t c memo united_states tax_court salvatore j d’ amtico and shirley e d’amtico petitioners v commissioner of internal revenue respondent docket no filed date salvatore j d’amico pro_se stephen c best for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined a deficiency of dollar_figure in petitioners' federal_income_tax for the issue for decision is whether petitioners are entitled for to exclude certain amounts from their gross_income under sec_104 we hold that they are not findings_of_fact some of the facts have been stipulated and are so found petitioners resided in littleton colorado at the time they filed the petition in date pro bakers limited a k a heinz bakery products heinz bakery products or the company a corporation affiliated with h j heinz company hired petitioner salvatore j d’amico mr d’amico who had had many years of experience in the baking industry to serve as the general manager of its plant in buffalo new york during heinz bakery products as-- signed additional duties and responsibilities to mr d’amico in date mr d’amico who was still employed by the company suffered a heart attack on date paul sneddon mr sneddon the presi- dent of heinz bakery products wrote a memorandum mr sneddon’s date memorandum to mr d’amico in order to memorial- ize a meeting that had recently taken place between them mr sneddon’s date memorandum inter alia summarized mr d’amico’s career at heinz bakery products and expressed dissatis-- ‘unless otherwise indicated all section references are to the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure faction with certain aspects of mr d’amico’s work performance for the company on date mr sneddon wrote another memorandum mr sneddon’s second memorandum to mr d’amico that memoran-- dum informed mr d’amico that his employment with heinz bakery products was terminated outlined the terms of a severance package that the company was offering to him severance package and indicated that mr d’amico had a period of days within which to sign a release form indicating his acceptance of the severance package mr d’amico suffered a second heart attack on date the date of mr sneddon’s second memorandum to him in date mr sneddon sent a letter to mr d’amico in which mr sneddon indicated that because of mr d’amico’s hospitalization as a result of his second heart attack the company was extending until date the period within which mr d’amico was permitted to sign a release form indicating his acceptance of the severance package in date mr d’amico retained thomas s gill mr gill an attorney to represent him regarding the company’s termination of his employment on date mr gill wrote a letter on behalf of his client mr d’amico mr gill’s date letter to daniel vogus mr vogus an attorney for heinz bakery products mr gill’s date letter informed mr vogus that mr d’amico would like to receive payment in the form of mental distress damages and suggested certain language to be included in any settlement agreement entered into by mr d’amico and the company mr gill’s date letter also summarized mr gill’s view of certain case law under sec_104 and concluded although i am sure that heinz and mr d’amico could never agree on whether his termination was wrong- ful i have explained to you how it might be analyzed to show that it was under these circumstances it seems to me that heinz could in good_faith enter into a settlement agreement with mr d’amico which has the effect of making the settlement payment nontaxable to mr d’amico please consider doing this mr gill and mr vogus and other attorneys for heinz bakery products engaged in settlement negotiations regarding mr d’amico’s termination by the company those negotiations re- sulted in an agreement settlement agreement that was executed by mr d’amico and heinz bakery products on date and date respectively mr d’amico never filed a lawsuit against heinz bakery products in the settlement agreement mr d’amico asserted in sec_2 entitled employee claim that his heart condition was a factor that made a difference in the company’s decision to terminate his employment and further asserted that as a result of that termination he suffered a heart attack and the company denied in sec_3 entitled no company wrong- doing a that mr d’amico’s heart condition was a factor in its decision to terminate him b that mr d’amico suffered a heart attack as a result of his termination by the company and c that it committed any wrongdoing whatsoever in terminating his employment pursuant to the settlement agreement the company agreed to pay mr d’amico dollar_figure for mental distress damages in addition to dollar_figure that previously had been paid to him and dollar_figure in consideration for the covenants of secrecy contained in sec_5 of the settlement agreement covenants of secrecy the release contained in section of that agreement release and the other covenants and obligations in the settlement agreement other covenants and obligations to which mr d’amico agreed the company also agreed under the settlement agreement to pay the cost of mr d’amico’s medical benefits through date ie dollar_figure and to purchase the automobile that it was leasing from a third person and that was being used by mr d’amico leased automobile and to transfer the ownership of that automobile to mr d’amico the sections of the settlement agreement relating to the covenants of secrecy and the release provided secrecy employee acknowledges that during his employment with the company he learned conceived discovered or invented ideas inventions improve- ments trade secrets discoveries formulas recipes standards processes packaging relating to products that the company or any of its affiliates produced manufactured sold marketed distributed delivered or had developed or has in development by or for it product information employee also acknowledges that during his employment he learned certain informa-- tion regarding the business organization sales marketing and distribution techniques and plans financial data and other information regarding the affairs of the company and its affiliates company information all product information whether of a patentable nature or not and all company information shall be the sole and absolute property of the company the company shall be the sole and absolute owner of all patent and other rights in connection with such product information and company information employee at all times shall keep all product information and company information secret from everyone and shall not use for his own purposes or disclose such matters to anyone except to company personnel and to others as the com-- pany authorizes employee shall not divulge furnish or make accessible any of the product information or company information or anything relating to the same to any competitor or other person firm or corporation except when the company authorizes him in writing to do so in addition employee shall not disparage the company or its affiliates or take any_action to damage the business of the company or its affiliates as used in this agreement the term affiliates shall mean any company that controls is controlled by or is under common_control with the company including but not limited to any direct or indirect subsidiary or divi- sion of h j heinz company acknowledgment employee acknowledges that a it is reasonable and necessary for the protection of the business and goodwill of the company and its affiliates for employee to enter into this agreement especially the confidentiality provisions b the company would suffer irreparable injury if employee breaches any of the provisions of paragraph of this agreement release a employee on behalf of himself his heirs estate executors administrators successors and assigns fully waives releases and discharges the company and its affiliates and their officers direc-- tors employees and agents collectively the releasees from all actions causes of action claims judgments obligations damages and liabilities of whatsoever kind and character occurring from the beginning of time to the date of this agreement in- cluding but not limited to any such claims arising out of or relating to employee's employment the termi- nation of such employment and any acts or events involving him and the company or any affiliate b employee represents that he has not filed or joined any claim com- plaint charge or lawsuit that is currently pending against any releasee with any govern- mental agency any court or any other body assigned to any other person or entity any such claim complaint charge or lawsuit or authorized any other person or entity to assert any such claim complaint charge or lawsuit on his behalf cc employee shall not file or join any claim complaint charge or lawsuit against any releasee with any governmental agency any court or any other body assign to any other person or en- tity any such claim complaint charge or lawsuit or authorize any other person or en- tity to assert any such claim complaint charge or lawsuit on his behalf d employee waives any claim for damages incurred at any time after the date of this agreement because of the alleged continuing effects of any alleged acts or omissions involving any releasee that occurred on or before the date of this agreement and any right to sue for monetary or injunctive relief against the alleged contin- uing effects of past acts or omissions occur- ring before the date of this agreement extent of release employee understands and agrees that the release and waiver set forth in para- graph of this agreement extends to all rights and claims of every nature and kind whatsoever known or unknown suspected or unsuspected past or present that existed before the execution of this agreement including but not limited to all rights and claims involving race discrimination sex discrimination age discrimination or discrimination against persons with disabilities based upon title vii of the federal civil rights act of as amended u s c 2000e et seg the federal age discrimination in employment act as amended u s c sec_621 et seg or the fed- eral americans with disabilities act u s c et seg or similar state or local statutes or other- wise and all claims in tort or contract related to employee's employment or to any acts or omissions of the company involving employee the release and waiver set forth in paragraph of this agreement or otherwise in this agreement do not release or waive any claim that may arise after the date employer executes this agreement or any claim for unemployment_compensation or workers'_compensation benefits the sections of the settlement agreement relating to the other covenants and obligations to which mr d’amico agreed provided confidentiality of termination employee shall keep strictly confidential and shall not dis- close directly or indirectly to anyone including but not limited to past present and future employees of the company any information concerning the settle- ment or the facts or circumstances that led to the termination of employment and this agreement termina- tion information employee shall also cause his representatives agents and attorneys to keep strictly confidential and to agree with the company a not to disclose directly or indirectly to anyone including but not limited to past present and future employees of the company any termination information and b not to represent any past present or future employee of the company with respect to termination of employment by the company the employee retains the right to disclose the contents of this agreement to the united_states internal_revenue_service or any state taxing agency for the purpose of supporting and defending the employee’s income_tax return or other tax_return and further retains the right to present it in any administrative or judicial proceeding where it becomes relevant upon days prior written notice to the company of the employee’s inten- tion to do so and an explanation of the need for doing so in either case employee at employee’s expense shall take such steps as the company requests to obtain a confidentiality agreement protective_order or other protection of the confidentiality of the contents of this agreement indemnity as a further material induce- ment to the company to enter into this agreement employee shall indemnify and hold the company and its affiliates harmless from and against any and all loss costs damages or expenses including but not limited to attorneys’ fees that the company or its affiliates incur arising out of any breach of this agreement by employee or the fact that any representation employee makes in this agreement was false when made the settlement agreement also provided in pertinent part non-reliance employee represents and acknowledges that in executing this agreement he does not rely and has not relied upon any representation or statement by the company or any of its affiliates or their attorneys not set forth in this agreement with regard to the subject matter basis or effect of this agreement or otherwise entire agreement this agreement sets forth the entire agreement between employee and the company on the subject matter of this agreement and fully supersedes any and all prior agreements or under- standings between the employee and the company pertain-- ing to the subject matter of this agreement the company issued to mr d’amico a form_w-2 for with respect to its purchase of the leased automobile and its transfer of that automobile to mr d’amico during that year form_w-2 -- - relating to the leased automobile that form_w-2 showed wages tips other comp of dollar_figure federal_income_tax withheld of dollar_figure social_security_tax withheld of dollar_figure and medicare_tax withheld of dollar_figure the company also issued one or more forms to mr d’amico for those forms showed additional income totaling dollar_figure which equaled the sum of the three payments that the company had made to and on behalf of mr d’amico during that year under the settlement agreement for the mental distress damages dollar_figure the cove- nants of secrecy the release and the other covenants and obligations dollar_figure and the cost of providing medical benefits to him dollar_figure we shall refer collectively to those forms as forms relating to the settlement agreement petitioners reported as income on page line of the joint federal_income_tax return that they filed for return the_amount_of_wages tips or other comp shown in the form_w-2 relating to the leased automobile and on page line of that return the total of the amounts of income shown in the forms relating to the settlement agreement however that total amount was rounded to the nearest dollar spetitioners rounded the amount shown in the form_w-2 relating to the leased automobile as wages tips other comp e dollar_figure to the lowest and nearest dollar for convenience we shall do the same when referring to the amount of income shown in that form petitioners also claimed on page line of their return an adjustment to ie a reduction of income of dollar_figure the amount of that adjustment equaled the aggregate amount of income shown in the form_w-2 relating to the leased automobile and the forms relating to the settlement agreement that petitioners reported in their return petitioners attached form_8275 disclosure statement to their return with respect to the adjustment to income of dollar_figure that they claimed in that return that form stated while salvatore d’amico was employed by pro bakers limited he suffered a heart attack after he had recovered and returned to work his bemployment was terminated under circumstances giving rise to the inference that it was because of his heart attack salvatore d’amico and pro bakers limited entered into a settlement agreement a copy is attached hereto pro bakers limited paid him dollar_figure of that settlement in the irs has determined that such payment is not taxable under sec_104 a of the code and rev rule in the notice_of_deficiency issued to petitioners notice respondent determined to reduce by dollar_figure the adjustment to income of dollar_figure that petitioners claimed in their return because it has not been established that any amount more than dollar_figure met the requirements of sec_104 as a result in the notice respondent increased petitioners’ taxable_income for by dollar_figure opinion although respondent determined in the notice to increase petitioners’ income by dollar_figure respondent concedes in respon- dent’s answering brief that dollar_figure of that amount which was the cost to the company of providing medical benefits to mr d’amico under the settlement agreement is to be excluded from petition- ers’ gross_income under sec_106 petitioners bear the burden of showing that respondent erred in determining that the remaining amount ie dollar_figure is to be included in their taxable_income for see rule a 290_us_111 the total amount of dollar_figure that remains in dispute consists of the following two components dollar_figure that the company paid mr d’amico during in consideration for the covenants of secrecy the release and the other covenants and obligations to which mr d’amico agreed dollar_figure payment and dollar_figure that the company paid to purchase the leased automobile the ownership of which it transferred to mr d’amico pursuant to the settlement agreement dollar_figure payment petitioners rely on petitioners advance as an alternative argument for the first time on brief that in the event that the court were to hold against them under sec_104 the fair_market_value of the leased automobile and not the amount that the company paid to purchase it should be used in determining the increase in petitioners’ income for that is attributable to that automobile in this regard petitioners contend that the fair continued sec_104 to support their position that both the dollar_figure payment and the dollar_figure payment collectively settlement amounts in dispute are to be excluded from their income for according to petitioners those amounts were paid to mr d’amico to settle his claims against the company for his physical inju- ries sec_61 provides the following sweeping definition of the term gross_income except as otherwise provided in this subtitle gross_income means all income from whatever source derived not only is sec_61 broad in its scope see 515_us_323 exclusions from gross_income must be narrowly construed see id 504_us_229 sec_104 on which petitioners rely provides that gross_income does not include the amount of any damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal injuries or sickness continued market_value of the leased automobile is dollar_figure we reject petitioners’ alternative contention first that contention was raised for the first time on brief and respondent did not have the opportunity to introduce evidence with respect to it second there is nothing in the record to support petitioners’ position on brief that the fair_market_value of the leased automobile is dollar_figure third on the record before us we find that it is the cost to the company of purchasing the leased automobile which is the benefit that mr d’amico received under the settlement agreement and which we hold below is to be included in petitioners’ taxable_income for the regulations under sec_104 restate the statutory language of that section and further provide the term damages received whether by suit or agree- ment means an amount received other than workmen’s compensation through prosecution of a legal suit or action based upon tort or tort type rights or through a settlement agreement entered into in lieu of such prosecution sec_1_104-1 income_tax regs where damages are received pursuant to a settlement agree- ment such as is the case here the nature of the claim that was the actual basis for settlement controls whether such damages are to be excluded from income under sec_104 see united_states v burke supra pincite the crucial guestion is in lieu of what was the settlement amount_paid bagley v commissioner t cc affd 121_f3d_393 8th cir the determination of the nature of the claim is factual see 102_tc_116 affd in part revd in part and remanded on another issue 70_f3d_34 5th cir 58_tc_32 where there is a settlement agreement that is entered into in an adversarial context at arm’s length and in good_faith that determination is usually made by reference to such agreement see 349_f2d_610 10th cir affg tcmemo_1964_33 robinson v commissioner supra lft the settlement agreement lacks express language stating what the settlement amount was paid to settle the intent of the payor is -- - critical to that determination see knuckles v commissioner supra 290_f2d_283 2d cir affg per curiam tcmemo_1960_21 although the belief of the payee is relevant to that inguiry the character of the settle- ment payment hinges ultimately on the dominant reason of the payor in making that payment see agar v commissioner supra pincite fono v commissioner t c affd without published opinion 749_f2d_37 9th cir the supreme court recently summarized the requirements of sec_104 as follows in sum the plain language of sec_104 the text of the applicable regulation and our decision in burke establish two independent requirements that a taxpayer must meet before a recovery may be excluded under sec_104 first the taxpayer must demon- strate that the underlying cause of action giving rise to the recovery is based upon tort or tort type rights and second the taxpayer must show that the damages were received on account of personal injuries or sickness commissioner v schleier supra pincite- fach of the requirements that must be satisfied in order to gualify the settlement amounts in dispute for exclusion from income under sec_104 involves two inquiries that are similar the dual inquiries under the first requirement are whether mr d’amico’s underlying claim was based on tort or tort type rights and if it was whether the underlying claim gave rise to the payment by the company of the settlement amounts in dispute the dual inguiries under the second requirement are -- - whether mr d’amico’s alleged injuries were personal in nature and if so whether the settlement amounts in dispute were received on account of those injuries we turn first to the dollar_figure payment which the company made to mr d’amico under the settlement agreement for the covenants of secrecy the release and the other covenants and obligations to which mr d’amico agreed on the present record we find that petitioners have failed to show what portion of the dollar_figure payment was made for the covenants of secrecy what portion was paid for the release and what portion was paid for the other covenants and obligations assuming arguendo that petitioners had established what portion of the dollar_figure payment was attributable to the covenants of secrecy any such portion was paid_by the company to mr d’ amico for his covenant as set forth in sec_5 of the settlement agreement not to divulge any trade secrets and similar confidential matters that he learned as an employee of the company on the record before us we find that petitioners have failed to establish that any such portion was paid on -according to petitioners’ return the company reflected the dollar_figure payment as well as certain other_payments totaling dollar_figure that the company made to and on behalf of mr d’amico pursuant to the settlement agreement in one or more forms relating to the settlement agreement that it issued to him account of a tort or tort type claim by mr d’amico alleging personal injuries or sickness moreover assuming arguendo that petitioners had established what portion of the dollar_figure payment was attributable to the release on the instant record we find that they have failed to show that any such portion was paid on account of a tort or tort type claim by mr d’amico alleging personal injuries or sickness in this regard we do not attribute any particular weight to the general language in section of the settlement agreement which appears to be boilerplate releasing the company from any and all claims including but not limited to tort claims finally assuming arguendo that petitioners had shown what portion of the dollar_figure payment was attributable to the other sec of the settlement agreement provides that the release extends to all rights and claims of every nature and kind whatsoever known or unknown suspected or unsuspected past or present that existed before the execution of this agreement including but not limited to all rights and claims involving race discrimination sex discrimination age discrimination or discrimination against persons with disabilities based upon title vii of the federal civil rights act of as amended u s c dollar_figuree et seg the federal age discrimination in employment act as amended u s c sec_621 et seg or the federal americans with disabilities act u s c et seg or similar state or local statutes or otherwise and all claims in tort or contract related to employee’s employment or to any acts or omissions of the company involving employee -- - covenants and obligations to which mr d’amico agreed ’ on the record before us we find that petitioners have failed to estab- lish that any such portion was paid_by the company on account of a tort or tort type claim by mr d’amico alleging personal injuries or sickness we turn now to the dollar_figure payment that pursuant to the settlement agreement the company made to purchase the leased automobile the ownership of which it transferred to mr d’amico on the instant record we find that petitioners have failed to establish that the dollar_figure payment was made by the company on account of a tort or tort type claim by mr d’amico alleging personal injuries or sickness in fact the record shows that the company considered the dollar_figure payment to be wage type compensation to mr d’amico which it reflected in the form_w-2 ‘under sec of the settlement agreement mr d’amico agreed to keep strictly confidential and not to disclose any information concerning the settlement or the facts and circumstances that led to his termination of employment by the company and the settlement agreement except for disclosure of the settlement agreement to the internal_revenue_service or any state taxing agency for the purpose of supporting and defending mr d’amico’s tax position and or in any administrative or judicial proceeding where it became relevant under sec of the settlement agreement mr d’amico agreed as a further material inducement to the company to enter into the settlement agreement to indemnify and hold the company and its affiliates harmless from and against any and all loss cost damages or expenses that they incurred arising out of a breach of the settlement agreement or the fact that any representation made by mr d’amico in the settlement agreement was false when made relating to the leased automobile that it issued to him based upon our examination of the entire record before us we find that petitioners have failed to satisfy the requirements necessary under sec_104 for exclusion of the settlement amounts in dispute from their gross_income we further find on that record that petitioners have failed to carry their burden of showing error in respondent’s determination as modified on brief in petitioners’ favor that they must include the settlement amounts in dispute ie dollar_figure in their taxable_income for to reflect the foregoing and the concession of respondent on brief decision will be entered under rule swe have considered all of the specific contentions and arguments of petitioners relating to the settlement amounts in dispute that are not discussed herein and we find them to be without merit and or irrelevant


department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-139189-08 date march internal_revenue_service number release date index number ---------------------------------- ------------------------------------------ -------------------------- -------------------------------------- legend legend x -------------------------------------------- ----------------------------- state -------- date -------------------------- dear --------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an entity classification election the information submitted states that x is a limited_liability_company formed under the laws of state on date x is not classified as a corporation under sec_301 b or x was eligible to be classified as an association_taxable_as_a_corporation effective on date the entity classification election however was not timely filed sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that unless the entity elects otherwise a domestic eligible_entity is a partnership if it has two or more members plr-139189-08 sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301 b by filing form_8832 entity classification election with the appropriate service_center under sec_301 c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 entity classification election with the appropriate service_center and elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code and the regulations thereunder this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-139189-08 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c summary opinion united_states tax_court gerard l schroeder petitioners v commissioner of internal revenue respondent docket no 5473-02s filed date gerard l schroeder pro_se carroll d lansdell 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 year at issue respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax for the taxable_year the issues for decision are whether petitioner is entitled to dependency_exemption deductions and whether petitioner is entitled to the child_tax_credit some of the facts in this case have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time the petition was filed petitioner lived in short hills new jersey petitioner was married to deborah d schroeder ms schroeder on date the couple had three children from the marriage david schroeder born date samantha schroeder born date and denton schroeder born date collectively the children petitioner and ms schroeder were divorced on date the transcript of the divorce proceeding transcript dated date was incorporated into the dual final judgment of divorce which was dated date petitioner and ms schroeder both acknowledged at the divorce proceeding that the agreements made in the transcript were enforceable even without the signature of either party ms schroeder did not sign any documents in relation to the transcript the transcript contained the support and custody agreement agreement entered into voluntarily and willingly by petitioner and ms schroeder the agreement called for petitioner and ms schroeder to have joint legal custody of the children with ms schroeder having primary physical custody petitioner testified that the children resided with ms schroeder for more than half of the taxable_year in addition petitioner testified that he and ms schroeder collectively provided all the support for the children during but he provided the majority of the that support the agreement also contained a provision that petitioner was entitled to receive all exemptions deductions and the like on his federal_income_tax returns with respect to all three children in preparing his federal_income_tax return petitioner claimed three dependency_exemption deductions and the child_tax_credit with respect to the children petitioner claimed the deductions relying on the terms of the agreement however petitioner did not attach to his tax_return a written declaration signed by ms schroeder stating that she would not claim the children as dependents during the taxable_year in the statutory_notice_of_deficiency respondent disallowed the dependency_exemption deductions and the child_tax_credit on grounds that petitioner had not established entitlement to either we decide the deficiency issue in this case on the basis of the record without regard to the burden_of_proof accordingly we need not decide whether the general_rule of sec_7491 is applicable in this case see 116_tc_438 dependency_exemptions sec_151 allows a taxpayer to deduct an annual exemption_amount for each dependent of the taxpayer sec_152 defines the term dependent to include a taxpayer’s child provided that more than half of the child’s support was received from the taxpayer during the calendar_year however special rules apply in the case of a child of divorced parents see sec_152 pursuant to sec_152 if a child receives over half of his support during the calendar_year from divorced parents and such child is in the custody of one or both parents for more than one-half of the calendar_year then such child is treated for purposes of sec_152 as receiving over half his support from the parent having custody for a greater portion of the calendar_year this special rule applies regardless of which parent actually provided the support sec_152 for purposes of sec_152 the parent having custody for a greater portion of the calendar_year is referred to as the custodial_parent and the term noncustodial_parent means the parent who is not the custodial_parent there are three exceptions to the support_test determined in sec_152 under these exceptions the noncustodial_parent is treated as providing over half of a child’s support if pursuant to sec_152 the custodial_parent signs a written declaration that such custodial_parent will not claim such child as a dependent and the noncustodial_parent attaches such written declaration to the noncustodial parent’s return for the taxable_year pursuant to sec_152 there is a multiple_support_agreement between the parties as provided in sec_152 or pursuant to sec_152 there is a qualified_pre-1985_instrument providing that the noncustodial_parent shall be entitled to any deduction allowable under sec_151 for such child provided that certain other requisites not pertinent here are met since ms schroeder had physical custody of the children for a greater portion of than did petitioner she is the custodial_parent and petitioner is the noncustodial_parent for purposes of sec_152 accordingly petitioner is allowed the dependency_exemption deductions only if one of the three exceptions in sec_152 is met however none of the exceptions apply petitioner failed to attach a signed written declaration to his tax_return no evidence was presented with respect to a multiple_support_agreement and no qualified pre- instrument exists petitioner argues that since the agreement explicitly grants the dependency_exemption deductions to him and states that the agreement is enforceable even if not signed he is entitled to the deductions however language in a divorce decree purportedly giving a taxpayer the right to an exemption deduction does not entitle the taxpayer to the deduction in the absence of a signed written declaration required by sec_152 114_tc_184 affd on another ground sub nom 293_f3d_1208 10th cir since petitioner attached no declaration whatsoever to his tax_return he is not entitled to the dependency_exemption deductions claimed for the year at issue petitioner further argues that he should be allowed the deductions in because respondent allowed the same deductions in and even though no such written declaration was attached to his tax_return in those years petitioner’s argument must fail because each taxable_year stands on its own and must be separately considered see 394_us_678 respondent is not bound in any given year to allow the same treatment permitted in a previous year see 877_f2d_624 n 7th cir 783_f2d_69 7th cir 155_f2d_164 6th cir taxpayers have no right to continue a prior tax treatment that was wrong either on the law or under the facts see 92_tc_206 the mere fact that petitioner may have obtained a windfall in prior years does not entitle him to like treatment for the taxable_year here in issue 58_tc_397 affd 481_f2d_812 10th cir see also schaeffer v commissioner tcmemo_1994_227 child_tax_credit a credit generally is allowed to a taxpayer for each qualifying_child of the taxpayer sec_24 among other requirements a qualifying_child is one for whom the taxpayer is entitled to a dependency_exemption deduction under sec_151 sec_24 because we determined above that petitioner is not entitled to the dependency_exemption deduction for his children for the taxable_year he also is not entitled to the child_tax_credit id reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


internal_revenue_service number release date index number ------------------------------------------ ---------------------------- ---------------------------- ------------------ ---------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-157839-05 date date legend x y country d1 dear ---- ------------- ---------------------------- ----------------------- ---------------------------- ----------------------- ---------------------- ------------------------ this letter responds to the letter dated date submitted on behalf of x and y requesting a ruling that x be granted an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301 c to be treated as a disregarded_entity for federal tax purposes facts on d1 x is wholly owned by y x intended to elect to be treated as a disregarded_entity for federal tax purposes effective d1 however x inadvertently failed to timely file the proper election law and analysis according to the information submitted x was formed under the laws of country plr-157839-05 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single owner having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules under ' c sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed under ' c the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term aregulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under ' will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301 a conclusion based solely on the facts submitted and the representations made we conclude that the requirements of ' have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective d1 x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form except as specifically provided herein no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code the code provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 of plr-157839-05 pursuant to the power_of_attorney on file with this office a copy of the letter is sincerely heather c maloy associate chief_counsel passthroughs and special industries being sent to your authorized representative enclosures cc copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index numbers ------------------ ------------------------------------- -------------------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-128092-11 date date x ----------------------------------------------------------- ------------------------- d1 ---------------------- dear ------------- this responds to a letter dated date submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code x made an election to be treated as an s_corporation x’s election was inadvertently terminated effective d1 because two shareholders temporarily ceased to qualify as eligible shareholders x represents that the termination was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to plr-128092-11 sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x’s s_corporation_election on d1 was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d1 and thereafter provided x’s s_corporation_election was valid and provided that the election was not otherwise terminated under sec_1361 this ruling is conditioned upon x and all its shareholders treating x as having been an s_corporation for the termination period and thereafter moreover the shareholders of x must include their pro_rata share of the separately_stated and nonseparately computed items of income loss deduction or credit as provided in sec_1366 make any adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 if x or its shareholders fail to treat themselves as described above this ruling is null and void except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file we are sending a copy of this letter to x’s authorized representative sincerely s richard t probst senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number 860d ------------------------------------------- ---------------------------------------------- --------------------------------------- --------------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc fip b01 plr-112817-16 date date trustee ------------------------------------------------------------- ----------------------------------------------------------- trustee trustee trustee state year year company exchange date a b ------------------------------------------- ------------------------------- ---------------------------------------------------------------- -------------- ------- ------- -------------------- ------------------------------------- ------------------------ -- ---- plr-112817-16 c d e month year dear --------------- ---- ---- ---- --------------- ------- this letter is in reply to a letter dated date in which trustee solely in its capacity as trustee or indenture trustee of two real_estate mortgage investment conduits remics identified in appendix a each a taxpayer and collectively the taxpayers requests certain rulings in connection with each taxpayer’s qualification as a remic under sec_860a-860g of the internal_revenue_code specifically you have asked for the following rulings in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement as defined below none of i the execution of the settlement agreement as defined below ii the methodology for determining and the right to receive an allocable share as defined below of the settlement payment as defined below or iii the receipt of an allocable share of the settlement payment will cause such taxpayer to fail to meet the requirements of sec_860d in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share of the settlement payment will be treated as a payment received on qualified mortgages within the meaning of sec_1 860g- g ii of the income_tax regulations in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the distribution of an allocable share amount in accordance with the applicable governing agreement and the settlement agreement will not cause any regular_interest in such taxpayer to fail to qualify as a regular_interest as defined in sec_860g or the sole class of residual_interest in such taxpayer to fail to qualify as a residual_interest as defined in sec_860g in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share amount will not be treated as a prohibited plr-112817-16 transaction within the meaning of sec_860f or as a contribution that is subject_to the tax imposed under sec_860g facts background each taxpayer a residential mortgage-backed securitization trust rmbs has elected to be treated as a remic within the meaning of sec_860d and is evidenced by a separate pooling and servicing agreement psa in addition to the psas each taxpayer has also entered into the related mortgage loan purchase agreements and assignment and assumption agreements each a governing agreement and collectively the governing agreements under the governing agreements trustee serves as trustee or indenture trustee for each of the taxpayers the laws of state govern the rights and obligations of the parties to the governing agreements including the trustee the annual_accounting_period for each taxpayer is the calendar_year and each taxpayer utilizes the accrual_method of accounting for maintaining its accounting books and filing its u s federal_income_tax return company is a bank_holding_company whose shares of common_stock are traded on exchange company and its subsidiaries collectively bank constitute a banking and financial services organization the taxpayers function as residential mortgage loan securitization vehicles the taxpayers were established during the period of year through year for the primary purpose of raising financing in the securitization market with respect to pools of residential real_estate mortgage loans originated or acquired by bank the sponsor of the mortgage securitizations the securitization process for each taxpayer generally occurred as follows one or more bank entities the seller sold portfolios of residential mortgage loans the mortgage loans to another bank entity the depositor the depositor conveyed the mortgage loans to the related trustee to be held in trust several classes of rmbs certificates or notes representing various entitlements to the underlying mortgage pool’s cash flows then were issued and sold through an underwriter or underwriters to investors investors in certain instances all or part of a class of issued certificates or notes may have been retained by bank plr-112817-16 for each taxpayer a master servicer servicer or both was charged with responsibility for among other things collecting debt service payments on the mortgage loans taking any necessary enforcement action against borrowers and remitting payments on a monthly basis for distribution to the investors in each securitization an election was made to treat the mortgage loans and certain related assets held by each taxpayer and related assets as a remic under the code the governing agreements for each taxpayer contain a series of representations and warranties made for the benefit of the taxpayer in general these include representations that the mortgage loans were underwritten in all material respects in accordance with certain underwriting guidelines that the mortgage loans conform in all material respects to their descriptions in the investor disclosure documents and that the origination underwriting and collection practices of the seller have been lawful and customary in the mortgage lending and servicing business the dispute in a letter dated date to bank a group of institutional investors institutional investors alleged that a significant number of the mortgage loans with respect to which the institutional investors held investment certificates or notes had been sold or deposited into the trusts based on false and or fraudulent representations and warranties by the mortgage originators the seller and or the depositor these assertions were based in part on the alleged excessive early default and foreclosure rates on and in respect to the mortgage loans bank and the institutional investors engaged in extensive negotiations over a period of more than a years in an effort to reach a settlement relating to the alleged breaches of the governing agreements the negotiations resulted in a settlement the settlement memorialized in a settlement agreement the settlement agreement between the institutional investors and bank under the terms of the settlement agreement the institutional investors then submitted a letter to trustee as a party to the underlying governing agreements expressing their support for the settlement and requesting that trustee accept it the settlement agreement involves a total of b remics trustee acts as trustee for the taxpayers trustee trustee and trustee collectively with trustee the settlement trustees act as trustee indenture trustee or separate trustee for the remaining c rmbs trusts d of which are structured as remics the settlement agreement defines accepting trustee as a trustee that has accepted the settlement agreement on behalf of an rmbs trust or on behalf of only one or more separate mortgage loan groups contained within an rmbs trust trustee constitutes an accepting trustee under the settlement agreement plr-112817-16 the settlement agreement defines settlement_trust as each rmbs trust including each taxpayer for which the applicable settlement trustee accepted and signed the settlement agreement with respect to all mortgage loans held by the trust and in the case where the applicable settlement trustee accepted and signed the settlement agreement on behalf of one or more but not all of the mortgage loan groups contained within an rmbs trust each such separate mortgage loan group for which the applicable settlement trustee accepted and signed the settlement agreement under the settlement agreement any rmbs trust or specific mortgage loan group contained within an rmbs trust for which the settlement agreement was not accepted is referred to as a non-settling trust none of the rmbs trusts including the taxpayers constitute a non-settling trust each rmbs trust including the taxpayers and each non-settling trust is treated as a separate trust for purposes of determining payment under the settlement agreement in month year trustee accepted and signed the settlement agreement on behalf of the taxpayers the settlement agreement the settlement agreement has two principal terms one a settlement payment to be allocated among all of the settlement trusts the settlement payment and two a release of claims against bank that arise under or are based upon the governing agreements or that relate to the origination sale delivery servicing and or administration of mortgage loans to or in the taxpayers the settlement agreement does not contain releases regarding the servicing of mortgage loans within any of the settlement trusts except as it pertains to alleged failures by any bank entity to provide notice of representation and warranty violations or to otherwise enforce claims for breaches of representations and warranties the settlement payment will be allocated among the settlement trusts in accordance with an agreed allocation formula that is based on the past and expected future losses associated with the mortgage loans held in all of the rmbs trusts an independent financial advisor the expert retained by the accepting trustees will perform any calculations required in connection with the allocation formula and those allocation calculations will be treated as final and accepted by the parties absent bad faith or manifest error the settlement payment allocations are determined by reference to the amount of net losses_incurred by each settlement_trust and each non-settling trust the expert will calculate the amount of net losses for each settlement_trust and for each non-settling trust that have been incurred and are estimated to be incurred from each trust’s inception to its expected termination the amount will be expressed as a plr-112817-16 percentage of the sum of the net losses that are estimated to be borne by the settlement trusts and non-settling trusts the net_loss percentage the expert will calculate the allocable share of the settlement payment for each settlement_trust and for each non-settling trust by multiplying the amount of the settlement payment by the net_loss percentage for each settlement_trust and non- settling trust the allocable share within e days of the completion of the expert’s calculation of each settlement trust’s allocable share and at the direction of the settlement trustees bank will wire each settlement trust’s allocable share into the related trust’s collection or distribution account for further distribution to investors taxpayers represent that the distribution provisions of the settlement agreement do not alter the rights or obligations of any of remic trust or remic interests therein and that the distribution of allocable shares to investors is consistent with the distribution provisions contained in the governing agreements that provide for the distribution of subsequent recoveries or unscheduled principal amounts received the settlement agreement requires that the distribution of a remic trust’s allocable share to its investors be consistent with the applicable provisions contained in the settlement trust’s governing agreement that provide for the distribution of subsequent recoveries or unscheduled principal amounts received as the case may be the settlement agreement provides that each settlement trust’s distribution of allocable share amounts to investors be characterized as distributions of principal in respect of remic regular_interest classes entitled to receive such distributions distributions to the investors who hold regular_interest classes entitled to receive principal will be made either in the order of seniority of such classes or on a pro-rata basis in accordance with applicable senior-subordinate principal distribution priority rules in the event a remic’s distribution waterfall provisions and its current allocable share amount available for distribution would combine to result in a distribution of any amount on or in respect of any trust’s residual_interest class whether on the date of the distribution of an allocable share or on any subsequent distribution date that is not the final distribution date under the governing agreement such amount shall not be paid on or distributed to such residual class instead the affected settlement trustee would retain this amount in the applicable trust’s distribution account and on the next distribution date the settlement trustee would distribute the retained amount to the applicable regular_interest investors entitled to receive a principal distribution of subsequent recoveries or unscheduled payments of principal consistent with the governing agreements the settlement agreement provides for the allocation of a notional amount to each remic’s issued certificates or notes equal to the remic’s distributed allocable share in order to restore the outstanding principal balance of such certificates or notes attributable to the prior write down of previously incurred realized losses on mortgage loans specifically a notional amount plr-112817-16 equal to a remic’s allocable share will be applied in the reverse order of previously allocated realized losses to increase on a pro_rata basis within each class the class certificate balance component balance component principal balance or note principal balance of each class of certificates or notes other than any class of remic residual interests to which realized losses have been previously allocated an increase to the principal balance of any class of certificates or notes shall not exceed the aggregate amount of realized losses previously allocated to such class under the governing agreements in addition holders of certificates or notes whose class principal balances are restored will not be entitled to any payment in respect of interest on the restored amount for any interest_accrual_period relating to the distribution date on which such increase occurs or on any prior distribution date law and analysis issue and qualified mortgages permitted_investments and payments received on qualified mortgages sec_860d provides that the terms real_estate_mortgage_investment_conduit and remic mean any entity that meets several requirements including that as of the close of the third month beginning after the startup_day and at all times thereafter substantially_all of the assets of the entity consist of qualified mortgages and permitted_investments sec_860g defines qualified_mortgage to include any obligation including any participation or certificate of beneficial_ownership therein which is principally secured_by an interest_in_real_property and which i is transferred to the remic on the startup_day in exchange for regular or residual interests in the remic ii is purchased by the remic within the 3-month period beginning on the startup_day if except as provided in regulations such purchase is pursuant to a fixed-price contract in effect on the startup_day or iii represents an increase in the principal_amount under the original terms of an obligation described in clause i or ii if such increase i is attributable to an advance made to the obligor pursuant to the original terms of a reverse_mortgage_loan or other obligation ii occurs after the startup_day and iii is purchased by the remic pursuant to a fixed price contract in effect on the startup_day sec_860g defines permitted_investments to mean any cash_flow_investment qualified_reserve_asset or foreclosure_property sec_860g defines cash_flow_investment to mean any investment of amounts received under qualified mortgages for a temporary period before distribution to holders of interests in the remic sec_1_860d-1 provides that for purposes of the asset test of sec_860d substantially_all of a qualified entity’s assets are qualified mortgages and permitted_investments if the qualified_entity owns no more than a de_minimis amount of other assets sec_1_860d-1 provides that the amount of assets other than plr-112817-16 qualified mortgages and permitted_investments is de_minimis if the aggregate of the adjusted bases of those assets is less than one percent of the aggregate of the adjusted bases of all of the remic’s assets sec_1_860g-2 states that in determining what is a cash_flow_investment the term payments received on qualified mortgages includes among other_payments payments by a sponsor or prior owner in lieu of the sponsor’s or prior owner’s repurchase of a defective obligation as defined in sec_1_860g-2 that was transferred to the remic in breach of a customary warranty sec_1_860g-2 defines a defective obligation as a mortgage subject_to certain defects including that the mortgage does not conform to a customary representation or warranty given by the sponsor or prior owner of the mortgage regarding the characteristics of the mortgage or the characteristics of the pool of mortgages of which the mortgage is a part each taxpayer’s right to receive its allocable share under the settlement agreement arises from the mortgage loans the allocable share for each taxpayer is a contract claim that stems directly from the rights held by the trustee on behalf of each taxpayer and its status as a remic therefore a taxpayer’s right to receive an allocable share does not constitute an asset that is newly acquired by a remic after its startup date the execution of the settlement agreement the methodology used to determine a taxpayer’s allocable share and the receipt of the allocable share by a taxpayer arise from each taxpayer’s interest in the mortgage loans and its status as a remic and therefore will not cause any taxpayer to fail to meet the requirements under sec_860d the allocable share under the settlement agreement is the result of a dispute between the institutional investors and bank regarding whether the mortgage loans conveyed to each taxpayer violated customary representations and warranties under the respective governing agreements for purposes of the remic rules a defective obligation includes mortgages that do not conform to a customary representation or warranty given by the sponsor or prior owner of the mortgage regarding the characteristics of the mortgage or the characteristics of the pool of mortgages of which the mortgage is a part each taxpayer’s right to the allocable share under the settlement agreement is akin to a payment received by such taxpayer from a sponsor or prior owner in lieu of the sponsor or prior owner’s repurchase of such a defective obligation therefore pursuant to sec_1_860g-2 the allocable share will be considered a payment received on a qualified_mortgage pursuant to sec_1 860g- g ii issue regular and residual interests sec_860g defines a regular_interest in a remic to mean any interest in a remic which is issued on the startup_day with fixed terms and which is designated plr-112817-16 as a regular_interest if a such interest unconditionally entitles the holder to receive a specified principal_amount or other similar amount and b interest payments or other similar amount if any with respect to such interest at or before maturity i are payable based on a fixed rate or to the extent provided in regulations at a variable rate or ii consist of a specified portion of the interest payments on qualified mortgages and such portion does not vary during the period such interest is outstanding sec_860g defines a residual_interest in a remic to mean an interest in a remic which is issued on the startup_day which is not a regular_interest and which is designated as a residual_interest sec_860g defines the term startup_day to mean the day on which the remic issues all of its regular and residual interests sec_1_860g-1 provides that for purposes of sec_860g a remic designates an interest as a regular_interest by providing to the internal_revenue_service the information specified in sec_1_860d-1 in the time and manner specified in sec_1_860d-1 sec_1_860g-1 provides that a residual_interest is an interest in a remic that is issued on the startup_day and that is designated as a residual_interest by providing the information specified in sec_1_860d-1 at the time and in the manner provided in sec_1_860d-1 a residual_interest need not entitle the holder to any distributions from the remic sec_1_860g-1 provides that for purposes of sec_860g a regular_interest in a remic has fixed terms on the startup_day if on the startup_day the remic’s organizational documents irrevocably specify i the principal_amount or other similar amount of the regular_interest ii the interest rate or rates used to compute any interest payments or other similar amounts on the regular_interest and iii the latest possible maturity_date of the interest a remic regular_interest must be issued on the startup date with fixed terms a remic residual_interest is an interest in the remic issued on the startup date that is not a regular_interest taxpayers represent that the distribution provisions of the settlement agreement do not alter the rights or obligations of any of the taxpayers or the investors’ interests therein and that the distribution of allocable shares to investors is consistent with the distribution provisions contained in the governing agreements that provide for the distribution of subsequent recoveries or unscheduled principal amounts received distributions that are made pursuant to these provisions are treated as and constitute distributions of underlying mortgage loan principal collections the settlement agreement also provides that should a principal payment become payable to a class of remic residual interests such payment will be maintained in the distribution account and the trustee shall distribute the retained amount to the applicable regular_interest investors entitled to receive a principal distribution of subsequent recoveries or unscheduled payments of principal accordingly the distribution of an allocable share to investors will not cause any regular_interest in a taxpayer to fail to qualify as a plr-112817-16 regular_interest or the sole class of residual_interest in the taxpayer to fail to qualify as a residual_interest issue tax on contributions after startup date and prohibited_transaction except as provided in sec_860g sec_860g imposes on any amount that is contributed to a remic after the startup_day a tax equal to percent of the amount contributed sec_860g provides that the tax on contributions after the startup date shall not apply to any contribution which is made in cash and is a a contribution to facilitate a cleanup call as defined in regulations or a qualified_liquidation b a payment in the nature of a guarantee c a contribution during the month period beginning on the startup_day d a contribution to a qualified_reserve_fund by any holder of a residual_interest in the remic or e any other contribution permitted in regulations sec_860f imposes a tax equal to percent of the net_income_derived_from_prohibited_transactions sec_860f defines prohibited_transaction to mean one of the following a disposition of any qualified_mortgage transferred to the remic other than a disposition pursuant to i the substitution of a qualified_replacement_mortgage for a qualified_mortgage or the repurchase in lieu of substitution of a defective obligation ii a disposition incident to the foreclosure default or imminent default of the mortgage iii the bankruptcy or insolvency of the remic or iv a qualified_liquidation b the receipt of any income attributable to any asset which is neither a qualified_mortgage nor a permitted_investment c the receipt by the remic of any amount representing a fee or other compensation_for services or d gain from the disposition of any cash_flow_investment other than pursuant to any qualified_liquidation as discussed above the receipt of the allocable share by a taxpayer arises from the mortgage loans and each taxpayer’s status as a remic the allocable share arises in connection with each taxpayer’s interest in the mortgage loans and is neither a contribution of cash to the remic nor is it listed as a prohibited_transaction in sec_860f as a result the receipt of the allocable share by a taxpayer will not be treated as a prohibited_transaction within the meaning of sec_860f or as a contribution subject_to tax under sec_860g plr-112817-16 conclusion we hereby rule as follows in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement none of i the execution of the settlement agreement ii the methodology for determining and the right to receive an allocable share of the settlement payment or iii the receipt of an allocable share of the settlement payment will cause the taxpayer to fail to meet the requirements of sec_860d in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share of the settlement payment will be treated as a payment received on qualified mortgages within the meaning of sec_1 860g- g ii in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the distribution of an allocable share amount in accordance with the applicable governing agreement and the settlement agreement will not cause any regular_interest in such taxpayer to fail to qualify as a regular_interest as defined in sec_860g or the sole class of residual_interest in such taxpayer to fail to qualify as a residual_interest as defined in sec_860g in the case of each taxpayer for which a timely valid and continuing remic election has been made in accordance with the applicable governing agreement the receipt of an allocable share amount will not be treated as a prohibited_transaction within the meaning of sec_860f or as a contribution that is subject_to the tax imposed under sec_860g this ruling’s application is limited to the facts representations code sections and regulations cited herein except as specifically ruled upon above no opinion is expressed concerning any federal_income_tax consequences related to the facts herein under any other provisions of the code specifically we do not rule whether any taxpayer qualifies as a remic under sec_860a-860g or whether any mortgage loan qualifies as a qualified_mortgage as defined in sec_860g this ruling is directed only to the taxpayers that requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the provisions of a power_of_attorney on file we are sending a copy of this ruling letter to your authorized representative plr-112817-16 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely ________________________________________ jason kurth assistant to the branch chief branch office of associate chief_counsel financial institutions products


pureuk l pve sermce nov uniform issue list legend decedent b taxpayer a insurance_company amount d financial advisor c amourt e amount f amount g dear si this is in response to your letter dated date in which you request a waiver of the 60-day rollover requirement contained in sec_402 a of the internal_revenue_code the code as applicable to an annuity described in code sec_403 pursuant to code sec_403 the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age represents that she received a distribution from a tax sheiter annuity tsa retirement account totaling amount g taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_402 a was due to her reliance on erroneous advice given to her by her financial advisor in connection with the rollover decedent b died on april the beneficiary of a tsa retirement account decedent b maintained with insurance aving named his surviving_spouse taxpayer a a sec_2 company the value of the retirement account was amount d taxpayer a as beneficiary intended to roll over the entire balance of amount d from the tsa retirement account into an ira account in a direct_rollover taxpayer a sought the help of financial advisor c who gave taxpayer a instructions in handling the distribution and rollover of the various retirement accounts maintained by decedent b with the help of financial advisor c taxpayer a completed a distribution form requesting that insurance_company distribute amount d from the tsa without income_tax withhoidings financiai advisor c instructed taxpayer a to elect a fump sum distribution instead of a direct_rollover distribution on the distribution form as a result insurance_company withheld federal in _taxes in amount f and on september check in amount g in addition financia days to comply with the rollover rather that the 60-day period provided by sec_402 of the code financial advisor c has confirmed in writing that she provided taxpayer a with misleading information in that she urged taxpayer a to request a lump sum distribution as opposed to a direct_rollover and misinformed taxpayer a that she had days to roll over the lump sum distribution from the tsa on december i taxpayer a sent three checks totaling amount d to her ira account which was accepted as a rollover of the lump sum distribution from the tsa es in amount e and state income taxpayer a received a net distribution isor c informed taxpayer a that she had based on the facts and representations you request that the service waive the 60-day rollover requirement with respect to the distribution of amount d because the failure to waive such requirement would be a hardship and against equity or good conscience with respect to your request to waive to day rollover requirement sec_403 of the code provides in relevant part that any amount distributed out of an annuity_contract described in sec_403 shall be taxable to the distributee in the taxable_year of the distributee in which distributed in the manner provided under sec_72 of the code relating to annuities code sec_403 provides that if any portion of the balance_to_the_credit of an employee in a b annuity_contract is paid to him in an eligible_rollover_distribution within the meaning of sec_402 and the employee transfers any portion of the distribution to an eligible_retirement_plan described in sec_402 then the distribution to the extent transferred shail not be includible in gross_income for the taxable_year in which it was distributed sec_402 defines an eligibie retirement pian for purposes of subsection c as including an ira described under sec_408 sec_403 provides that rules similar to the rules of paragraphs through and of sec_402 shall apply for purposes of sec_403 sec_403 b provides in relevant part that any amount transferred in a direct trustee-to-trustee transfer in accordance with sec_401 a shall not be includible in gross_income for the taxable_year of the transfer sec_402 of the code provides rules governing rollovers of amounts from exempt trusts to eligible retirement plans including iras sec_402 of the code provides in general that where a surviving_spouse receives a distribution attributable to the deceased spouses’ eligible retirement pian the surviving_spouse shall treat the distribution in the same manner as if the surviving_spouse were the employee sec_401 a a of the code provides that a_trust shall not constitute a qualified_trust under this section unless the plan of which such trust is a part provides that if the distributee of any eligible rollover distribution- ij elects to have such distribution paid directly to an eligible_retirement_plan and ii specifies the eligible retirement pian to which such distribution is to be paid in such form and at such time as the plan_administrator may prescribe such distribution shail be made in the form of a direct trustee-to-trustee transfer to the eligible_retirement_plan so specified sec_401 of the code provides that for purposes of code sec_401 a the term eligible_retirement_plan has the meaning given such term by sec_402 with an exception not pertinent to this ruling_request thus a direct transfer defined in code sec_401 may be made into an ira sec_1_401_a_31_-1 of the income_tax regulations question and answer-5 provides in relevant part that an eligible_rollover_distribution that is paid to an eligible retirement pian in a direct_rollover is not currently includible in the distributee’s gross_income under sec_402 and is exempt fron the 20-percent withholding imposed under sec_3405 of the code sec_1 a -1 of the income_tax regulations question and answer-15 provides in relevant part that a direct_rollover described in code sec_401 a is a distribution and rollover of the eligible_rollover_distribution and not a transfer of assets and liabilities thus for example the consent and requirements of code sec_401 a a and apply to transactions described in code sec_401 a code sec_402 provides that except as provided in subparagraph b paragraph shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed sec_402 of the code provides that the secretary may waive the 60-day requirement under sec_402 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 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 submitted by taxpayer a is consistent the information presented and documentation with her assertion that her failure to accomplish a timely rollover was caused by taxpayer a’s reliance on erroneous advice given to her by her tax advisor in connection with the rollover thus based on the above pursuant to code sec_402 c b the service hereby waives the 60-day rollover period found in gode sec_402 as a result the rollover_contribution of amount g service will treat taxpayer a's december into her ira as a valid rollover within the meaning of code sec_402 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_61 k of the code provides that it may not be used or cited as precedent to inquire about this ruling please contact ish at a please address all correspondence to ld aii se t ep ra t3 sincerely yours eee employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose


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 teb presp-142955-06 date date dear ---------------- pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the projects described in appendix a attached hereto are qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------- --------------------------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure---- ----------------of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the projects described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met if you have any questions with respect to this allocation please contact --------------------- ------------------------------------------------------------------------------------------------------------------- - -------- or -----------------------------of the office of division counsel associate chief_counsel tax-exempt and government entities on --------------------- not a toll-free call except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter presp-142955-06 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in appendix a is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch appendix a project type project location landfill_gas facility -------------------------------- --------------------- -------------------------------- -------------------------------- -------------------------- total amount allocated dollar_figure-------------- dollar_figure-------------- dollar_figure------------------------ -------------- presp-142955-06 borrower name -------------------------- ------------- -------------------------- wind facility -------------