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 fip b03 plr-141499-15 date date legend taxpayer --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------- entity entity entity entity accounting firm taxable_year taxable_year taxable_year date date date date date state industry derivatives individual dear ------------------------ ------------------------ ---------------------------------------------------- --------------------------------- --------------------------------- ----------------------------------------- ---------------- --------------------------------------------------------------------------------- ------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- ----------------------- ----------------------- -------------------------- --------------------------- -------------- ------------- --------------------------------------------------------------- ------------------------------------------------------------ --------------------------- plr-141499-15 this is in reply to a letter dated date submitted on behalf of taxpayer by its authorized representative taxpayer requests an extension of time to file an election under sec_1092 of the internal_revenue_code and sec_1_1092_b_-4t of the temporary income_tax regulations to establish one or more mixed_straddle accounts for taxable_year and taxable_year facts taxpayer a state corporation is a wholly-owned subsidiary of entity and is included in the consolidated_returns of entity for u s federal_income_tax purposes entity is in the business of industry in the u s taxpayer is the sole shareholder of entity which is in the business of trading various derivatives on date entity acquired taxpayer from entity through a wholly-owned holding corporation entity prior to the acquisition entity had made an election to establish one or more mixed_straddle accounts relative to the derivatives held by entity during entity 3’s taxable_year ending on date entity is a disregarded_entity for u s federal tax purposes for all periods after entity 1’s acquisition of taxpayer the tax department of entity served as the tax department for taxpayer entity and entity neither the vice president of tax for entity individual nor the other members of this tax department were knowledgeable about the procedures for making the mixed_straddle account election prior to the acquisition of taxpayer and its wholly-owned subsidiaries the tax department of entity had only prepared returns and elections that were specific to industry the business of entity during date and near the time of the acquisition the tax director of entity advised individual that a new mixed_straddle account election would be required after the acquisition of taxpayer accordingly the tax department of entity prepared and filed a form_6781 gains and losses from sec_1256 contracts and straddles form to establish the same mixed_straddle accounts that entity previously elected to establish relative to the derivatives held by entity the election was filed on or about date and was effective for taxpayer’s taxable_year individual and the other members of the tax department were not advised nor were they otherwise aware that under sec_1_1092_b_-4t a mixed_straddle account election is effective only for the taxable_year in which the election is made instead they erroneously believed that the election once made remained in effect for all future periods until the election was revoked as a result taxpayer failed to timely file a form_6781 for taxable_year and taxable_year however consistent with the erroneous belief that the election made for taxable_year was still in effect entity prepared and filed its consolidated u s federal_income_tax return for taxable_year as if taxpayer had made a timely election for taxable_year plr-141499-15 the error was discovered after accounting firm began a third-party audit in date of entity 2’s financial statements for taxable_year and taxable_year during this process individual was advised for the first time that a mixed_straddle account election is effective only for the taxable_year in which the election is made law and analysis sec_1_1092_b_-4t generally permits a taxpayer to elect in accordance with paragraph f of sec_1_1092_b_-4t to establish one or more mixed_straddle accounts sec_1_1092_b_-4t defines a mixed_straddle account to mean an account for determining gains and losses from all positions held as capital assets in a designated class of activities by the taxpayer at the time the taxpayer elects to establish a mixed_straddle account sec_1_1092_b_-4t generally provides that except as otherwise provided the election to establish one or more mixed_straddle accounts for a taxable_year must be made by the due_date without regard to any extensions of the taxpayer's income_tax return for the immediately preceding_taxable_year or part thereof sec_1_1092_b_-4t further provides that if a taxpayer begins trading or investing in positions in a new class of activities during a taxable_year the election with respect to the new class of activities must be made by the taxpayer by the later of the due_date of the taxpayer’s income_tax return for the immediately preceding_taxable_year without regard to any extensions or days after the first mixed_straddle in the new class of activities is entered into sec_1_1092_b_-4t also provides that if an election is made after the time specified above the election will be permitted only if the commissioner concludes that the taxpayer had reasonable_cause for failing to make a timely election because sec_1_1092_b_-4t provides specific guidance about making a late mixed_straddle account election the rules generally applicable to late elections described in sec_301_9100-3 do not apply to this late mixed_straddle account election conclusion based on the facts and representations submitted we conclude that taxpayer has shown reasonable_cause for failing to make a timely election under sec_1_1092_b_-4t therefore we grant taxpayer’s request for an extension of time to make the election under sec_1_1092_b_-4t for taxable_year and taxable_year this extension will expire days from the date of this letter the election must be made in the manner prescribed in sec_1_1092_b_-4t and filed with the director having audit jurisdiction over entity 1’s consolidated u s federal_income_tax return except as specifically ruled upon above no opinion is expressed as to the tax treatment of any transactions under the provisions of any other sections of the code or plr-141499-15 regulations which may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from the transaction specifically no opinion is expressed concerning whether the positions designated by taxpayer as the class of activities is a permissible designation under sec_1_1092_b_-4t this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely __________________________ patrick white senior counsel branch office of associate chief_counsel financial institutions products enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------- ------------------------------- --------------------------------------- -------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ---------- telephone number --------------------- refer reply to cc ita b04 plr-117152-12 date date legend --------------------------------------------------------- ------------------------------------------------- taxpayer partnership co-general partner ---------------------------------------------------------- investor corp a city state month1 date1 year1 ------------------------------------------- ----------------------------------------------------------------------------- ---------- ------------ ---------------------- -------------------------- ------- dear ---------------- this is in response to your letter of date requesting on behalf of the above- named taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file an election under sec_168 of the internal_revenue_code the election the material information submitted for consideration is summarized below facts taxpayer is the co-general partner of partnership which was formed to develop construct own and operate apartment housing in a manner allowing low-income_housing tax_credits to be available under sec_42 of the code which are allocated among the partners taxpayer owns a percent interest in partnership and co-general partner also owns a percent interest investor is the sole limited_partner in plr-117152-12 partnership and owns a dollar_figure percent interest partnership constructed a low-income_housing project in city state and placed its assets into service in month1 taxpayer uses the accrual_method of accounting and the calendar_year as its taxable_year taxpayer is wholly owned by corp a a tax-exempt_organization described in sec_501 as corp a an exempt_organization owns more than percentage in value of the stock of taxpayer taxpayer is a tax-exempt_controlled_entity within the meaning of sec_168 taxpayer was organized with the specific purpose and intent that it would serve as a co-general partner in partnership and would make the election available under sec_168 to be treated as a taxable entity based upon the information submitted taxpayer intended to make an election under sec_168 on a timely filed federal_income_tax return for its first tax_year ended on date1 however due to an oversight taxpayer’s accountant did not include an election in the timely filed federal_income_tax return for the taxpayer however partnership’s year1 form_1065 was timely filed on the basis that an election had been made ie no portion of the property was treated as tax-exempt_use_property for depreciation purposes this ruling_request was filed promptly after discovery of the failure to properly make the election law and analysis sec_167 of the code provides generally for a depreciation deduction for property used in a trade_or_business under sec_168 the alternative_depreciation_system must be used for any tax-exempt_use_property as defined in sec_168 sec_168 provides that for purposes of sec_168 if any property which is not tax-exempt_use_property is owned by a partnership which has both a tax-exempt_entity and a person who is not a tax-exempt_entity as partners and any allocation to the tax-exempt_entity of partnership items is not a qualified_allocation then an amount equal to such tax-exempt entity's proportionate share of such property shall be treated as tax-exempt_use_property sec_168 provides that for purposes of sec_168 and any tax- exempt controlled_entity shall be treated as a tax-exempt_entity sec_168 provides that for purposes of sec_168 and a tax-exempt_controlled_entity may elect not to be treated as a tax-exempt_entity such an election is irrevocable and will bind all tax-exempt entities holding an interest in the tax-exempt_controlled_entity sec_301_9100-7t requires elections under sec_168 to be made by the due_date of the tax_return for the first taxable_year for which the election is to be plr-117152-12 effective sec_301_9100-1 defines the term regulatory election as including any election the due_date for which is prescribed by a regulation therefore the election is a regulatory election under sec_301_9100-1 and sec_301_9100-3 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i provided the taxpayer demonstrates 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 on the facts and information submitted including the affidavits submitted and representations made we conclude that taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government accordingly the requirements of the regulations for granting relief in this case have been satisfied and we grant an extension of time until days from the date_of_issuance of this letter for taxpayer to file the election to make the election taxpayer must file an amended federal_income_tax return for its tax_year ending on date1 and attach thereto the election and information set forth in sec_301_9100-7t also taxpayer must attach a copy of this letter to the return in addition pursuant to sec_301_9100-7t a copy of the election statement should be attached to the federal_income_tax returns of each of the tax-exempt shareholders or beneficiaries of taxpayer caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling plr-117152-12 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely christina m glendening assistant to the branch chief branch office of associate chief_counsel income_tax accounting


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 corp b05 plr-104829-10 date date legend shareholdera ---------------------- -------------------------------------------------------------------- purchaser -------------------------------------------------------------------- ----------------------------------- purchaseraffiliate ---------------------------------- ----------------------- target -------------------------------------------------------------------- -------------------------------- target affiliates 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------------------------------------------------------------------- -------------------------------------------------------------------- ------------------------------------------------------ plr-104829-10 -------------------------------------------------------------------------- -------------------------------------------------------------------- locationa --------------------------------- ------------------------------------------------------------------------ b c datea dateb datec dated --- -------------------------- -------------------------- ------------------------- -------------------------- ------------------- company official ----------------------------------------------------------------------------------------------------------------- --------------------------- tax professional ----------------------------------------------------------------------------------------------- -------------------------- dear -------------------------- this letter responds to a letter dated date submitted on behalf of purchaser and purchaseraffiliate requesting the internal_revenue_service service to grant an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election the extension is being requested for purchaser and purchaseraffiliate to file a sec_338 election under sec_338 of the internal_revenue_code sometimes hereinafter referred to as the election with respect to purchaser’s and purchaseraffiliate’s acquisition of the stock of target and the deemed acquisitions of the stock of target affiliates on datea and dateb respectively additional information was received in a letter dated date the material information submitted is summarized below plr-104829-10 purchaser a corporation organized in locationa and purchaseraffiliate a corporation organized in locationb are holding_companies and members of an affiliated_group within the meaning of sec_338 more than of the stock in purchaser is and has been held directly or indirectly by shareholdera a u s_corporation the shareholdera group has provided advice to purchaser with regard to certain u s tax matters target directly and or indirectly holds all the outstanding_stock in the b target affiliates prior to the acquisition described herein target was a publicly held company neither target nor any of the target affiliates is a u_s_person during the 12-month_period that ended on dateb purchaser and purchaseraffiliate acquired for c cash all the outstanding_stock in target and thus indirectly all the outstanding_stock in target affiliates after datea but prior to dateb purchaseraffiliate was deemed to liquidate into purchaser pursuant to a series of check-the-box elections in which purchaseraffiliate became disregarded as an entity separate from its owner purchaser and purchaseraffiliate intended to file the election the election was due on datec but for various reasons a valid election was not filed subsequent to datec it was discovered that a valid election had not been filed thereafter this request was submitted under sec_301_9100-3 for an extension of time to file a valid election representations a purchaser and purchaseraffiliate were members of an affiliated_group within the meaning of sec_338 and purchaser’s and purchaseraffiliate’s acquisition of the stock of target and the deemed acquisition of the stock of the target affiliates constituted a qualified_stock_purchase as defined in sec_338 b as of the date the request for this ruling letter was submitted the service had not contacted purchaser purchaseraffiliate target or any of the target affiliates concerning purchaser’s and purchaseraffiliate’s failure to timely make the election c the period of limitations on assessments under sec_6501 of the code has not expired for any affected taxpayer i for the taxable_year in which the acquisition occurred ii for the taxable_year for which the election should have been filed or iii for any taxable years that would have been affected by the election had it been timely filed the period of limitations on assessment for any taxpayer’s taxable_year that would be affected by the election will expire no earlier than dated applicable law plr-104829-10 sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election and the acquisition is a qualified_stock_purchase under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 describes the commissioner’s authority to grant an extension of time to make a regulatory election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making 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 sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338-2 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for purchaser and purchaseraffiliate to file the election provided purchaser and purchaseraffiliate show that they acted reasonably and in good_faith that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and that granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser purchaseraffiliate company official and tax professional explain the circumstances that resulted in the failure to timely file the election the information establishes that purchaser and purchaseraffiliate reasonably relied on a qualified_tax professional who failed to make or advise purchaser and purchaseraffiliate to make the election in addition the information representations and affidavits submitted indicate that the present request for relief was submitted to this office prior to the service discovering that the election had not been timely made see sec_301_9100-3 and v conclusion and grant of extension based solely on the facts information representations and affidavits submitted we conclude that purchaser and purchaseraffiliate have shown that they acted plr-104829-10 reasonably and in good_faith in failing to timely file the election the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government provided the stock acquisition qualifies substantively as a sec_338 qualified_stock_purchase we grant an extension of time under sec_301_9100-3 until forty-five days from the date on this letter for purchaser and purchaseraffiliate to file the election with respect to the acquisition of the stock of target and the deemed acquisition of the stock of the target affiliates within days from the date on this letter purchaser and purchaseraffiliate must file the election on form_8023 in accordance with sec_1_338-2 and the instructions to the form a copy of this letter must be attached to the form_8023 within days of the date on this letter all relevant parties must file or amend as applicable all returns and amended returns if any necessary to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year a copy of this letter and a copy of the form must be attached to any_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy the requirement of attaching a copy of this letter by attaching a statement to their return that provides the date and control number plr-104829-10 of this ruling letter the above extension of time is conditioned on the taxpayers' tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made upon audit of the relevant federal_income_tax returns further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the amount of tax_liability is lower sec_301_9100-3 caveat we express no opinion as to whether the acquisition qualifies substantively as a qualified_stock_purchase under sec_338 or as to any_tax consequences arising from the election furthermore except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any matter or item discussed or referenced in this ruling letter in addition we express no opinion as to the tax effects or other consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or effects plr-104829-10 resulting from filing the election late that are not specifically set forth in the above ruling notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply for purposes of granting this relief we relied upon certain information representations and or affidavits submitted by purchaser purchaseraffiliate company official and tax professional with all submissions accompanied by a penalties of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings all of this material is subject_to verification on examination procedural statements this ruling letter is directed only to the person s who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this matter a copy of this letter is being sent to your authorized representatives sincerely _______________________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service number release date index number ------------------------ ------------------------------------------ ------------------------ ------------------------------ -------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-110688-10 date august legend trust state state bank date date date grantor child child child state court state statute state statute a b c dear -------------- --------------------------------------------------------- ---------------------------------------------------- ------------ ------------- ---------------------------------- ------------------ ---------------------- ----------------------- -------------------------------------------------- --------------------- ---------------------- -------------------------- ---------------------------------------------------------------------- --------------------------------------------------- --------------------------------------------- --------------------------------------------- ----------- ---- -------------- this letter responds to your date letter and other correspondence requesting a generation-skipping_transfer gst tax ruling concerning the proposed modifications of trust the facts submitted are as follows plr-110688-10 on date grantor established trust an irrevocable_trust for the benefit of his descendants trust was initially funded with assets contributed by grantor grantor timely filed a form_709 united_states gift and generation-skipping_transfer_tax return for the transfer to trust and allocated dollar_figurea of his gst_exemption to trust as a result of the allocation trust has an inclusion_ratio of zero no further contributions have been made to trust since the initial transfer the current trustee is bank article a of trust provides in relevant part that the trustee is to hold manage invest and reinvest the property comprising the trust collect the income and distribute all none or such part of the net_income among the members living from time to time of a class of beneficiaries composed of grantor’s descendants in such amounts shares and interests as the trustee in trustee’s absolute discretion may from time to time determine article b provides in relevant part that the trustee may distribute from time to time to any then living member of the class of beneficiaries composed of grantor’s descendants such amounts of principal as the trustee in trustee’s absolute discretion determines to be necessary or desirable for any such beneficiary’s health education maintenance and support article provides that trust is to terminate upon the first to occur of the death of the last survivor of grantor’s descendants or the expiration of the rule_against_perpetuities of state upon termination all property then comprising the trust is to be distributed to grantor’s then living descendants on date pursuant to article x the trustee changed the situs of trust from state to state since date the trust is governed by the laws of state except that the applicable rule_against_perpetuities is still subject_to the laws of state the beneficiaries of trust petitioned state court to reform trust the beneficiaries include child child and child and through court appointed representation grantor’s living grandchildren and all other minor incapacitated unborn or unknown individuals who are now or in the future will become descendants of grantor pursuant to the reformation trust is to be split into four separate subtrusts three of the subtrusts will be unitrusts one for each branch of grantor’s family a unitrust for the family of child a unitrust for the family of child and a unitrust for the family of child each of the unitrusts will be funded with b percent of the overall cash and cash equivalents of trust or dollar_figurec whichever is greater the balance of trust consisting of the remaining cash and cash equivalents and all other assets of trust is to be held in the fourth subtrust known as the family_trust which will continue to be administered under the terms of trust as it existed prior to the reformation the trust provisions governing the unitrusts are as follows article of the reformed trust provides in relevant part that the primary beneficiary of each unitrust plr-110688-10 shall be the grantor’s child the descendants of grantor’s child shall also be additional beneficiaries of such unitrust however the trustee should primarily look to the family_trust as a source for making distributions to the descendants of the grantor’s child so long as that child is living in each full taxable_year the trustee is to pay to the primary beneficiary of the unitrust an amount equal to percent of the net fair_market_value of the unitrust assets valued as of the last business_day of the prior taxable_year in addition to the unitrust_amount the trustee may pay as much of the principal of the unitrust to the primary beneficiary as the trustee feels is desirable for the health education maintenance and support of the primary beneficiary article g of the reformed trust provides in relevant part that upon the death of a primary beneficiary his or her interest in the unitrust is to be administered for the benefit of the primary beneficiary’s children by representation until each of the primary beneficiary’s children has attained age the trustee is to pay the unitrust_amount to the primary beneficiary’s children and the descendants of any deceased child of the primary beneficiary as the trustee upon consultation with the trust advisors considers to be in their best interests any of the unitrust_amount that is not distributed is to be accumulated and added to the principal of the unitrust after all of the deceased primary beneficiary’s children have attained age the trustee is to distribute all of the unitrust_amount to the deceased primary beneficiary’s children by representation if there are descendants of a deceased child of the deceased primary beneficiary who have not attained age then the trustee is to pay only as much of their respective share of the unitrust_amount as the trust advisors deem appropriate and the balance of their respective share is to be accumulated and added to their share of the principal of the unitrust if the deceased primary beneficiary has no surviving descendants then the deceased primary beneficiary’s unitrust_amount is to be allocated to the grantor’s children and their descendants by representation by adding to and augmenting the other unitrusts which are being held for grantor’s children and their descendants state statute provides that the percentage to be used in determining the unitrust_amount shall be a reasonable current return from the trust in any event not less than percent nor more than percent taking into account the intentions of the settlor of the trust as expressed in the governing instrument the needs of the beneficiaries general economic conditions projected current earnings and appreciation for the trust and projected inflation and its impact on the trust state statute provides in relevant part that following the conversion of an income trust to a total return unitrust or upon creation of a total return unitrust by a settlor the trustee shall treat the unitrust_amount as if it were net_income of the trust for purposes of determining the amount available from time to time for distribution from the trust plr-110688-10 on date state court entered order reforming trust subject_to the trustee’s receipt of a private_letter_ruling from the internal_revenue_service regarding the proposed modifications to trust you have requested the following ruling the proposed modifications of trust will not alter the inclusion_ratio of trust for gst purposes so that after the modifications are effected trust which includes the four subtrusts will maintain an inclusion_ratio of zero law and analysis sec_2601 of the internal_revenue_code imposes a tax on every gst which is defined under sec_2611 as a taxable_distribution a taxable_termination or a direct_skip section b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations provide that the gst tax shall not apply to any gst under a_trust that was irrevocable on date but only to the extent that such transfer was not made out of corpus added to the trust after date or out of income attributable to corpus so added 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 gst tax because the trust was irrevocable on date will not cause the trust to lose its exempt status in general unless specifically provided otherwise these rules are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in 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 sec_26_2601-1 provides that a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the plr-110688-10 modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or person who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust sec_26_2601-1 example illustrates a modification that does not shift an interest to a lower generation in the example grantor established an irrevocable_trust in for the benefit of grantor's grandchildren a b and c the trust provides that income is to be paid to a b and c in equal shares for life the trust further provides that upon the death of the first grandchild to die one-third of the principal is to be distributed to that grandchild's issue per stirpes upon the death of the second grandchild to die one-half of the remaining trust principal is to be distributed to that grandchild's issue per stirpes and upon the death of the last grandchild to die the remaining principal is to be distributed to that grandchild's issue per stirpes in a became disabled subsequently the trustee with the consent of b and c petitioned the appropriate local court and the court approved a modification of the trust that increased a's share of trust income the modification does not shift a beneficial_interest to a lower generation beneficiary because the modification does not increase the amount of a gst transfer under the original trust or create the possibility that new gst transfers not contemplated in the original trust may be made in this case the modification will increase the amount payable to a who is a member of the same generation as b and c in addition 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 therefore the trust as modified will not be subject_to the provisions of chapter sec_26_2601-1 example considers a situation where a_trust that is otherwise exempt from the gst tax because it was irrevocable prior to date provides that trust income is payable to a for life and upon a's death the remainder is to pass to a's issue per stirpes state x the situs of the trust then amends its income and principal statute to define income as a unitrust_amount of of the fair_market_value of the trust assets valued annually the example concludes that the administration of the trust in accordance with the state statute defining income to be a unitrust_amount will not be considered to shift a beneficial_interest in the trust therefore the trust will not be subject_to the provisions of chapter further under the facts of the example no trust_beneficiary will be treated as having made a gift plr-110688-10 for federal gift_tax purposes and neither the trust nor any trust_beneficiary will be treated as having made a taxable_exchange for federal_income_tax purposes no guidance has been issued concerning changes that may affect the status of trusts that are exempt from gst tax because sufficient gst_exemption was allocated to the trust to result in an inclusion_ratio of zero at a minimum a change that would not affect the gst status of a_trust that was irrevocable on date should similarly not affect the exempt status of such a_trust in this case the proposed modifications will not result in a shift of any beneficial_interest in trust to any beneficiary who occupies a generation lower than the persons holding the beneficial interests further the proposed modifications will not extend the time for vesting of any beneficial_interest in the subtrusts beyond the period provided for in trust therefore provided the proposed modifications meet the requirements of state law we conclude that the proposed modifications of trust which includes the four subtrusts will not alter the inclusion_ratio of trust for gst purposes so that after the modifications are effected trust will maintain an inclusion_ratio of zero in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination the rulings in this letter pertaining to the federal estate and or generation-skipping_transfer_tax apply only to the extent that the relevant sections of the internal_revenue_code are in effect during the period at issue this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs special industries plr-110688-10 enclosures copy for sec_6110 purposes copy of this letter


internal_revenue_service number release date index number ---------------------- ------------------------------ --------------------------------- --------------------- ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------- telephone number --------------------- refer reply to cc fip b03 plr-149239-06 date date legend fund --------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------- trust --------------------------------------------------- company ------------------------------------------ state a -------------------- firm ----------------------------------------------- firm ---------------------------------------------- accounting firm -------------------------------------------- date --------------------------- date -------------- date --------------------------- year ------- plr-149239-06 dear ---- ----------------------------------------------------------------------- this responds to a letter dated date submitted on behalf of fund fund requests that its election under sec_855 of the internal_revenue_code to treat dividends distributed after the close of a tax_year as having been paid during that tax_year be considered timely filed pursuant to sec_301_9100-3 of the procedure and administration regulations facts trust is organized as a state a business_trust and is registered under the investment_company act of as amended trust consists of several separate funds one of which is fund company is responsible for overall management and administration of all funds in trust company was responsible for reviewing and filing fund’s extension form for the income_tax return form 1120-ric for the year that ended on date prior to that year fund had elected to be treated as a regulated_investment_company ric under sec_851 of the internal_revenue_code in year company entered into a contract with firm to provide accounting and sub-administration services for each fund in trust in prior years firm as administrator prepared and filed the income_tax returns for the funds accounting firm had served as independent auditor and tax advisor for trust it prepared federal and state tax returns for some of the funds but prior to year it had not prepared returns for fund during year company acquired a group of funds for which accounting firm provided tax services including filing extensions for income_tax returns even though fund was not recently acquired company believed that accounting firm would prepare and file the extensions for fund as it had done for the acquired funds because one of the acquired funds had merged into fund prior to the year that ended on date accounting firm believed that the extension would be filed by company or by firm on date after it was revealed that no extension had been filed for fund accounting firm filed an income_tax return for fund fund declared and paid dividends to the extent necessary to comply with the requirement to qualify as a ric under sec_852 of the code to eliminate income_tax and to eliminate excise_tax under sec_4982 of the code in accordance with sec_855 of the code fund elected on its federal_income_tax return for the year that ended on date to treat the dividends_paid in its tax_year that ended on date as paid in the prior tax_year the election however was not timely because the return was filed late and no extension had been filed or granted fund makes the following additional representations plr-149239-06 the request for relief was filed by fund before the failure to make the regulatory election was discovered by the service granting the relief requested will not result in fund having a lower tax_liability in the aggregate for all years to which the regulatory election applies than that fund would have had if the election had been timely made taking into account the time_value_of_money fund did not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of the code at the time fund requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences fund did not choose to not file the election law and analysis sec_855 of the code provides that if a ric declares a dividend prior to the time prescribed by law for the filing of its return for a taxable_year including the period for any extension of time granted for filing such return and distributes the amount of such dividend to shareholders in the 12-month_period following the close of such taxable_year and not later than the date of the first regular dividend payment made after such declaration the amount so declared and distributed shall to the extent the company elects in such return in accordance with regulations prescribed by the secretary be considered as having been paid during such taxable_year except as provided in subsections b c and d sec_1_855-1 of the income_tax regulations sets forth the method of making the election and provides that the election must be made in the return filed by the ric for the taxable_year sec_301_9100-1 of the procedure and administration regulations provides in part that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 through c i set forth rules that the internal_revenue_service generally will use to determine whether under the facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides plr-149239-06 that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money holding based upon the facts presented and representations made by fund we hold that fund has demonstrated good cause for the granting relief under sec_301_9100-3 accordingly fund will be treated as having made a timely election under sec_855 of the code on its federal_income_tax return filed on date for the taxable_year that ended on date aggregate for the year to which the election applies than fund’s tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director will determine fund’s tax_liabilities for the year involved if the director determines that fund’s liability is lower that office will determine the federal_income_tax effect no opinion is expressed as to whether fund’s tax_liability is not lower in the this ruling is limited to the timeliness of fund’s election under sec_855 of the code this ruling does not relieve fund from any penalty that it may owe as a result of its failure_to_file its federal_income_tax returns on time except as specifically ruled upon above no opinion is expressed or implied as to any federal excise or income_tax consequences regarding fund in particular no opinion is expressed or implied whether fund qualifies as a ric that is taxable under subchapter_m part of the code plr-149239-06 this ruling is directed only to the taxpayer who requested it sec_6110 sincerely yours of the code provides that it may not be used or cited as precedent enclosures copy of this letter copy for sec_6110 purposes ___________________________ alice m bennett chief branch office of associate chief_counsel financial_institution products


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-171619-03 date june ------- ---------------- -------------------------- ------------------------------------------------------------ legend partnership ------------------------------------------------------------ a ------------------------------------------------------------ d1 year year dear ------------- subsequent correspondence submitted on behalf of partnership requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an election under sec_754 of the internal_revenue_code for the period ending d1 facts year partnership made a liquidating_distribution to a partnership relied on its accountant to provide partnership with tax_advice partnership’s accountant inadvertently failed to inform partnership of the advisability of making an election under sec_754 according to the information submitted partnership was formed in year in this letter responds to a letter dated date together with ------- partnership represents that it has acted reasonably and in good_faith that granting relief will not prejudice the interests of the government and that it is not using hindsight in making the election law and analysis sec_754 provides that a partnership may elect to adjust the basis of partnership property where there is a distribution_of_property or a transfer of a partnership_interest the election applies to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year that the election applies and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 is made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed no later than the time for filing for the taxable_year 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 code except subtitles e g h and i sec_301_9100-1 defines the term aregulatory election as an election whose deadline is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 and sec_301_9100-3 provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making 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 interest of the government conclusion based on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result partnership is granted an extension of time of sixty days following the date of this letter to make a sec_754 election effective year the election should be made in a written_statement filed with the applicable service_center a copy of this letter should be attached to the statement filed a copy of this letter is enclosed for that purpose if the statutory period of limitation on assessment or filing a claim_for_refund has except as expressly provided herein no opinion is expressed or implied expired for any year subject_to this grant of late relief and as a condition of this late relief partnership must adjust the basis_of_property to reflect any additional_depreciation that would have been allowable under sec_734 if the sec_754 election had been timely made any depreciation deduction allowable for an open_year is to be computed based upon the remaining useful_life and using property basis as adjusted by the greater of any depreciation deduction allowed_or_allowable in any prior year had the sec_754 election been timely made concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the code provides that it may not be used or cited as precedent letter is being sent to your authorized representative this ruling is directed only to the taxpayer requesting it sec_6110 of in accordance with the power_of_attorney on file with this office a copy of this sincerely s heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court haas associates accountancy corporation petitioner v commissioner of internal revenue respondent michael a haas and angela m haas petitioners v commissioner of internal revenue respondent docket nos filed date william edward taggart jr for petitioners kathryn k vetter for respondent memorandum findings_of_fact and opinion swift judge in these consolidated cases respondent determined deficiencies in petitioners’ federal income taxes and accuracy-related_penalties as follows michael and angela haas deficiency dollar_figure -- -- sec_6662 accuracy- related penalty big_number --- --- haas associates accountancy corp deficiency --- dollar_figure dollar_figure sec_6662 accuracy- related penalty -- big_number big_number unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure the issues for decision involve claimed ordinary deductions relating to a covenant_not_to_compete and to consulting services a claimed exclusion from income of dollar_figure relating to receipt of shares of stock in an accounting firm and the accuracy- related penalties all references to haas are to petitioner michael haas findings_of_fact some of the facts have been stipulated and are so found when the petitions were filed petitioners michael and angela haas resided in novato california and the principal_place_of_business of petitioner haas associates accountancy corp haas associates was located in novato california haas associates was incorporated in the state of california in haas graduated from the university of san francisco with a degree in accounting and was employed for years as an accountant for ernst ernst in august of haas began employment as an accountant for dean hale petrie dhp a public accounting firm incorporated in california the stock of dhp was owned predominantly if not exclusively by kurt petrie petrie in haas became a certified_public_accountant on date the name of dhp was changed to dean petrie and haas dph and on date percent of the outstanding shares of stock in dph was transferred to haas petrie owned the other percent of the dph stock and petrie served as president and general manager of dph in after working together for years differences of opinion developed between haas and petrie over how dph should be managed as a result haas informed petrie that he wanted to leave dph haas attempted to negotiate an agreement with petrie under which he would pay dph for the right to take over the accounting services relating to some of dph’s clients with whom haas had developed a strong relationship haas and petrie failed to reach an agreement and in november of haas and petrie q4e- hired attorneys to continue the negotiations the negotiations turned acrimonious and resulted ina series of offers and counteroffers on date haas and petrie signed a contract under which haas agreed to make certain payments to dph in return for which accounting services relating to approximately clients of dph were to be turned over to a new corporation to be owned by haas in prior years the accounting services performed by dph for the clients produced for dph approximately dollar_figure in annual gross_receipts to effect this agreement on date haas associates a new subsidiary of dph was formed and on date the name of dph was changed to dean petrie dp in a date separation agreement between haas petrie and dp the division between haas and petrie of the dp accounting firm was formalized as a first step in the transaction haas received an additional dollar_figure percent of the outstanding shares of dp stock bringing haas’ total stock interest in dp to dollar_figure percent haas’ 26-percent stock interest in dp was then redeemed by dp and all of the shares of stock in haas associates was transferred to haas the files relating to the former clients of dph were transferred to haas dp and petrie hereinafter we generally use dp to refer to dph and to dp - - individually agreed for a period of months not to compete with haas and haas associates e not to solicit any of the clients transferred to haas and to haas associates and dp and petrie nominally agreed to provide limited transitional consulting services to haas and to haas associates relating to the clients in the separation agreement the fair market values of dph as a corporation as of date of haas’ stock interests in dp of the clients transferred to haas of the client files of the covenant_not_to_compete and of the right to receive consulting services were indicated as follows item value dph as a corporate entity dollar_figure stock interest in dp transferred to haas big_number stock interest in dp transferred by haas to dp big_number clients transferred to haas and haas associates big_number client files big_number covenant_not_to_compete big_number right to receive consulting services big_number under the terms of the separation agreement the receipt by haas of the additional 26-percent stock interest in dp was to -- - be treated by haas as representing dollar_figure in taxable compensation and as an ordinary business_expense for dp haas’ exchange of his dp stock for the stock in haas associates was to be treated as a tax-free reorganization under sec_355 and sec_368 a d under the terms of the separation agreement the client files the covenant_not_to_compete and the right to receive consulting services were transferred to haas individually in exchange for the payment by haas to dp of dollar_figure the indicated total value therefor ’ until date haas carried on two separate_accounting practices----one individually and one through haas associates on date haas transferred all of the assets of his individual accounting practice to haas associates haas and his wife angela timely filed their joint federal_income_tax return on their return haas included as ordinary_income the dollar_figure reflecting the indicated value for the shares of stock in dp that haas had received dollar_figure relating to the client files dollar_figure relating to the covenant_not_to_compete dollar_figure relating to the consulting services dollar_figure dp issued to haas a form_w-2 wage and tax statement in the amount of dollar_figure relating to the additional 26-percent stock interest in dp that haas received even though the value indicated therefor in the separation agreement was dollar_figure - for and haas associates timely filed corporation income_tax returns on haas and his wife’s joint federal_income_tax return and on haas associates’ and corporation income_tax returns the dollar_figure relating to the covenant_not_to_compete was amortized as an ordinary and necessary business_expense deduction and the dollar_figure relating to consulting services was deducted in as an ordinary business_expense as follows amortization deduction deduction for relating to covenant not consulting year to compete services haas’ joint income_tax return dollar_figure dollar_figure haas associates’ corporation income_tax return big_number -- big_number -- on audit respondent disallowed the above deductions relating to the covenant_not_to_compete and to the consulting services in the alternative only if these deductions are not allowed petitioners claim that the dollar_figure relating to the --- - 26-percent stock interest in dp that haas received should be excluded from haas’ income opinion dollar_figure relating to covenant_not_to_compete under sec_162 a taxpayer may deduct all ordinary and necessary expenses_incurred in carrying_on_a_trade_or_business generally amounts paid for covenants not to compete are amortized over the life of the covenants as current business_expenses see 84_tc_21 amounts paid however for goodwill or for going_concern_value of a business generally are treated as nondeductible capital expenditures see fong v commissioner tcmemo_1984_402 affd without published opinion 816_f2d_684 9th cir to be respected for federal_income_tax purposes covenants not to compete should reflect economic reality see 810_f2d_562 6th cir affg tcmemo_1985_53 lemery v commissioner 451_f2d_173 9th cir affg per curiam 52_tc_367 the division between haas and petrie was acrimonious and strained and we are satisfied that petrie could have made a amortization deductions were also claimed for the dollar_figure relating to the client records which respondent did not disallow --- - strong effort to compete for the clients that were transferred to haas petrie was an experienced and successful accountant who after the division was the president and sole shareholder of dp we believe that the covenant_not_to_compete to which petrie and dp agreed and for which haas paid dollar_figure reflects economic_substance and that the dollar_figure represented a reasonable amount for the covenant_not_to_compete based on prior years the clients protected by the covenant represented approximately dollar_figure in annual gross_receipts the dollar_figure for the 3-year covenant_not_to_compete is properly amortizable as an ordinary and necessary business_expense dollar_figure relating to consulting services petitioners contend that the dollar_figure paid_by haas for the right to receive consulting services from petrie and dp was necessary to aid in the division of the accounting practice respondent contends that little if any consulting services were provided by petrie and dp that petitioners have not satisfied their burden of establishing haas’ need for the consulting services and that any consulting services that were provided by petrie and dp or its predecessor dph occurred before the division and should be treated as nondeductible startup expenditures of haas associates see sec_195 we agree with respondent -- - the evidence does not establish that the dollar_figure payment relating to the so-called consulting services represented an ordinary and necessary business_expense for haas or for haas associates see rule a haas was an experienced accountant and had good relationships with the clients the credible_evidence does not establish the need for any such services further any payment relating to consulting services that petrie and dph provided before the division of the dph accounting firm is to be treated as a nondeductible startup expenditure of haas’ individual accounting practice or of haas associates’ accounting practice see sec_195 dollar_figure relating to 26-percent stock interest and sec_6662 penalty alternatively petitioners claim that the dollar_figure relating to haas’ receipt of the additional 26-percent stock interest in dp should be excluded from their income under the strong_proof rule generally followed by this court taxpayers challenging the tax treatment or allocations reflected in purchase and sale contracts may succeed only by producing strong_proof that the revised allocations better reflect the actual intent of the parties and the economic realities see 294_f2d_52 9th cir affg 34_tc_235 102_tc_406 76_tc_239 we shall however apply the danielson_rule if the court_of_appeals to which the case is appealable would do so see 99_tc_490 54_tc_742 affd 445_f2d_985 10th cir lang v commissioner tcmemo_1993_474 because the court_of_appeals for the ninth circuit the court_of_appeals to which this case is appealable has not explicitly adopted the danielson_rule see 51_tc_306 affd sub nom throndson v commissioner 457_f2d_1022 9th cir we shall apply the strong_proof rule the basis for petitioners’ alternative contention is that the dollar_figure reported as income on their joint federal_income_tax return represented artificial income and should not be charged to haas as income respondent contends that petitioners have not presented strong_proof to overcome the treatment in the separation agreement by haas petrie and dp of the dollar_figure as ordinary_income to haas under the danielson_rule a party may seek to alter the terms of an agreement only by adducing proof which in an action between the parties to the agreement would be admissible to alter the agreement or to show its unenforceability because of mistake undue influence fraud duress etc see 378_f2d_771 3d cir vacating and remanding 44_tc_549 -- no credible_evidence refutes the income character of the dollar_figure haas received the additional 26-percent stock interest in dp that was valued at dollar_figure and treated as nonemployee compensation haas agreed to report and did report the dollar_figure on his and his wife’s joint federal_income_tax return as taxable_income petitioners have not provided adequate evidence to support the recharacterization of the dollar_figure as nontaxable income under sec_6662 a penalty is imposed equal to percent of the portion of the underpayment that is attributable to a substantial_understatement_of_income_tax namely an understatement for a year in excess of percent of the amount required to be shown on the federal_income_tax return or dollar_figure see sec_6662 however if the taxpayer has substantial_authority for the tax_return position the penalty does not apply see sec_6662 b we have disallowed the dollar_figure claimed deduction relating to consulting services primarily on grounds of petitioners’ burden_of_proof we believe that petitioners on the limited facts in evidence relating to this issue had a reasonable basis for claiming a current ordinary deduction for the dollar_figure relating to the consulting services we do not sustain the sec_6662 penalty to reflect the foregoing decisions will be entered under rule