t c memo united_states tax_court yrc regional transport inc and subsidiaries f k a usf corporation and subsidiaries petitioner v commissioner of internal revenue respondent docket no filed date howard j levine richard alan levine and libin zhang for petitioner deborah h delgado and r scott shieldes for respondent memorandum opinion kerrigan judge this case is before the court on petitioner’s motion for summary_judgment filed under rule upon the question of whether the tax_court has jurisdiction over a duplicate refund made to petitioner respondent objects to the motion on date respondent issued petitioner a notice_of_deficiency increasing petitioner’s tax_liability by dollar_figure for tax_year in respondent’s amended answer respondent asserts that petitioner’s deficiency should be increased to dollar_figure disallowing fully a dollar_figure refund issued to petitioner on date regarding the motion for summary_judgment petitioner disputes only respondent’s characterization of the date refund as a rebate refund 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 we round all monetary amounts to the nearest dollar background the following facts are not in dispute petitioner’s principal_place_of_business was in kansas when it filed the petition in date petitioner was acquired by yrc worldwide inc subsidiaries yrc worldwide yrc worldwide reported a net_operating_loss on its form_1120 u s_corporation income_tax return its consolidated_return for tax_year yrc the new deficiency represents an increase of dollar_figure from the dollar_figure deficiency determined in the notice_of_deficiency worldwide carried back a portion of that net_operating_loss to tax_year for petitioner in petitioner was known as usfreightways corp subsidiaries on date yrc worldwide filed a form_1139 corporation application_for tentative refund requesting a dollar_figure tentative refund for petitioner’s tax_year attributable to yrc worldwide’s net_operating_loss_carryback on date respondent issued to petitioner a dollar_figure refund check of which dollar_figure was a tentative refund of corporate_income_tax for petitioner’s tax_year and dollar_figure was net overpayment interest petitioner received and deposited this refund check the parties agree that the date refund was a rebate refund within the definition of sec_6211 at a time not apparent from the record respondent processed the form_1139 a second time on date respondent issued to petitioner a dollar_figure refund check of which dollar_figure was a tentative refund of corporate_income_tax for petitioner’s tax_year and dollar_figure was net overpayment interest petitioner received and deposited this refund check since petitioner has also been known as usf corp subsidiaries yrc worldwide also filed two forms requesting tentative refunds of dollar_figure and dollar_figure for subsidiaries yellow corp subsidiaries and roadway express respectively neither petitioner nor yrc worldwide filed an independent claim for petitioner’s tax_year that would have resulted in the two tax_refund payments of dollar_figure plus interest issued to petitioner on date and date at a time not apparent from the record respondent decreased yrc worldwide’s net_operating_loss for tax_year because of this decrease respondent determined that dollar_figure of yrc worldwide’s net_operating_loss_carryback as attributed to petitioner’s tax_year should be disallowed in the notice_of_deficiency respondent determined that this disallowance resulted in a deficiency of dollar_figure for petitioner’s tax_year in the amended answer however respondent requests that petitioner’s deficiency for tax_year be increased from dollar_figure to dollar_figure so as to disallow the double nol deduction that arises from a duplicate processing of a tentative refund i summary_judgment discussion summary_judgment may be granted where the pleadings and other materials show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir the burden is on the moving party in this case petitioner to demonstrate that there is no genuine dispute as to any material fact and that he or she is entitled to judgment as a matter of law 116_tc_73 in considering a motion for summary_judgment we view evidence in the light most favorable to the nonmoving party 100_tc_32 the nonmoving party may not rest upon the mere allegations or denials of his or her pleading but must set forth specific facts showing there is a genuine dispute for trial sundstrand corp v commissioner t c pincite respondent has failed to show that there is a genuine dispute for trial as discussed below respondent contends merely that the second processing was sufficient to render the date refund a rebate refund consequently we conclude there is no dispute as to any material fact and that a decision may be rendered as a matter of law ii rebate refunds and nonrebate refunds the internal_revenue_code recognizes two types of refunds rebate and nonrebate 49_f3d_340 7th cir aff’g 839_fsupp_1321 c d ill acme steel co v commissioner t c memo slip op pincite rebate refunds are issued on the basis of a substantive recalculation of a taxpayer’s tax_liability eg the amount of tax due is less than the tax_shown_on_the_return acme steel co v commissioner slip op pincite see sec_6211 if the recalculation of tax_liability is correct the taxpayer may retain the refund however if the recalculation of tax_liability is incorrect the commissioner must recover the erroneous refund acme steel co v commissioner slip op pincite rebate refunds issued in error may be recovered through the deficiency procedures of sections or an action for recovery_of an erroneous refund under sec_7405 id nonrebate refunds on the other hand bear no relation to a recalculation of tax_liability and they are often issued to taxpayers because of clerical or computer errors id slip op pincite see also o’bryant f 3d pincite examples of nonrebate refunds include those issued because the commissioner credited a taxpayer’s payment twice or because the commissioner applied a payment to the wrong tax_year acme steel co v commissioner slip op pincite o’bryant dealt with a nonrebate refund in o’bryant f 3d pincite the court_of_appeals for the seventh circuit held that the refund at issue was a nonrebate refund because it was paid_by reason of an accounting error by the commissioner the refund in that case was caused by the commissioner’s crediting a payment twice to the taxpayers’ account o’bryant f_supp pincite in making its decision the court_of_appeals emphasized the fundamental difference in character between rebate and nonrebate refunds refunds issued by the commissioner by accident are nonrebate refunds while rebate refunds are issued because of the taxpayer’s tax_liability o’bryant f 3d pincite see also 63_f3d_83 n 1st cir the commissioner may recover a nonrebate refund only under sec_7405 or under administrative collection procedures if those are available clark f 3d pincite acme steel co v commissioner slip op pincite clayton v commissioner tcmemo_1997_327 slip op pincite aff’d without published opinion 181_f3d_79 1st cir the deficiency procedures are not available to the commissioner to recover nonrebate refunds because of the definition of deficiency in sec_6211 acme steel co v commissioner slip op pincite sec_6211 provides that a deficiency is the amount by which the tax actually imposed exceeds-- sec_7405 authorizes the united_states to recover erroneous nonrebate refunds pursuant to a civil suit but such a suit ordinarily must be filed within two years after the making of the refund sec_6532 see also clayton v commissioner tcmemo_1997_327 slip op pincite aff’d without published opinion 181_f3d_79 1st cir the sum of a the amount shown as the tax by the taxpayer upon his return if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon plus b the amounts previously assessed or collected without assessment as a deficiency over-- the amount of rebates as defined in subsection b made in lesinski v commissioner tcmemo_1997_234 we held that we do not have jurisdiction over nonrebate refunds see also acme steel co v commissioner slip op pincite iii the date refund the parties agree that there is no dispute as to whether the date refund was a duplicate tentative refund of corporate_income_tax for petitioner’s tax_year they dispute only whether the second processing that occurred was sufficient to render the date refund a rebate refund the issue is whether the date refund was issued to petitioner on the basis of a substantive recalculation of tax_liability making it a rebate refund or because of clerical or computer errors making it a nonrebate refund for the reasons discussed below we find that a clerical_error occurred rather than a substantive recalculation of petitioner’s tax_liability as discussed above the parties agree that the date refund was a rebate refund the date refund was made close to days from the date on which yrc worldwide filed the form_1139 for petitioner see sec_6411 within days after the date of the application_for a tentative_carryback_adjustment the secretary shall make a limited examination of the application and shall make a refund if appropriate within that 90-day period see also 78_tc_100 holding that a refund may still be a rebate refund even if the commissioner issued it more than days from the date of the application on the date refund check respondent wrote to signify tax_year and int big_number respondent has provided two documents that clarify what happened during the second processing first respondent provided a declaration by the lead revenue_agent assigned to the corporate_income_tax examination of yrc worldwide and its subsidiaries the declaration included a copy of yrc worldwide’s form_1139 for petitioner on the copy of the form_1139 the lead revenue_agent wrote per michele irs stated over a month mo ago that the refund is being paid however the refund not sic received transcript reflects pending payment pincite the lead revenue_agent was referring to michele legg to whom yrc worldwide gave a power_of_attorney second respondent provided a form_3753 manual refund posting voucher that an internal_revenue_service irs employee completed on date the manual refund posting voucher is for a refund of dollar_figure to be issued to petitioner of which dollar_figure is principal and dollar_figure is interest on the form the irs employee wrote 5330-po under form number under reason she checked tentative carry back and other 42nd day is past under evidence of credit condition she checked transcript of account we note that the internal_revenue_manual acknowledges that manual refunds have potential for erroneous duplicate refunds internal_revenue_manual irm pt date see also id pt date noting that m anual refund is exception sic processing and has a greater margin for error these documents show that respondent did not substantively recalculate petitioner’s tax_liability for tax_year respondent’s transcripts for petitioner’s tax_year also show that respondent did not substantively recalculate petitioner’s tax_liability a form_4340 certificate of assessments payments and other specified matters for petitioner’s tax_year states as follows explanation of transactions prior tax abated interest due taxpayer refund cancelled refund check refund interest correction interest due taxpayer refund interest due taxpayer assessment other debts reversal big_number big_number dollar_figure big_number dollar_figure dollar_figure big_number dollar_figure big_number date an official irs non-master-file transcript for petitioner’s tax_year shows the same activity occurring in the same manner thus the record does not reflect that the date refund was the result of a substantive recalculation of tax_liability the difference in the refund amounts is attributed to accrued interest the record convinces us that the date refund was a clerical_error the manual refund posting voucher shows that an irs employee manually issued the second refund using a form 5330-po and based the refund on petitioner’s transcript of account we note that neither petitioner’s tax_liability for tax_year nor the amount of tentative carryback refund requested changed between date when the first refund was issued and date on the manual refund posting voucher the irs employee wrote that the relevant form number was 5330-po likewise on the date refund check respondent wrote f5330 form_5330 return of excise_taxes related to employee_benefits plans deals with excise_taxes and not tentative carryback refunds consequently we hold that the date refund was a nonrebate refund respondent may not use this deficiency procedure to recover the date refund see acme steel co v commissioner slip op pincite lesinski v commissioner slip op pincite respondent may pursue recovery under sec_7405 in a district_court or under administrative collection procedures if either of those is available see clayton v commissioner slip op pincite lesinski v commissioner slip op pincite we will grant petitioner’s motion for summary_judgment the record reflects that this discrepancy confused petitioner in a memorandum to petitioner’s file dated date ms legg stated that they thought at first that the date refund check was related to the form_1139 but that upon further review the coding on the check convinced them that the refund check was related to excise_tax ms legg was not sure who filed a form_5330 to request an excise_tax refund any contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing an appropriate order and decision will be entered


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-128138-18 date date legend x ----------------------------------------- -------------------------------------------------------- y ----------------------------------------- ---------------------------------------------------------- z a b c p1 --------------------------------- --------------------------- --------------------------------- ------------------------------------------- ----------------------------------------------- p2 ----------------------------------------- ----------------------------------------------------------- p3 --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- sec_1 ----------------------------------------- ------------------------------------------------------------------------------- sec_2 ---------------------------------------------------------------------------- plr-128138-18 d1 d2 d3 d4 d5 d6 d7 ------------------ ------------------- --------------------- -------------------------- --------------------- --------------------- ------------------------- year1 year2 year3 year4 ------ ------ ------ ------ state1 ----------- state2 ------------ dear --------------- this is in response to a letter dated date and supplemental information filed on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation for federal tax purposes facts according to the information submitted y was formed under the laws of state1 on d1 under former name a in year1 a changed its name to b in year2 p1 acquired b and z on d2 b changed its name to c on d3 c changed its name to y and at the same time z changed its name to sec_1 and p1 merged into p2 a newly formed entity with p2 surviving the merger plr-128138-18 on d4 sec_2 was formed under the laws of state2 on d5 y was merged into sec_2 with sec_2 surviving the merger in a transaction under sec_368 immediately following the merger sec_2 was converted into a single member llc under the laws of state2 and changed its name to x retaining the ein of y on d5 immediately following the conversion p2 transferred of x to sec_1 immediately thereafter sec_1 transferred of x to p3 a newly formed entity after the d5 transactions p2 owned of sec_1 and p3 owned of x on d6 p3 was liquidated into sec_1 in a transaction under sec_332 after the liquidation p2 owned of sec_1 and sec_1 owned of x x represents that although it should have been treated as a disregarded_entity for tax purposes x was included on p2’s consolidated_returns for year3 and thereafter following the liquidation on d6 x intended to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d7 however x inadvertently failed to timely file form_8832 entity classification election to be treated as an association_taxable_as_a_corporation for federal tax purposes x represents that it has filed its federal_income_tax returns consistent with the relief requested for year4 and thereafter that no hindsight is involved and that the interests of the government will not be prejudiced if relief is granted law and analysis 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 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides that an eligible_entity may elect to classified other than as provided under sec_301_7701-3 by filing form_8832 with the service_center designated on the form sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_7701-3 provides that such an election must be signed by either a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organization documents to make the election and who represents to having such authorization under penalties of perjury sec_301_7701-3 provides that if an election is to have a retroactive effective date each person who was an owner between the date the election is to be effective and the date the election is plr-128138-18 filed and who is not an owner at the time the election is filled must also sign the election under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the 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 make an election to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d7 x must make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-128138-18 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely holly porter associate chief_counsel passthroughs special industries by david r haglund david r haglund branch chief branch office of the chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court warren d ward petitioner v commissioner of internal revenue respondent docket no 13066-05s filed date warren d ward pro_se gavin l greene for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_6330 and sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure this proceeding arises from a petition for judicial review filed in response to a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination issued to petitioner in date and supplemented in date pursuant to sec_6330 petitioner seeks review of respondent’s determination sustaining a proposed levy for the taxable years and after concessions the issues for decision are whether respondent correctly determined petitioner’s underlying tax_liability for the years at issue and whether respondent abused his discretion by sustaining the proposed levy the parties filed cross-motions for summary_judgment pursuant to rule a for the reasons discussed below we shall grant respondent’s motion and deny petitioner’s motion petitioner resided in whittier california when the background petition was filed during the years at issue petitioner worked for viking freight inc viking freight which was later acquired by fedex petitioner filed a federal_income_tax return for respondent concedes unreported income of dollar_figure and dollar_figure for and respectively and an addition_to_tax under sec_6651 for although petitioner attached a form_w-2 wage and tax statement showing that petitioner earned dollar_figure from viking freight the return reports no income and no tax_liability because petitioner did not file a federal_income_tax return for or respondent prepared substitutes for returns for those years based on forms w-2 and other third-party information documents respondent assessed a dollar_figure civil penalty against petitioner under sec_6702 for filing a frivolous tax_return for respondent also determined a deficiency in income_tax for each of the years and and issued petitioner separate notices of deficiency for each year petitioner did not petition the court in response to any of the notices respondent assessed the tax reflected in the notices of deficiency and on the same dates as the assessments were made issued petitioner statutory notices of balance due after petitioner failed to make payment respondent issued a notice_of_intent_to_levy petitioner timely submitted a form request for a collection_due_process_hearing petitioner’s case was assigned to a settlement officer who conducted an administrative hearing with petitioner by correspondence the settlement officer considered both the civil all dollar amounts are rounded to the nearest dollar the notice_of_intent_to_levy also included civil penalties assessed under sec_6702 for the taxable years through penalty and the income_tax liabilities that had been assessed the settlement officer ultimately concluded that the proposed levy should be sustained respondent issued a notice_of_determination with respect to the civil penalty and a separate notice_of_determination for the income_tax liabilities petitioner filed a timely petition with the court by order dated date we dismissed this case for lack of jurisdiction to the extent petitioner sought review of the notice_of_determination concerning the civil penalty the order makes clear that we have jurisdiction only with respect to the notice_of_determination that addresses petitioner’s income_tax liabilities after a hearing in date we remanded this case to respondent’s office of appeals and petitioner’s case was assigned to a different settlement officer the settlement officer provided petitioner with several documents including our jurisdiction to review the commissioner’s collection activity requires that we have jurisdiction over the underlying type of tax involved 127_tc_68 and historically we have not had jurisdiction to review the sec_6702 penalty 115_tc_324 on date congress enacted the pension_protection_act of the act publaw_109_280 120_stat_780 the act amends sec_6330 to give the tax_court jurisdiction to review the commissioner’s collection activity regardless of the underlying type of tax involved however the amendment to sec_6330 is effective only for determinations made after date act sec_855 120_stat_1019 because the determination in this case was made before that date we lack jurisdiction to review the sec_6702 penalty forms certificate of assessments payments and other specified matters for the years at issue the settlement officer requested that petitioner submit inter alia tax returns for and and a form 433-a collection information statement for wage earners and self-employed individuals although the parties exchanged correspondence over the next few months petitioner did not provide the requested information respondent issued petitioner a supplemental notice_of_determination concerning collection action s under sec_6320 and or supplemental notice on date the supplemental notice sustains the proposed levy and states that applicable legal and administrative requirements were met in date the parties filed cross-motions for summary_judgment respondent and petitioner each filed an objection and petitioner filed a reply to the objection discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 summary_judgment may be granted with respect to all or any part of the legal issues in controversy if the pleadings answers to interrogatories depositions admissions and any other acceptable materials respondent had filed an earlier motion for summary_judgment on date which we denied without prejudice together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule a and b 98_tc_518 affd 17_f3d_965 7th cir 85_tc_527 the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences will be read in a manner most favorable to the party opposing summary_judgment 85_tc_812 79_tc_340 because we find there is no genuine issue of material fact summary_judgment is appropriate sec_6331 authorizes the secretary to levy upon property and property rights of a taxpayer liable for taxes who fails to pay those taxes within days after a notice_and_demand for payment is made sec_6331 provides that the levy may be made only if the secretary has given written notice to the taxpayer days before the levy sec_6330 requires the secretary to send a written notice to the taxpayer of the amount of the unpaid tax and of the taxpayer’s right to a sec_6330 hearing at least days before the levy is begun if a sec_6330 hearing is requested the hearing is to be conducted by the office of appeals and the appeals officer conducting it must verify that the requirements of any applicable law or administrative procedure have been met sec_6330 and c the taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy sec_6330 the taxpayer also may raise challenges to the existence or amount of the underlying tax_liability at a hearing if the taxpayer did not receive a statutory_notice_of_deficiency with respect to the underlying tax_liability or did not otherwise have an opportunity to dispute that liability sec_6330 122_tc_1 this court has jurisdiction under sec_6330 to review the commissioner’s administrative determinations sec_6330 122_tc_287 where the validity of the underlying tax_liability is properly at issue we review the determination de novo where the underlying tax_liability is not at issue we review for abuse_of_discretion 114_tc_604 114_tc_176 i the underlying tax_liability respondent concedes that the underlying tax_liability is properly at issue in the notices of deficiency respondent while copies of the notices of deficiency were attached to respondent’s pleadings respondent was unable to produce evidence that petitioner received the notices accordingly respondent considered the underlying tax_liability at the administrative hearing and agrees that petitioner may raise the issue in this proceeding see sec_6330 determined that petitioner had unreported wage income for each of the years at issue for the taxable years and respondent also determined additions to tax under sec_6651 and sec_6654 a unreported income gross_income includes all income from whatever source derived including compensation_for services sec_61 in general the commissioner’s determinations set forth in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of showing that the determinations are in error rule a 290_us_111 under certain circumstances the burden_of_proof as to factual matters shifts to the commissioner sec_7491 however petitioner has neither alleged that sec_7491 applies nor established his compliance with the requirements of sec_7491 and b to substantiate items maintain records and cooperate fully with respondent’s reasonable requests petitioner therefore bears the burden_of_proof but for the provisions of sec_7463 this case would be appealable to the court_of_appeals for the ninth circuit_court of appeals see sec_7482 we therefore follow the law of that court 54_tc_742 affd 445_f2d_985 10th cir in order for the presumption of correctness to apply in a case involving unreported income the court_of_appeals has held that the commissioner must show some minimal evidence linking the taxpayer to the source of that income 116_f3d_1309 9th cir although it is unclear whether continued petitioner does not deny that he worked for viking freight during the years at issue or that he received compensation_for his services in fact petitioner attached a form_w-2 from viking freight to his tax_return petitioner’s payroll records for and likewise indicate that petitioner received wage income in the amounts shown in the notices of deficiency respondent’s determination on this issue is sustained b addition_to_tax under sec_6651 if a federal_income_tax return is not timely filed an addition_to_tax will be assessed unless it is shown that such failure is due to reasonable_cause and not due to willful neglect sec_6651 the commissioner has the burden of production with respect to the liability of any individual for an addition_to_tax under sec_6651 sec_7491 the burden of showing reasonable_cause under sec_6651 remains on petitioner 116_tc_438 respondent has met his burden of production petitioner does not deny that he failed to file a tax_return for or continued this rule applies in the context of sec_6330 see aston v commissioner tcmemo_2003_128 n respondent has connected petitioner with the source of the wage income through the forms w-2 as well as payroll records thus respondent’s determination is entitled to the presumption of correctness petitioner introduced no evidence establishing reasonable_cause respondent’s determination on this issue is sustained c addition_to_tax under sec_6654 sec_6654 provides for an addition_to_tax in the case of any underpayment of estimated_tax by an individual this addition_to_tax is mandatory unless one of the statutorily provided exceptions applies see sec_6654 75_tc_1 there is no exception for reasonable_cause or lack of willful neglect 33_tc_1071 respondent bears the burden of production with respect to the addition_to_tax under sec_6654 davis v commissioner tcmemo_2005_160 to meet this burden respondent must show that petitioner had a required_annual_payment 127_tc_200 the required_annual_payment equals the lesser_of percent of the tax_shown_on_the_return for the taxable_year or percent of the tax for such year if no return is filed or percent of the tax shown on the individual’s return_for_the_preceding_taxable_year if the individual filed a return for that preceding year sec_6654 because petitioner had a tax_liability for each of the years at issue he had an obligation to make estimated_tax payments for and see wheeler v commissioner supra pincite the forms do not indicate nor does petitioner contend that he made any such payments for or respondent therefore has met his burden of production as petitioner has not shown that any of the statutory exceptions are applicable respondent’s determination on this issue is sustained ii the proposed levy petitioner asserts that respondent failed to satisfy the requirements of sec_6330 specifically petitioner contends that he was not given notice_and_demand for payment of tax as required by sec_6303 in general sec_6303 provides that the secretary shall give notice_and_demand for payment to the taxpayer within days of making an assessment of tax a settlement officer may rely on form_4340 to verify that a notice_and_demand for payment was sent to the taxpayer see 7_f3d_137 9th cir clough v commissioner tcmemo_2007_106 n the forms for and show that respondent issued petitioner timely notices of balance due which constitute notice_and_demand for payment within the meaning of sec_6303 clough v commissioner supra n standifird v commissioner tcmemo_2002_245 affd 72_fedappx_729 9th cir petitioner has failed to present any credible_evidence that notice_and_demand was not issued as indicated on the forms we therefore conclude that notices and demands were properly issued because the record indicates that respondent also satisfied the remaining requirements of sec_6330 we sustain respondent’s determination to proceed with the levy except to the extent of respondent’s concessions see supra note see also 124_tc_189 holding that a form_4340 satisfies the verification requirements of sec_6330 to reflect the foregoing an appropriate order and decision will be entered


internal_revenue_service department of the treasury number release date index no 2601-dollar_figure p o box ben franklin station washington dc person to contact telephone number refer reply to cc psi - plr-140553-01 date date re legend taxpayers decedent spouse son daughter daughter daughter trust court court individual individual partnership corporation bank date date date date date date date date date date year year dear plr-140553-01 this is in response to a letter dated date and prior correspondence submitted on behalf of the taxpayers requesting rulings regarding the generation- skipping transfer_tax consequences of a division of trust assets as described below facts the facts submitted and representations made are as follows decedent died prior to date survived by his spouse spouse his son son and three daughters daughter daughter and daughter in his will decedent appointed son as executor of his estate under article fifth of his will decedent devised and bequeathed the residue of his estate in trust and directed the trustee to divide the property into trust a and trust b son was named as initial trustee during spouse’s life the trustee was to pay her the net_income from both trusts as well as any amounts of principal the trustee deemed necessary for her support and maintenance spouse was given a testamentary general_power_of_appointment over the assets of trust a to the extent she failed to exercise the power the assets of trust a were to augment trust b spouse died prior to date she did not exercise her testamentary_power_of_appointment therefore under decedent’s will any assets in trust a at spouse’s death passed to trust b which is the subject of this ruling letter and hereinafter referred to as trust paragraph of article fifth of decedent’s will provides as follows upon the death of my wife spouse trust b and trust a to the extent that my wife shall make no different disposition thereof shall continue and the net_income therefrom shall be paid to my daughters daughter daughter and daughter in equal shares share and share alike for their respective lifetimes if one or more of my said daughters shall fail to survive me the share such predeceased daughter would have received shall be paid to her surviving issue by right of representation upon the death of the last surviving daughter this trust shall terminate and the corpus together with accrued and undistributed_income shall be distributed to my grandchildren by right of representation and including in this instance any lawful issue of my son son paragraph of article fifth of decedent’s will hereinafter referred to as the income equalization provision provides as follows if at any time after the death of my wife spouse and before the termination of my trust estate the gross_income from all sources in any one year of my son son shall be less than one-third of the net_income distributable under the trust estate during said year the trustee shall distribute to my said son an plr-140553-01 amount of money sufficient to make his annual gross_income equal to the share received from my trust estate during such year by each of my daughters or their issue by right of representation if one or more of them shall have died on date court issued a decree of final distribution of decedent’s estate the decree was filed with court date paragraph of article fifth of decedent’s will contains no direction as to the payment of a daughter’s share of trust income if she should die during the trust term without issue individual as trustee petitioned court for a construction of the trust and for instructions to the trustee notice of the hearing on the petition was given as required by state law on date by order approving petition for construction of trust instrument and for instructions to trustee court approved the resignation of son and the appointment of individual as trustee in the order court construed paragraph of article fifth of decedent’s will as follows upon the death of either daughter daughter or daughter the share of the net_income that would have been received by that deceased daughter pursuant to paragraph of article fifth on page of the will of decedent shall be paid to her surviving issue by right of representation in the event such deceased daughter is not survived by any issue the share of the net_income that would have been received by the deceased daughter shall be distributed to the survivor s of daughter daughter or daughter in the same order court construed paragraph of article fifth of decedent’s will the income equalization provision as follows a son’s right to receive a distribution from the trust each year shall be determined on the gross_income of son for the previous year and the net_income distributable for the trust for the current_year b if son’s gross_income for the previous year is less than one-third of the trust’s net_income distributable for the current_year then son shall be entitled to receive a distribution from the trust in an amount equal to seventy-five percent of the difference between the trust’s net_income distributable for the current_year and son’s gross_income for the previous year c any distribution from the trust to son shall reduce the amount to be distributed by the trust to daughter daughter and daughter or their successors on a pro_rata basis one of the primary assets of trust from its inception until year was a limited_partnership_interest in partnership in year partnership entered into a merger and recapitalization transaction in which trust received stock in corporation and cash in exchange for its interest in partnership plr-140553-01 in year following the transaction daughter filed suit against individual as trustee seeking to remove individual as trustee and seeking reimbursement for damages in the same year daughter filed suit against individual’s attorneys with respect to services provided to individual as trustee in year corporation filed suit against daughter and daughter cross-claimed against individual for indemnification on date upon petition of individual as trustee for instructions court ordered that trust income distributable to son during the period january through april of each year shall be calculated based upon his gross_income for the year which i sec_2 years before the current_year thereafter his income distributions for the period may through december of each year will be adjusted to account for his actual gross_income for the year before the current_year on date all of the parties to the lawsuits listed above reached a global_settlement of all claims raised in the suits and executed an agreement of compromise settlement and release settlement agreement in the trustee’s petition for approval of settlement the parties acknowledged that further clarification of the trust was needed with respect to the disposition of son’s income_interest in the trust upon his death prior to the termination of the trust because paragraph of article fifth of decedent’s will does not provide for this contingency thus a question existed as to whether his income_interest would pass to his children or to the other income beneficiaries the trustee committed himself to filing a petition for instructions from the court seeking an order that upon the death of son during the trust term his children shall not succeed to his income_interest but shall remain solely remainder beneficiaries on date individual filed trustee’s petition for approval of settlement with court notice of the hearing on the petition together with a copy of the settlement agreement was mailed to each beneficiary of the trust in accordance with state’s probate code under state’s probate code any interested person could appear and make a response or objection at or before the hearing daughter 3's attorney appeared at the hearing representing daughter and her children court appointed a guardian ad litem to review the petition on behalf of any unborn and ascertained issue of son otherwise no other trust beneficiaries appeared at the hearing or filed any objections on date court issued two orders the first order approved the settlement agreement the second order instructed the trustee that following the death of son his heirs were not to receive income from the trust during the lifetimes of daughter or daughter but were to receive their remainder interests in the trust after the deaths of daughter and daughter at this time daughter was deceased and her two children were receiving her income_interest in the trust the settlement agreement in its entirety is incorporated into the court’s order by reference the settlement agreement contains provisions modifying the trust the modifications to the trust as contained in the court’s order are contingent upon the plr-140553-01 taxpayers’ receipt of a favorable private_letter_ruling from the service and are summarized as follows first the trust shall be modified to provide for the creation of a separate subtrust subtrust solely for the benefit of daughter and her children the subtrust shall be maintained upon the same terms and conditions as the trust including but not limited to those terms and conditions concerning termination of the trust the subtrust shall be funded with of the trust’s shares in corporation and of all other assets of trust second daughter and her children shall be the only persons who have the right to receive income principal or any other pecuniary legal or equitable interest in any asset of the subtrust the income earned by the subtrust shall not be considered in determining the income distribution to the income beneficiaries of the trust daughter and her children will not be entitled to the income from the trust unless either of the following should occur if during his lifetime son receives gross_income that triggers the income equalization provision of the trust daughter or her children if she is deceased and the trust is not terminated shall receive from the trust an amount equal to of son’s gross_income or if son predeceases daughter or daughter or both daughter or her children if she is deceased and the trust is not terminated shall receive of all trust income distributions third daughter and her children shall select as trustee of the subtrust an independent person who is not a member of their family the trustee of the subtrust shall have the same powers with respect to the assets of the subtrust other than the corporation stock as those set forth in the trust the settlement agreement provides that in funding the subtrust all assets of the trust that can be divided into quarters will be so divided so that of those assets will be transferred to the subtrust other assets which cannot be so divided will be pooled in the most commercially reasonable manner and of this pool will be transferred to the subtrust the settlement agreement provides that if an amendment alteration or modification of the agreement involves solely the rights and terms of the trust or subtrust such amendment alteration or modification need only be signed by the trustee the subtrustee and each of daughter and her children under this provision bank which had succeeded individual as trustee of the trust individual who had been named trustee of the subtrust subtrustee and daughter and each of her children executed the first amendment to the settlement agreement which related to the trust’s income distributable to son under the income equalization provision of decedent’s will plr-140553-01 on date daughter filed a petition for construction of trust for instructions and for approval of amendment to settlement agreement the next day bank filed a consent to the petition on date all of the beneficiaries of the trust were served with notice of a hearing to be held on the petition each beneficiary was served with a copy of the modified terms of the trust and the amendment to the settlement agreement and afforded an opportunity to object to them no objections were filed on date court issued its order construing the trust instructing the trustees and approving the amendment to the settlement agreement the effectiveness of the order is subject_to the issuance of a favorable private_letter_ruling from the service under the new provisions that govern the trust until daughter 1’s death the income of subtrust will be distributed to daughter during her life and at her death will be distributed to the then-living issue of daughter by right of representation until daughter 3’s death the income of the trust will be divided into two equal shares one share will be paid to daughter for life and at her death to her then-living issue by right of representation the other share will be divided into two equal shares one for each of the two children of daughter at the death of either child of daughter the deceased child’s share will be paid to that child’s then-living issue by right of representation the provisions of court 2's order of date continue to apply to construe the terms of the trust thus should either daughter or daughter die without issue while the other daughter is still living the deceased daughter’s share will be paid to the surviving daughter until her death upon the death of the survivor of daughter and daughter subtrust and the trust will terminate and be distributed outright subtrust will be distributed to daughter 3's then-living issue or if none will augment equally the shares distributed from the trust the trust will be divided into three equal shares daughter 1's share daughter 2's share and son’s share daughter 1's share and daughter 2's share will each be distributed to the respective daughter’s then-living issue or if none will augment equally subtrust and the other shares being distributed from the trust son’s share will be distributed to the then-living lawful issue of son or if none will augment equally subtrust and the other shares being distributed from the trust the income equalization provision of paragraph of article fifth of decedent’s will is modified to ensure that son and daughters or their issue receive the share of income each would have received under the original terms of the trust the court’s order provides that during the life of son if in any year prior to the termination of the trust son’s gross_income from other sources for the year immediately preceding the current_year is less than ½ of the trust net_income for the current_year the trustee of the trust shall distribute to son an amount of cash or other comparable liquid_assets sufficient so that when added to his gross_income from other sources for the prior year plr-140553-01 the sum thereof is equal to of the sum of the trust’s net_income for the current_year and son’s gross_income for the prior year individual who is not related to daughter or her children will be the subtrustee the beneficiaries of subtrust acting by majority vote may remove an acting trustee and may also appoint a trustee or co-trustees if no trustee is then serving who may be any person or persons other than a beneficiary a beneficiary’s spouse or a person related or subordinate to a beneficiary within the meaning of sec_672 of the internal_revenue_code you have asked that we rule as follows after the proposed partition subtrust will be treated as a_trust that was irrevocable on date for purposes of b of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the proposed partition of trust into subtrust and trust will not constitute an actual or constructive_addition to subtrust under sec_26_2601-1 neither the creation of subtrust as a result of the proposed partition of trust nor distributions from subtrust to its beneficiaries including but not limited to distributions upon the termination of subtrust will be subject_to the generation-skipping_transfer_tax law sec_2601 imposes a tax on each generation-skipping_transfer gst made by a transferor to a skip_person under a of the tax_reform_act_of_1986 the generation-skipping_transfer_tax gstt is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date under sec_26 b ii any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gstt will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the gstt if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in plr-140553-01 sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst or the creation of a new gst in 387_us_456 the court considered whether a state trial court's characterization of property rights conclusively binds a federal court or agency in a federal estate_tax controversy the court concluded that the decision of a state trial_court as to an underlying issue of state law should not be controlling when applied to a federal statute rather the highest court of the state is the best authority on the underlying substantive rule_of state law to be applied in the federal matter if there is no decision by that court then the federal authority must apply what it finds to be state law after giving proper regard to the state trial court's determination and to relevant rulings of other courts of the state in this respect the federal_agency may be said in effect to be sitting as a state court revrul_95_58 1995_2_cb_191 concludes that a settlor’s retained power to remove a trustee and appoint an individual or corporate trustee or successor that is not related or subordinate to the settlor within the meaning of sec_672 will not be considered retention of the trustee’s discretionary powers for purposes of sec_2036 and sec_2038 analysis trust was irrevocable prior to date you represent that there have been no constructive or actual additions to trust since date subtrust and trust will be administered under the original terms of trust as the new provisions governing income payments to daughters and their issue are provided in decedent’s will as construed and modified by the orders of court on date date and date intended to ensure that the same beneficiaries will receive the same shares of income they would have received under the original terms of trust as construed by court on date we believe that the court’s construction of the trust in its order on date was a reasonable interpretation of decedent’s intent with respect to the payment of trust income following the death of a daughter without surviving issue the new income equalization provision is modified to ensure that the same beneficiaries among son and daughters or their issue receive the same shares of income they would have received under the original terms of the trust as construed by court on date and date these new provisions do not effectively change the original terms of the trust as construed by these orders moreover we believe the court’s instructions concerning the provision and the method for calculating the amount plr-140553-01 of trust income which should be distributed to son under the provision represent reasonable interpretations of decedent’s intent in including the provision in his will subtrust and trust will terminate at the death of the last survivor of daughters when trust would have terminated under its original terms the original terms of trust provide that when the trust terminates the remaining trust assets will be distributed to decedent’s grandchildren by right of representation and including in this instance any lawful issue of son under the new provisions when subtrust and trust terminate trust will be divided into three equal shares one for daughter and her issue one for daughter and her issue and one for son and his issue the share for daughter and the share for daughter will each be distributed to the respective daughter’s then-living issue or if none will augment equally subtrust and the other shares being distributed from trust similarly subtrust will be distributed among the then-living issue of daughter or if none will augment equally the share for daughter the share for daughter and the share for son son’s share will be distributed to the then-living lawful issue of son or if none will augment equally subtrust and the other shares being distributed from the trust based on an analysis of the applicable case law we believe that the new provisions for the distribution of subtrust and trust upon their termination represent a construction of the original terms of trust that is consistent with applicable state law as it would be applied by the highest court of the state therefore these new provisions ensure that upon the termination of subtrust and trust the trusts will be distributed among the same beneficiaries as under the original terms of trust court 2's order of date provides administrative provisions for subtrust and provisions governing the removal and appointment of trustees of subtrust although these provisions were not contained in the original provisions of decedent’s will they create no new powers or benefits in any beneficiary under these new provisions the beneficiaries of subtrust can remove and replace trustees or co-trustees with persons who are not a beneficiary of subtrust spouse of such beneficiary or who are not subordinate or related to such beneficiary within the meaning of sec_672 we conclude that for purposes of sec_26_2601-1 the modification of the terms of trust by court does not shift any beneficial_interest in the trust to any beneficiary who occupies a generation lower than the persons holding the beneficial interests prior to the modification further the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust accordingly based on the facts submitted and the representations made and provided that the partition of trust into subtrust and trust is a valid partition under applicable state law we rule as follows plr-140553-01 subtrust will be treated as a_trust that was irrevocable on date for purposes of b of the tax_reform_act_of_1986 and sec_26 b of the generation-skipping_transfer_tax regulations the proposed partition of trust into subtrust and trust will not constitute an actual or constructive_addition to subtrust under sec_26_2601-1 neither the creation of subtrust as a result of the proposed partition of trust nor distributions from subtrust to its beneficiaries including but not limited to distributions upon the termination of subtrust will be subject_to the generation-skipping_transfer_tax except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours associate chief_counsel passthroughs and special industries by katherine a mellody senior technician reviewer branch enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------- ----------------------------------------------------------- ------------------------------ --------------------------------- --------------------------------- department of the treasury washington dc person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-141225-07 date date --------------------- --------------------- ------------------------- x --------------------------------------------------- country d1 dear --------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an election to be treated as a disregarded_entity country x represents that it is a foreign_entity eligible to elect to be treated as a disregarded_entity 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 is an entity formed under the laws of 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 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_7701-3 unless it elects otherwise a foreign eligible_entity is classified as an association if all members have limited_liability if the foreign eligible plr-141225-07 entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve 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 based on the facts submitted and representations made we conclude that the 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 sec_6110 provides that it may not be used or cited as precedent except as specifically set forth above no opinion is expressed or implied as to 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 copies of this plr-141225-07 sincerely letter are being sent to x’s authorized representatives enclosures copy of this letter copy for sec_6110 purposes william p o’shea associate chief_counsel passthroughs and special industries


internal_revenue_service number release date index number ------------------------------- -------------------------------------- ----------------------------- x --------------------- ----------------------- department of the treasury washington dc person to contact ----------------- id no ------------- telephone number refer reply to cc psi b02 - plr-114035-06 date date ------------------ --------- ----------------- ------- ---------------------- shareholder state date date dear ----- -------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on date under the laws of state shareholder is the shareholder of x shareholder intended for x to be treated as an s_corporation for the taxable_year in which x began doing business but no form_2553 election by a small_business_corporation was timely filed for x x requests to be treated as an s_corporation effective date 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 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 plr-114035-06 x did not timely file an election to be treated as an s_corporation under sec_1362 effective date x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 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 date within days from the date of this letter x should submit a properly completed form_2553 effective date with a copy of this letter attached to the appropriate service_center the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x otherwise qualifies as an s_corporation for federal tax purposes except as specifically set forth above no opinion is expressed or implied as to 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 sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs and special industries letter is being sent to x enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number 9100-dollar_figure ------------------------------------------ ------------------------------- -------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ ------------------- telephone number --------------------- refer reply to cc psi b02 plr-153182-09 date date legend a x y z ------------------------------------------------------------------------------------------------------ ------------------------ ------------------------------------------------------------------------------------------------------ ------------------------ ------------------------------------------------------------------------------------------------------ ------------------------ ------------------------------------------------------------------------------------------------------ ------------------------ state -------------- d1 d2 ------------------ ------------------------- dear ---------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of a by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for a to treat x y and z as qualified subchapter_s subsidiaries qsubs the information submitted states that a was formed in state on d1 a filed a form_2553 election by a small_business_corporation effective d1 in addition a represents that it intended to make a qsub election for x y and z effective d2 plr-153182-09 however forms qualified_subchapter_s_subsidiary election were not timely filed for x y and z sec_1361 provides that a qsub shall not be treated as a separate corporation and all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines a qsub as a domestic_corporation which is not an ineligible_corporation if percent of the stock of the corporation is held by an s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations provides the time and manner of making a qsub election a taxpayer makes a qsub election with respect to a subsidiary by filing a form_8869 with the appropriate service_center sec_1 a provides that a qsub election cannot be effective more than two months and days prior to the date of filing sec_301_9100-1 gives the commissioner discretion to grant reasonable extensions of time to make regulatory elections under the rules of sec_301_9100-2 and sec_301_9100-3 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a regulation published with the federal_register sec_301_9100-3 sets forth the standards that the commissioner uses to determine whether to grant a discretionary extension of time these standards indicate that the commissioner should grant relief when the taxpayer provides evidence proving to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government based solely on the facts submitted and the representations made we conclude that a has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 as a result a is granted an extension of time of days from the date of this letter to elect to treat x y and z as qsubs effective d2 accordingly provided that a makes a qsub election for x y and z by filing completed forms effective d2 with the appropriate service_center within days from the date of this letter then such elections will be treated as timely made for d2 a copy of this letter should be attached to the forms except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x y and z are eligible qsubs this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-153182-09 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely curt g wilson associate chief_counsel office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom it a - plr-115973-99 date date in re legend taxpayer township county state year city donee watershed plan plan court dear this letter is in response to your date request for a ruling on behalf of taxpayer additional information was submitted on date date and date rulings requested you have requested a ruling on whether the proposed contribution by taxpayer will be a qualified_conservation_contribution within the meaning of sec_170 plr-115973-99 and h of the internal_revenue_code facts taxpayer and a business partner jointly own multiple parcels of real_estate some of which have been commercially developed and some of which are undeveloped farmlands in year taxpayer acquired approximately acres of farmland in township county state taxpayer and the business partner own the property as tenants in common taxpayer intends to partition the acres into two parcels a 110-acre parcel the property and a five-acre parcel the residential parcel currently taxpayer leases the property to a farmer who uses it to produce various crops the residential parcel is improved with a house and a barn and currently is leased to a party who is unrelated to either the farmer or taxpayer after the partition taxpayer intends to grant a conservation_easement on the property and to sell the residential parcel taxpayer represents that there are no plans to develop further the residential parcel the property consists of farmland approximately ten acres of woods and a stream which transverses the property the stream is part of watershed a system of streams and waterways that feed the two major rivers in county there is an approximately 100-foot buffer of trees and other vegetation on each side of the stream various wild animals thrive in the woods and the stream area taxpayer asserts that the property is unique in county because it a combination of woods stream and farmland the soil on the farmland is rated prime under county’s agricultural use value system currently the property is zoned for agriculture in reaction to the loss of prime agriculture lands and the state’s other natural_resources state passed a statute creating a conservation_easement and authorizing certain governmental and private organizations to accept such easements the statute defines a conservation_easement as an interest in land held for the public purpose of retaining land in its natural open or wooded condition the agricultural use of land is specifically included in the definition of a conservation_easement county has adopted two land use plans to aid it in planning for future development plan and plan plan was adopted to preserve green-ways and river corridors and to protect the natural landscapes of county plan sought to advance the goal of plr-115973-99 linking natural green space areas in the county as opposed to creating vegetation islands based on this goal plan selected several areas in county as warranting preservation because of its woods and stream the property falls within one of the areas identified in plan as warranting preservation as an open space site plan is a county-wide development plan relying on and incorporating plan plan divided the county into several classification areas with a stated goal of achieving a high-quality living environment through a wise distribution of compatible land use patterns plan sought to implement this goal through a series of objectives and policies an objective is defined by plan as a step to reaching the stated goal that is capable of attainment and measurement a policy is defined as a course of action to reach the objective that provides a link between the intent of the plan and day-to-day land use decisions the first objective of plan is to protect and preserve agriculture lands the second objective to preserve stream corridors significant wooded areas and environmentally sensitive land is followed by an objective to encourage a rational pattern of development to reach these objectives plan adopted several policies including a statement that county will discourage the conversion of prime agriculture lands to non agriculture uses and a position that land uses that are potentially incompatible shall be buffered from one another through the use of open space or other suitable means under plan county designated the general area in which the property is located as an urban residential area indicating that because this area presently has the necessary infrastructure and location required for further residential development the costs associated with developing this area will be less than if such development were to occur in other county locations however plan also recognized the property’s farmland as prime and its stream and woods as green open space and deemed them worthy of protection it is anticipated that absent the granting of a conservation_easement the property and adjacent parcels will be rezoned and developed the property is located in an interstate highway corridor approximately twenty miles north of city a large metropolitan area with a population in excess of million a subdivision of homes abuts the property’s northern boundary and three new homes have been constructed to the immediate south of the property taxpayer represents that the property is located in the most populous portion of county in an plr-115973-99 area that is experiencing significant development pressure the easement taxpayer proposes to grant a perpetual conservation_easement on property to donee donee is a governmental_unit described in sec_170 and sec_170 of the internal_revenue_code donee has been granted the authority to acquire property for the purpose of conserving the natural_resources of state by state statute and is a governmental organization specifically authorized to acquire conservation easements additionally donee has sufficient resources and the statutory authority to adopt rules to protect and preserve the lands under its jurisdiction and to enforce those rules through its own agents donee has agreed to accept and enforce the easement and indicated that it relied on plan as incorporated by plan in reaching its decision donee also stated that the property warrants protection because it falls within the state’s policy of reducing the loss of good farmland and because of the combination of the physical attributes ie farmland woods and stream of the property before donee agreed to accept the easement it conducted a review process that began with the appointment of a committee to review the proposed easement grant the committee reviewed the proposed easement physically inspected the property examined aerial photographs of the property and drafted a letter to donee providing its reasons for suggesting the acceptance of the easement the committee’s letter also suggested certain changes to the terms of the proposed easement before donee accepted the easement the donee’s officials met in a closed executive session to discuss the committee’s report and held a public meeting during which members of the community had the opportunity to have their opinions heard on the easement the proceedings of the public meeting were reported in the local newspaper at the conclusion of the public meeting the donee’s officials voted unanimously to accept the easement with the committee’s proposed changes these changes have been incorporated into the deed before donee’s acceptance of the easement is finalized court must review the easement and authorize the donee’s acceptance of it the terms of the easement provide that the easement will be recorded and that it will prohibit commercial or industrial uses of the property subdivision of the property for plr-115973-99 any purpose construction of any buildings unless for permitted agriculture uses destruction of trees or other vegetation dumping of trash and any other uses of the property that would impair its conservation purposes unless necessary for the protection of those purposes taxpayer has reserved the right to conduct agricultural activities on the property the easement prohibits transfers of the easement by donee unless subsequent to the transfer donee requires that the conservation_purpose continue to be carried out and the subsequent transferee is a qualified_organization under sec_170 of the code and is qualified to hold the easement under state statute taxpayer and donee agree that the provisions of the easement will bind them and their successors if donee ceases to exist or no longer qualifies under the internal_revenue_code or under state statute to hold the easement donee must transfer the easement to an agency or organization that does qualify under both the internal_revenue_code and under state law law and analysis sec_170 of the internal_revenue_code permits a deduction for a charitable_contribution as defined in sec_170 sec_170 defines a charitable_contribution as a contribution or gift to or for_the_use_of certain qualifying organizations under sec_170 of the code a taxpayer who contributes not in trust less than the taxpayer’s entire_interest in property generally is not allowed a deduction however sec_170 provides an exception to this rule in the case of a qualified_conservation_contribution sec_170 of the code and sec_1_170a-14 of the income_tax regulations define a qualified_conservation_contribution as a contribution of a qualified_real_property_interest to a qualified_organization exclusively for conservation purposes qualified_real_property_interest sec_170 of the code defines the term qualified_real_property_interest to include a restriction granted in perpetuity on the use of real_property sec_1 170a- b of the income_tax regulations states that a qualified_real_property_interest includes a perpetual conservation restriction which is a restriction granted in perpetuity on the use that may be made of real property-including an easement plr-115973-99 the proposed contribution is of an easement providing for restrictions to be imposed in perpetuity on the use of real_property consequently the contribution is of a qualified_real_property_interest within the meaning of sec_170 of the code and sec_1_170a-14 of the regulations qualified organization-eligible donee under sec_170 of the code and sec_1_170a-14 of the regulations the term qualified_organization includes a governmental_unit described in sec_170 donee is a governmental_unit described in sec_170of the regulations and therefore constitutes a qualified_organization to be an eligible donee under sec_1_170a-14 of the regulations a qualified_organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions under state statute which created donee donee is authorized to protect and maintain state’s natural_resources in addition donee is expressly authorized to accept conservation easements and has law enforcement authority and the resources to enforce the restrictions donee has indicated that it will enforce the restrictions therefore we determine that donee is an eligible donee under sec_1_170a-14 of the regulations the donor must prohibit transfers of the easement by the donee unless subsequent to the transfer the donee requires that the conservation_purpose continue to be carried out and the subsequent transferee qualifies as an eligible donee under sec_1_170a-14 of the regulations the deed of easement requires any transferee to assume the responsibilities of donee under the easement additionally the transferee must be a qualified_organization under sec_170 of the code and be eligible under state’s statute to hold the easement however the deed does not require that a transferee must have a commitment to protect the conservation purposes of the donation nor that it must have the resources to enforce the restrictions in the deed as required by sec_1_170a-14 of the regulations to be an eligible donee consequently this ruling is conditioned on taxpayer adding to the terms of the deed a restriction that donee may transfer the easement only to a transferee who has a commitment to protect the conservation purposes of the donation and the resources to enforce the restrictions in the deed plr-115973-99 conservation_purpose sec_170 of the code provides that a qualified_conservation_contribution must be exclusively for conservation purposes a conservation_purpose as defined in sec_170 includes the preservation of open space including farmland and forest land where such preservation is pursuant to a clearly delineated federal state or local governmental conservation policy and where it will yield a significant public benefit sec_1_170a-14 of the regulations states that acceptance of the easement by a governmental agency tends to establish the requisite clearly delineated governmental policy the more rigorous the review process by the governmental agency the more the acceptance of the easement tends to establish a clearly delineated governmental policy however the mere acceptance of an easement by a governmental agency by itself is not sufficient to establish a clearly delineated governmental policy given the thorough examination of the proposed easement by the committee appointed by donee for that purpose the public and private deliberations by donee and the multiple levels of review before donee accepted the easement the donee’s review process is sufficiently rigorous that the acceptance of the easement by donee tends to establish a clearly delineated governmental policy sec_1_170a-14 of the regulations states that the requirement that the preservation of open space be pursuant to a clearly delineated governmental policy is intended to protect the types of property identified by public representatives as worthy of preservation or conservation this policy must be more than a general declaration of conservation goals by a single official or legislative body this section states further that the donation of a perpetual conservation restriction to a qualified_organization pursuant to a formal resolution or certification by a local governmental agency established under state law specifically identifying the subject properly as worthy of protection for conservation purposes will meet the requirement of this paragraph id the property was recognized in particular by county in plan and plan and recognized in general by state’s conservation_easement statute as worthy of protection for conservation purposes in addition donee as a local_government plr-115973-99 established under state law and pursuant to its statutory authority to protect state’s natural_resources determined that the property was worthy of protection in its review process and by its voting to accept the easement given that donee is a qualified_organization that the review process was rigorous and that in reaching its decision to accept the donation donee relied on the county plans and the state statute in addition to its own inherent powers the donation of the easement is pursuant to a clearly delineated governmental policy the flush language of sec_170 of the code states that preservation of open space also must yield a significant public benefit sec_1_170a-14 of the regulations enumerates several factors to consider in determining whether an open space easement will yield a significant public benefit one of the factors in sec_1_170a-14 of the regulations is the uniqueness of the property to the area while farmland woods and streams taken individually are not unique to the area taxpayer asserts that the combination of all three on one parcel of land is unique in county in addition donee stated that it is accepting the easement in part to preserve these three attributes the proposed easement will permanently protect this combination of farmland woods and stream another factor described in the regulations is the intensity of land development in the vicinity of the property this factor looks to both existing developments and foreseeable development trends the submissions by taxpayer show a large subdivision to the north of the property and the existence of homes to the south of the property the property is located in the most densely populated area of the county an area that is expected to continue to grow at a steady rate the proposed easement will protect the property from these present development trends and from other foreseeable development trends an additional factor in sec_1_170a-14 of the regulations is to look to the consistency of the proposed open space use with public programs for conservation in the region such public programs include government approved master plans that include or are related to the land areas in question plan indicates the desirability of preserving the prime farmland that the property contains additionally plan incorporates plan 1's goals of preserving the green-ways and river corridors and to protect the natural landscapes of county the woods and stream on the property plr-115973-99 were specifically designated as worthy of preservation and protection by plan preservation of the farmland and open space of the property is consistent with the public programs for conservation in the region given these factors the proposed donation of a conservation_easement will yield a significant public benefit accordingly the donation of the easement will be for conservation purposes exclusively for conservation purposes sec_170 of the code provides that the contribution must be exclusively for conservation purposes sec_170 provides that a contribution shall not be treated as exclusively for conservation purposes unless the conservation_purpose is protected in perpetuity sec_1_170a-14 of the regulations provides that any interest retained by the donor must be subject_to legally enforceable restrictions that will prevent use of the donor’s retained_interest that is inconsistent with the conservation purposes of the donation see s rep no 1980_2_cb_599 similarly sec_1_170a-14 of the regulations provides that a deduction for an open space easement will not be allowed if the terms of the easement permit a degree of intrusion or future development that would interfere with the essential scenic quality of the land or with the governmental conservation policy that is being furthered by the donation sec_1_170a-14 of the regulations also provides that the terms of the donation must provide a right of inspection by the donee to determine if there is compliance with the donation and must provide a right of the donee to enforce the conservation restrictions the stated purpose of the easement is to preserve and protect the conservation values of the property in perpetuity only such uses as are consistent with the conservation values will be allowed taxpayer reserves the right to use the property solely for crop farming_purposes and for other uses that are not inconsistent with the easement taxpayer reserves no right for future development of the property beyond the construction of structures connected with the permitted agriculture uses the easement grants the right to donee to enter the property to monitor compliance with the easement and the right to legally enforce the terms of the easement these restrictions which will bind taxpayer and any successors in interest will be recorded in the land records of county plr-115973-99 accordingly taxpayer has demonstrated that the donation is exclusively for conservation purposes and is enforceable in perpetuity within the meaning of sec_170 of the code and the relevant regulations conclusion based on the facts submitted and the representations made in your ruling_request we conclude that the contribution of the easement is a qualified_conservation_contribution within the meaning of sec_170 and sec_170 of the code this conclusion is contingent on taxpayer making the changes to the deed of easement necessary to comply with the transfer requirements of sec_1_170a-14 of the regulations it is possible that the value of taxpayer’s retained property the residential parcel could be increased as a result of the easement the contribution is deductible only to the extent that its value exceeds the value of the benefits received see sec_1 170a- h i of the regulations revrul_67_246 1967_2_cb_104 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 taxpayer the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings and it is subject_to verification on examination sincerely acting assistant chief_counsel income_tax and accounting by ______________________ michael d finley chief branch cc


tax_exempt_and_government_entities_division significant index no department of the treasury internal_revenue_service washington d c nov t ep ra ar re substitute mortality_table ruling taxpayer plan ein plan no plan plan ein ein dear plan no plan no ein this letter is to inform you that your request to use substitute mortality tables for making computations under sec_430 of the internal_revenue_code the code for plan sec_1 through has been granted with respect to the populations specified in this letter effective for a period of plan years beginning with the plan_year commencing january your request has been granted in accordance with sec_430 of the code and sec_303 of the employee_retirement_income_security_act_of_1974 specifically this approval applies to the following populations e e plan sec_1 through combined- male participants annuitants and nonannuitants excluding disabled participants plan sec_1 through combined- female participants annuitants and nonannuitants excluding disabled participants in granting this approval we have only considered whether the substitute mortality rates were developed correctly in accordance with sec_1_430_h_3_-2 of the treasury regulations regulations and revproc_2017_55 accordingly we are not expressing any opinion as to the accuracy or acceptability of any calculations or other material submitted with your request permission is hereby granted to use the substitute mortality rates shown in the table below for plan sec_71 through approved for use beginning with the plan_year commencing january substitute mortality tables base year’ male female annuitants annuitants and and nonannuitants nonannuitants o n a n a n o n o w r d a n o o o d s n w a t a o n b o d a n o r a a a a a a a m n n a n n n n m n n n n o g t a n i d o c male female annuitants annuitants and and age nonannuitants nonannuitant sec_32 at male female annuitants annuitants and and nonannuitants nonannuitants age male female annuitants annuitants and and age __ nonannuitants nonannuitant sec_411 the above rates were developed based on an experience study period from january through december with a base_year of the rates were calculated by adjusting the applicable standard mortality tables in sec_1_430_h_3_-1 of the regulations indicated in the table below using the mortality ratio and credibility weighting factor determined by aggregating male and female experience as shown in the table below male and female annuitants and nonannuitants mortality ratio credibility weighting factor the internal_revenue_service has reviewed the substitute mortality rates and supporting information and has determined that based on the information submitted the rates were correctly developed in accordance with sec_1_430_h_3_-2 of the regulations and revproc_2017_55 the above rates must be applied on a generational basis as provided in sec_1_430_h_3_-2 of the regulations your attention is called to sec_430 of the code and sec_1 h - d of the regulations which describe the circumstances in which the use of the substitute mortality_table will terminate before the end of the 10-year period described above in general the substitute mortality tables can no longer be used as of the earliest of for a plan using a substitute mortality_table for only one gender the first plan_year for which there is full or partial credible mortality information with respect to the other gender that had lacked credible mortality information unless an approved substitute mortality_table is used for that gender the first plan_year in which the plan fails to satisfy the requirements of paragraph h -2 c of the regulations regarding the requirement that other plans and populations in the controlled_group must also use substitute mortality tables unless it can be demonstrated that they do not have credible mortality information taking into account the transition_period for newly affiliated companies in sec_1_430_h_3_-2 of the regulations the second plan_year following the plan_year for which there is a significant change in individuals covered by the plan as described in sec_1_430_h_3_-2 of the regulations the plan_year following the plan_year in which a substitute mortality_table used for a plan population is no longer accurately predictive of future mortality of that population as determined by the commissioner or as certified by the plan’s actuary to the satisfaction of the commissioner or the date specified in guidance published in the internal_revenue_bulletin pursuant to a replacement of mortality tables specified under sec_430 of the code and h -1 of the regulations other than annual updates to the static mortality tables issued pursuant to h - a of the regulations or changes to the mortality improvement rates pursuant to sec_1_430_h_3_-1 of the regulations this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan years for which the substitute mortality tables are used please note the information that is required to be attached to schedule sb actuarial information in accordance with the instructions to that form we have sent a copy of this letter to your authorized representatives pursuant to a power_of_attorney form on file in this office and to the manager ep classification in columbus ohio and to the manager ep compliance unit in chicago illinois if you require further assistance in this matter please contact id at sincerely cc david m ziegler manager employee_plans actuarial group