department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division dy ob date uniform issue list legend t c dear sir or madam contact person identification_number telephone number -t eo ba based on further consideration this ruling corrects and modifies our ruling dated date plr your ruling letter as corrected and modified is restated below this is in reply to your rulings request of date on t's proposed transfer of all of its assets to c pursuant to sec_507 of the internal_revenue_code t a_trust and c a nonprofit corporation are exempt from federal_income_tax under section t and c are c of the code and are private_foundations under sec_509 of the code t will have no effectively controlled by the same individuals expenditure_responsibility grants outstanding under sec_4945 of the code at the time of its transfer t will transfer all of its assets to c the following rulings are requested t's transfer of all its assets into c will be a transfer described in sec_507 of the code and will not result in termination of c's status as a private_foundation under sec_507 of the code neither the transfer of all assets of t to c nor any subsequent notice of termination of t will result in the imposition of the termination_tax under sec_507 of the code the transaction will not constitute an act of self-dealing and therefore will not result in the imposition of tax under sec_4941 of the code t's transfer of assets to c will not subject t to any_tax under sec_4942 of the code for a failure to distribute income t will not be required to comply with the recordkeeping requirements of sec_4942 of the code with respect to the transfer of assets to c after the transfer of all its assets the transaction will not be a taxable_expenditure under sec_4945 of the code and therefore will not subject t to tax under sec_4945 of the code nor will t be required to exercise expenditure_responsibility over the assets transferred to c e sec_501 of the code provides for the exemption from federal_income_tax of nonprofit_organizations organized and operated exclusively for the charitable and or other exempt purposes stated in that section sec_509 of the code describes organizations exempt from federal_income_tax under sec_501 of the code are private_foundations subject_to the provisions of chapter of the code sec_507 of the code and sec_1_507-1 of the income_tax regulations provide that a private_foundation may voluntarily terminate its private_foundation_status by submitting to the internal_revenue_service a statement of its intention to voluntarily terminate its private_foundation_status pursuant to sec_507 and by paying any termination_tax under sec_507 of the code sec_507 of the code impose excise_tax on a private_foundation which voluntarily terminates its private_foundation_status under sec_507 of the code and provides that this sec_507 tax is the aggregate tax benefits that have resulted from the private foundation's equal to the lower_of exempt status under sec_501 of the code or the value of the net assets of the private_foundation sec_507 of the code concerns the transfer of assets by one private_foundation to one or more other private_foundations and provides that each transferee private_foundation shall not be treated as a newly created organization sec_1_507-3 of the regulations indicates that a transfer under sec_507 of the code includes a transfer of assets from one private_foundation to one or more other private_foundations pursuant to any reorganization including a significant disposition of or more of the transferor foundation's assets sec_1_507-3 of the regulations provides that a transfer of assets from one private in a reorganization each transferee private_foundation to one or more private_foundations pursuant to foundation shall not be treated as a newly created organization but shall succeed to the transferor's aggregate tax benefits under sec_507 of the code sec_507 of the code indicates that the aggregate tax benefits of a private_foundation refer to the value of its exemption from federal_income_tax and of the deductions taken by its donors during its existence sec_1_507-1 of the regulations provides that a private_foundation which transfers all of its net assets is not required to file annual information returns required by sec_6033 of the code for subsequent tax years after its tax_year of such transfer when it has no assets or activities sec_1_507-3 of the regulations provides that a transferor private_foundation is required to meet its charitable distribution_requirements under sec_4942 of the code even for any_tax year in which it makes a transfer of its assets to another private_foundation pursuant to sec_507 of the code also where a private_foundation transfers all of its assets any recordkeeping requirements under sec_4942 of the code do not apply when the foundation has no assets sec_1_507-3 of the regulations provides that where a private_foundation has transferred all of its assets to another private_foundation in a transfer under sec_507 of the code it is not required to exercise expenditure_responsibility under sec_4945 of the code with respect to such transfer sec_1_507-3 of the regulations provides that if a private_foundation transfers assets to one or more private_foundations which are effectively controlled directly or indirectly within the meaning of sec_1_482-1 of the regulations by the same persons who effectively control the transferor it were the transferor foundation for purposes foundation each transferee foundation will be treated as if each transferee is treated as of sec_4940 through and sec_507 through of the code its transferor in the proportion which the fair_market_value of the transferor's assets transferred to the transferee bears to the fair_market_value of all of the transferor’s assets immediately before the transfer sec_1_507-3 of the regulations provides that a transfer of assets under sec_507 of the code does not relieve the transferor private_foundation from filing its own final tax_year return as required by sec_6043 of the code sec_1_507-4 of the regulations provides that the tax on termination of private_foundation_status under sec_507 of the code does not apply to a transfer of assets under sec_507 of the code sec_1_507-1 and sec_1_507-3 of the regulations provide that a transferor foundation's transfer of assets under sec_507 of the code will not constitute any termination of the transferor foundation's private_foundation_status under sec_509 of the code sec_4940 of the code imposes excise_tax on certain investment_income of a private_foundation sec_4941 of the code imposes excise_tax on any act of self-dealing between a private_foundation and any of its disqualified persons under sec_4946 of the code sec_53_4946-1 of the regulations provides that for purposes of self-dealing under sec_4941 of the code an exempt_organization under sec_501 of the code is not a disqualified_person a private_foundation must expend annual qualifying sec_4942 of the code requires that distributions under sec_4942 of the code for the conduct of exempt purposes revrul_78_387 1978_2_cb_270 describes the carryover of a transferor private foundation's excess qualifying distributions under sec_4942 of the code where the transferor and the transferee foundations are controlled by the same persons under sec_1_507-3 of the regulations the transferee is treated as the transferor so that the transferee can reduce its own distributable_amount under sec_4942 of the code by its share of the transferor foundation's excess qualifying distributions under sec_4942 of the code sec_4945 of the code imposes excise_tax on any private foundation's making of a taxable_expenditure under sec_4945 of the code sec_4945 of the code requires that in order to avoid making a taxable_expenditure a transferor private_foundation must exercise expenditure_responsibility under sec_4945 of the code on its grants to another private_foundation 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_4945 of the code provides that a taxable_expenditure includes any amount expended by a private_foundation for purposes other than exempt purposes sec_53_4945-6 allows a private_foundation to transfer its assets to exempt_organizations under sec_501 of the code including private_foundations pursuant to sec_507 of the code without the transfers being taxable_expenditures under sec_4945 of the code analysi sec_1 under sec_507 of the code and sec_1_507-3 of the regulations a transfer under sec_507 of the code includes a transfer of assets from one private_foundation to one or more to any reorganization or liquidation which includes any significant other private_foundations pursuant because t will be in such a disposition of or more of the transferor private foundation's assets t's transfer of all of its assets to c will be a transfer reorganization by its transfer of all of its assets to c under sec_507 of the code under sec_1_507-4 of the regulations t's transfer of its assets pursuant to sec_507 of the code will not terminate t's or c's private_foundation_status under sec_509 of the code and will not be a termination under sec_507 of the code under sec_1_507-4 of the regulations t's transfer of its assets to c pursuant to sec_507 of the code will not result in tax under sec_507 of the code under sec_507 of the code when t notifies the internal_revenue_service at least one day after t transfers all of its net assets to c of its intent to voluntarily terminate its private_foundation_status pursuant to sec_507 of the code t will thus terminate its private_foundation_status pursuant to further under sec_507 of the code the value of t's assets that sec_507 of the code after t has transferred all of its assets to c will be zero thus t's voluntary notice of termination of its private_foundation_status pursuant to sec_507 will not result in termination_tax under sec_507 of the code t's transfer of assets will be made for exempt purposes to c which is an organization exempt from under sec_53_4946-1 of the federal_income_tax under sec_501 of the code regulations t is not a disqualified_person under sec_4946 of the code for purposes of sec_4941 of the code because t is exempt from federal_income_tax under sec_501 of the code because t's transfer of assets will not be a transfer to any disqualified_person under sec_4946 of the code t's transfer will not be an act of self-dealing under sec_4941 of the code it t represents that or c acting on its behaif will timely make ail of t's required qualifying distributions under sec_4942 of the code for t's tax_year of its transfer of all of its assets to c because all of the required qualifying distributions of t will be made by t or by c on t's behalf there will be no tax on t under sec_4942 of the code for failure to make its required qualifying distributions for exempt purposes under sec_4942 of the code under section any recordkeeping requirements of sec_4942 of the code after t's transfer of all of its assets to c a of the regulations required to comply with not will be t under sec_53_4945-6 of the regulations a private_foundation can transfer of its assets pursuant to sec_507 of the code to organizations exempt from federal_income_tax under sec_501 of the code without the transfer being a taxable_expenditure under sec_4945 of the code further thus t's transfer of assets will not be a taxable_expenditure under sec_4945 of the code sec_1_507-3 of the regulations provides that where a private_foundation transfers all of its assets to one or more exempt_organizations under sec_501 of the code pursuant to sec_507 of the code such transferor foundation will have no expenditure_responsibility requirement under sec_4945 of the code thus t will not have to exercise expenditure_responsibility under sec_4945 of the code with respect to its transfer of all of its assets to c accordingly we rule that t's transfer of all of its assets to c will be a transfer under sec_507 of the code and will not result in termination of t's or c's status as a private_foundation under sec_507 of the code t's transfer of its assets to c and any subsequent notice by t of its termination of its private foundation status pursuant to sec_507 of the code when t still has no assets will not result in termination_tax under sec_507 of the code t's transfer of its assets to c will not be an act of self-dealing and will not result in tax under sec_4941 of the code t's transfer of its assets to c will not subject t to any_tax under sec_4942 of the code for a failure to distribute income twill not be required to meet the recordkeeping requirements of sec_4942 of the code with respect to its transfer of all of its assets to c after t transfers all of its assets to c t's transfer of all of its assets to c will not be a taxable_expenditure under sec_4945 of the code and will not subject t to tax under sec_4945 of the code and t will not be required to exercise expenditure_responsibility with respect to its transfer of all of its assets to c because this rulings letter could help to resolve any questions please keep it in your permanent records this rulings letter is directed only to the organizations that requested it code provides that this rulings letter may not be used or cited as precedent sec_6110 of the sincerely sa joseph chasin acting manager exempt_organizations technical group


internal_revenue_service number release date index number 2032a 2032a ---------------------------------- ------------------ ------------------------------ re ---------------------------------- -------------------- department of the treasury washington dc person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 - plr-142950-10 date date legend decedent child child child child grandchild grandchild grandchild grandchild grandchild grandchild grandchild grandchild trust trust trust date partnership date spouse spouse spouse ------------------------- --------------------- ------------------------ ---------------------- ---------------------------------- ------------------------ ---------------------- ----------------------- ------------------------- ------------------------- ---------------------- ------------------------ -------------------- ----------------------------- ------------------------------ ------------------------------ ---------------------- ---------------------------------- ------------------ ------------------- --------------------------------------------------------------------------------------------- ---------------------- plr-142950-10 spouse partner partner partner partner partner partner partner partner partner partner y state year year year date v year --------------------------------- -------------------------------- ---------------------------------- -------------------------------------- ------------------------------- ------------------------- ------------------------ --------------------------- ----------------------- ------------------------------------- ------------------------ ----------- --------------- ------- ------- ------- ------------------- ---- ------- dear -------------------- this letter responds to the letter dated date and subsequent correspondence submitted by your authorized representative requesting rulings under sec_2032a of the internal_revenue_code with respect to the proposed transfer of farmland by a qualified_heir to a limited_liability_company llc and the subsequent lease of the farmland by the llc to a partnership the facts and representations submitted are summarized as follows prior to his death decedent a united_states citizen owned and farmed land farm located in state united_states on date decedent entered into a lease lease with a general_partnership partnership in which decedent agreed to lease farm for the year through year crop years to partnership in exchange partnership agreed to pay decedent dollar_figurey during the lease_term partnership conducted farming operations on farm it is represented that during this period decedent actively and materially participated in the farming operation on farm decedent died in year of the lease decedent died on date survived by four children child child child and child child and his spouse spouse have two children grandchild and grandchild child and his spouse spouse have three children grandchild grandchild and grandchild child and his spouse spouse have three children plr-142950-10 grandchild grandchild and grandchild child is married to spouse the ruling requests in this letter pertain to child under item vii of decedent’s will decedent bequeathed the residue of his estate to his children outright in substantially equal shares to be divided among them as they agree or in the absence of such agreement as his executor may determine the residue of decedent’s estate included farm item vii further provides that if any child does not survive decedent then decedent bequeaths that deceased child’s share of the residue to a separate trust for the then living children of the deceased child decedent’s grandchildren under item vii a the trustee of each separate trust shall pay the beneficiary grandchildren as much of the net_income of the trust as the trustee in the trustee’s discretion deems advisable for the education support maintenance and health of those grandchildren any income not distributed shall be added to principal item vii b provides that the trustee in the trustee’s discretion may distribute principal for the education support maintenance and health of each beneficiary grandchild under item vii c one-half of the assets of each separate trust will be distributed to the beneficiary grandchildren in shares as equal as the trustee can attain each share will be distributed to a beneficiary grandchild upon reaching age or if a grandchild dies before reaching that age to the then living descendants of the deceased grandchild the remaining assets of each separate trust will be distributed in equal shares to the beneficiary grandchildren each share will be distributed to a beneficiary grandchild upon reaching age or if a grandchild dies before reaching that age to the then living descendants of the deceased grandchild on date child child and child each disclaimed a portion of his undivided_interest in farm bequeathed to him under decedent’s will specifically child disclaimed one-half of his interest child disclaimed one-half of his interest and child disclaimed nine-tenths of his interest pursuant to item vii of decedent’s will child 1’s disclaimed interest passed to trust a_trust benefiting child 1’s children grandchild and grandchild child 2’s disclaimed interest passed to trust a_trust benefiting child 2’s children grandchild through grandchild child 3’s disclaimed interest passed to trust a_trust benefiting child 3’s children grandchild through grandchild accordingly after the disclaimers each grandchild held a beneficial_interest in farm indirectly through the trusts grandchild and grandchild were over age on decedent’s date of death and under item vii c of the will they are entitled to receive their interests in farm outright it is represented that those interests will be distributed to grandchild and grandchild upon receipt of this letter therefore the undivided interests in farm are currently held as follows child holds a 8th interest child holds a 8th interest child holds a 40th interest child holds a 4th interest trust holds a 8th interest trust holds a 8th interest and trust holds a 40th interest in the event a_trust distributes any interests in farm to a beneficiary during the 10-year recapture_period under sec_2032a then such beneficiary will enter into an agreement to be fully liable for any amount of additional estate_tax plr-142950-10 under that section upon the receipt of this letter grandchild and grandchild will each receive a distribution from trust equal to a 40th interest in farm trust will hold the remaining 40th interest in trust for grandchild the executor of decedent’s estate estate filed a timely united_states estate and generation-skipping_transfer_tax return and elected to value farm under sec_2032a child through child each executed the agreement to special valuation under sec_2032a of schedule a-1 of decedent’s form_706 to be personally liable for any amount of additional estate_tax that may be due under sec_2032a it is represented that the leasing arrangement with partnership continued in effect after decedent’s death following the receipt of this letter_ruling and the distribution of the undivided interests in farm from trust to grandchild and grandchild child through child grandchild grandchild and trust through trust propose to transfer their undivided interests in farm to newly-formed limited_liability companies llc through llc in exchange for proportionate interests in the llcs specifically child and trust will transfer their undivided interests in farm to llc in exchange for proportionate interests in llc child and trust will transfer their undivided_interest in farm to llc in exchange for proportionate interests in llc child grandchild grandchild and trust will transfer their undivided_interest in farm to llc in exchange for proportionate interests in llc child will transfer her undivided_interest in farm to llc in exchange for a percent interest in llc the proposed llc operating_agreement paragraph provides that the managers of the llc will have full and complete authority power and discretion to manage and control the business affairs and properties of the company to make all decisions regarding those matters and to perform any and all acts or activities customary or incident to the management of the company’s business child will be the manager of llc paragraph provides that the purpose of the company is to engage in the ownership leasing and farming of farm paragraphs and prohibit the sale of child 4’s interest in llc for years other than to a member of child 4’s family as defined in sec_2032a paragraph provides that child will execute an agreement as a member of the llc to be personally liable for any additional estate_tax which may result due to the application of sec_2032a it is represented that llc will enter into an agreement to be fully liable for any amount of additional estate_tax that may be due under sec_2032a the proposed llc through llc operating agreements contain similar terms partnership was formed in year at the time decedent entered into lease and currently there were and are v corporate partners partner through partner each partner owns a v percent interest in partnership the shareholders of partner sec_1 and are child and spouse the shareholders of partner sec_2 and are child and plr-142950-10 spouse the shareholders of partner sec_3 and are child and spouse the shareholders of partner sec_4 and are child and spouse the shareholders of partner are estate child child and child the shareholders of partner are child child child and grandchild each llc proposes to enter into a leasing agreement with partnership specifically llc will enter into lease with partnership llc will enter into lease with partnership llc will enter into lease with partnership llc will enter into lease with partnership pursuant to the terms of each proposed lease each llc will lease its undivided_interest in farm to partnership for agricultural purposes specifically to be used as a farm for farming_purposes partnership will agree to pay each llc a sum certain per annum or a certain percentage share of the crops grown per annum the decision to pay either a fixed cash rent or to pay rent based on a percentage of crops grown on farm shall be made solely by partnership the term of each lease will be fixed by the parties subsequent to receiving this letter child has requested the following rulings child 4’s transfer of her undivided_interest in farm to llc in exchange for a percent interest in llc as proposed will not be treated as a disposition of child 4’s interest in farm resulting in additional estate_tax under sec_2032a llc 4’s proposed leasing arrangement with partnership will not be treated as a cessation of the qualified_use of child 4’s interest in farm and accordingly will not result in additional estate_tax under sec_2032a law and analysis ruling sec_2032a provides that if the decedent was at the time of his death a citizen or resident_of_the_united_states and the executor elects the application of sec_2032a and files the agreement referred to in sec_2032a then for purposes of chapter the value of the qualified_real_property shall be its value for the use under which it qualifies under sec_2032a as qualified_real_property sec_2032a provides that for purposes of sec_2032a the term qualified_real_property means real_property located in the united_states which was acquired from or passed_from_the_decedent to a qualified_heir of the decedent and which on the date of the decedent’s death was being used for a qualified_use by the decedent or a member_of_the_decedent’s_family but only if the percentage requirements under subsections a through d are met plr-142950-10 sec_2032a provides that for purposes of sec_2032a the term qualified_use means the devotion of the property to any of the following a use as a farm for farming_purposes or b use in a trade_or_business other than the trade_or_business_of_farming sec_2032a provides that if within years after the decedent’s death and before the death of the qualified_heir the qualified_heir disposes of any interest in qualified_real_property other than by a disposition to a member of his family then an additional estate_tax will be imposed under sec_2032a the qualified_heir is personally liable for the additional estate_tax imposed under sec_2032a sec_2032a provides that the term qualified_heir means with respect to any property a member of the decedent's family who acquired such property or to whom such property passed_from_the_decedent sec_2032a provides that the term member_of_the_family means with respect to any individual only a an ancestor of such individual b the spouse of such individual c a lineal descendant of such individual of such individual’s spouse or of a parent of such individual or d the spouse of any lineal descendant described in subparagraph c sec_20_2032a-3 of the estate_tax regulations which applies to pre-death ownership by a decedent provides that real_property valued under sec_2032a may be owned directly or may be owned indirectly through ownership of an interest in a corporation a partnership or a_trust where the ownership is indirect however the decedent’s interest in the business must in addition to meeting the tests for qualification under sec_2032a qualify under the tests of sec_6166 as an interest in a closely-held business on the date of the decedent’s death and for sufficient other time as stated above the requirements under sec_20_2032a-3 address only pre-death ownership by a decedent although no regulations have ever been issued applying this rule to qualified heirs the legislative_history indicates that congress intended this rule to apply to qualified heirs as well it is intended however that the treasury_department will provide by regulations that the disposition of qualified_property by tax-free transfer to a corporation pursuant to sec_351 or to a partnership pursuant to sec_721 is not to result in application of the recapture_tax if the qualified_heir retains the same equitable interest in the property if the corporation or partnership would with respect to the qualified_heir be considered a closely_held_business within the meaning of sec_6166 and if the corporation or partnership consents to personal liability for the recapture if it disposes of the real_property or ceases to use the property plr-142950-10 for qualified purposes during the period in which recapture may occur emphasis added h_r rep no n pincite in this case child decedent’s daughter is a member of decedent’s family as defined under sec_2032a and an interest in farm passed from decedent to child under decedent’s will accordingly child is a qualified_heir for purposes of sec_2032a and e child proposes to transfer her undivided_interest in farm to llc in exchange she will receive a percent interest in the company thus child will indirectly own farm through the llc the proposed llc operating_agreement provides that child will execute an agreement as a member of llc to be personally liable for any additional estate_tax under sec_2032a further it is represented that llc will enter into an agreement to be fully liable for any amount of additional estate_tax that may be due under sec_2032a based on the facts submitted and representations made and assuming llc satisfies the requirements of sec_6166 as a closely-held business we conclude that child 4’s transfer of her undivided_interest in farm to llc in exchange for a percent interest in llc as proposed will not be treated as a disposition of child 4’s interest in farm resulting in additional estate_tax under sec_2032a ruling sec_2032a provides that if within years after the decedent’s death and before the death of the qualified_heir the qualified_heir ceases to use for the qualified_use the qualified_real_property which was acquired or passed_from_the_decedent then an additional estate_tax will be imposed the requirements for determining whether there has been a cessation in use under sec_2032a are found in sec_2032a sec_2032a provides that for purposes of sec_2032a real_property shall cease to be used for other qualified_use if such property ceases to be used for the qualified_use set forth in subparagraph a of sec_2032a under which the property qualified under sec_2032a the legislative_history underlying the amendments to sec_2032a suggests by negative implication that the qualified_use requirement of sec_2032a is satisfied if the income from rental of the property is substantially dependent upon production see s rep no pincite specifically the senate report states that during any period when the decedent leases the real_property to a nonfamily member for use in a qualified_use pursuant to a lease under which the rental is not substantially dependent upon production the qualified_use requirement is not satisfied this requirement has plr-142950-10 been construed by the courts to apply to qualified heirs as well see 113_f3d_802 8th cir income from a leasing arrangement in which the lessee has the option to pay the lessor rent either in the form of a sum certain or a certain percentage of the crop share is substantially dependent upon production see estate of gavin supra and 783_f2d_694 7th cir in estate of gavin under the decedent’s will the farm property passed to decedent’s grandchildren and children some of the qualified heirs leased the farm to decedent’s son another qualified_heir the lease provided for either an annual rent of dollar_figure or a percent crop share at the son’s option the court found that the son’s ability to choose whether to pay fixed cash rent or a percent share put the other qualified heirs at risk because in a bad year the son would likely pay the fifty-fifty_split rather than the fixed payments the court held that the leasing arrangement did not result in a cessation of use under sec_2032a and therefore the qualified heirs were not subject_to additional estate_tax under sec_2032a in schuneman the decedent owned a farm and prior to her death she leased the farm to a third party the lessee agreed to conduct farming operations on the farm under the leasing arrangement the rental amount was based upon crop production and crop prices the court concluded that the lease arrangement created financial risk for the decedent and held that the farm was used in a qualified_use at the time of her death pursuant to lease llc will lease farm to partnership for agricultural purposes specifically to be used as a farm for farming_purposes farming is a qualified_use under sec_2032a under lease partnership will agree to pay the llc either a sum certain per annum or a certain percentage of the share of crops grown per annum the decision to pay either fixed cash rent or to pay rent based on a percentage of crops grown on farm shall be made solely by partnership lease is substantially_similar to the lease in estate of gavin supra in this case we conclude that the rental payments under lease will be substantially dependent upon production based on the facts submitted and representations made we conclude that llc 4’s proposed leasing arrangement with partnership will not be treated as a cessation of the qualified_use of child 4’s interest in farm for purposes of sec_2032a and accordingly will not result in additional estate_tax under sec_2032a the rulings contained in this letter are based upon information and representations submitted by the taxpayers 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-142950-10 except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we are not ruling on the application of sec_2032a to the election made on decedent’s form_706 by the executor of decedent’s estate further we are not ruling on whether child materially participates in farming on farm for purposes of sec_2032a whether the required material_participation by the qualified_heir or a member of her family occurred is a factual determination section dollar_figure of revproc_2011_1 i r b provides that the service ordinarily does not issue letter rulings in certain areas because of the factual nature of the problem involved this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel passthroughs and special industries by ______________________________ lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


internal_revenue_service number release date index number ---------------------- ------------------------------- ---------------------------------------------------- ------------------------------------- ------------------------------------ in re --------------------------------------------------- - ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number ---------------------- refer reply to cc corp b02 plr-105105-16 date date legend parent ------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ ---------------------------------------------------- date date -------------------- ---------------------- company official tax professional -------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------- ------------------------- dear ----------------- this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to make an election the extension is being requested for parent to make an election under sec_1_1502-21 to relinquish the entire carryback period for the parent consolidated group's consolidated_net_operating_loss cnol for the tax_year ending date the election additional information was submitted in letters dated date and date the material information submitted for consideration is summarized below parent was the common parent of a consolidated_group parent group for the relevant years parent group sustained a cnol in the tax_year ending on date plr-105105-16 parent intended to relinquish the carryback period for its consolidated group's cnol on its tax_return for the tax_year ending date all prior and subsequent returns for parent group were filed consistent with a valid election having been made however for various reasons a valid election was not filed after date the date that the return and the election were due with extensions it was discovered that a valid election was not filed subsequently this request was submitted for an extension of time to file a valid election parent has represented that parent group has not and will not carry any portion of the cnol for the tax_year ending date to a prior consolidated_return_year of parent group parent has also represented that no member of the consolidated_group of which parent was the common parent for the tax_year ending date had a separate_return_year within the meaning of sec_1_1502-1 at any time during the carryback period parent has further represented that parent group is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time of the request for relief and the new position requires or permits a regulatory election for which relief is requested sec_1_1502-21 provides that a consolidated_group may make an irrevocable election under sec_172 to relinquish the entire carryback period with respect to a cnol for any consolidated_return_year the election is made in a separate statement entitled this is an election under sec_1_1502-21 to waive the entire carryback period pursuant to sec_172 for the insert consolidated_return_year cnols of the consolidated_group of which insert name and employer_identification_number of common parent is the common parent sec_1_1502-21 also provides that the statement must be filed with the group's income_tax return for the consolidated_return_year in which the loss arises under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory 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 regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 plr-105105-16 in this case the time for filing the election is fixed by the regulations ie sec_1 b i therefore the commissioner has discretionary authority under sec_301 to grant an extension of time for parent to file the election provided parent establishes it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent and company official tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advice parent to make the election and that the request for relief was filed before the failure to timely make the election was discovered by the internal_revenue_service see sec_301_9100-3 and iv based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for parent to file the election with respect to the relinquishment of the entire carryback period for the cnol for the tax_year ending date as described above the above extension of time is conditioned on the taxpayers' parent and the members of its consolidated_group tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made by the director's office upon audit of the federal_income_tax returns involved parent must file the election in accordance with sec_1_1502-21 parent group's return for the tax_year ending date having been filed consistent with a valid election having been made must be amended to attach the election statement required by sec_1_1502-21 a copy of this letter must be attached to the election statement alternatively if the parent group files its returns electronically parent may satisfy this requirement by attaching a statement to its return that provides the date and control number of this letter_ruling we express no opinion as to the tax effects or consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling plr-105105-16 for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by parent and company official tax professional however the director should verify all essential facts moreover notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in the office copies of this letter are being sent to your authorized representatives sincerely ken cohen senior technician review branch office of associate chief_counsel corporate cc


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si plr-121162-98 date date company manager shareholders property state a b c d e f plr-121162-98 dear this letter responds to your letter dated date submitted on behalf of company requesting a ruling that the rental income received by company from the property is not passive_investment_income within the meaning of sec_1362 company represents the following facts company was incorporated in state on a company and its shareholders intend to elect under sec_1362 to be an s_corporation effective b company leases the property to various commercial tenants under long-term_contracts company's shareholder-officers devote all their time to the rental activities of company and other related corporations manager with the same owners as company and with c full-time non-owner employees provides management and maintenance services to company and other related corporations through manager as well as a variety of independent contractors company provides various services in its real_estate leasing and management business these services include but are not limited to the maintenance of the buildings' structural_components and systems such as exteriors roofs heating and air conditioning plumbing sprinklers and fire alarms routine cleaning and repairs maintenance of outside lighting sidewalks and parking lots landscaping snow removal and supervision of tenant improvements in addition to the services provided to tenants company handles the usual marketing leasing and administrative functions involved in managing real_estate company received or accrued approximately d in rents and paid_or_incurred approximately e in relevant expenses for f on the property sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 terminates whenever the corporation i has accumulated_earnings_and_profits at the close of each of three consecutive tax years and ii has gross_receipts for each of such tax years more than percent of which are passive_investment_income except as otherwise provided in sec_1362 sec_1362 provides that the term passive investment plr-121162-98 income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1_1362-2 of the income_tax regulations provides that rents means amounts received for_the_use_of or the right to use property whether real or personal of the corporation sec_1_1362-2 provides that rents does not include rents derived in the active trade_or_business of renting property rents received by a corporation are derived in an active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation based solely on the facts as presented in this ruling_request and viewed in light of the applicable law and regulations we conclude that the rents company receives from the property will not be passive_investment_income under sec_1362 except for the specific ruling above no opinion is expressed or implied concerning the federal tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed regarding company's eligibility to elect s_corporation status further the passive_investment_income rules of sec_1362 are completely independent of the passive_activity rules of sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 in accordance with the power_of_attorney on file with this office we are sending you the original of this letter and copies to company and to the second authorized representative plr-121162-98 this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent sincerely donna m young senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries encl copy for sec_6110 purposes


t c memo united_states tax_court roy j chase petitioner v commissioner of internal revenue respondent docket no filed date roy j chase pro_se willie fortenberry for respondent memorandum findings_of_fact and opinion cohen judge respondent determined deficiencies additions to tax and penalties with respect to petitioner’s federal_income_tax as follows additions to tax i r c sections year deficiency b a b b f dollar_figure dollar_figure dollar_figure -- big_number dollar_figure dollar_figure -- big_number dollar_figure -- -- dollar_figure big_number dollar_figure -- -- dollar_figure big_number dollar_figure -- -- dollar_figure big_number dollar_figure -- -- dollar_figure big_number dollar_figure -- -- dollar_figure big_number dollar_figure -- -- dollar_figure big_number dollar_figure -- -- dollar_figure big_number dollar_figure -- -- dollar_figure percent of the interest on the deficiency respondent also determined additions to tax under sec_6663 for and but has now conceded that those additions to tax are not due unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure the issues for decision are whether petitioner’s underpayment of taxes and failure_to_file tax returns for the years in issue were due to fraud and whether a penalty should be awarded under sec_6673 by reason of petitioner’s groundless and frivolous positions maintained in this proceeding findings_of_fact some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference petitioner resided in new smyrna beach florida at the time that he filed his petition petitioner is a computer_software engineer specializing in software development testing and quality assurance from through petitioner was employed by various companies in the computer field he was employed as a test technician field representative engineering technician test department manager and supervisor and software engineer he taught hardware and software courses for employees and customers of two companies petitioner filed federal_income_tax returns as a single individual for through and jointly with his wife for and through from through petitioner failed to file federal_income_tax returns petitioner did not maintain bank accounts in his name during the years in issue because he refused to provide his social_security_number to banking institutions from through petitioner received compensation as an independent_contractor in the field of software development and quality assurance the checks that he received in payment for his services were cashed at the payers’ banks or through bank accounts maintained by his wife his mother or his sister-in-law petitioner received gross_receipts from his occupation as follows year gross_receipts dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number in addition petitioner received minor amounts of interest_income during these years during the years in issue petitioner accumulated cars boats and motorcycles in petitioner and his wife purchased a home in florida the deed was recorded in the name of petitioner’s wife in the internal_revenue_service irs commenced an investigation of petitioner’s federal_income_tax liability for and in a response to an administrative_summons petitioner and his wife wrote a letter to the irs that asserted the following arguments we must first of all inform you that we have no tax_liability for the years in question we must secondly inform you that we possess a number of rights and that we claim all of our rights at all times a question of jurisdiction arises in your claim against us for the liability of any income_tax we are now and were during the years in question citizens of the state of new hampshire we do not now and did not during the years in question work or reside in any territory which is or was under exclusive federal jurisdiction we are not now and have never been operating under any privelege sic or engaging in any activity which generates revenue taxable_income any_tax on our property the fruits of our labor must fall within the context of the apportionment clauses of the united_states constituion sic furthermore whereas we possess other constitutionally protected rights you lack any authority to require us to testify before you to deliver to you any of our property or to provide you with any information we do not wish to voluntarily confer jurisdiction over us in a letter dated date petitioner and his wife asserted the following we are writing to inform you that the meeting arranged for us on date is cancelled as stated in our previous letter to you we have no tax_liability to the united_states or the internal_revenue_service perhaps you do not understand our status furthermore we have opened no accounts with respect to title_26 we remind you that you lack any authority to summons us or to seize any of our property see hale v henkel we have not voluntarily assesed sic ourselves flora v u s nor opened any accounts with you nor entered into any contractual agreement with you or the united_states our status is such that we are not subject_to the provisions of title_26 please provide proof of any such voluntary assesment sic or the existance sic of any accounts or that you have any proper jurisdiction over us before bothering us again petitioner continued to maintain similar arguments through investigation of his liability for subsequent years during a criminal case brought against him through trial of this proceeding in date and in his posttrial brief the criminal case that was commenced against petitioner was dismissed in when the presiding judge indicated that the matter should be pursued civilly rather than criminally in petitioner and his wife incorporated a business as strategic computer solutions the corporation had employees including petitioner and his wife and issued forms w-2 wage and tax statement at the end of each year federal income taxes and social_security_taxes on the employees including petitioner and his wife were withheld and the withheld taxes were paid to the irs petitioner and his wife filed joint returns and reported their wages for and subsequent years opinion petitioner has not raised any nonfrivolous arguments concerning the amount of deficiencies determined in the statutory notice he has asserted various arguments concerning procedural matters and failures of the government to prepare returns on his behalf and to assess promptly the amounts owing he rejects the court’s explanation that assessment cannot occur until the decision in this case is final see sec_6213 he acknowledged during his testimony that he did not consult with any_tax professionals on the legality of his position on taxes in through he cites numerous cases out of context while ignoring those authorities contrary to his position he summarizes his position as follows it is my understanding that i’ve never been made liable for a tax i don’t understand how one is made liable for a tax but i have never received an assessment for any of the years in question up until the notice_of_deficiency i’ve never received any indication that the government is asking me to pay money that the irs is asking me to pay money petitioner ignores the evidence concerning multiple notices to him that he had failed to file required returns and the investigation of his liability for and that commenced in and resulted in criminal prosecution petitioner claims that he won the criminal case and therefore believes that he was correct he also claims that his beliefs were reinforced by the length of time that it took the irs to proceed against him civilly as is usual however civil proceedings awaited the conclusion of the criminal matter see eg 464_us_386 113_tc_206 affd 9_fedappx_700 9th cir the notices of deficiency followed promptly after dismissal of the criminal case petitioner’s arguments concerning liability are stale and have been uniformly rejected no further discussion of them is warranted see 919_f2d_1440 10th cir 833_f2d_1538 11th cir 769_f2d_707 11th cir 764_f2d_1389 11th cir 737_f2d_1417 5th cir 702_f2d_59 5th cir 661_f2d_71 5th cir affg tcmemo_1981_122 70_tc_730 affd 614_f2d_159 8th cir in the criminal context the government was required to prove petitioner’s guilt beyond a reasonable doubt in this case respondent must prove by clear_and_convincing evidence that petitioner had an underpayment_of_tax for and due to fraud sec_6653 and that his failure_to_file tax returns for the other years in issue was fraudulent sec_6651 sec_7454 rule b similar standards for proving fraud apply under either statute see 102_tc_632 99_tc_202 fraud may be proved by circumstantial evidence and the taxpayer’s entire course of conduct may establish the requisite fraudulent intent 80_tc_1111 circumstantial evidence of fraud includes badges_of_fraud such as those present here a longtime pattern of failure_to_file returns failure to report substantial amounts of income failure to cooperate with taxing authorities in determining the taxpayer’s correct liability implausible or inconsistent explanations of behavior concealment of assets and failure to make estimated_tax payments see eg 796_f2d_303 9th cir affg tcmemo_1984_601 252_f2d_56 9th cir 75_tc_1 67_tc_181 affd without published opinion 578_f2d_1383 8th cir petitioner stipulated to the payments received from through he admitted during his testimony that he received funds for work performed during each of the years in issue proof of gross_receipts is sufficient to satisfy respondent’s burden of showing an underpayment for and in the absence of evidence of offsetting deductions see eg greenwood v commissioner tcmemo_1990_362 petitioner has neither argued nor shown that he had any offsetting deductions not allowed in respondent’s determination in defending the charge of fraud petitioner attempts to rely on his letters openly stating his position to the irs those letters however commenced only after his failure to comply with his obligations had been discovered they are not persuasive evidence negating fraud see rowlee v commissioner supra pincite respondent cites petitioner’s resumption of filing returns for and later years after the investigation of him had commenced as evidence that petitioner was well aware of his federal tax obligations petitioner argues that he filed returns for and subsequent years because different laws apply to corporations it appears however that petitioner continued to receive compensation_for services that he personally performed and reported that compensation on his tax returns for and subsequent years notwithstanding his attempt to justify his prior delinquencies we believe that petitioner was knowledgeable about his tax-paying responsibilities but ‘consciously decided to unilaterally opt_out of our system of taxation’ until the irs commenced its investigation of him niedringhaus v commissioner supra pincite quoting 94_tc_316 we are convinced that petitioner’s refusal to file tax returns was willful and with knowledge that he was obligated to file them and pay tax on his income his sudden discovery of his frivolous positions after many years of apparent compliance his failure to consult any professionals or authorities on the subject and his refusal to acknowledge his errors through the time of trial of this case undermine his claims of good-faith belief similar evidence has been held sufficient to support a criminal conviction in other cases see eg 939_f2d_499 7th cir 920_f2d_619 10th cir united_states v ward supra 801_f2d_108 2d cir 785_f2d_90 3d cir 772_f2d_287 7th cir 640_f2d_1014 9th cir 633_f2d_1356 9th cir when as here accompanied by evidence of intent to conceal income and assets the longtime pattern of failing to file tax returns is sufficient to sustain the civil penalties see eg niedringhaus v commissioner supra pincite rowlee v commissioner supra marsh v commissioner tcmemo_2000_11 affd 23_fedappx_874 9th cir houser v commissioner tcmemo_2000_111 harrell v commissioner tcmemo_1998_207 affd without published opinion 191_f3d_456 7th cir dunham v commissioner tcmemo_1998_52 the penalties for fraud in this case will be sustained as indicated above our conclusion that petitioner’s underpayment of taxes and failure_to_file returns was due to fraud is based on the objective facts and rejection of his claims of good_faith our reasoning is supported in part by his refusal to acknowledge that his positions are contrary to law as he was advised by the irs relevant authorities and the court in this case petitioner persists in his frivolous and groundless arguments through his posttrial brief apparently petitioner expects that if he feigns sincere belief he will avoid penalties petitioner is obviously intelligent and articulate but he has persevered too long to have any credibility serious sanctions are necessary to deter him and others similarly situated under these circumstances sec_6673 provides in relevant part sec_6673 tax_court proceedings -- procedures instituted primarily for delay etc --whenever it appears to the tax_court that-- a proceedings before it have been instituted or maintained by the taxpayer primarily for delay b the taxpayer’s position in such proceeding is frivolous or groundless or c the taxpayer unreasonably failed to pursue available administrative remedies the tax_court in its decision may require the taxpayer to pay to the united_states a penalty not in excess of dollar_figure petitioner was specifically warned by respondent and by the court of the likelihood of a penalty under sec_6673 if he persisted in his frivolous arguments and he has persisted he did so even when the court ordered briefs limited to the question of fraud see 792_f2d_91 7th cir affg tcmemo_1985_237 a penalty will be awarded to the united_states in the amount of dollar_figure to reflect the foregoing an appropriate order and decision will be entered for respondent


t c no united_states tax_court ervin michaefl sarrell petitioner v commissioner of internal revenue respondent docket no 6044-o1l filed date on date r mailed to p a notice_of_determination concerning collection action s under sec_6320 and or regarding p’s tax_liability for the notice_of_determination was mailed to p at an address in israel on date the court received and filed a petition for lien or levy action under code sec_6320 or sec_6330 the petition arrived at the court in a properly addressed envelope bearing a postmark indicating that it was mailed from israel r moved to dismiss the petition for lack of jurisdiction on the ground that the petition was not filed within the 30-day period prescribed in sec_6330 a i r c held the court lacks jurisdiction over the petition because it was not timely filed p cannot rely on the so-called timely mailing timely filing rule_of sec_7502 i r c because that rule does not apply to foreign postmarks further unlike sec_6213 i r c which is applicable to deficiency actions sec_6330 i r c does not provide an expanded filing period when a notice_of_determination is addressed to a person outside the united_states ervin michael sarrell pro_se william j gregg for respondent opinion dawson judge this case was assigned to special_trial_judge robert n armen jr pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_183 the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge armen special_trial_judge this matter is before the court on respondent’s motion to dismiss for lack of jurisdiction on the ground that the petition was not filed within the 30-day period prescribed in sec_6330 a as explained below we shall grant respondent’s motion to dismiss background on date the internal_revenue_service appeal sec_1 unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure office in new orleans louisiana issued to petitioner a notice_of_determination concerning collection action s under sec_6320 and or regarding petitioner’s unpaid federal_income_tax liability for the notice_of_determination was sent to petitioner by registered mail addressed to him at hairus moshav gan haim israel israel address the notice_of_determination informed petitioner that if he wanted to dispute respondent’s determination in court then he must file a petition with this court within days from the date of this letter on date the court received and filed a petition for lien or levy action under code sec_6320 or sec_6330 the petition which is dated date arrived at the court in a properly addressed envelope that petitioner mailed to the court from the israel address the envelope bears a sticker from the israel postal authority indicating that it was sent by registered mail the envelope also bears a number of israeli postage stamps which appear to have been canceled by the israel postal authority on date as indicated respondent moved to dismiss the petition for lack of jurisdiction on the ground that the petition was not timely filed in particular respondent contends that because the envelope in which the petition was mailed to the court bears a foreign postmark petitioner may not rely on the so-called timely mailing timely filing rule set forth in sec_7502 q4e- petitioner filed an objection to respondent’s motion asserting that because of intervening jewish holidays including passover and holocaust memorial day and slow rural mail delivery in israel he did not receive the notice_of_determination until date petitioner further asserted that he was delayed in mailing his petition to the court as a consequence of additional holidays including israeli memorial day and israeli independence day petitioner’s objection included as an exhibit a copy of what appears to be an israel postal authority receipt indicating that petitioner mailed his petition to the court on monday date this matter was called for hearing at the court’s motions session held in washington d c counsel for respondent appeared at the hearing and offered argument in support of the motion to dismiss there was no appearance by or on behalf of petitioner discussion sec_6331 provides that if any person liable to pay any_tax neglects or refuses to pay such tax within days after notice_and_demand for payment the secretary is authorized to collect such tax by way of a levy upon the person’s property sec_6331 provides that at least days prior to proceeding with enforced collection by way of a levy ona person's property the secretary is obliged to provide the person with a final notice_of_intent_to_levy including notice of the - administrative appeals available to the person in the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_746 congress enacted new sec_6320 pertaining to liens and new sec_6330 pertaining to levies to provide protections for taxpayers in tax collection matters sec_6330 generally provides that the commissioner cannot proceed with enforced collection by way of levy until the taxpayer has been given notice of and the opportunity for an administrative review of the matter in the form of an appeals_office hearing and if dissatisfied with judicial review of the administrative determination see 115_tc_35 114_tc_176 when the appeals_office issues a determination_letter toa taxpayer following an administrative hearing regarding a notice_of_intent_to_levy sec_6330 provides that the taxpayer will have days following the issuance of such determination_letter to file a petition for review with the tax_court or if the tax_court does not have jurisdiction over the underlying tax_liability with a federal district_court see 114_tc_492 we have held that this court’s jurisdiction under sec_6320 and sec_6330 depends upon the issuance of a valid determination_letter and the filing of a timely petition for review see 116_tc_263 offiler v commissioner supra pincite see also rule b petitioner did not challenge the validity of the notice_of_determination we observe that the notice was mailed to the same address that petitioner listed as his return address on the envelope bearing the petition and on the envelope bearing the notice of objection accordingly it appears that the notice_of_determination was mailed to petitioner at his last_known_address see sec_6330 c under the circumstances the sole issue for decision is whether the petition was timely filed the record in this case demonstrates that the petition was not filed within the 30-day period prescribed in sec_6330 the record shows that respondent mailed the notice_of_determination to petitioner on date consequently and by virtue of sec_7503 the 30-day filing period expired on monday date--a date that was not a legal_holiday in the district of columbia the petition in this case was received and filed by the court on date week after the expiration of the 30-day period it follows that we must dismiss this case for lack of jurisdiction see 115_tc_114 we agree with respondent that petitioner is unable to take advantage of the so-called timely mailing timely filing rule_of sec_7502 although sec_7502 provides that in certain circumstances a timely mailed petition will be treated as though it were timely filed sec_7502 provides that the rule shall apply in the case of postmarks not made by the united_states postal service only if and to the extent provided by regulations prescribed by the secretary it is well settled that the timely mailing timely filing rule_of sec_7502 a does not apply to foreign postmarks see pekar v commissioner t cc and cases cited therein see also sec_301_7502-1 proced admin regs stating sec_7502 does not apply to any document which is deposited with the mail service of any other country moreover congress did not provide an extended filing period under sec_6320 or sec_6330 when a notice_of_determination is addressed to a person outside the united_states compare sec_6213 which provides a 150-day filing period when a notice_of_deficiency is addressed to a person outside the united_states the tax_court is a court of limited jurisdiction and we may exercise our jurisdiction only to the extent expressly provided by statute sec_7442 112_tc_46 107_tc_249 simply stated any effort to enlarge the period within which a taxpayer outside the united_states may file a petition for review with the court under sec_6320 and sec_6330 must originate with congress to reflect the foregoing an order will be entered granting respondent’s motion to dismiss for lack of jurisdiction


department of the treasury internal_revenue_service number release date index number person to contact telephone number refer reply to cc psi - plr-167562-01 date date washington dc x y a b c d1 d2 d3 d4 d5 d6 d7 d8 plr-167562-01 accounting firm1 accounting firm2 law firm year year dear this letter responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting that x be given an extension of time under sec_301 of the procedure and administrative regulations in which to elect to treat its subsidiary as a qualified_subchapter_s_subsidiary qsub the letter also requests a ruling that a disproportionate_distribution by x to its shareholders did not terminate x’s s election the information submitted states that a b and c are the shareholders of x x was incorporated on d1 and elected to be an s_corporation effective d2 y was incorporated on d3 and elected to be an s_corporation effective d3 pursuant to advice from x’s accountants accounting firm1 on d4 a and b transferred percent of their stock in y to x through this restructuring y became a wholly owned subsidiary of x c the chief financial officer of x represents that it was intended for x to treat y a wholly owned subsidiary of x as a qsub effective d4 x relied on accounting firm1 and law firm to advise x of any necessary elections however x was not advised of the need to file a qsub election and thus no qsub election was filed in d5 in the course of preparing x’s tax_return extensions accounting firm2 discovered that x had not filed an election to treat y as a qsub additionally in year and from d4 to d7 of year x made disproportionate distributions to a and b on d6 x issued shares to c however during the period from d6 to d8 x made distributions to a and b but failed to make distributions to c c represents that these disproportionate distributions were made due to a clerical oversight in the course of reviewing x’s qsub ruling accounting firm2 discovered the disproportionate distributions to a and b upon further examination the shareholders of x determined that the disproportionate distributions may have caused a termination of x’s s election at that time steps were taken to equalize the distributions moreover x and its shareholders have agreed to make such adjustments consistent plr-167562-01 with the treatment of x as an s_corporation as may be required by the secretary c represents that x’s articles of incorporation and by-laws provide for a single class of voting common_stock with no preferences as to either voting dividends or distributions among the shares of stock c represents there was no other binding agreement that any shareholder of x would be entitled to any preference with respect to the distributions made by x sec_1362 of the internal_revenue_code provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines the term qualified_subchapter_s_subsidiary qsub as a domestic_corporation which is not an ineligible_corporation if percent of the stock of the corporation is owned by the s_corporation and the s_corporation elects to treat the corporation as a qsub the statutory provision does not however provide guidance on the manner in which the qsub election is made or on the effective date of the election 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 the election may be effective on the date the form_8869 is filed or up to two months and days prior to the filing of the form provided that date is not before the parent’s first taxable_year beginning after date and that the subsidiary otherwise qualifies as a qsub if a valid qsub election is made the subsidiary is not treated as a separate corporation and all assets liabilities and items of income deduction and credit of the qsub are treated as assets liabilities and items of income deduction and credit of the parent s_corporation sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 plr-167562-01 sec_1361 provides that the term s_corporation means with respect to any_tax year a small_business_corporation for which an election under sec_1362 is in effect for that year sec_1361 provides that a small_business_corporation cannot have more than one class of stock sec_1_1361-1 of the income_tax regulations provides that a corporation generally is treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds sec_1_1361-1 provides that the determination of whether all outstanding shares of stock confer identical rights to distribution and liquidation proceeds is made based on the corporate charter articles of incorporation bylaws applicable state law and binding agreements relating to distribution and liquidation proceeds although a corporation is not treated as having more than one class of stock so long as the governing provisions provide for identical distribution and liquidation rights any distributions including actual constructive or deemed distributions that differ in timing or amount are to be given appropriate tax effect in accordance with the facts and circumstances based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8869 with the appropriate service_center to elect to treat y as a qsub effective d4 a copy of this letter should be attached to the form_8869 in addition based on the information submitted and the representations made we conclude that because x’s stock has identical distribution rights under its governing provisions the difference in timing between x’s disproportionate distributions and the remedial distributions does not cause x to have more than one class of stock for purposes of sec_1361 however such disproportionate and remedial distributions must be given appropriate tax effect under these circumstances we conclude that x’s s election did not terminate because of the disproportionate distributions except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 and whether y was or is a qsub for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent plr-167562-01 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ----------------------- -------------------------------------------------- --------------------------- --------------------- ----------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------ telephone number --------------------- refer reply to cc psi b03 plr-135114-08 date date x -------------------------------------------------------- ----------------------- legend county ------------ date ------------------ dear ----------- this letter 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 under sec_301_7701-3 facts the information submitted states that x was formed under the laws of country on date x represents that x is a foreign_entity eligible to elect to be treated as a disregarded_entity for federal tax purposes x intended to elect to be treated as a disregarded_entity for federal tax purposes effective on date however x did not timely file a form_8832 entity classification election law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can plr-135114-08 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 sec_301_7701-3 provides that except as provided in sec_301_7701-3 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 an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the appropriate service_center sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for 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 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be 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 grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an plr-135114-08 extension of time of sixty days from the date of this letter to elect to be treated as a disregarded_entity for federal tax purposes effective date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to your authorized representative sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes