distributed from the plans to the participants if elected by the administrative committee plans x and y will provide that the administrative committee may elect to either or before march following the close year plan_year that of distribute the amount of all esop dividends for the all beneficiaries plan_year to plan while all participants and simultaneously individual providing all 19ygviu page participants and all individual beneficiaries an option to decline receipt of such dividends or to distribute the amount of all esop dividends for the plan_year to each participant and each beneficiary who elects to receive such dividends such election to be provided to all participants and all beneficiaries the total amount contributed pursuant to an employee’s election under sec_401 of the code to plan x and plan y will not exceed the amount allowed pursuant to sec_402 and total annual_additions will not exceed the limits under sec_415 of the code procedurally esop dividends will be paid directly to the trustee of plan x and plan the trustee of plan x and plan y the participants directly by and distributed to corporation proposes that all a y the appropriate forms will be issued in regard to the above described dividend distributions based on the foregoing the dividends_paid on corporation a stock held by plan x and plan y to the that are paid directly in cash to the participants or trustee to the participants within days of the close of the plan_year will be deductible by corporation a in the year distributed or paid under sec_404 of the code you request a distributed ruling plan then plan that and of or x y sec_404 of the code provides that in the case of a corporation a taxable_year the amount of any applicable_dividend paid in cash such corporation during the taxable_year with respect to by applicable_employer_securities in addition to the deductions allowed under sec_404 such deduction is a deduction for be allowed as there shall sec_404 of the code provides in relevant part that the term applicable_dividend means any dividend which in accordance with the plan provisions is paid to the plan and is distributed in cash to the participants in the plan or their beneficiaries not later than days after the close of the plan_year in which paid sec_404 of the code provides that for purposes of this subsection with respect to any dividend employer_securities which are held on the record_date for such dividend by an employee stock ownership applicable_employer_securities means page the corporation paying such plan which is maintained by dividend or a controlled_group_of_corporations within the meaning of sec_409 which includes such corporation any other corporation which is a member of b a - sec_1_404_k_-1t the temporary income_tax regulations provides that the deductibility of dividends_paid to plan participants under section not affected by a plan provision which permits participants to elect to receive or not receive payment of dividends k code q a the of of is sec_404 of the code provides secretary may disallow the deduction under paragraph dividend constitutes in substance an evasion of taxation determined secretary that such the if that the for any dividend a based upon your representations the subject dividends on company esop accounts will be paid to the plan participants within days of the close of the plan_year if they do not elect to have the dividends retained in plan xx participants’ allocated stock plan the to we conclude accordingly on corporation a stock held by plan x and plan y that are paid directly in cash to the participants or to the trustee of plan x or plan y and then distributed to the participants within days be deductible by corporation a the year distributed or paid under sec_404 of the code dividends close year that plan paid will the the the in of of the above ruling is based on the assumption that plan x and plan y will be qualified under sec_401 sec_401 sec_409 and as applicable and the related trust sec_4975 of the code will be tax exempt under sec_501 at the time that the above transaction takes place are assuming that the subject shares allocated to the participants’ plan xx and plan y accounts are applicable_employer_securities within the meaning of sec_404 the subject we are not expressing any opinion as to whether the dividends language the requirements of sec_401 sec_401 or sec_4975 of the code in addition we with respect to particular amendment conforms any of to is also this ruling the proposed dividend does not constitute in substance an evasion of taxation within the meaning of sec_404 of the code to whether or not the disallowance of deductions provided for in that section would be applicable here we are expressing no opinion as assumption that based the on page l92guugs a copy of sent to your authorized representative in accordance with a power_of_attorney on file in this office this letter has been sincerely yours lacey i f loa frances v sloan chief employee_plans technical branch enclosures deleted copy of letter notice of intention to disclose ce