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 tege eoeg eo2 plr-110187-18 date date legend foundation ------------------------------ grantee x y z ------------------------------------- ---------------------------------------- ------------------------ ------------------------------ dear ----------------------------- this letter responds to a letter submitted on your behalf from your authorized representative dated date requesting a ruling as to whether your grant to grantee will be treated as a qualifying_distribution under sec_4942 of the internal_revenue_code_of_1986 as amended hereafter the code and whether your grant to grantee will not constitute a taxable_expenditure under sec_4945 or of the code facts based on the documents and representations submitted on behalf of foundation the relevant facts on which foundation’s request for rulings is based are as follows foundation is a tax-exempt_organization described under sec_501 and is classified as a private_foundation under sec_509 all and section references are to the internal_revenue_code_of_1986 as amended unless otherwise stated plr-110187-18 grantee is a tax-exempt_organization described under sec_501 and is classified under sec_509 as a type_i_supporting_organization pursuant to sec_509 grantee’s charitable purposes include i advancing the public understanding of religion by means of informative media for reporters editors other members of the secular news media and the general_public and ii facilitating informing and improving religious literacy and encouraging public discourse about religion in a neutral and informative way without endorsing or promoting any particular religion sect denomination practice or point of view grantee is not an organization controlled by foundation and is not a disqualified_person or controlled by a disqualified_person foundation proposes to make a grant to grantee to assist grantee in a global religion journalism project hereafter the project to provide comprehensive coverage of religion as a vital and powerful cultural force and to create compelling content in all formats all of which will further grantee’s charitable purpose grantee intends to undertake the project in collaboration with x y and z grantee has represented to foundation that it conducts its publishing and content distribution operations through x x is a nonprofit limited_liability_company that is a wholly-owned subsidiary of grantee and is treated as a disregarded_entity for federal_income_tax purposes the purposes of x include advancing public understanding of religion and educating the public about religion through online publications and other media facilitating information and public discourse about religion without favoring any religion or point of view and promoting the charitable purposes of grantee grantee has represented to foundation that it will collaborate with y on the project y is a not-for-profit corporation and taxed as a subchapter_c_corporation for federal_income_tax purposes as a not-for-profit corporation y is prohibited from paying dividends or distributing any part of its income or profits to its members directors or officers y gathers and distributes news information nationally and internationally grantee has represented to foundation that it will collaborate with z on the project z is a tax-exempt_organization described under sec_501 and is classified as a public charity z serves as a link between the news industry and academia by making available university research and commentary to a mass-media audience z has an existing relationship with y under which y distributes and markets z’s articles to readers throughout the united_states grantee has represented to foundation that the key objective of the project is to help the public understand more deeply and accurately the role that religion plays both good and bad in the daily experiences and attitudes of individuals families and communities and in the development of values that define the broader society and culture through the intended collaboration in the project with x y and z grantee will coordinate and plr-110187-18 support the creation of a joint religion news desk of editors and field journalists and others who will produce stories on religion that are fair accurate balanced and objective and that feature among other things portrayals of religious practices principles and dynamics from diverse religious traditions grantee intends to use y’s global footprint and news experience x’s experience in reporting religion-based news which will enable more in-depth reporting on specific topics and z’s subject matter experts’ unique scholarly and academic viewpoint to ensure the objective and educational nature of the content generated though the project foundation proposes to make the grant exclusively to further the charitable purposes of the project grantee will have sole discretion and control_over the use of the grant funds in selecting contractors or sub-grantees in connection with the project and its use of grant funds and will make such selections completely independently of foundation foundation will not be a party to grantee’s contracts or sub-grants in connection with the project moreover foundation has not earmarked any of the grant funds to or for the benefit of any organization other than grantee nor will it do so grantee has assured foundation that any contracts or sub-grants executed in connection with the project will reflect terms and conditions consistent with the following features the grant funds will be used exclusively to further grantee’s charitable purpose of i advancing the public understanding of religion by means of informative media resources ii providing programs for reporters editors other members of the secular news media and the general_public and iii facilitating informing and improving religious literacy and encouraging public discourse about religion in a neutral and informative way without endorsing or promoting any particular religion sect denomination practice or point of view no aspect of the project may contradict grantee’s charitable purpose or adversely affect grantee’s tax-exempt status pursuant to sec_501 grantee will maintain legal control and possession of the grant funds to engage contractors and sub-grantees to perform services in connection with the project which contractors and sub-grantees will be selected by grantee in its sole discretion university scholars educators and others will regularly develop and produce scholarship and academic perspectives for general publication which will ensure that the content of material produced and published with the support of grant funds is religious and educational in nature and not selected solely on the basis of perceived mass appeal similarly editors producers reporters journalists and others working on the project will ensure that the content of material produced and published with the support of the grant is religious and educational in nature and not selected solely on the basis of perceived mass appeal plr-110187-18 the content produced with the grant funds will be distributed using methods identified by the project participants that are distinguishable from ordinary commercial publishing practices such as charging subscription rates that reflect reductions relative to regular rates relying on sources of revenue other than subscriptions sales of individual copies and advertising publishing content that stimulates the religious interests of readers to contribute to the advancement of religion limiting the solicitations for the purchase of materials through commercial means such as mailing lists radio and newspaper advertising publishing certain materials at no cost to the reader engaging in activities other than the publication and distribution of literature and limiting the accumulation of net_revenues from sales activities and using excess net_revenues on charitable programs grantee will be entitled to review all content produced with the grant funds to ensure that such content is limited to matters relevant to religious inquiry exploration and thought and does not include content based solely on perceived mass appeal grantee will have the right reasonably to reject content to the extent that it does not meet such standards the grant funds may not be used to carry on propaganda or otherwise attempt to influence legislation to influence the outcome of any specific public election or to carry on any voter registration drive or to undertake any activity that is not within grantee’s charitable purposes pursuant to sec_170 each contractor or sub-grantee will certify to grantee that personnel hired or engaged to provide services using the grant funds will have requisite experience as appropriate with respect to religion news and that such services will exclusively further the charitable purposes of the project grantee will have access to reports and financial information to ensure that it may appropriately monitor the use of grant funds in connection with the project grantee will have the right to review all expenses relating to the project and to decline any proposed expenses or decline to make reimbursement for any incurred expenses that do not in grantee’s reasonable_judgment further grantee’s charitable purposes alternatively grantee may require a contractor or sub-grantee to certify to grantee that all expenses for which reimbursement has been requested have been incurred solely to further the project grantee will have the right reasonably to grant or withhold approval of i the pricing of content produced using grant funds ii agreements with marketing companies in connection with such content and iii the manner of distributing such content to ensure that such manner of distribution is distinguishable from ordinary commercial publishing practices plr-110187-18 to the extent that revenue generated by the project is allocated between grantee and y or any other entity not exempt under sec_501 such allocation shall be based solely on gross revenue or similar terms designed to ensure that no part of grantee’s net_earnings inures to the benefit of a private_shareholder_or_individual content produced in connection with the project generally will be owned by the party that produced such content provided however that content jointly produced by grantee herein including x and another party may be jointly owned by grantee and such party furthermore grantee will have a perpetual and non-transferable royalty- free license to use all content produced by the other party for grantee’s internal reference material for use in grant’s publications or as part of a larger work that includes content that grantee has newly created grantee expects that reciprocal licensing rights will be given to y or other parties with respect to content produced by grantee but in connection with any such license grantee will receive regular reports regarding the use of content pursuant to such license and y or the other party will agree to revisit and revise the terms of such license if necessary to ensure that such use is consistent with grantee’s obligations pursuant to sec_501 rulings requested foundation requests that the service issue rulings as follows foundation’s grant will constitute a qualifying_distribution under sec_4942 and foundation’s grant will not constitute a taxable_expenditure under sec_4945 or law sec_170 defines charitable_contribution to mean a contribution or gift to or for_the_use_of a corporation trust or community chest fund or foundation organized and operated exclusively for religious charitable scientific literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals sec_501 defines organizations_exempt_from_taxation to include a foundation organized and operated exclusively for religious charitable scientific or educational_purposes or for the prevention of cruelty to children or animals provided no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual no plr-110187-18 substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office sec_1_501_c_3_-1 provides that the word charitable includes the advancement of religion advancement of education or science and the promotion of social welfare by organizations designed to accomplish any of the purposes described in the regulation sec_1_501_c_3_-1 states that the term educational includes instruction of the public on subjects useful to the individual and beneficial to the community sec_4942 generally imposes a tax on the undistributed_income_of_a_private_foundation other than an operating_foundation under sec_4942 for any taxable_year that has not been distributed before the first day of the second or any succeeding taxable_year following such taxable_year sec_4942 defines undistributed_income for any taxable_year as the amount by which the distributable_amount for such taxable_year exceeds the qualifying distributions made out of such distributable_amount for such taxable_year sec_4942 defines qualifying distributions as any amount_paid to accomplish one or more charitable religious or educational or other enumerated exempt purposes described in sec_170 other than any contribution to i an organization controlled by the foundation or one or more disqualified persons or ii a private non- operating_foundation unless the amount_paid satisfies the requirements of sec_4942 sec_4945 imposes an excise_tax on each taxable_expenditure incurred by a private_foundation sec_4945 provides that the term taxable_expenditure includes a grant paid to an organization unless the grantee is either a public charity described in sec_509 or other than certain supporting organizations described in sec_4942 or ii or an exempt_operating_foundation described in sec_4940 or unless the grantor exercises expenditure_responsibility over the grant pursuant to sec_4945 sec_4945 provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation for any purpose other than one specified in sec_170 plr-110187-18 sec_53_4945-5 provides that where a grantee of a private_foundation uses grant funds to make a subsequent payment to a secondary grantee such subsequent payment will not be treated as a grant by the private_foundation to the secondary grantee if the foundation does not earmark the use of the grant for any named secondary grantee and there does not exist an agreement oral or written whereby such grantor foundation may cause the selection of the secondary grantee by the original grantee even where the private_foundation has reason to believe that a secondary grantee would benefit from a grant the foundation will not be deemed to have made a grant to such secondary grantee so long as the original grantee organization exercises control in fact over the selection process and actually makes the selection completely independently of the private_foundation sec_53_4945-6 provides that qualifying distributions as defined in sec_4942 ordinarily will not be treated as taxable_expenditures for purposes of sec_4945 revrul_66_147 1966_1_cb_137 holds that an organization qualifies for exemption from federal_income_tax under sec_501 of code where it is formed to survey scientific and medical literature published throughout the world and to prepare and distribute free of charge abstracts taken from such literature revrul_67_4 1967_1_cb_121 holds that an organization formed for the purpose of encouraging basic_research in specific types of physical and mental disorders to improve educational procedures for teaching those afflicted with such disorders and to disseminate educational information about such disorders by the publication of a journal containing current technical literature relating to these disorders qualifies for exemption from federal_income_tax under sec_501 the service stated that the publishing of scientific and medical literature qualify for exemption from federal_income_tax under sec_501 if the content of the publication is educational the preparation of material follows methods generally accepted as ‘educational’ in character the distribution of the materials is necessary or valuable in achieving the organization's educational and scientific purposes and the manner in which the distribution is accomplished is distinguishable from ordinary commercial publishing practices revrul_68_306 1968_1_cb_257 holds that a nonprofit organization that publishes a newspaper primarily devoted to news articles and editorials relating to church and religious matters qualifies for exemption from federal_income_tax under sec_501 the ruling held that by disseminating information about church activities and by publishing inspirational articles the organization improves communication between the churches and their members and stimulates the religious interests of its readers therefore the organization is accomplishing a charitable purpose by contributing to the plr-110187-18 advancement of religion the service held that the organization is not operated in an ordinary commercial manner subscriptions are procured through the cooperation and effort of individual churches and church-associated groups although the organization receives substantial income from the sale of subscriptions and advertising space such revenue does not cover its costs of operations it must depend upon contributions to make up the difference revrul_68_307 1968_1_cb_258 holds that a nonprofit organization formed to help the national park service improve and expand its educational and scientific programs qualifies for exemption from federal_income_tax under sec_501 the organization's activities are directed toward furthering the educational and scientific programs of the park service within a specific park it prepares publishes and distributes literature concerning the phenomena and history of the park this literature is sold at a nominal price at visitor centers by the park personnel in addition the organization cooperates with the park service in acquiring material and equipment suitable for use in scientific and educational work in the park it also assists in developing the park library and museum in preserving historic objects and generally in furthering the educational and scientific aims of the park service revrul_70_129 1970_1_cb_128 holds that an organization formed to support research in anthropology by manufacturing quality cast reproductions of anthropological specimens which are sold to scholars and educational institutions in a noncommercial manner qualifies for exemption under sec_501 the service noted that the distribution of reproductions in this case accomplishes the dissemination of important educational and scientific information in the same manner as the scientific abstracts described in revrul_66_147 supra furthermore under the facts in this case the charging of fees for the reproductions does not preclude qualification under sec_501 because the manner in which the distribution is accomplished like that in revrul_67_4 supra is distinguishable from ordinary commercial practices analysis issue sec_4942 and sec_53_4942_a_-3 provide in part that the term qualifying_distribution means any amount_paid to accomplish one or more purposes described in sec_170 or b other than any contribution to i an organization controlled by the foundation or one or more disqualified persons or ii a private non-operating foundation unless the amount_paid satisfies the requirements of sec_4942 plr-110187-18 foundation has represented that grantee is not an organization controlled by foundation is not a disqualified_person or controlled by a disqualified_person and is not a private non-operating foundation thus if the grant is paid to accomplish one or more purposes described in sec_170 or b it will be a qualifying_distribution sec_170 lists the following purposes religious charitable scientific literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals these purposes are the same as the purposes listed in sec_501 thus a grant by a private_foundation to another organization described in sec_501 ordinarily is an amount_paid to accomplish a purpose described in sec_170 the project is a global religious journalism project in which religious information is published to advance the public’s understanding of religion the project intends to produce fair accurate and balanced objective stories that explain the religious convictions practices and dynamics behind news events foundation has represented that the expected content also will offer unique analyses from experts in the field in this way the project will further charitable purposes by advancing religion as contemplated in sec_1_501_c_3_-1 the project is also educational as it will increase people’s understanding of various religions and the role that religion plays in society the project is educational as the term education is defined under sec_1_501_c_3_-1 and similarly as the term is used to describe the religious_organization in revrul_68_306 because the content generated by the project will inform the public on subjects useful to the individual and beneficial to the community the project will prepare the religious and educational content in a manner similar to the organizations described in revrul_66_147 and revrul_67_4 grantee will rely on staff members and contributing authors who are experts in the fields of religion and religious-news gathering this method should ensure that the preparation of the content will conform to non-commercial educational_purposes the content produced through the project will be publicly distributed in a noncommercial manner to achieve grantee’s charitable purposes the material produced through the project will be distributed through websites networks training workshops and other programs for media professionals organizations and the general_public as the means of informing the public on subjects that are useful to individuals and beneficial to the community as contemplated by sec_1_501_c_3_-1 moreover the material will be distributed in a noncommercial manner so that the publications further charitable purposes described in sec_501 and sec_170 specifically during the period of the grant the project will be supported by the grant and not wholly through subscriptions or advertising some material will be published at no cost to the reader additionally project materials will remain freely available to grantee via a perpetual plr-110187-18 royalty-free license even though project materials were produced through collaboration with others as such similar to the organizations described in revrul_68_307 and revrul_70_129 grantee’s manner of distribution of project material is distinct from those of a commercial enterprise issue sec_4945 imposes an excise_tax on each taxable_expenditure incurred by a private_foundation sec_4945 defines taxable_expenditure to include a grant paid to an organization unless the grantee is described in sec_509 or other than certain supporting organizations described in sec_4942 or ii the grantee is an exempt_operating_foundation described in sec_4940 or the grantor exercises expenditure_responsibility over the grant pursuant to sec_4945 here foundation represented that grantee is classified as a type_i_supporting_organization described in sec_509 and not in sec_4942 or ii as such the grant to grantee will not be a taxable_expenditure under sec_4945 sec_4945 provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation for any purpose other than one specified in sec_170 here as stated above foundation has represented that the grant is being paid to grantee to accomplish the project which will be a charitable activity as described in sec_170 and sec_501 furthermore although grantee will collaborate with x y and z the grant is not earmarked for x y or z and as described under sec_53_4945-5 the grant will only be classified as a grant to grantee as such the grant to grantee will not be a taxable_expenditure under sec_4945 conclusion foundation’s grant will constitute a qualifying_distribution under sec_4942 and foundation’s grant will not constitute a taxable_expenditure under sec_4945 or 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 individual with authority to bind the taxpayer and upon the understanding that there will be no material changes in the facts this office has not verified any of the material submitted in support of the request_for_ruling and such material is subject_to verification on examination the associate office will revoke or modify a letter_ruling and apply the revocation retroactively if there has been a misstatement or omission of controlling facts the facts at the time of the transaction are materially different from the plr-110187-18 controlling facts on which the ruling was based or in the case of a transaction involving a continuing action or series of actions the controlling facts change during the course of the transaction see revproc_2018_1 sec_11 no ruling is granted as to whether taxpayer qualifies as an organization described in sec_501 and or sec_509 sec_170 except as expressly provided above and no opinion is expressed or implied concerning the federal_income_tax consequences of any other aspects of any transaction or item_of_income described in this letter_ruling this letter_ruling is directed only to the taxpayer that requested it sec_6110 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 if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely andrew f megosh jr senior tax law specialist exempt_organizations branch tax exempt government entities cc


department of the treasury q internal_revenue_service washington d c tax_exempt_and_government_entities_division oct uniform issue list te pra tr res k erk ree legend taxpayer financial_institution amount plan dear the following facts and representations have been submitted under penalties of perjury in support of the ruling requested this is in response to your request dated date as supplemented by correspondence dated date date and date in which you request a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code’ taxpayer represents that she received a distribution from the plan totaling amount taxpayer asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_402 of the code was due to an error committed by financial_institution taxpayer further represents that amount has not been used for any other purpose taxpayer was a participant in the plan when she retired in she requested a trustee-to-trustee transfer of her interest in the plan totaling amount into an ira with financial_institution the plan transferred amount on date financial ifstitution represented that it received amount from the plan but instead of depositing - amount into an individual_retirement_account ira as taxpayer requested financial_institution deposited amount in a regular non-ira savings account financial_institution further represented that it discovered its error after the period in which it could have corrected the error on its own and subsequently advised taxpayer of the need to seek a waiver of the 60-day rollover requirement based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement in sec_402 of the code with respect to the distribution of amount sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 states that such rollover must be accomplished within days following the day on which the distributee received the property an ira constitutes one form of eligible retirement pian sec_402 of the code provides that an eligible_rollover_distribution shall not include any distribution to the extent such distribution is required under sec_401 of the code regarding required distributions sec_402 of the code provides in relevant part that the secretary may waive the 60-day requirement under sec_402 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 sec_401 of the code provides the rules for governing direct transfers of eligible rollover distributions sec_1_401_a_31_-1 of the income_tax regulations question and answer-15 provides in relevant part that an eligible_rollover_distribution that is paid to an eligible_retirement_plan in a direct_rollover is a distribution and rollover and not a transfer of assets and liabilities revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer including financial_institution admitting its error in depositing amount in a non-ira is consistent with her assertion that her failure to accomplish a timely rollover was due to an error committed by financial_institution therefore pursuant to sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from the plan taxpayer is granted a period of days from the issuance of this ruling letter to contribute amount into a rollover ira provided ali other requirements of sec_402 except the 60-day requirement are met with respect to such contribution the contribution of amount will be considered a rollover_contribution within the meaning of sec_402 this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code regarding required distributions no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact at - please address all correspondence to se t ep ra t2 sincerely yours jason employ e plans technical group ne manager enclosures deleted copy of ruling letter notice of intention to disclose


- - s se'tep ra az - significant index no department of the treasury internal_revenue_service washington d c apr ga o v e a e n l a a hy at ne su evess ue rey y v tax exempt ane government entities division re plan taxpayer dear regarding the this letter is in response to your ruling_request dated october _ taxpayer's request for a ruling regarding the payment of subsidized early retirement benefits in conjunction with the default schedule required by sec_432 b ii of the internal_revenue_code the code the issue raised relates to the rehabilitation plan required as a result of the plan's actuary certifying the plan to be in critical status effective date sec_432 of the code requires that the rehabilitation plan include a default schedule which must assume that there are no increases in contributions under the plan other than those necessary to emerge from critical status after future benefit accruals and other_benefits have been reduced by as much as the law allows the taxpayer proposes to present to the collective bargaining parties a default schedule that will eliminate all subsidized early retirement benefits including unreduced service pensions the default schedule will eliminate the ability of participants with or more years_of_service to retire with an unreduced pension benefit as a result participants who have sufficient service to retire without a reduction in benefits will no longer be able to do so once the default schedule is that participants who are eligible to retire and receive an unreduced service pension over participants will elect to retire rather than wait until age to receive their full pension benefit in place the taxpayer anticipates the taxpayer also proposes to give participants notice days prior to the date that the subsidized service pension benefit is eliminated and that as part of this default schedule eligible participants who retire during this 60-day window may then return to employment and have their benefits suspended while working the subsidized service pension benefit in question is an early retirement pension prior to elimination of the benefit benefit and the plan’s normal_retirement_age i sec_65 the taxpayer proposes to allow employees to retire on one day in order to qualify for the subsidized service pension benefit and return to work the very next day or perhaps after a week has passed in either case neither the employee nor the employer will plan on these retirees actually terminating employment and no longer performing services for the employer when they retire and qualify for their early retirement pension benefit based on the aforementioned facts you requested a ruling as to whether allowing participants who are eligible for subsidized early retirement benefits to retire on one day in order to qualify for the early retirement subsidy and then immediately return to work with payment of their early retirement pension benefit suspended would result in disqualification of the plan under sec_401 of the code sec_401 of the code provides that for plan years beginning after date a pension_plan does not fail to qualify under sec_401 solely because the plan provides that a distribution may be made to an employee who has attained age and who has not separated from employment at the time of distribution sec_409a of the code provides when deferred_compensation under nonqualified compensation plans is included in gross_income sec_409a provides in pertinent part that compensation deferred under a nonqualified_deferred_compensation_plan may not be distributed earlier than separation_from_service as determined by the secretary sec_432 of the code requires that a rehabilitation plan must be adopted for a multiemployer_plan that is in critical status sec_432 of the code indicates that the plan_sponsor must provide to the bargaining partie sec_1 or more schedules showing revised benefit structures revised contribution structures or both which if adopted may reasonably be expected to enable the multiemployer_plan to emerge from critical status in accordance with the rehabilitation plan flush language following sec_432 of the code provides that the schedule or schedules described in subparagraph b i shall reflect reductions in future benefit accruals and adjustable benefits as defined in e a iv ii and increases in contributions that the plan_sponsor determines are reasonably necessary to emerge 2vu1147038 from critical status one schedule shall be designated as the default schedule and such schedule shall assume that there are no increases in contributions under the plan other than the increase necessary to emerge from critical status after future benefit accruals and other_benefits other than benefits the reduction or elimination of which are not permitted under sec_41 d have been reduced to the maximum extent permitted by law sec_432 of the code provides that an adjustable_benefit includes any early_retirement_benefit or retirement-type subsidiary within the meaning of sec_411 and any benefit payment option other than the qualified joint-and survivor annuity sec_1_401-1 of the income_tax regulations regulations provides that a qualified_pension plan ie a qualified defined_benefit_plan or money_purchase_pension_plan is a definite written program and arrangement that is communicated to employees and that is established and maintained by an employer to provide for the livelihood of the employees or their beneficiaries after the retirement of such employees through the payment of benefits sec_1_401-1 of the regulations provides that a qualified_pension plan must be established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits for employees over a period of years usually for life after retirement sec_1_401_a_-1 of the regulations provides that in order for a pension_plan to be a qualified_plan under sec_401 the plan must be established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to its employees over a period of years usually for life after retirement or attainment of normal_retirement_age subject_to paragraph b of this section a plan does not fail to satisfy the requirements of this paragraph b i merely because the plan provides in accordance with sec_401 that a distribution may be made from the plan to an employee who has attained age and who is not separated from employment at the time of such distribution sec_1_401_a_-1 of the regulations provides that sec_1_401-1 a pre-erisa regulation provides rules applicable to the requirement of sec_1_401_a_-1ci and that regulation is applicable except as otherwise provided sec_1_409a-1 of the regulations provides that in general an employee separates from service with the employer if the employee dies retires or otherwise has a termination of employment with the employer sec_1_409a-1 of the regulations provides that whether a termination of employment has occurred is based on whether the facts and circumstances indicate that the employer and employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona_fide services the employee would perform after such date whether as an employee or as an independent_contractor would permanently decrease to no more than percent of the average level of bona_fide services performed whether as an employee or an independent_contractor over the immediately preceding 36-month period or the full period of services to the employer if the employee has been providing services to the employer less than months sec_1_409a-1 of the regulations also provides that facts and circumstances to be considered in making this determination include but are not limited to whether the employee continues to be treated as an employee for other purposes such as continuation of salary and participation in employee benefit programs whether similarly situated service providers have been treated consistently and whether the employee is permitted and realistically available to perform services for other service recipients in the same line_of_business sec_1_409a-1 of the regulations provides the following example an employee may demonstrate that the employer and employee reasonably anticipated that the employee would cease providing services but that after the original cessation of services business circumstances such as termination of the employee’s replacement caused the employee to return to employment although the employee’s retum to employment caused the employee to be presumed to have continued in employment because the employee is providing services at a rate equal to the rate at which the employee was providing services before the termination of employment the facts and circumstance in this case would demonstrate that at the time the employee originally ceased to provide services the employee and the service_recipient reasonably anticipate that the employee would not provide services in the future sec_1_410_a_-7 of the regulations defines severance of service date as the earlier of the date on which an employee quits retires is discharged or dies or the first anniversary of the first date of absence or for any other reason the severance of service date is used to provide an endpoint for crediting service and to apply the statutory break_in_service rules to an elapsed_time_method of crediting service under a -7 sec_1_410_a_-7 of the regulations defines period_of_service in pertinent part generally as a period_of_service commencing on the employee’s employment_commencement date and ending on the severance_from_service_date revrul_79_336 1979_2_cb_187 provides that for purposes of the special forward averaging treatment of lump sum distributions under sec_402 an employee will be considered separated from service within the meaning of sec_402 formerly e a of the code only upon the employee's death retirement resignation or 2vu114 discharge and not when the employee continues on the same job for a different employer as a result of the liquidation merger or consolidation etc of the former employer 11_f3d_1354 7th cir in deciding on what date an employee actually retired concluded by applying common_law rules of contract interpretation that the word retire is to be given its ordinary meaning the court opined in common parlance retire means to leave employment after a period_of_service see webster's ninth new collegiate dictionary retire is to withdraw from one’s position or occupation to conclude one’s working or professional career’ 96_f3d_1033 7th cir in reviewing 11_f3d_1354 7th cir with regard to its earlier decision on the question of whether the anti-cutback rule_of the retirement equality act of pub_l_no 98_stat_1426 which amended erisa g should be interpreted to prohibit pension_plan amendments or terminations that reduce or eliminate an employee's ability to participate in early retirement benefits let stand the definition of the word retire provided in meredith taken together sec_1_409a-1 and sec_1_409a-1 provide that when an employee legitimately retires he separates from service with the employer accordingly if both the employer and employee know at the time of retirement that the employee will with reasonably certainty continue to perform services for the employer a termination of employment has not occurred upon retirement and the employee has not legitimately retired sec_1_410_a_-7 defines the severance of service date as the earlier of the date on which an employee quits retires is discharged or dies or the first anniversary of the first date of absence or for any other reason sec_1_410_a_-7 defines period_of_service as generally ending on an employee's severance of service date taken together sec_1_410_a_-7 and dollar_figure a -7 b provide that an employee retires on a severance of service date when his period_of_service ends in meredith v allsteel inc the seventh circuit_court of appeals defined the word retire to have its ordinary meaning specifically the court provided that in common parlance retire means to leave employment after a period_of_service mentioning that webster's ninth new collegiate dictionary defined retire as to withdraw from one’s position or occupation to conclude one’s working or professional career in ahng v allsteel inc while reviewing the meredith case the same court retained this definition of the word retire accordingly an employee would not legitimately retire if he did not actually leave employment upon retirement although sec_409a and its regulations address a nonqualified_plan arrangement the definitions regarding termination and separation_from_service are consistent with the definition of severance of service date found in a -7 b and both are consistent with the conclusion of revrul_79_336 these regulations and revenue_ruling serve to clarify that an employee legitimately retires when he stops performing service for the employer and there is not the explicit understanding between the employer and employee that upon retirement the employee will immediately return to service with the employer that an employee severs his employment with the employer when he retires is directly expressed in the definition of the word retire found in meredith v allsteel inc on date a notice of proposed rulemaking reg-114726-04 under sec_401 was published in the federal_register de the proposed_regulations the proposed_regulations provided rules permitting distributions to be made from pension_plan under a phased retirement program and set forth requirements of bona_fide phased retirement program the preamble to the proposed_regulations provides that the proposed_regulations specifically do not endorse a prearranged termination and rehire as constituting a full retirement in accordance with sec_1_401_a_-1 and sec_1_401-1 because a qualified_pension plan is generally not permitted to pay benefits before retirement an employee who retires with the explicit understanding between the employer and employee that upon retirement the employee will immediately return to service with the employer has not legitimately retired and may not qualify for an early_retirement_benefit under the plan we have concluded that employees who retire on one day in order to qualify for a benefit under the plan with the explicit understanding between the employee and employer that they are not separating from service with the employer are not legitimately retired accordingly because these employees would not actually separate from service and cease performing services for the employer when they retire these retirements would not constitute a legitimate basis to allow participants to qualify for early retirement benefits which are then immediately suspended such retirements will violate sec_401 of the code and result in disqualification of the plan under sec_401 of the code however in accordance with sec_401 of the code employees who have attained age upon benefit commencement may qualify for and receive an early_retirement_benefit under the plan while they continue in employment please note that this ruling does not express any other opinion regarding the suitability of the proposed default schedule or the associated rehabilitation plan this ruling letter is directed solely to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you have any questions regarding this ruling letter please contact sincerely yours eee ee david m ziegler manager employee_plans actuarial group


internal_revenue_service number release date ---------------------------------- ----------------------------- --------------------------------------------- ---------------------------------- in re --------------------------------------------- ----------------------------- -------------------------- ------------------------ - department of the treasury washington dc person to contact ---------------- id no ------------- cc ita telephone number --------------------- refer reply to plr-120220-05 date date legend a ----------------------------------------------------------------- ------------------------------------------------- dates -------------------------- -------------------------- ----------------------------- groups ------------------------------------------------------------ ------------------------------------------------------------------- ------------------------------------------------ dear -------------------- this letter responds to your letter and submissions of date supplementing a previous submission of march in which you requested on behalf of a above and forty other related parties the taxpayers - see attachment certain private letter rulings relating to the late-filing of forms election to have a tax_year other than a required tax_year specifically you requested that the taxpayers’ late-filed forms be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations we are pleased to address your concerns the information submitted indicates that each of the forty-one taxpayers on whose behalf rulings are requested is a partnership employing an overall accrual_method of accounting taxpayers are members of a tiered_structure as defined in sec_1_444-2t of the temporary income_tax regulations under sec_706 of the internal_revenue_code a partnership’s taxable_year must be its required_taxable_year unless among other exceptions not relevant here the partnership elects under sec_444 of the code to use a taxable_year other than its required_taxable_year sec_444 and permit an eligible_partnership to elect or change to a taxable_year only if the deferral_period of the taxable_year elected is not longer than the shorter of three months or the deferral_period of the taxable_year being changed the term deferral_period generally refers to the number of months between the beginning of the entity’s taxable_year and the close of the first required_taxable_year ending within such taxable_year in the instant circumstances taxpayers desired to elect a taxable_year ending november for their initial taxable_year which is a permitted taxable_year under sec_444 sec_444 of the code and sec_1_444-2t of the regulations provide in relevant part that entities that are part of a tiered_structure that consists only of partnerships all of which have the same taxable_year may make or continue an election under sec_444 of the code sec_1_444-3t of the regulations provides among other requirements that form_8716 must be filed by the earlier of i the 15th day of the fifth month following the month that includes the first day of the tax_year for which the election will first be effective or ii the due_date without regard to extensions of the income_tax return resulting from the sec_444 election sec_301_9100-1 of the regulations set forth rules respecting the granting of extensions of time for making certain elections under these rules the commissioner in his discretion may grant a reasonable extension of time to make a regulatory election under subtitle a provided the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government sec_301_9100-2 sets forth rules governing automatic extensions for regulatory elections including elections to use other than the required tax_year under sec_444 if the provisions of section' do not apply to the taxpayer's situation as in the instant case the provisions of sec_301_9100-3 other extensions may apply sec_301_9100-3 sets forth standards that the commissioner will employ in determining whether to grant discretionary relief in situations that do not meet the requirements of sec_301_9100-2 the standards applied are whether the taxpayer acted reasonably and in good_faith in the matter and whether the granting of relief will prejudice the interests of the government generally a taxpayer will be deemed to have acted reasonably and in good_faith where for example the taxpayer reasonably relied on a qualified_tax professional and that professional failed to make or advise the taxpayer to make the election at issue in the instant circumstances group taxpayers’ forms electing to use a taxable_year ending november were due on or before date group taxpayers’ forms electing to use a taxable_year ending november were due on or before date and group taxpayers’ forms electing to use a taxable_year ending november were due on or before date due to an error or misunderstanding none of the forms was timely filed however the error was not due to any lack of due diligence or prompt action on the part of any taxpayer the information submitted and representations furnished by the taxpayers and their tax professionals establish that taxpayers acted reasonably and in good_faith in respect of this matter furthermore we have determined that the granting of relief in this case will not prejudice the interests of the government within the intendment of sec_301_9100-3 accordingly the requirements of sec_301_9100-3 for the granting of relief have been satisfied within days of the date of this ruling each taxpayer should file with the irs cincinnati service_center attn entity control a form_8716 electing to use a tax_year ending november effective for its first taxable_year ending either date date or date as appropriate a copy of this letter_ruling should accompany such submission and each taxpayer should type or print at the top of the form filed under sec_301_9100-3 of the regulations this ruling is further conditioned on taxpayers complying with sec_1 1t a which provides in relevant part that for each taxable_year that a partnership has an election under sec_444 in effect the partnership must i file a return as provided in sec_1_7519-2t and ii make any required_payment as provided in sec_1_7519-2t except for the specific ruling above which is restricted to the filing of forms we express or imply no opinion concerning the federal_income_tax consequences of the facts of this case under any other provision of the code or regulations that may be applicable thereto this letter_ruling is based on facts and representations provided by the taxpayers and their authorized representatives and is limited to the matters specifically addressed no opinion is expressed as to the tax treatment of the transactions considered herein under the provisions of any other sections of the code or regulations which may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from such transactions which are not specifically addressed herein because it could help resolve federal tax issues a copy of this letter should be maintained with the taxpayers’ permanent records pursuant to a power_of_attorney currently on file with this office the original of this letter_ruling is being sent to the taxpayers’ authorized representative and copies are being furnished to the taxpayers and their second-designated authorized representatives a copy of this letter is also being sent to the taxpayers’ appropriate irs industry director this ruling is directed only to the taxpayers who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent associate chief_counsel income_tax accounting s william a jackson by _________________________ william a jackson chief branch attachment enclosures copy of this letter copy for sec_6110 purposes attachment plr-119941-05 -------------------------------------------------------------------- -------------------------------------------------------------- plr- -------------------------------- plr-119947-05 ------------------------------------------------------------------------------- plr-119950-05 ------------------------------------------------------------- plr-119955-05 ------------------------------------------ plr- ---------------------------------------- plr-120150-05 ----------------------------------------- plr-120154-05 ------------------------------------------------------ plr-120199-05 ------------------------------------------------------- plr- --------------------------------------------- plr-120212-05 ------------------------------------------------------ plr-120219-05 --------------------------------------------- plr-120220-05 ---------------------------------------- plr-120218-05 ------------------------------------------- plr-120222-05 -------------------------------- plr-120231-05 ---------------------------------------------- plr-120233-05 ------------------------------------------------------- ------------------------------------------------------ plr-120235-05 ---------------------------------------- plr-120236-05 ------------------------------------------------------ plr-120237-05 --------------------------------------------------------------- plr-120239-05 -------------------------------------------------- plr-120248-05 --------------------------------------- plr-120249-05 ------------------------------------------ plr-120252-05 ------------------------------------------------ plr-120254-05 -------------------------------------------------------------- plr-120258-05 --------------------------------------------- plr-120263-05 -------------------------------------------------- plr-120268-05 ------------------------------------------- plr-120270-05 ------------------------------------------------------------------ plr-120507-05 ----------------------------------------------- plr-120514-05 ----------------------------- plr-120512-05 ---------------------------- plr-120517-05 ----------------------------------------------------- plr-120519-05 --------------------------------------------- plr-120526-05 ------------------------------------ plr-120527-05 -------------------------------------------------------------- plr-120566-05 ----------------------------------------------------- plr-120528-05 --------------------------------------------------- plr-120548-05 ----------------------------------------------------- plr-120550-05 ----------------------------------------- -------------------------------------------- plr-120552-05


department of the treasury internal_revenue_service washington d c office_of_chief_counsel date number release date cc pa dpl b01 gl-129835-01 uilc internal_revenue_service national_office chief_counsel_advice memorandum for associate area_counsel sb_se cc sb sac from subject chief branch disclosure and privacy law s david l fish cc pa dpl b01 disclosure issues pertaining to collection_of_taxes owed by minors this chief_counsel_advice responds to your electronic mail inquiry dated date and subsequent electronic mail messages in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent you requested advice regarding potential disclosure problems pertaining to collection_of_taxes owed by minors in the context of offers in compromise oic on date you posed three scenarios which are typical of the many possible fact patterns below we have updated a memorandum regarding disclosures to minors and applied that guidance to the fact patterns we first set forth the general rules and then apply them to your fact patterns minor returns and return_information of a minor may be disclosed to the minor sec_6103 returns e return_information irm earned_income disclosures may be made to parents if the minor's return reflects earned_income pursuant to sec_6201 an unpaid assessment against a child is also considered to be an unpaid assessment against the parent to the extent it is based on persons who can obtain returns under sec_6103 - can also obtain the related return_information under sec_6103 the disclosure of returns requires a written request no written request is required for the disclosure of return_information cc pa dpl b01 gl-129835-01 compensation_for the child's services if the return reflects earned_income of the minor the return may be disclosed to the parent pursuant to sec_6103 and the return_information pertaining thereto may be disclosed to the parent pursuant to sec_6103 irm signer of return disclosures may be made to the parent who signed the return on behalf of the child revrul_82_206 1982_2_cb_356 advises that if the child cannot make and file his own tax_return the parent should do so on behalf of the child by the use of the following language by signature parent or guardian for minor child the revenue_ruling is derived from sec_6012 and the regulations promulgated thereunder sec_1_6012-1 requires the guardian or other person charged with the care of the minor's person or property to make and file the return on behalf of the child if the child did not make and file the return inherent in this section is the authority to discuss the return and resulting tax_liability including any necessary collection activities with the parent who signed the return irm trustee committee or guardian of incompetent’s estate sec_6103 provides for disclosure to the committee trustee or guardian of an incompetent's estate if under state law the parent is the legal guardian of the minor's estate all issues concerning the minor's tax_liability whether it relates to earned or unearned_income may be discussed with the parent consent and power_of_attorney sec_6103 provides for disclosures of returns and return_information to the designee of a taxpayer upon consent to such disclosure if the child signed the return the child is the taxpayer and the child may consent to such disclosure by executing a form_8821 tax_information_authorization or other consent meeting the requirement sec_2 in contrast return preparers are generally not entitled to receive returns or return_information without written authorization from the taxpayer i r m you note in your incoming memorandum that under california law the parent is not the legal guardian of the minor’s estate citing cal fam code sec_7502 re minor children of hunt cal p re guardianship of imperatrice cal p re guardianship of yano cal p re white cal app 2d p 2d cal prob code et seq you also note that it appears that under california law no one is authorized to sign an offer_in_compromise on behalf of a minor unless that person has been appointed by a state court specifically for that purpose pursuant to cal prob code et seq cc pa dpl b01 gl-129835-01 of sec_301_6103_c_-1t if the parent signed the return on behalf of the child the signing parent may execute a form_8821 on behalf of the child to designate disclosure to others eg the non-signing parent or an accountant if the parent is the guardian of the minor’s estate under state law the parent may also sign a consent on behalf of a minor see c -1t e authority to execute disclosure consents similarly the child or the parent who signed the return can execute a form_2848 power_of_attorney and declaration of representative to have a third party represent the child before the service there is no disclosure authority for the parent who did not sign a return that reflects only unearned_income to execute a form_8821 or form_2848 on behalf of the child if however under state law the parent is the legal guardian of the minor's estate or if the parent has been appointed by the appropriate court the guardian of the child's estate that parent may file a form_8821 on behalf of the child irrespective of who signed the child's tax_return in those states in which the parent is not the guardian of the minor's estate the parent who did not sign the minor's tax_return which reflects only unearned_income may not execute a form_8821 on behalf of the child we will now apply these principles to your fact patterns q1 child signed return and child signed oic irs rejects oic mother writes in requesting information concerning the rejection of the oic a1 irs may not disclose child’s return_information to mother unless earned_income is or should have been reported on child’s return child has executed a disclosure consent or power_of_attorney permitting disclosure of child’s return_information to mother or state law establishes estate guardianship of mother as to child irs may explain in general terms the oic process q2 father signed oic it is unknown who signed the return collection usually does not have the return it has the taxpayer_delinquent_account tda irs will reject the we are advised by the director of practice that while the conference and practice requirements sec_601 do not address whether the service may recognize a form_2848 executed by a minor a prudent approach would be to look to state law to see whether a minor is capable of entering into an agency relationship if so then irs should recognize a power_of_attorney signed by a minor sec_6103 may authorize disclosure of return_information to a parent to the extent the disclosure is necessary to obtain information that is not otherwise reasonably available however in the majority of circumstances involving minor children we believe sec_6103 and c as described above would be the appropriate authority cc pa dpl b01 gl-129835-01 offer and anticipates correspondence from father and wants to reply to correspondence if received a2 irs may not disclose return_information of child to father unless father signed return earned_income is or should have been reported on child’s return child has executed a disclosure consent or power_of_attorney permitting disclosure of child’s return_information to father or state law establishes estate guardianship of father as to child q3 father and mother signed oic intending to compromise their own liability and the liability of their two minor children it is unknown who signed children's returns irs wants to advise father and mother that separate offers are required for each child's liability and that financial statements are needed for each child a3 irs may reject oic of father and mother because of the general_rule that a separate oic is required for the liabilities of any one person or the joint liability of two persons return_information of children may not be disclosed to father or mother unless father or mother respectively signed return earned_income is or should have been reported on child’s return child has executed a disclosure consent or power_of_attorney permitting disclosure of child’s return_information to father and mother or state law establishes estate guardianship of father or mother respectively as to child however father and mother can be advised that separate offers are required for each child’s liability and that financial statements are needed for each child since that is not a disclosure of return_information please call me at if you have any further questions


t c summary opinion united_states tax_court conrad fitzgerald lewis petitioner v commissioner of internal revenue respondent docket no 2430-04s filed date conrad fitzgerald lewis pro_se steven m webster for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent 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 respondent determined deficiencies in petitioner’s federal income taxes of dollar_figure dollar_figure and dollar_figure for the taxable years and respectively after concessions the issues for decision are whether petitioner is entitled to claim the dependency_exemption deduction for dd for tax years and whether petitioner is entitled to a child_tax_credit with dd as the qualifying_child for tax years and whether petitioner is entitled to claim schedule c expenses for the and tax years whether petitioner is entitled to miscellaneous_itemized_deductions for the tax_year and whether petitioner failed to report interest_income for tax years and background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are 1petitioner listed km bw and dd the court uses only the minor child’s initials as dependents on his tax returns for the taxable years and in the notice_of_deficiency respondent disallowed petitioner’s claimed dependency_exemption deductions and related child tax_credits for km bw and dd however at trial respondent conceded that petitioner was entitled to the dependency_exemption deductions and related child tax_credits for km and bw for the taxable years and 2respondent also adjusted petitioner’s miscellaneous_itemized_deductions for the amount_of_deductions with respect to taxable_year to which petitioner is entitled is a computational matter which will be decided based on the court’s resolution of the issues in this case incorporated herein by this reference petitioner resided in hopkins south carolina on the date the petition was filed in this case in march of petitioner and paula b lewis ms lewis were married ms lewis had a child km from a previous relationship petitioner and ms lewis had two children during their marriage bl and jl petitioner and ms lewis also had two foster children bw and dd in their custody during the taxable years in issue dd is the only child at issue in the present case on date the south carolina department of social services issued to petitioner and ms lewis a license to conduct a foster family boarding home under the provisions of act number sec_3 enacted date dd was placed with petitioner and ms lewis by growing home a branch of south carolina social services from date through date petitioner and ms lewis separated in taxable_year at that time petitioner moved out of their house at the time of trial petitioner and ms lewis were still trying to reconcile but were not formally divorced petitioner and ms lewis purchased their house in using their combined funds the house was titled solely in ms lewis’s name ms lewis claimed a deduction for the home mortgage interest_paid on her and petitioner’s house for taxable_year of dollar_figure during the years in issue ms lewis was a self-employed cosmetologist also during the years in issue petitioner was employed as a truck driver by wilson trucking corporation petitioner received wage income from wilson trucking corporation for taxable years and of dollar_figure dollar_figure and dollar_figure respectively further during the years in issue petitioner operated a hair cutting and beauty salon business known as your future style sometime in ms lewis started a business known as kiddy cuts and styles during ms lewis ceased business operations of kiddy cuts and styles shortly after ms lewis discontinued her existing business in date petitioner started his business named your future style the business petitioner leased a commercial unit in leesburg plaza commercial space which was located in columbia south carolina petitioner and ms lewis’s names were both on the commercial lease contract and the phone bills for the business the utility bills relating to the business were in the name of and addressed to paula b adams doing business as kiddy cuts style 3the court assumes that paula b adams is ms lewis’s maiden name petitioner renovated the commercial space before opening his salon petitioner’s commercial space consisted of three barber chairs and six salon stations petitioner leased out the barber chairs and salon stations to licensed barbers and cosmetologists the average lease rentals for the barber chairs and salon stations were dollar_figure and dollar_figure per week respectively one of the cosmetologists to whom petitioner leased a salon station was ms lewis ms lewis filed federal_income_tax returns for the taxable years and ms lewis attached a schedule c profit or loss from business to each of her form sec_1040 u s individual_income_tax_return for the taxable years and on her schedules c for these years ms lewis reported her principal profession as a cosmetologist her business name as your future style and the commercial space as the address of your future style petitioner received interest_income during taxable years and from wachovia bank of dollar_figure and dollar_figure respectively petitioner also received interest_income during taxable years and from fort jackson federal credit_union of dollar_figure and dollar_figure respectively petitioner did not report any of this interest_income on his and federal_income_tax returns on his federal_income_tax return petitioner claimed dependency_exemption deductions for km bw and dd and child tax_credits for km bw and dd as the qualifying children also petitioner attached to his federal_income_tax return a schedule c on his schedule c for taxable_year petitioner reported dollar_figure of business income from the business petitioner deducted dollar_figure in business_expenses which resulted in a reported business loss of dollar_figure petitioner’s schedule c business_expenses were as follows line insurance other than health dollar_figure line 20a rent or lease vehicles machinery and equipment dollar_figure dollar_figure line repairs and maintenance dollar_figure line supplies dollar_figure line taxes and licenses line utilities dollar_figure dollar_figure line other expenses total dollar_figure furthermore petitioner attached a schedule a itemized_deductions to his federal_income_tax return on his schedule a petitioner claimed as follows in pertinent part itemized_deductions amount dollar_figure line state and local income taxe sec_901 line real_estate_taxes line personal_property_taxes line total taxes big_number line home mortgage interest and points big_number line gifts to charity by cash big_number or check church line other than by cash or check line total contributions to charity line unreimbursed employee_expenses uniforms and cleaning dollar_figure shoe sec_250 line tax preparation fees line total limited misc expenses line net limited misc deduction line total itemized_deduction sec_250 big_number big_number big_number big_number big_number as previously stated petitioner did not report any interest_income on his federal_income_tax return on hi sec_2001 federal_income_tax return petitioner claimed dependency_exemption deductions for km bw and dd and child tax_credits for km bw and dd as the qualifying children also petitioner attached to hi sec_2001 federal_income_tax return a schedule c on his schedule c for taxable_year petitioner reported dollar_figure of business income from the business and deducted dollar_figure in business_expenses which resulted in a reported business loss of dollar_figure as previously stated petitioner did not report any interest_income on hi sec_2001 federal_income_tax return on hi sec_2002 federal_income_tax return petitioner claimed dependency_exemption deductions for km bw and dd and child tax_credits for km bw and dd as the qualifying children also petitioner attached to hi sec_2002 federal_income_tax return a schedule c on his schedule c for taxable_year petitioner reported dollar_figure of business income from the business and deducted dollar_figure in business_expenses which resulted in a reported business loss of dollar_figure furthermore petitioner attached a 4the record in this case did not contain an itemized list of petitioner’s schedule c business_expenses for taxable_year sec_2001 and sec_2002 5see supra note schedule a to hi sec_2002 federal_income_tax return on hi sec_2002 schedule a petitioner claimed as follows in pertinent part itemized_deductions line medical and dental expenses line net medical deduction line state_and_local_income_taxes line total taxes line total itemized_deductions amount dollar_figure big_number big_number big_number big_number in the notice_of_deficiency with respect to taxable_year respondent denied petitioner the claimed dependency_exemption deductions the claimed child tax_credits dollar_figure of his claimed dollar_figure business_expense deductions and dollar_figure of his claimed dollar_figure schedule a itemized_deductions additionally respondent determined that petitioner had unreported interest_income of dollar_figure for taxable_year with respect to taxable_year respondent denied petitioner the claimed dependency_exemption deductions the claimed child tax_credits and the entire amount of his claimed dollar_figure schedule c business_expense deductions additionally respondent determined that petitioner had unreported interest_income of dollar_figure for taxable_year with respect to taxable_year respondent denied petitioner the claimed dependency_exemption deductions the claimed child tax_credits the entire amount of petitioner’s claimed dollar_figure schedule c business_expense deductions and dollar_figure of petitioner’s claimed dollar_figure schedule a itemized_deductions discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct 290_us_111 in pertinent part rule a provides the general_rule that the burden_of_proof shall be upon the petitioner in certain circumstances however if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the proper tax_liability sec_7491 places the burden_of_proof on the commissioner sec_7491 rule a credible_evidence is ‘the quality of evidence which after critical analysis a court would find sufficient to base a decision on the issue if no contrary evidence were submitted’ 122_tc_143 quoting 116_tc_438 sec_7491 applies only if the taxpayer complies with substantiation requirements maintains all required records and cooperates with the commissioner for witnesses information documents meetings and interviews 6see footnote 7we interpret the quoted language as requiring the taxpayer’s evidence pertaining to any factual issue to be evidence the court would find sufficient upon which to base a decision on the issue in favor of the taxpayer see bernardo v commissioner tcmemo_2004_199 sec_7491 although neither party alleges the applicability of sec_7491 we conclude that the burden_of_proof has not shifted to respondent with respect to any of the issues in the present case moreover deductions are a matter of legislative grace and are allowed only as specifically provided by statute 503_us_79 292_us_435 deduction for dependency_exemption at issue are the dependency_exemption deductions claimed by petitioner for dd sec_151 allows deductions for exemptions for dependents of the taxpayer see sec_151 sec_152 defines the term dependent to mean a child of the taxpayer over half of whose support for the year was received from the taxpayer sec_152 provides that a foster_child shall be treated as a child of the taxpayer if such child satisfies the requirements of sec_152 that section requires that the child be an individual other than an individual who at any time during the taxable_year was the spouse determined without regard to sec_7703 of the taxpayer who for the taxable_year of the taxpayer has as his principal_place_of_abode the home of the taxpayer and is a member of the taxpayer’s household s upport includes food shelter clothing medical and dental care education and the like sec_1_152-1 income_tax regs in determining whether an individual received more than one-half of his or her support from the taxpayer there shall be taken into account the amount of support received from the taxpayer as compared to the entire amount of support which the individual received from all sources id in other words the support_test requires the taxpayer to establish the total support costs for the claimed individual and that the taxpayer provided at least half of that amount a taxpayer who cannot establish the total amount of support costs for the claimed individual generally may not claim that individual as a dependent 56_tc_512 cotton v commissioner tcmemo_2000_333 dd was placed in petitioner and ms lewis’s home as a foster_child by the department of social services of south carolina on date and dd stayed in their home until date petitioner and ms lewis received approximately dollar_figure per month from social services toward the support of dd petitioner and ms lewis separated in and thereafter petitioner moved out of the house petitioner admitted that after he moved out of the house still occupied by ms lewis his new residence did not constitute the principal_place_of_abode for dd for taxable years and additionally petitioner did not testify that he provided over half of dd’s support for the taxable years and in fact petitioner testified that the department of social services provided funding that completely paid for all of dd’s support for the taxable years at issue in the present case upon the basis of the record before us we find that petitioner has not established that his home during taxable_year and was the principal_place_of_abode of dd further we find that petitioner has failed to establish the total support costs for the claimed individual dd and that he provided at least half of that amount respondent’s determination on this issue is sustained child_tax_credit as previously stated petitioner claimed a child_tax_credit for taxable years and with dd as the qualifying_child in the notice_of_deficiency respondent disallowed the child_tax_credit sec_24 authorizes a child_tax_credit with respect to each qualifying_child of the taxpayer the term qualifying_child is defined in sec_24 as relevant here a qualifying_child means an individual with respect to whom the taxpayer is allowed a deduction under sec_151 sec_24 we have already held that petitioner is not entitled to a dependency_exemption deduction under sec_151 for dd accordingly dd is not considered a qualifying_child within the meaning of sec_24 it follows therefore that petitioner is not entitled to a child_tax_credit under sec_24 with respect to dd schedule c expenses a taxpayer generally may not deduct personal_living_and_family_expenses sec_262 however sec_162 allows a taxpayer to deduct all ordinary and necessary business_expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business to be necessary an expense must be appropriate and helpful to the taxpayer’s business welch v helvering u s pincite to be ordinary the transaction which gives rise to the expense must be of a common or frequent occurrence in the type of business involved 308_us_488 sec_6001 and the regulations promulgated thereunder require taxpayers to maintain records sufficient to permit verification of income and expenses as a general_rule if the trial record provides sufficient evidence that the taxpayer has incurred a deductible expense but the taxpayer is unable to adequately substantiate the precise amount of the deduction to which he or she is otherwise entitled the court may estimate the amount of the deductible expense bearing heavily against the taxpayer whose inexactitude in substantiating the amount of the expense is of his own making and allow the deduction to that extent 39_f2d_540 2d cir however in order for the court to estimate the amount of an expense the court must have some basis upon which an estimate may be made 85_tc_731 without such basis any allowance would amount to unguided largesse 245_f2d_559 5th cir with these well-established propositions in mind we must determine whether petitioner has satisfied his burden of proving that he is entitled to the claimed schedule c expenses at trial petitioner testified that most of his records substantiating his claimed schedule c business_expenses were destroyed due to a fire in his house however petitioner offered into evidence documents which were not destroyed by the alleged fire these documents consisted of bellsouth phone bills which were in the name of and addressed to paula conrad lewis doing business as kiddy cut style utility bills from sce g in the name of and addressed to paula b adams doing business as kiddy cuts style and a letter from r e hendrix - apartment rentals stating this is to confirm the fact that paula conrad lewis rented from us unit n at leesburg 8see footnote plaza satisfactorily from date to date the rent was dollar_figure per month the expenses evidenced by the above-mentioned phone bills and utility bills appear from the text of the bills to be incurred not for the business your future style but for kiddy cuts and styles the record is not entirely clear as to the transition of business operations from kiddy cuts and styles to your future style however we surmise the following facts it appears that out of convenience and for bad credit reasons petitioner transferred the utility and phone accounts from kiddy cuts and styles to his business in doing so he did not change the name of the business on the utility and phone account official records petitioner’s testimony and ms lewis’s form sec_1040 establish that kiddy cuts and styles ceased business operations in and that the charges shown on the above-mentioned phone bills and utility bills were in fact incurred in the operation of the business your future style at first glance the business relationship between ms lewis and petitioner outwardly resembles a joint_venture or a partnership whether a valid partnership exists for federal_income_tax purposes is governed by federal_law see 337_us_733 as pertinent here a partnership for federal_income_tax purposes is defined in sec_761 as a joint_venture or other unincorporated organization through or by means of which any business or venture is carried on and which is not within the meaning of this subtitle a corporation or a_trust or estate see also sec_7701 a partnership is created when persons join together their money goods labor or skill for the purpose of carrying on a trade profession or business and when there is community of interest in the profits and losses 327_us_280 whether parties have formed a partnership is a question of fact and while all circumstances are to be considered the essential question is whether the parties intended to and did in fact join together for the present conduct of an undertaking or enterprise 42_tc_1067 petitioner stated that ms lewis’s name was on the commercial lease contract the phone bills and the utility bills because he had bad credit and needed her creditworthiness to enter into the lease and obtain phone and utility_services petitioner further testified that profits and expenses stemming from the business were not split between himself and ms lewis ms lewis’s federal_income_tax returns for taxable years and confirm that she did not report any of the income generated by the business her federal_income_tax returns for the taxable years and report that her income was derived from her occupation as a cosmetologist independent_contractor we therefore conclude that petitioner was the sole_proprietor of the business your future style thus he is entitled to deduct all substantiated schedule c expenses that were incurred in the operation of the business a taxable_year as previously stated on his schedule c for taxable_year petitioner reported dollar_figure of business income from the business additionally petitioner deducted dollar_figure in business_expenses which resulted in a reported business loss of dollar_figure respondent in the notice_of_deficiency disallowed dollar_figure of petitioner’s claimed dollar_figure business_expense deductions for taxable_year on the basis of the record in this case for the taxable_year petitioner has substantiated through the phone bills the utility bills and his landlord’s letter business_expenses in the following amounts rent bellsouth phone expenses sce g utility expenses dollar_figure dollar_figure dollar_figure total dollar_figure petitioner has substantiated schedule c business_expenses for taxable_year of dollar_figure as previously stated respondent in the notice_of_deficiency allowed petitioner dollar_figure in schedule c business_expenses thus respondent has allowed a larger amount than petitioner was able to substantiate at trial therefore we sustain respondent’s determination as to the taxable_year b taxable_year as previously stated on his schedule c for taxable_year petitioner reported dollar_figure of business income from the business additionally petitioner deducted dollar_figure in business_expenses which resulted in a reported business loss of dollar_figure respondent in the notice_of_deficiency disallowed the entire amount of petitioner’s claimed dollar_figure schedule c business_expense deductions for taxable_year on the basis of the record in this case for the taxable_year petitioner has substantiated through the aforementioned documents business_expenses in the following amounts rent bellsouth phone expenses sse g utility expenses dollar_figure dollar_figure dollar_figure total dollar_figure petitioner has substantiated schedule c business_expenses for taxable_year of dollar_figure we conclude that petitioner is entitled to deduct schedule c business_expenses for taxable_year of dollar_figure c taxable_year as previously stated on his schedule c for taxable_year petitioner reported dollar_figure of business income from the business additionally petitioner deducted dollar_figure in business_expenses which resulted in a reported business loss of dollar_figure respondent in the notice_of_deficiency disallowed the entire amount of petitioner’s claimed dollar_figure schedule c business_expense deductions for taxable_year on the basis of the record in this case for the taxable_year petitioner substantiated through the aforementioned documents the following amounts of business_expenses rent bellsouth phone expenses sce g utility expenses total dollar_figure dollar_figure dollar_figure dollar_figure petitioner has substantiated schedule c business_expenses for taxable_year of dollar_figure we conclude that petitioner is entitled to deduct schedule c business_expenses for taxable_year of dollar_figure miscellaneous_itemized_deductions petitioner attached a schedule a to his federal_income_tax return in the notice_of_deficiency respondent disallowed dollar_figure of petitioner’s claimed dollar_figure schedule a itemized_deductions for taxable_year the amount of dollar_figure disallowed by respondent consists of disallowed home mortgage interest_expense of dollar_figure disallowed total contributions to charity of dollar_figure and disallowed net limited miscellaneous_itemized_deductions of dollar_figure a home mortgage interest as stated above respondent disallowed petitioner’s claimed deduction of dollar_figure for home mortgage interest_paid during taxable_year respondent contends that petitioner is not entitled to any of the claimed deduction because the house was purchased and encumbered by a mortgage in ms lewis’s name and titled in ms lewis’s name petitioner testified that the house was in ms lewis’s name because of his bad credit history as pertinent here sec_163 and h allows an individual a deduction for all interest_paid within the taxable_year on indebtedness except for personal_interest qualified_residence_interest is excluded from the definition of personal_interest and thus is deductible under sec_163 see sec_163 qualified_residence_interest is any interest which is paid_or_accrued during the taxable_year on acquisition_indebtedness or home_equity_indebtedness see sec_163 acquisition_indebtedness is any indebtedness secured_by the qualified_residence of the taxpayer or incurred in acquiring constructing or substantially improving the qualified_residence see sec_163 the indebtedness generally must be an obligation of the taxpayer and not an obligation of another see 604_f2d_34 9th cir affg tcmemo_1976_150 as previously stated at trial petitioner testified that the qualified_residence was in ms lewis’s name because of his bad credit history petitioner presented no documentary_evidence such as the mortgage itself or canceled checks to prove that the mortgage was his obligation or that he paid the mortgage interest during taxable_year further ms lewis claimed a deduction for the home mortgage interest_paid on the subject property for taxable_year in the amount of dollar_figure since petitioner has failed to provide any proof that the mortgage was his obligation or that he made mortgage interest payments we sustain respondent’s disallowance of petitioner’s claimed deduction of home mortgage interest b gifts to charity on petitioner’s schedule a filed with his federal_income_tax return for taxable_year he reported the following gifts to charity itemized_deductions gifts by cash or check gifts other than by cash or check total gifts amount dollar_figure dollar_figure respondent determined that petitioner did not adequately substantiate that gifts other than by cash or check were made respondent further determined that if such gifts were made petitioner did not adequately substantiate the fair_market_value of the gifts accordingly respondent allowed a deduction for charitable_contributions for taxable_year in the amount of dollar_figure deductions for charitable_contributions are allowable only if verified under regulations prescribed by the secretary sec_170 sec_1_170a-13 income_tax regs in turn sets forth the types of substantiation necessary to support deductions for charitable_contributions for charitable_contributions of property other than money taxpayers generally must maintain for each contribution a receipt from the donee showing the following information the name of the donee the date and location of the contribution and a description of the property in detail reasonably sufficient under the circumstances sec_1_170a-13 income_tax regs the amount of the contribution is the fair_market_value of the property at the time of the contribution sec_1_170a-1 income_tax regs petitioner provided no documentation that would substantiate that his claimed gifts other than by cash or check were made or the fair_market_value of such alleged gifts furthermore petitioner did not give any testimony as to any specific charitable gifts on the basis of the record in this case we conclude that petitioner has not substantiated any charitable gifts for taxable_year other then those already allowed by respondent accordingly respondent’s determination on this issue is sustained c unreimbursed employee_expenses on petitioner’s schedule a filed with his federal_income_tax return for taxable_year petitioner deducted unreimbursed employee_expenses of dollar_figure and tax preparation fees of dollar_figure respondent determined that petitioner did not adequately substantiate unreimbursed employee_expenses above the amount of dollar_figure accordingly respondent allowed a deduction for job expenses and most other miscellaneous deductions for taxable_year of dollar_figure as previously stated sec_162 allows a deduction for ordinary and necessary business_expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business for an expense to be ordinary the transaction that gives rise to the expense must be of a common or frequent occurrence in the type of business involved deputy v du pont u s pincite to be necessary an expense must be appropriate and helpful to the taxpayer’s business welch v helvering u s pincite the performance of services as an employee constitutes a trade_or_business see sec_1_162-17 income_tax regs the employee must show the relationship between the expenditures and 9respondent calculated this amount by adding the substantiated claimed unreimbursed employee_expenses of dollar_figure to the tax preparation fees allowed of dollar_figure the employment see evans v commissioner tcmemo_1974_267 affd 557_f2d_1095 5th cir the taxpayer bears the burden of substantiation 65_tc_87 affd per curiam 540_f2d_821 5th cir petitioner testified that the unreimbursed employee_expenses were paid in furtherance of his occupation as a truck driver once again petitioner provided no documentation that would substantiate that he paid the claimed expenses or that the alleged expenses were related to his employment as a truck driver on the basis of the record in this case we conclude that petitioner has not substantiated any unreimbursed employee_expenses for taxable_year in excess of the amount allowed by respondent accordingly respondent’s determination on this issue is sustained interest_income petitioner timely filed his federal_income_tax returns for taxable years and without reporting any interest_income respondent in the notice_of_deficiency determined that petitioner received interest_income of dollar_figure and dollar_figure for taxable years and respectively the law is clear gross_income includes all income from whatever source derived sec_61 sec_61 specifically includes income derived from interest respondent has established that petitioner received interest_income from wachovia bank of dollar_figure and dollar_figure for taxable years and respectively and fort jackson federal credit_union of dollar_figure and dollar_figure for taxable years and respectively petitioner has failed to provide any documentation that would contradict respondent’s determination furthermore petitioner has not specifically testified to not receiving the above-mentioned interest_income on the basis of the record in this case we conclude that petitioner has received interest_income of dollar_figure and dollar_figure for taxable years and respectively accordingly respondent’s determination on this issue is sustained reviewed and adopted as the report of the small_tax_case division decision will be entered under rule


number release date id office uilc cca_2009031917212341 ----------------------------- from --------------- sent thursday date pm to ------------------------- cc subject re employment_tax question if the payments are made through the church i believe it is properly viewed as additional compensation from the church that should be reported on the w-2 however ministers self-employed and subject_to seca rather than fica with no itw even though they are generally common_law employees special rules in c and provide for this result so no fica or itw would be owing