department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uil contact person identification_number telephone number employer_identification_number legend foundation scientific endeavor country scientists organization foundation award x dear sir or madam we have considered your ruling_request dated date as revised by your letters of date date and date regarding whether a change in your grant- making activities will adversely affect your tax-exempt status under sec_501 of the internal_revenue_code code as an organization described in sec_501 facts you are recognized as exempt under sec_501 of the code and classified as a non- operating private_foundation pursuant to sec_509 your activities include providing funds to further studies in scientific endeavor and research by scientists of country scientists of country descent and others who desire to help country’s scientists as part of your activities you make grants to institutions of higher learning directed to programs that promote international cooperation in scientific endeavor support and assist organization and other international scientific meetings or conferences and encourage and support other international activities considered likely to contribute to the development of scientific endeavor in any of its aspects pure applied or educational is recognized as exempt under sec_501 of the code and classified as a foundation non-operating private_foundation pursuant to sec_509 foundation was formed to promote research and study in the field of scientific endeavor by recognizing excellence in the field foundation 1’s primary purpose is to recognize past achievement in scientific endeavor by awarding an international prize currently two of five trustees of foundation are disqualified persons with respect to you as they are lineal descendents of your founder since the filing of this ruling_request you have made an endowment grant to foundation primarily to help endow the award program this endowment grant is subject_to an expenditure_responsibility agreement between you and foundation foundation has received dollar_figurex in one-time endowment grants one-third of which came from you foundation anticipates that the income from these one-time endowment grants will fully fund its grants for the foreseeable future you do not presently anticipate making future grants to foundation on similar terms you are not claiming a qualifying_distribution for the endowment grant to foundation organization is a foreign non-governmental non-profit scientific_organization its purpose is to promote international cooperation in scientific endeavor foundation is a domestic non-profit corporation which is recognized as exempt under sec_501 of the code and is classified as a non-operating private_foundation pursuant to sec_509 organization foundation and foundation collectively parties have entered into a memorandum of understanding under which the parties will establish and administer the award on an on-going basis every four years foundation will bestow an award in the field of scientific endeavor to an individual selected by organization organization will administer the award selection process publicize the award and conduct the award ceremony this award will be similar to the prestigious nobel prizes with a gold medallion and a substantial cash prize awarded to an individual recipient the award will be presented at the quadrennial meeting of organization the award recipient is honored for his prior contributions to the advancement of scientific endeavor the award program has two parts individual recipient and an equal amount in grants as organizational awards to non-profit organizations recommended by the award recipient which are conducting research education or other outreach programs in the field of scientific endeavor a substantial cash prize to the foundation and foundation have entered into an award grant agreement and addendum agreement under which foundation will administer the award in conformance with the award program guidelines specifically during each four-year term of the agreement foundation will provide foundation with funds for the prize and for certain other costs related to the award and presentation of the award foundation will distribute those funds to organization individual award winner and organizational awardees in furtherance of the charitable purposes of the award program foundation and foundation under the terms of the agreement neither foundation nor foundation shall make any taxable_expenditure as described in sec_4945 of the code in conjunction with carrying out their duties with respect to the award foundation is required to maintain records and report annually to foundation on the use of grant funds and to expend those funds in furtherance of the award program as stated in the award program guidelines foundation has agreed not to use any grant funds a sec_2 to carry on propaganda or otherwise to attempt to influence legislation within the meaning of sec_4945 to participate in intervene in or attempt to influence any specific public election or to carry on directly or indirectly any voter registration drive within the meaning of sec_4945 to make any grant which does not comply with the requirements of sec_4945 relating to grants to individuals or sec_4945 relating to grants to organizations other than public_charities or to undertake any activity for any purposes other than one specified in sec_170 relating to the definition of charitable educational and similar purpose under the federal_income_tax law in addition in order to ensure that amounts paid_by foundation may be treated as qualifying distributions under sec_4942 of the code foundation shall expend all grant funds received from foundation and any income therefrom by the end of foundation 2’s tax_year following foundation 2’s tax_year in which such funds were received provide such records or other evidence regarding foundation expenditures and operations as foundation may reasonably require in connection with foundation 1's tax-related obligations and cooperate in any other manner necessary in foundation 1’s reasonable discretion to ensure that it may treat all distributions to foundation as qualifying distributions within the meaning of sec_4942 of the code and may otherwise comply with federal tax law requested rulings your proposed grant-making activity in the form of endowment grants to foundation to support activities which further your exempt purposes will not cause the service to revoke or modify the determination that you are exempt from federal taxation under sec_501 of the code as an organization described in sec_501 your grant-making activity in the form of endowment grants to foundation to support purposes specified in sec_170 of the code will not constitute taxable_expenditures within the meaning of sec_4945 law sec_170 of the code states in part that the term charitable_contribution means 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 sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated exclusively for religious charitable scientific or educational_purposes so long as no part of the organization’s net_earnings inure to the benefit of any private_shareholder_or_individual sec_509 of the code describes organizations exempt from federal_income_tax under sec_501 of the code that are private_foundations subject_to the provisions of chapter of the code sec_4945 of the code imposes a tax on each taxable_expenditure of a private_foundation as defined in sec_4945 sec_4945 of the code provides that a grant to an individual for travel study or other similar purposes is a taxable_expenditure unless the grant satisfies the requirements of sec_4945 sec_4945 of the code in part provides that a grant to an organization is a taxable_expenditure unless such organization is a public charity an exempt_operating_foundation with the private_foundation exercises expenditure_responsibility with respect to such grant in accordance with sec_4945 sec_4945 of the code requires that in order to avoid making a taxable_expenditure a transferor private_foundation must exercise expenditure_responsibility in accordance with sec_4945 on grants made to a private_foundation sec_4945 of the code provides that a taxable_expenditure includes any amount expended by a private_foundation for purposes other than exempt purposes under sec_170 sec_4945 of the code defines expenditure_responsibility in terms of the grantor private_foundation requiring pre-grant inquiry and post-grant reports as to the grantee private_foundation on its uses of the grant sec_4946 of the code provides that a disqualified_person with respect to a private_foundation will include a person who is a substantial_contributor to the foundation sec_53_4945-5 of the foundation and similar excise_taxes regulations foundation regulations provides that expenditure_responsibility includes a requirement that the grantor private_foundation must make a pre-grant inquiry of the prospective grantee private_foundation thus before making a grant the grantor must conduct a limited inquiry of the potential grantee such pre-grant inquiry must be complete enough to give a reasonable person assurance that the grantee will use the grant for the proper exempt purposes this inquiry should concern matters such as the identity prior history and experience of the grantee organization and its managers and any knowledge which the grantor has based on prior experience or other information which is readily available concerning the management activities and practices of the grantee foundation the scope of this inquiry may vary from case to case depending upon the size and purpose of the grant the period of time over which it is to be paid and the prior experience which the grantor has had with respect to the capacity of the grantee to use the grant for the proper purposes sec_53_4945-5 of the foundation regulations provides that in order to exercise expenditure_responsibility the grantor private_foundation must require that the grantee organization be made subject_to a written commitment signed by an appropriate officer director or trustee of the grantee to repay any portion of the amount granted which is not used for the purposes of the grant to submit full and complete annual reports on the manner in which the grant funds are spent and the progress made in accomplishing the purposes of the grant to maintain records of receipts and expenditures and to make its books_and_records available to the grantor at reasonable times and not to use any of the funds to carry on propaganda or otherwise attempt to influence legislation within sec_4945 of the code or to influence the outcome of any specific public election or to carry on any voter registration drive within the meaning of sec_4945 or to make any grant which does not comply with the requirements of sec_4945 or sec_4945 or to undertake any activity for any purpose other than one specified in sec_170 of the code the agreement must clearly specify the purposes of the grant such purposes may include contributing for capital endowment provided that neither the grants nor the income therefrom may be used for purposes other than those in sec_170 of the code sec_53_4945-5 of the foundation regulations on capital endowment grants made to private_foundations provides that if a private_foundation makes a grant to another private_foundation for endowment or for other capital purposes the grantor foundation must require reports from the grantee foundation on the uses of the principal and the income if any from the grant funds the grantee must make such reports annually for its tax_year in which the grant was made and for its immediately succeeding two tax years only if it is reasonably apparent to the grantor before the end of such grantee’s second succeeding tax_year that neither the principal nor the income from the grant funds has been used for any purpose which would result in liability for tax under sec_4945 of the code may the grantor then allow the grantee's reports to be discontinued revrul_77_380 1977_2_cb_419 held that grants made by a private_foundation to an individual primarily in recognition of past achievement with the funds being unrestricted or earmarked for subsequent travel or study and meeting the requirements of sec_4945 of the code are not taxable_expenditures within the meaning of sec_4945 analysis ruling your proposed grant-making activity in the form of endowment grants to foundation to support activities which further your exempt purposes will not cause the service to revoke or modify the determination that you are exempt from federal taxation under sec_501 of the code as an organization described in sec_501 according to your articles of incorporation your purposes are charitable educational and scientific within the meaning of sec_501 of the code you have made an endowment grant to the foundation which will award an international prize in scientific endeavor every four years this award will recognize prior individual accomplishments in the field of science and will provide funding to non-profit organizations conducting research education or other outreach programs in the field of science insofar as the activities to be carried out by your grant to the foundation further your educational and scientific purposes as provided in the agreement memorandum of understanding and grant letter you have submitted your endowment grant to the foundation does not jeopardize your exemption as a private_foundation under sec_509 and sec_501 ruling your grant-making activity in the form of endowment grants to foundation to support purposes specified in sec_170 of the code will not constitute taxable_expenditures within the meaning of sec_4945 is a corporation organized and operated exclusively for religious charitable foundation scientific literary and educational_purposes according to its articles of incorporation foundation will support charitable religious scientific literary or educational undertakings by making contributions to organized charitable religious scientific literary or educational bodies or institutions within the meaning of sec_501 of the code such purposes are specified in sec_170 your grant to foundation another private_foundation is a taxable_expenditure if it is for any purpose other than one specified in sec_170 of the code according to sec_4945 it is also a taxable_expenditure according to sec_4945 unless you exercise expenditure_responsibility as described in sec_4945 as noted above your grant to foundation furthers your exempt purposes and will also support the exempt purposes as specified in sec_170 of the code of foundation you have submitted documentation which demonstrate that you have made a pre-grant inquiry of foundation as specified in sec_53_4945-5 of the foundation regulations you represent in your ruling_request letter of date that your grants to organization recipients that are not described in sec_4945 are required to execute a grant letter the grant letter you have submitted meets the requirements of sec_4945 and sec_53 b pursuant to the award grant agreement between foundation and foundation described above foundation will also comply with the expenditure_responsibility requirements of sec_4945 and the foundation regulations thereunder in making its grants to avoid making any taxable_expenditures because the award grant to the individual is solely for past achievements and not to finance any future activities of the individual it is not for travel study or similar purposes under sec_4945 see revrul_77_380 supra under the award program guidelines the nominees for organizational awards are subject_to approval by foundation pursuant to the agreement foundation will execute grant agreements to awardees and exercise expenditure_responsibility with respect to grants to organizations that are not described in sec_4945 accordingly your grant to foundation will not be a taxable_expenditure assuming that you obtain the required reports from foundation make the required reports to the irs on form_990-pf and take appropriate action in the event of any non-compliance with the terms of the grant letter rulings based on the foregoing we rule as follows your endowment grant to the foundation to support activities which further your exempt purposes will not cause the service to revoke or modify the determination that you are exempt from taxation under sec_501 of the code as an organization described in sec_501 your endowment grant to foundation to support purposes specified in sec_170 of the code will not constitute a taxable_expenditure within the meaning of sec_4945 assuming that you obtain the required reports from foundation make the required reports to the irs on form_990-pf and take appropriate action in the event of any non-compliance with the terms of the grant letter this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolved questions concerning your federal_income_tax status this ruling should be kept in your permanent records 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 in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely elizabeth kastenberg for mary jo salins manager exempt_organizations technical group enclosure notice


t c memo united_states tax_court david and monika zisskind petitioners v commissioner of internal revenue respondent docket no 14621-05l filed date timothy j burke for petitioners louise r forbes for respondent memorandum findings_of_fact and opinion haines judge petitioners filed a petition with this court in response to a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination for pursuant to sec_6330 sec_1 unless otherwise indicated all section references are to continued petitioners seek review of respondent’s determination the issues for decision are whether petitioners are liable for an addition_to_tax under sec_6651 whether respondent abused his discretion by determining that petitioners were not entitled to an abatement of interest under sec_6404 and whether respondent abused his discretion by determining that a federal_tax_lien was appropriately filed and would remain in effect until petitioners’ tax_liability was satisfied findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts the supplemental stipulation of facts and the attached exhibits are incorporated herein by this reference at the time the petition was filed petitioners resided in south boston massachusetts during david zisskind petitioner was a self-employed real_estate developer and contractor petitioner owned an interest in mercer properties l l c mercer in date mercer sold real_property developed by petitioner in april or date mercer distributed profits of dollar_figure from that sale to petitioner petitioner knew that he would owe tax as a result continued the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure amounts are rounded to the nearest dollar of the distribution however petitioner did not make any estimated_tax payments during despite their federal_income_tax return’s being due on date petitioners filed their return on date petitioners reported the distribution of income from mercer total income of dollar_figure taxable_income of dollar_figure and total_tax of dollar_figure petitioners reported zero total payments an estimated_tax penalty of dollar_figure and a total amount due of dollar_figure petitioners paid only dollar_figure with their return on date respondent assessed the total amount petitioners reported due an addition_to_tax of dollar_figure under sec_6651 for failure to timely file and an addition_to_tax of dollar_figure under sec_6651 for failure to pay the amount shown as tax on the return on date petitioners submitted to respondent a form_656 offer_in_compromise and a form 433-a collection information statement for wage earners and self-employed individuals petitioners proposed to pay dollar_figure to compromise their outstanding tax_liability for respondent found that petitioners’ form 433-a was insufficient questioned the source of several deposits into petitioners’ bank account and questioned their involvement in at least two limited_liability companies on date respondent requested more information from petitioners respondent found the additional information provided by petitioners unsatisfactory and returned the offer-in-compromise forms to petitioners on date on date respondent sent petitioners a notice_of_federal_tax_lien and your right to a hearing under sec_6320 notice_of_federal_tax_lien for their outstanding tax_liability for at the time respondent issued the notice_of_federal_tax_lien petitioners owed dollar_figure including penalties and interest on date petitioners submitted to respondent a form request for a collection_due_process_hearing request for a sec_6330 hearing petitioners requested that an offer-in- compromise or an installment_agreement be entered into however petitioners did not provide a form_656 a form 433-a or an installment_agreement request on date settlement officer maria russo ms russo of respondent’s boston appeals_office was assigned to petitioners’ case on date timothy j burke mr burke petitioners’ attorney telephoned ms russo to discuss petitioners’ request for a sec_6330 hearing on october at various times during their sec_6330 hearing and afterwards petitioners requested an offer-in-compromise or an installment_agreement in the notice_of_determination respondent determined that petitioners abandoned their request for an offer-in-compromise and did not provide adequate financial information so that an installment_agreement could be considered petitioners do not dispute this determination in their petition or on brief and we do not discuss the offer-in-compromise and the installment_agreement further mr burke sent a letter to ms russo disputing petitioners’ liability for the additions to tax under sec_6651 and petitioners’ sec_6330 hearing was held on date during the hearing petitioners contested their liability for the additions to tax under sec_6651 and requested an abatement of interest under sec_6404 and requested the withdrawal of the federal_tax_lien ms russo informed petitioners they would not be liable for the additions to tax under sec_6651 and if they could establish that their failure to timely file and pay was due to reasonable_cause ms russo requested that petitioners provide her with additional information to establish reasonable_cause between january and date petitioners provided ms russo with bank statements their federal_income_tax return and other information intended to establish reasonable_cause for their failure to timely file and pay on date ms russo advised petitioners that she would review the information submitted and make her determination on date respondent issued petitioners the notice_of_determination respondent determined that petitioners established their failure to timely file was due to reasonable_cause accordingly respondent determined petitioners were not liable for an addition_to_tax under sec_6651 however respondent determined petitioners were liable for an addition_to_tax under sec_6651 because they did not establish that their failure to pay the tax shown on their return was due to reasonable_cause respondent also determined petitioners were not entitled to an abatement of interest because petitioners provided no concrete information as to how the collection would be facilitated if the notice_of_federal_tax_lien were withdrawn respondent determined the federal_tax_lien should not be withdrawn respondent verified that all statutory and administrative requirements were met and concluded that the filing of the notice_of_federal_tax_lien was appropriate in response to the notice_of_determination petitioners filed a petition with this court on date opinion sec_6321 imposes a lien in favor of the united_states on all property and rights to property of a taxpayer liable for taxes when a demand for payment of the taxes has been made and the taxpayer fails to pay those taxes sec_6320 provides that the secretary shall furnish the taxpayer with written notice of a federal_tax_lien within business days after the notice of lien is filed sec_6320 further provides that the taxpayer because respondent found petitioners were not liable for the addition_to_tax under sec_6651 respondent increased the amount of the addition_to_tax under sec_6651 by dollar_figure to dollar_figure may request an appeals hearing within days beginning on the day after the 5-day period described above sec_6320 and b sec_6320 provides that the appeals hearing generally shall be conducted consistent with the procedures set forth in sec_6330 sec_6330 provides for review with respect to collection issues such as the appropriateness of the commissioner’s proposed collection actions and the possibility of collection alternatives sec_6330 the taxpayer may also challenge the amount of the underlying tax_liability if a statutory_notice_of_deficiency was not received or the taxpayer did not otherwise have an opportunity to dispute the tax_liability sec_6330 pursuant to sec_6330 within days of the issuance of a notice_of_determination the taxpayer may appeal the determination to this court if we have jurisdiction over the underlying tax_liability where the validity of the underlying tax_liability is properly at issue the court will review the matter de novo 114_tc_604 114_tc_176 where the validity of the underlying tax_liability is not properly at issue however the court will review the commissioner’s determination for an abuse_of_discretion sego v commissioner supra pincite goza v commissioner supra pincite because the underlying income_tax_liability was self- assessed petitioners did not receive a notice_of_deficiency the parties agree petitioners have not had an opportunity to dispute their liability for the addition_to_tax under sec_6651 therefore we review de novo whether petitioners are liable for the addition_to_tax under sec_6651 see 118_tc_22 ramirez v commissioner tcmemo_2005_179 godwin v commissioner tcmemo_2003_289 affd 132_fedappx_785 11th cir however we review for an abuse_of_discretion respondent’s determinations rejecting an abatement of interest and sustaining the federal_tax_lien see downing v commissioner supra pincite ramirez v commissioner supra godwin v commissioner supra see also sec_6404 a addition_to_tax under sec_6651 sec_6651 imposes an addition_to_tax for failure to pay the amount shown as a tax on a return by the date prescribed determined with regard to any extension of time for payment sec_7491 requires respondent to carry the burden of production with respect to the addition_to_tax for failure to pay 116_tc_438 to meet his burden of production respondent must come forward with sufficient evidence indicating that it is appropriate to impose the addition_to_tax id once respondent meets this burden petitioners must come forward with evidence sufficient to persuade the court that they are not liable for the addition_to_tax the parties stipulated that petitioners did not pay their tax_liability for when it was due respondent’s form_4340 certificate of assessments payments and other specified matters indicates that at the time of trial petitioners still had an outstanding tax_liability for further petitioner testified that petitioners have not paid their outstanding tax_liability for we find that on these facts respondent has met his burden of production under sec_7491 petitioners may avoid the addition_to_tax if they can establish that their failure to timely pay was due to reasonable_cause and not due to willful neglect sec_6651 a showing of reasonable_cause requires a taxpayer to demonstrate that he exercised ordinary business care and prudence but nevertheless was unable to pay the tax within the prescribed time sec_301_6651-1 proced admin regs the taxpayer will be considered to have exercised ordinary business care and prudence if he made reasonable efforts to conserve sufficient assets in marketable form to satisfy his tax_liability and nevertheless was unable to pay all or a portion of the tax when it became due id petitioner knew that he would owe tax as a result of the distribution of profits from mercer but petitioners failed to make estimated_tax payments and paid only dollar_figure when they filed their return nevertheless petitioners argue they had reasonable_cause for their failure to timely pay their full tax_liability because they made reasonable efforts to conserve sufficient assets in marketable form to satisfy their tax_liability but were nevertheless unable to pay the tax when it became due petitioners assert they invested the profits received from mercer with merrill lynch into stocks like intel and high tech stocks and things that were safe however petitioners assert that merrill lynch lost it leaving petitioners unable to satisfy their tax obligations petitioner testified that he believed he was making a conservative investment and he thought it was the same thing as a bank while petitioners provided ms russo with bank statements to support their contention that they were unable to pay their outstanding tax_liability they did not provide ms russo with information regarding their investment with merrill lynch other than petitioner’s testimony there is no evidence in the record concerning petitioners’ investment with merrill lynch or that such an investment was even made other than stating they invested in stocks like intel and high tech stocks petitioners have not specifically identified what stocks they invested in petitioners provided the court with no information indicating when their investment became worthless in fact petitioners did not claim a capital_loss on their federal_income_tax return indicating that their investment did not become worthless in without this information we cannot determine whether petitioners had the ability to pay their tax_liability when it was due there is no evidence in the record regarding whether petitioners exercised ordinary business care and prudence in monitoring their investment additionally given that petitioner was a self-employed real_estate developer and contractor we do not find credible his testimony that he thought investing with merrill lynch was the same thing as depositing the money with a bank petitioners have not established that they made a reasonable efforts to conserve sufficient assets in marketable form see sec_301_6651-1 proced admin regs petitioners have failed to show that their failure to timely pay the amount of tax shown on their return was due to reasonable_cause and not due to willful neglect therefore we hold that petitioners are liable for an addition_to_tax under sec_6651 as respondent determined b abatement of interest under sec_6404 sec_6404 provides that the secretary may abate the assessment of interest that accrued as the result of any unreasonable error or delay by an officer_or_employee of the internal_revenue_service in performing a ministerial or managerial act however sec_6404 also provides that an error or delay shall be taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved and after the internal_revenue_service has contacted the taxpayer in writing with respect to such deficiency or payment the court may order abatement if the secretary abuses his discretion by failing to abate interest sec_6404 in order to prevail a taxpayer must prove the commissioner exercised his discretion arbitrarily capriciously or without sound basis in fact or law 112_tc_19 nelson v commissioner tcmemo_2004_34 petitioners argue that respondent abused his discretion by failing to abate interest that accrued due to the respondent’s unnecessary delay in resolving the present matter petitioners assert respondent delayed in returning to them the offer-in- compromise forms submitted on date and failed to meet with petitioners despite several requests to do so petitioners have not shown that respondent caused any unreasonable error or delay in the evaluation of their offer-in- compromise forms submitted on date moreover any delays in processing the offer-in-compromise were attributable in significant part to petitioners’ failure to provide the revenue_officer with requested information or clarification of other information petitioners’ assertion that respondent failed to meet with them to resolve this case despite several attempts by petitioners to do so is without support petitioners provided no specific information regarding who they tried to contact or when additionally ms russo’s casenotes indicate that she promptly responded to all telephone calls and correspondence petitioners have failed to establish that respondent caused any unreasonable errors or delays in the performance of a ministerial or managerial act therefore petitioners have failed to show that respondent abused his discretion by rejecting their request for an abatement of interest we hold that respondent did not abuse his discretion by rejection petitioners’ request for an abatement of interest c appropriateness of the federal_tax_lien during their sec_6330 hearing petitioners requested that respondent release the federal_tax_lien however petitioners did not allege in their petition that respondent erred by determining that the federal_tax_lien should not be withdrawn at trial petitioner testified that the federal_tax_lien was affecting his business and petitioners would be able to pay their taxes if the lien was removed on brief petitioners requested that the court find as a fact that the petitioner believes that if the federal_tax_lien was taken off he would be able to earn money to pay his tax_liability however petitioners did not argue on brief that respondent abused his discretion by determining that the federal_tax_lien should not be withdrawn rule b provides that in a lien or levy action the petition must include clear and concise assignments of each and every error which the petitioner alleges to have been committed in the notice_of_determination any issue not raised in the assignments of error shall be deemed to be conceded because petitioners did not allege in their petition that respondent abused his discretion by determining that the federal_tax_lien should not be withdrawn and because petitioners did not address it on brief we find that petitioners have conceded the issue therefore we hold that respondent did not abuse his discretion by determining that a federal_tax_lien was appropriately filed and would remain in effect until petitioners’ tax_liability was satisfied in reaching our holdings we have considered all arguments made and to the extent not mentioned we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


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 b01 plr-159337-04 date date -------------------------------------- --------------------------------------------------------- legend x ------------------------------------ t ------------------------------------ ----------------------- a b -------------------- -------------------------------------- state ------------ d1 ------------------ d2 ----------------- d3 ---------------------- d4 ---------------------- d5 ----------------------- dear --------------- this letter responds to the letter dated date submitted on behalf of x requesting rulings under sec_1362 and sec_1362 of the internal_revenue_code sec_26 b and of the generation-skipping_transfer_tax regulations and sec_301_9100-3 of the procedure and administration regulations facts intended x to be treated as an s_corporation effective d2 but x inadvertently failed to timely file an s_corporation_election x also intended to file elections to treat its x was incorporated on d1 under the laws of state the shareholders of x subsidiaries as qualified subchapter_s subsidiaries qsubs effective d2 but x failed to timely file the qsub elections on d3 a created an irrevocable_trust t for the purpose of benefiting b and members of b’s family on d2 the intended effective date of the s election and the qsub elections t was a shareholder of x the trustees of t intended to make an electing_small_business_trust esbt election effective d2 but they failed to timely file the esbt election pursuant to revproc_98_55 relief for late s_corporation_election and automatic relief for late esbt and qsub elections were requested on d4 however the elections were invalid because t did not satisfy the definitional requirements of an esbt under sec_1361 under the limited_power_of_appointment contained in the terms of t t had potential beneficiaries that were persons other than individuals estates or organizations described in sec_170 through furthermore the limited_power_of_appointment caused x to have more than shareholders making x disqualified to be a small_business_corporation under sec_1361 paragraph a-i-1 of t provides that during b’s lifetime the trustees in their discretion are to pay so much or all of the net_income and principal of t for the benefit of b paragraph a-i-2 provides that b shall have the power to direct the disposition in whole or in part and from time to time of the principal and undistributed_net_income of t to or in trust for the benefit of such person or persons other than a or a’s wife trust or trusts corporation or corporations charitable foundation or charitable foundations as b in b’s sole discretion may select except that this power shall not be exercisable directly or indirectly in favor of or for the benefit of b b’s estate b’s creditors or the creditors of b’s estate b’s power is exercisable during b’s lifetime at any time following the death of a or by the terms of b’s will b’s power_of_appointment is releasable from time to time in whole or in part if b exercises or releases his power during his lifetime the exercise or release shall be by instrument in writing delivered to the trustees and shall become effective upon such delivery paragraph a-i-3 provides that to the extent b has not exercised his power under the terms of paragraph a-i-2 upon b’s death if his spouse survives him all assets of t are to be retained in trust and the trustees shall from time to time pay so much or all of the net_income and principal to or for the benefit of b’s surviving_spouse or to or for the benefit of b’s living issue as the trustees in their sole discretion deem necessary for the health support maintenance and education of such persons including reasonable luxuries paragraphs a-ii-1 a-ii-1-a and a-ii-1-b provide that to the extent b has not exercised his power under paragraph a-i-2 upon b’s death if he is not survived by his spouse t assets shall be allocated in equal shares one each for the living children of b and a share for the children of any deceased child of b the trustees are to pay so much or all of the net_income and principal of each share to or for the benefit of the child for whom the share was allocated as the trustees shall from time to time in their discretion deem necessary for the health support maintenance and education of such child including reasonable luxuries paragraph a-ii-1-f provides that upon the expiration of twenty-one years on d5 b executed a partial_release of his limited_power_of_appointment following the death of the survivor of b any surviving_spouse of b living on the date of the creation of t a a’s spouse a’s brother a’s brother’s spouse and the issue of a’s brother and spouse living at the date of the creation of t each share of t principal and undistributed_net_income is to be distributed to the child of b for whom the share was allocated or in the case of a share held for the benefit of the issue of a deceased child of b the share is to be distributed to the then living issue of the deceased child per stirpes contingent upon receipt of a favorable private_letter_ruling from the internal_revenue_service b released the right to exercise the limited_power_of_appointment i to a non- permitted s_corporation shareholder ii to more than persons or entities taking into consideration any existing shareholders and iii in any manner that postpones or suspends the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of t extending beyond the lives in being as enumerated in t plus a period of years rulings requested b’s partial_release of the limited_power_of_appointment is not treated as a constructive_addition to t for generation-skipping_transfer_tax purposes b’s partial_release of the limited_power_of_appointment is not treated as a modification to t and t remains as an exempt trust for generation-skipping_transfer_tax purposes the consent by the trustee of t to x’s election to be treated as an s_corporation and the consent by the trustee of t to the esbt election is not a modification to t and t remains an exempt trust for generation-skipping_transfer_tax purposes under sec_1362 x is treated as an s_corporation effective d2 the limited_power_of_appointment contained in the terms of t caused x’s election to be treated as an s_corporation to be invalid however the ineffectiveness of the s_corporation_election was inadvertent under the meaning of sec_1362 an extension of time to make qsub elections effective d2 for the subsidiaries of x is granted under sec_301_9100-3 sec_26_2601-1 provides that except as provided under under a of the tax_reform_act_of_1986 and sec_26_2601-1 of the sec_2601 imposes a tax on every generation-skipping_transfer gst made law after date generation-skipping_transfer_tax regulations the gst tax is generally applicable to generation-skipping transfers made after date however under b a and sec_26_2601-1 the tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 where any portion of a_trust remains in the trust after the post- date release exercise or lapse of a power_of_appointment over that portion of the trust and the release exercise or lapse is treated to any extent as a taxable transfer under chapter or chapter the value of the entire portion of the trust subject_to the power that was released exercised or lapsed is treated as if that portion had been withdrawn and immediately retransferred to the trust at the time of the release exercise or lapse the creator of the power will be considered the transferor of the addition except to the extent that the release exercise or lapse of the power is treated as a taxable transfer under chapter or chapter appointment under this section the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment as defined in sec_2041 will not be treated as an addition to a_trust if such power_of_appointment was created in an irrevocable_trust that was not subject_to chapter under sec_26_2601-1 and in the case of an exercise the power_of_appointment is not exercised in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of the trust extending beyond any life in being at the date of creation of the trust plus a period of years plus if necessary a reasonable period of gestation the perpetuities period sec_26_2601-1 provides a special rule for certain powers of sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 or hereinafter referred to sec_26_2601-1 provides that a modification of the governing as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided in the original trust furthermore a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered a shift in a beneficial_interest in a_trust sec_2041 provides that the value of the gross_estate shall include the value of all property with respect to which the decedent has at the time of his death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive sec_2041 defines the term general_power_of_appointment as a power that is exercisable in favor of the decedent the decedent's_estate the decedent's creditors or the creditors of the decedent's_estate sec_2514 provides for a similar definition of a general_power_of_appointment for gift_tax purposes sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power which an election under sec_1362 is in effect corporation which is not an ineligible_corporation which does not a have more than shareholders b have as a shareholder a person other than an estate and other than a_trust described in subsection c who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1361 defines an s_corporation as a small_business_corporation for sec_1361 defines a small_business_corporation as a domestic sec_1361 provides that a qsub shall not be treated as a separate corporation and all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines a qsub as a domestic_corporation that is not an ineligible_corporation if percent of the stock of the corporation is owned by an s_corporation and the s_corporation elects to treat the corporation as a qsub a taxpayer makes a qsub election with respect to a subsidiary by filing a form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center sec_1361 provides that the term electing_small_business_trust sec_1_1361-3 of the income_tax regulations provides that a qsub election will be effective on the date specified on the election form or on the date the election is filed if no date is specified the effective date specified on the election form cannot be more than two months and days prior to the date of filing and cannot be more than months after the date of filing means any trust if - i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under this subsection applies to such trust sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under ' b however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no ' a election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and ' b shall not apply corporation was not effective for the taxable_year for which made determined without sec_1362 provides that if an election under sec_1362 by any regard to subsection b by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents the secretary determines that the circumstances resulting in such ineffectiveness were inadvertent no later than a reasonable period of time after the discovery of the circumstances resulting in such ineffectiveness steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period of inadvertent ineffectiveness of the s election agrees to makes 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 such ineffectiveness the corporation is treated as an s_corporation during the period specified by the secretary sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in ' to make a regulatory election sec_301_9100-1 defines a regulatory election as an election with a due_date prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin requests for relief under '301 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 analysis and conclusion ruling sec_1 and in the present case it has been represented that t was irrevocable on date and that there have been no additions constructive or otherwise to t after that date consequently t is currently exempt from the gst tax based on the representations made and the facts submitted b’s power_of_appointment is not exercisable in favor of b b’s estate b’s creditors or the creditors of b’s estate and is not a general_power_of_appointment therefore b’s partial_release of the power_of_appointment would not result in any shift of a beneficial_interest in t to a person or persons who occupy a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the release and will not extend the time for vesting of any beneficial_interest in t beyond the period provided for prior to the release accordingly the proposed release of b’s limited_power_of_appointment will not constitute a constructive_addition to t for these same reasons the proposed release will not be a modification to t under sec_26_2601-1 ruling plr-159337-04 the consent by the trustee of t to x’s election to be treated as an s_corporation and the consent by the trustee of t to the esbt election does not have any effect on the dispositive provisions of t therefore the consent does not result in any shift of a beneficial_interest in t to a person or persons who occupy a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the consent and will not extend the time for vesting of any beneficial_interest in t beyond the period provided for prior to the consent and will not be a modification to t accordingly t will remain an exempt trust for gst tax purposes following the partial_release by b of his power_of_appointment ruling x did not timely file an election to be treated as an s_corporation under ' a x has however established reasonable_cause for not making a timely s election and is entitled to relief under ' b therefore based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d2 this ruling is conditioned on x within days of the date of this letter filing a new form_2553 election by a small_business_corporation with the appropriate service_center with an effective date of d2 a copy of this letter should be attached to the election ruling x represents that its invalid s_corporation_election was inadvertent unintended and not the result of tax_avoidance or retroactive tax planning x further represents that at all relevant times x and its shareholders treated x as an s_corporation x and its shareholders agree to make any adjustments required by the secretary consistent with the treatment of x as an s_corporation with respect to the period specified by sec_1362 based solely on the facts submitted and the representations made we conclude that x’s election to be treated as an s_corporation as of d2 was invalid and also conclude that the invalid election constitutes an inadvertent invalid election within the meaning of sec_1362 under the provisions of ' f x will be treated as an s_corporation as of d2 and thereafter provided that x s s_corporation_election is not otherwise terminated under ' d furthermore the trustee of t will be treated as having filed timely an estb election on behalf of t effective d2 provided that x s s_corporation_election is not otherwise terminated under ' d and provided further that the trustee of t file an estb election for t with the appropriate service_center effective d2 within days of the date of this letter a copy of this letter should be attached to the election ruling plr-159337-04 based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of and with regard to the request for an extension of time to make qsub elections for its subsidiaries as a result x is granted an extension of time of days from the date of this letter to file a form_8869 to elect to treat its subsidiaries as qsubs effective d2 a copy of this letter should be attached to the election and is included for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed concerning whether x is a valid s_corporation whether t is a valid esbt or whether x’s subsidiaries are valid qsubs this letter_ruling is directed only to the taxpayer requesting it sec_6110 under a power_of_attorney on file in this office a copy of this letter will be sent to of the code provides that it may not be used or cited as precedent your authorized representatives cc sincerely s heather c maloy heather c maloy associate chief_counsel passthroughs and special industries


cca_2018112110072398 id uilc number release date from sent wednesday date am to cc bcc subject fw domestic crude export - guidance requested this responds to your request for advice concerning whether cases raising solely constitutional and non-tax issues are eligible for appeals consideration while it is ultimately up to appeals to interpret its provisions on criteria for case consideration we agree that appeals may determine that its procedures allow it to decline to accept cases with no tax issues a fair reading of appeals published guidance and procedures would allow appeals to decline to consider all non-tax issues that do not fall within the scope of the tax laws including arguments based only on constitutional grounds in particular publication your appeal rights and how to prepare a protest if you don’t agree rev provides appeals can not consider your reasons for not agreeing if they don’t come within the scope of the tax laws for example if you disagree solely on constitutional grounds emphasis added see also irm c sec_601_106 the general appeals delegation_order irm does not make any specific provision for either consideration or exclusion of constitutional issues to sum it is ultimately up to appeals to decide which cases to take and which to decline current published appeals procedures do appear to allow appeals to decline to accept a case which raises solely constitutional and non-tax issues


department of the treasury internal_revenue_service washington d c june cc dom fs proc tl-n-1642-00 uilc number release date internal_revenue_service national_office field_service_advice memorandum for district_counsel los angeles cc wr lad la from subject assistant chief_counsel field service cc dom fs modified expedited refunds in joint_committee cases with whipsaw issues this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent disclosure statement field_service_advice is chief_counsel_advice and is open to public inspection pursuant to the provisions of sec_6110 the provisions of sec_6110 require the service to remove taxpayer identifying information and provide the taxpayer with notice of intention to disclose before it is made available for public inspection sec_6110 and i sec_6110 also authorizes the service to delete information from field_service_advice that is protected from disclosure under u s c sec_552 b and c before the document is provided to the taxpayer with notice of intention to disclose only the national_office function issuing the field_service_advice is authorized to make such deletions and to make the redacted document available for public inspection accordingly the examination appeals or counsel recipient of this document may not provide a copy of this unredacted document to the taxpayer or their representative the recipient of this document may share this unredacted document only with those persons whose official tax_administration duties with respect to the case and the issues discussed in the document require inspection or disclosure of the field_service_advice legend x y z corp s authorized representatives year year year calendar_year calendar_year calendar_year dollar_figurea dollar_figureb dollar_figurec dollar_figured dollar_figure dollar_figure dollar_figure dollar_figure issue what discretion does the service have to issue an expedited refund pending the completion of a tax examination after accepting a surety bond to secure the tax to be refunded if a potential whipsaw situation precludes the service from determining an overpayment conclusion in considering a request for an modified expedited refund in a joint_committee case the service may only refund the amount that is determined by the service as the minimum amount of overpaid tax that is due to the taxpayer if the determined refund exceeds dollar_figure million the refund must first be submitted for approval by the joint_committee if the service cannot determine an overpayment_of_tax without creating a whipsaw situation because of the inconsistent treatment of the same item by the taxpayers involved in a transaction the service may not refund the claimed overpayment_of_tax to the taxpayer even with joint_committee approval facts prior to year x owned of the stock of corp s and several related corporations during year in lieu of a salary corp s and the related corporations each paid z an employee of each corporation with their own stock pursuant to subscription agreements at the end of year x retained the absolute ownership of each corporation’s stock while x’s ownership of the remaining of each corporation’s stock was subject_to z’s interest under the subscription agreement on forms for year the corporations reported expenses totaling dollar_figurea for the value of the salaries paid to z pursuant to the subscription agreement in filing z’s income_tax return for year however z elected under sec_83 to report the fair_market_value of the corporate stock which z valued at dollar_figureb as income in year in year corp s and the other corporations filed amended returns for year on which each reported an expense in the amount of the fair_market_value of the stock transferred to z under the subscription agreements the corporations valued the stock transferred to z at dollar_figurec x have filed an amended_return for year to claim a refund of dollar_figured dollar_figured is more than dollar_figure in examining the refund claim filed by x the service is auditing the returns filed by corp s and the other corporations as well as the income_tax_liability of z the service has not completed its consideration of x ’s refund claim or its audit of z the service is unable to make a determination that because of the inconsistent treatment taken by x and z in valuing the stock at dollar_figurec and dollar_figureb respectively the service could be placed in a whipsaw situation under which x would gain a deduction of dollar_figurec while z was taxed on income of only dollar_figureb if it were to honor x’s refund claim without simultaneously reaching a final resolution of z’s income_tax_liability from the same transaction thus until x z and the service agree to a value for the stock or a court conclusively determines that value the service cannot determine with certainty the amount of the claimed corporate expenses the service is preparing to issue a 30-day_letter to z proposing a tax_deficiency based upon a stock value of dollar_figurec any_action on x ’s claim_for_refund is being delayed pending completion of the audit of z that audit plus anticipated litigation is not expected to be completed for at least another year x have requested that the service make an expedited refund of their claimed overpayment of income_tax for year while the service’s review of the refund claim is pending because the examination and litigation is not expected to be completed for at least one year the requested refund exceeds dollar_figure x have offered to provide security in the form of a surety bond we are not reviewing the proposed surety bond legal analysis sec_6402 of the internal_revenue_code is the sole code provision that affirmatively authorizes the service to make refunds to a taxpayer sec_6402 provides that service may refund any balance of any_tax overpayment to a taxpayer after crediting the amount of such overpayment against any outstanding tax_liabilities of the taxpayer emphasis added an overpayment although not exhaustively defined in the code is the amount by which a payment of tax exceeds the correct total amount of the taxpayer’s liability for a tax period or any amount that was assessed or collected after the expiration of the applicable_period of limitations sec_6401 332_us_524 the service is not required or authorized by statute to refund tax_payments claimed by a taxpayer if an overpayment has not been determined lewis v reynolds 281_us_201 sec_6511 provides the limitations_period within which a taxpayer must file a claim_for_refund of any_tax overpayments the general procedures for making an claim_for_refund of income_tax are found in sec_301_6402-2 sec_3 the service will issue a refund under these procedures only if it determines based upon the grounds set forth and detailed in a timely filed refund claim that there is an overpayment_of_tax sec_301_6402-4 of the regulations which addresses a claim_for_refund included on a tax_return provides one exception to the necessity that the service first determine that there is an overpayment_of_tax before making a refund if an overpayment is claimed on the taxpayer’s return to recover payments made before the return was filed the service may credit or refund payments in excess of the amount of tax_shown_on_the_return without awaiting examination of the completed return and without awaiting filing of a claim_for_refund implicit in this exception for refunds claimed on the return is the understanding that the service must otherwise make a determination with respect to the validity of the taxpayer’s refund claim before crediting or refunding claimed overpayments under sec_6402 sec_6411 also provides a special procedure under which a taxpayer may apply for the tentative_carryback_adjustment of tax for a prior taxable_year affected by certain carrybacks from another taxable_year because the service must quickly respond to these carryback applications the service makes a limited review of the application only for material omissions and computational errors before either disallowing the application or making a tentative refund under sec_6411 sec_1_6411-3 the application_for a carryback adjustment must be filed within twelve months after the source year in which the loss or credit to be carried back arose except for determining overpayment interest the application is not a claim for credit or refund sec_6411 last sentence see thompson v united_states u s t c big_number fed cl 492_fsupp_530 n c aff’d without pub op 638_f2d_1351 4th cir x ’s refund claim is not an application under sec_6411 in general except with respect to refunds claimed on the taxpayer’s original tax_return or on an application_for tentative carryback on which a taxpayer claims an overpayment_of_tax the service does not make refunds of tax unless it has first determined that there is an overpayment_of_tax to be refunded refund claims submitted pursuant to sec_301_6402-2 and sec_3 do not in themselves provide a basis for making a refund of tax until the service determines that an overpayment exists and that the taxpayer is entitled to the refund in this case the possibility of being whipsawed precludes the service from making a determination that x have overpaid their income_tax for year based upon their claim_for_refund a whipsaw occurs when taxpayers treat the same transaction involving the same income inconsistently thus creating the possibility that the income might go untaxed see 36_f3d_1361 5th cir 842_f2d_1005 8th cir 14_fsupp2d_978 w d tex when presented with possible whipsaws the service is substantially justified in taking contradictory protective positions to protect the revenue dooley v commissioner tcmemo_1992_557 wickert v commissioner tcmemo_1986_277 aff’d 842_f2d_1005 8th cir in view of the sizable difference between the values ascribed to the fair_market_value of the corporation stock paid_by the corporations to z in year the service cannot determine an overpayment and make a refund of tax if the service were to allow x ’s claim_for_refund based upon their dollar_figurec valuation of the stock without first obtaining a binding agreement from z a court could later determine that z’s dollar_figureb valuation was correct the service in order to make the tax_liability from the transaction consistent would then be compelled if the appropriate limitations periods had not expired to sue for the return of an erroneous refund from x or to propose a new deficiency in tax for x which could itself be subject_to further litigation it is in the best interest of the service to either finally resolve the value of the stock with both parties to the transaction or to take inconsistent protective positions that can be brought to a court for resolution see 102_tc_522 in which the tax_court criticized notably because sec_6532 gives the service only two years after a refund is made to sue to recover an erroneous refund the service may have to file suit to protect its right of recovery from x before this issue could be resolved with z the service failure to take action to facilitate simultaneous consideration of the two sides of a whipsaw case in which both parties escaped taxation on the transaction x assert that the service procedures for making expedited refunds in joint_committee cases provide a process for the service to make a refund before it completes its examination of the sec_83 issue or the other issues in the audit of x ’s year income_tax return we do not agree the provisions of irm the joint_committee handbook provide the service’s current procedures for submitting proposed refunds for approval by the joint_committee in implementation of sec_6405 sec_6405 supplements the refund authorization in sec_6402 by prohibiting the refund_or_credit of income_tax in excess of dollar_figure until after a report is submitted to the joint_committee on taxation neither sec_6405 nor the joint_committee handbook permit the making of refunds that are not authorized under sec_6402 under the normal joint_committee review procedure a report is prepared and a case is submitted for joint_committee review only if there is a net overpayment to be refunded or credited to the taxpayer in excess of dollar_figure million after the service has completed an examination of one or more tax years a regular report is used if refunds have already been made eg in response to a sec_6411 tentative_refund_claim so that less than dollar_figure million is left to be refunded and an expedited report is made if there is a net unpaid refund in excess of dollar_figure million to be made see irm and a supplemental report is filed if further adjustments are made after one report has been filed see irm irm also provides for a modified expedite refund report to be prepared when the service has not completed action on a case chapter of the joint_committee handbook contains the procedures for using the modified expedited report per this chapter the modified expedite refund report may be used when there are unagreed issues as shown in section or unexamined source years as shown in section cases involving unagreed issues are those in which the taxpayer and the service are prepared to make a partial agreement for the assessment or abatement of some tax_liabilities without resolving all of the pending issues for a tax period cases involving unexamined source years are those in which the service and the taxpayer have resolved the issues for the tax_year with the exception of carrybacks or carryforwards from other source years that are still being examined in both situations the modified procedures are authorized for use in obtaining joint_committee approval for an expedited refund without waiting for the completion of survey or examination action to be completed irm chapter of the handbook requires certain conditions to be met before a modified expedited refund report can be prepared and sent to the joint_committee a b c d e f g there must be a claimed sec_6405 refund amount subject_to joint_committee review in excess of dollar_figure in an unexamined or unsurveyed source or carryback_year irm the examination of the unagreed issues or the source year will require a substantial period of time six months or more to resolve and the delay would deprive the taxpayer of a timely refund to which the taxpayer is clearly entitled irm and the taxpayer must post an acceptable bond or similar security irm and irm the report must contain an explanation of why the refund is being issued before the case is completed or surveyed including a conclusion that no disadvantage to the government will occur as a result of the early refund irm and the refund may reflect only the minimum amount to which the taxpayer is entitled regardless of the outcome of the unagreed issue irm and a supplemental report must be submitted at the end of the examination or survey irm and and the refund may not be one involving tentative refunds irm and the key requirement for both unagreed issue cases and unexamined source year cases is that the modified expedite report procedures apply only to the minimum amount to which the taxpayer is entitled and only if that amount is over dollar_figure million irm in this case the amount claimed by x is over dollar_figure million but the service has not determined that x are entitled to recover any portion of that claimed amount before determining that x are entitled to the refund of any portion of the amount claimed by them the service will need to determine the validity of z’s sec_83 election and the fair_market_value of the stock of the s_corporations that was transferred to z by the corporations in year until those determinations are made and some of x ’s tax_liabilities are abated there is no overpayment_of_tax to be refunded the modified expedited refund report process only applies if the service has agreed that the taxpayer is entitled to a refund of an tax overpayment in excess of dollar_figure in this case where the service has not agreed that x are entitled to a refund there is no provision in the joint_committee handbook for making a provisional refund based upon the taxpayers’ claim since the taxpayers did not claim the refund on their original return and did not timely file a claim under sec_6411 for a tentative refund for a carried back adjustment the service must first determine an overpayment before a refund can be made chapter of the joint_committee handbook rev revised the language manual provisions concerning modified expedited refunds but no substantive changes were made see manual transmittal ch although use of the modified expedited report procedures had been authorized at irm revised whenever a taxpayer requested that a refund be made prior to the completion of survey or examination action the statutory limitations of sec_6402 were implicit these procedures could be applied where a b c d e f a refund was claimed in excess of dollar_figure any examination or survey action was not expected to be completed within six months a modified expedite refund request report was sent to the joint_committee the taxpayer posted bond or other security as required by the service to secure repayment if necessary of the tax being refunded the taxpayer provided an executed written security_agreement and the service found that no disadvantage to the government would occur since the service is not authorized to refund tax unless the tax is overpaid the service’s determination that the taxpayer is entitled to a refund is a condition_precedent for finding that there is no disadvantage to the government like the current manual provisions the former manual provisions provided a mechanism under which the service could expeditiously make a refund subject_to joint_committee approval based upon a partial agreement rather than waiting until all adjustments were completed for a tax period nevertheless some taxpayers may have interpreted the failure to include an express limitation prohibiting refunds unless there was a service determination of an overpayment_of_tax as an indication that refunds could be made solely if claimed by a taxpayer under this misinterpretation taxpayers claiming refunds of more than dollar_figure million would be able to obtain an immediate refund of any taxes previously paid_by claiming a refund and posting a bond because sec_6402 does not authorize such refunds we do not believe that this interpretation of either the former or current manual provisions is correct on the facts presented the service does not have the authority to make a refund of tax in exchange for a bond or other security unless it first determines that there is an overpayment_of_tax to be refunded to the taxpayer the service has not determined that x overpaid their tax_liability for year thus no portion of the previously paid tax_liability may be refunded to x under the expedited refund procedures for joint_committee cases case development hazards and other considerations we believe that the service can rely upon the current provisions of chapter of the joint_committee handbook to decline the taxpayers’ request to have a proposed refunds submitted for joint_committee review even if the taxpayers offer to provide a bond or other security the handbook reflects the service’s limited authority to issue refunds of overpayments under sec_6402 a modified expedited refund report for joint_committee review should only be prepared for a proposed refund that exceeds dollar_figure million and represents the minimum amount to which the service determines the taxpayer is immediately entitled in a case involving either additional unagreed issues for the same tax_year or carrybacks or carryforwards from unexamined source years since the service has not determined an overpayment in this whipsaw case there is no overpayment to be refunded please call if you have any further questions


internal_revenue_service number release date index numbers ----------------------------- -------------------------------- ---------------------------------------- ---------------- ------------------------------------------------- department of the treasury washington dc person to contact ---------------------- id no ------------- telephone number -------------------- refer reply to cc psi b03 - plr-139922-07 date date -------------------------------------------------------------------------------- ---------------------------------------- ---------------------------------------------------- ------------------------------------------------------- ---------------------------------------------------------------- legend company ------------------------------------ sub ----------------------------------------------------------- fund business ------------------------------------------------------------------------------------------------------------------ regions a ----------------------- ----------------------------------------------------------- b ------------------------------ ----------------------------------------------------------- c ----------------------------------------------------------- d ----------------------------------------------------------- e ----------------------------------------------------------- country ------------------------------------- -------------------------------- ----------------- ---------- ------- ----------- ----------------- --------------------------- we received a letter dated date submitted on behalf of b the information submitted discloses that in a company formed and sponsored plr-139922-07 country country a b dear ---------------- requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a disregarded_entity for federal tax purposes this letter responds to that request facts sub a fund to focus on business in regions in pursuit of its business purposes fund acquired directly or indirectly entities a b c d and e the entities a is a country entity which owns c a country entity b is a country entity which owns d and e also country entities company and sub intended the entities to be disregarded entities for federal tax purposes effective on b however each of the entities inadvertently failed to timely file form_8832 entity classification election law and analysis classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 sec_301_7701-3 provides that except as provided in sec_301 sec_301_7701-3 provides in part that a business_entity that is not sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 provides in part that an election made under plr-139922-07 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or an announcement published in the internal_revenue_bulletin commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the granting of relief will not prejudice the interests of the government conclusions requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied consequently b is granted an extension of time of days from the date of this letter for electing under sec_301_7701-3 to be treated as a disregarded_entity effective b b must file form_8832 within the extension period with the appropriate service_center with a copy of this letter attached sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be based on the facts and representations submitted b has established that the sec_301_9100-1 through provide the standards the plr-139922-07 except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election sec_6110 of the internal_revenue_code this ruling may not be used or cited as precedent being forwarded to taxpayer’s authorized representative pursuant to a power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer requesting it according to sincerely s william p o’shea associate chief_counsel passthroughs special industries enclosures copies of this letter copy for sec_6110 purposes