department of the treasury zuue ll internal_revenue_service washington d c aye tax_exempt_and_government_entities_division uniform issue list ti tplralt feb legend taxpayer a taxpayer b ira x company c sum o trust m bank d court e state f dear this is in response to a ruling_request dated date as supplemented by additional correspondence dated date date date date and date from your authorized representative concerning sec_401 and sec_408 of the internal_revenue_code code 2a zs the following facts and representations have been submitted taxpayer b who was married to taxpayer a died on was born on after attaining age taxpayer a has currently reached age and taxpayer a was born on taxpayer b taxpayer b died taxpayer b established and maintained ira x on date taxpayer b concurrently with the execution of his last will and testament also executed trust m section three of his will directed the residue of his estate be given to trust m under the provisions of article il of trust m the trustee is required to pay income of the trust to his wife taxpayer a not less often than quarterly and to pay principal to taxpayer a her children or their issue according to ascertainable standards upon the death of taxpayer a article il section c sub sec_1 of trust m directs that per cent of the trust assets be distributed to such charitable or other organizations described in code sec_501 as shall be chosen by the surviving children of taxpayer b upon the death of taxpayer a article i section c sub sec_2 and of trust m direct that the remaining percent of the trust assets remain in trust for the benefit of the children for their lives and be ultimately distributed to grandchildren at the time taxpayer b died he owned ira x sponsored by company c with an approximate value of sum o for purposes of determining required minimum distributions during his lifetime taxpayer b elected to recalculate his life expectancy on date taxpayer b signed an application_for ira x which designated bank d trustee for trust m dated date as beneficiary of ira x a copy of the trust document and subsequent amendments have been provided to the administrator of ira x on court e a court of competent jurisdiction entered an order reforming trust m pursuant to such order the trust is split and divided into two independent and separate shares one share equal to per cent of the value of the trust as of the date of taxpayer b’s death will upon the death of taxpayer a be distributed in full to charitable beneficiaries designated by the children of taxpayer b pursuant to article il section c sub sec_1 the other share equal to per cent of the value of the trust assets as of the date of death of taxpayer b will remain in trust and be distributed for the benefit of the children and grandchildren of taxpayer b pursuant to the provisions of article ii section c sub sec_2 and the order further authorizes the trustee to make disproportionate divisions of property and allocations to the separate shares of the trust including allocating all or none of any item to one share or the other on court e amended the the trustee shail distribute the trust on a pro-rata basis in addition the order by providing that of order stated that the trustee shall not allocate different kinds disproportionate shares or undivided interests among the separate trust shares or beneficiaries it is represented that trust m signed by taxpayer b on date is a valid and trust under the flaws of state f and said trust as amended by court e on article viit of trust m provides that the right to revoke trust m is limited to the grantor thereof taxpayer b continues to be a valid trust under the laws of state f based on the foregoing facts and representations you have requested the following rulings that required distributions with respect to the per cent of ira x paid to the wife taxpayer a children and grandchildren of taxpayer b may be made in accordance with requirements of code sec_401 and the proposed_regulations promulgated thereunder without regard to any distribution s made from said ira x to the charitable entity ties which is the beneficiary ies of the remaining per cent of ira x that the required distributions from the per cent of taxpayer b’s ira x payable to taxpayer a and taxpayer b’s children and grandchildren will be computed according to code sec_401 a b i with the fife of taxpayer a as the measuring life regarding ruling_request one code sec_408 defines an individual_retirement_annuity as an annuity_contract or endowment_contract which is issued by an insurance_company and meets the requirements set forth in code sec_408 through b code sec_408 provides that under regulations prescribed by the secretary rules similar to the rules of code sec_401 and the incidental death_benefit requirements of code sec_401 shall apply to the distribution of the entire_interest of the owner code sec_401 provides in general a_trust shall not constitute a qualified_trust untess the plan provides that the entire_interest of each employee - i will be distributed to such employee not later than the required_beginning_date or ii will be distributed beginning not later than the required_beginning_date in accordance with regulations over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary o2 code sec_401 e defines the term designated_beneficiary as any individual designated as a beneficiary by the employee sec_1_401_a_9_-1 question and answer d-2a of the proposed income_tax regulations states in part that only individuals may be designated beneficiaries for purposes of computing required distributions under code sec_401 a person who is not an individual such as the employee’s estate may not be a designated_beneficiary however proposed regulation sec_1_401_a_9_-1 question and answer d-5 states generally that if a_trust is named as beneficiary the underlying beneficiaries of the trust may be treated as designated beneficiaries for purposes of code sec_401 if the following requirements are met the trust is valid under state law or would be but for the fact that there is no corpus the trust is irrevocable or the trust contains language to the effect that it becomes irrevocable upon the death of the employee owner the beneficiaries of the trust who are beneficiaries with respect to the trust’s interest in the employee's benefit are identifiable from the trust instrument and a copy of the trust instrument is provided to the plan_administrator sec_1_401_a_9_-1 question and answer h-2a of the proposed income_tax regulations states except as provided in paragraphs b and c if an employee's benefit under a plan is divided into separate_accounts or segregated shares in the case of a defined_benefit_plan the separate_accounts or segregated shares will be aggregated for purposes of satisfying the rules in sec_401 regarding ruling_request two code sec_401 and ii and a c provide that the entire_interest of each employee under a plan to which the required_minimum_distribution rules apply must be distributed no later than april of the calendar_year following the calendar_year in which the individual attains age the required_beginning_date or in general must be distributed beginning not later than the required_beginning_date in accordance with regulations over the life of the employee or over the lives of the employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary proposed regulation a -1 question and answer d-6 a states generally that in the case in which a_trust is named as a beneficiary all beneficiaries of the trust with respect to the trust’s interest in the employee’s benefit are treated as having been designated as beneficiaries of the employee under the plan for purposes of determining the distribution period under code sec_401 if certain requirements set forth are met in situations where a_trust has more than one beneficiary proposed regulation a -1 question and answer e-5a provides generally that the designated_beneficiary with the shortest life expectancy will be the designated_beneficiary for g2qz purposes of determining the distribution period code sec_401 provides in part that if distributions have begun under sec_401 and the employee dies before the entire_interest has been distributed the remaining portion of such interest will be distributed at least as rapidly as under the method of distribution being used under sec_401 as of the date of the death of the owner in this case taxpayer b maintained ira x at the time of his death furthermore taxpayer b timely made trust m as the beneficiary of his ira x the information provided above indicates that trust m is a see-through trust within the meaning of sec_1 a of the proposed_regulations trust m provides that per cent of the trust assets are to be set_aside and allocated for the benefit of taxpayer a and the children and grandchildren of taxpayer b the other per cent is to be set_aside for allocated and distributed to certain charities the trust assets are to be divided between the two sets of beneficiaries on a pro_rata basis thu sec_90 per cent of ira x must be used to fund the portion of trust m set up for the benefit of taxpayer a and taxpayer b’s children and grandchildren the remaining per cent of ira x must be used to fund the portion of trust m set_aside for the benefit of the charitable beneficiaries thereof therefore per cent of ira x may not be used for the benefit of the charities referenced in trust m therefore based on the foregoing with respect to ruling_request one we conclude that required distributions with respect to the per cent of ira x paid to the wife taxpayer a children and grandchildren of taxpayer b may be made in accordance with requirements of code sec_401 and the proposed_regulations promulgated thereunder without regard to any distribution s made from said ira x to the charitable entity ties which is the beneficiary ies of the remaining per cent of ira x in this case taxpayer a wife of taxpayer b is the oldest beneficiary of the per cent share of trust m which will be administered and distributed according to the provisions of article il section c sub sec_2 and this is the separate trust share to which it is intended that ira x be distributed therefore with respect to ruling_request two we conclude that the required distributions from the per cent of taxpayer b’s ira x payable to taxpayer a and taxpayer b's children and grandchildren will be computed according to code sec_401 with the life of taxpayer a as the measuring life this ruling is based on the assumption that ira x meets the requirements code sec_408 at ail times relevant thereto please note that this ruling does not address the issues if any which arise under the new proposed_regulations under code sec_401 and sec_408 which were published in the date internal_revenue_bulletin pincite r b this ruling is directed only to the taxpayer who requested it code sec_61 k provides that it may not be used or cited by others as precedent copies of this ruling have been sent to your authorized representatives pursuant to a power_of_attorney on file in this office should you have any questions concerning this letter_ruling please contact t ep ra t1 sincerely yours a manager employee pians techriical group tax_exempt_and_government_entities_division enclosures deleted copy of the ruling notice ce 22y


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-143231-02 date date legend x a b c d state d1 dear this letter responds to a letter dated date and subsequent correspondence on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code plr-143231-02 facts according to the information submitted x was incorporated under state law on d1 x's shareholders a b c and d intended that x would be an s_corporation effective on d1 x relied upon an attorney to file its form_2553 election by a small_business_corporation however the form_2553 was not filed timely a represents that x and x's shareholders have filed all of their tax returns since d1 as if x were an s_corporation law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally 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 sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply conclusion based on the facts submitted and representations made we conclude that x has established reasonable_cause for its failing to make a timely s election and that x is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 containing an effective date of d1 within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether x is an s_corporation for federal tax purposes plr-143231-02 pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to x's authorized representative 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 sincerely yours s james a quinn senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes 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 corp 1-plr-118538-98 date date legend stockholder distributing distributing controlled distribution distribution corporation a corporation b corporation c_corporation d corporation e corporation f corporation g corporation h corporation i corporation j corporation k state s date date date date date l m n o s t u v z business x business y consultant p q1 q2 dear we respond to your letter dated date in which you requested rulings as to the federal_income_tax consequences of a proposed transaction additional information was submitted in letters dated date and date and date specifically you requested rulings under sec_355 of the internal_revenue_code the facts submitted are as follows distributing is a state s_corporation incorporated in date that has been actively and directly engaged through its employees in business x for at least the past years additionally distributing is also a holding_company for other corporations which collectively conduct business x and business y distributing is a state s closely held holding corporation incorporated on date which is the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return distributing is engaged in business x and business y through its stock ownership in distributing corporation g and corporation h distributing 2’s capital structure consists of common_stock and two series of preferred_stock series a and series b all of the series a and series b preferred_stock are held by the same person stockholder controlled is a state s_corporation created on date in anticipation of the distribution of controlled in the proposed transaction currently controlled is not engaged in any activities controlled’s capital structure consists of common_stock all of which is owned by distributing controlled is authorized to issue two series of preferred_stock but does not have any preferred_stock outstanding corporation a is a wholly owned subsidiary of distributing corporation a has been directly and actively engaged through its employees in business y for at least the past years corporation b is a wholly owned subsidiary of distributing corporation b has been directly and actively engaged through corporation a’s employees in business y for at least the past years the appropriate amount of corporation a’s employees’ compensation is provided by corporation b based on the percentage of time devoted to corporation b’s business corporation c is a wholly owned subsidiary of distributing corporation c has been directly and actively engaged through corporation a’s employees in business y for at least the past years the appropriate amount of corporation a’s employees’ compensation is provided by corporation c based on the percentage of time devoted to corporation c’s business corporation d is a wholly owned subsidiary of distributing corporation d is engaged in business y corporation e is a holding corporation that wholly owns several subsidiaries which conduct business y currently distributing owns l of corporation e’ s stock the remaining m of corporation e’s stock is held by unrelated public shareholders as well as some corporation e employees corporation f is engaged in business y currently corporation e owns a n interest in corporation f and corporation i owns a v interest in corporation f corporation g is engaged in business x distributing transferred a o interest in corporation g to distributing and distributing transferred that stock interest to corporation i on date corporation h is engaged in business x distributing transferred all of the stock of corporation h to distributing and distributing transferred that stock interest to corporation i on date corporation i is a wholly owned subsidiary of distributing corporation i is engaged in business x corporation j is engaged in business x currently corporation i owns a s interest in corporation j distributing 2’s management has determined that to compete in the growing business y marketplace it needs to upgrade and expand business y beyond its present status accordingly additional capital is needed such capital will be raised by equity and debt financing because debt financing is the cheaper of the two distributing prefers to raise the needed capital through debt to the full extent possible however the existing equity_base limits the amount of debt financing which may be acquired as a result additional equity_capital must be raised before additional capital in the form of debt can be raised distributing has been advised by consultant that it would be more successful in obtaining the additional equity_capital and achieve a higher per-share value by making a public offering of stock concentrated on a single business which business consultant advises is business y accordingly distributing proposes to raise the equity_capital by spinning-off the business y corporations and for that purpose has separated the business y corporations from the business x corporations after the spin off controlled will make a public offer of its stock in order to complete the spin-off of business y’s corporations the following steps have been completed or will be completed the transaction on date distributing acquired t of corporation e’ stock distributing then contributed such stock to its wholly owned subsidiary distributing in constructive exchange for additional distributing stock corporation i dividended u of corporation e’s stock to its parent distributing distributing created a new wholly-owned subsidiary controlled distributing will contribute the stock of corporation h and corporation g to distributing in constructive exchange for additional stock of distributing distributing will then contribute the stock of corporation h and corporation g to corporation i in constructive exchange for additional stock of corporation i on date corporation i will dividend its v ownership_interest in corporation f to distributing and distributing will transfer its ownership holdings in corporation a corporation b corporation c_corporation d corporation e and corporation f to controlled in exchange for stock of controlled under this exchange controlled will transfer p shares of common_stock and two series of preferred_stock in the amount of q1 shares of series a and q2 shares of series b controlled will transfer its ownership holding in corporation d to its wholly owned subsidiary_corporation c and its ownership holdings in corporation e and corporation f to its wholly owned subsidiary_corporation b in constructive exchange for stock of those entities distributing will distribute the stock of controlled to its sole shareholder distributing distributing will distribute pro-rata the common_stock of controlled to the distributing common shareholders all of the controlled series a and series b preferred_stock will be distributed to the same person stockholder who owned all of the distributing series a and series b preferred_stock controlled will make a public offering of its stock within one year of the distributions but the purchasers of the stock will hold no more than of the controlled stock it is possible that in step above some or all of corporation e’s unrelated public shareholders and possibly some corporate e’s employee-shareholders will join with distributing and transfer their stock in corporation e to controlled in exchange for controlled stock nevertheless even if all of the unrelated public shareholders and corporation e employee-shareholders participate in the exchange described in step distributing will hold no less than an z interest in controlled_corporation i may possibly provide certain legal accounting and management consulting services to entities in the controlled_group for a limited period after the distributions however if such services are provided it is expected that the amounts expended by entities in the controlled_group for services rendered by corporation i would be approximately to percent of the total operating_expenses of the controlled_group furthermore it is expected that any such services would be terminated within a to month period following the distributions corporations a and b will provide local_telephone_service to continuing members of the distributing group after the distributions of controlled_corporation c will continue to provide service to the distributing group after the distributions of controlled distributing will provide services to member of the controlled_group after the distributions of controlled corporations j and k may provide services to members of the controlled_group after the distributions of controlled the following representations have been made in connection with the proposed transaction a no part of the consideration to be distributed by distributing and distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing and distributing in connection with the distributions controlled will issue stock_options to purchase controlled shares to persons who hold isos and non qualified_stock_options to purchase distributing shares in substitution for a portion of the options now held by those persons the terms of the options will depend on the relative fair market values of controlled and distributing at the time of the distributions and the original option exercise price the remaining options in distributing will be adjusted in exercise price to reflect the distributions b the years of financial information submitted on behalf of distributing and corporation a corporation b and corporation c are representative of those corporations’ present operations and with regard to such corporations there have been no substantial operational changes since the date of the last financial statements submitted c immediately after the distributions at least percent of the fair_market_value of the gross assets of distributing will consist of the stock and securities of a controlled_corporation that is engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 d immediately after the distributions at least percent of the fair_market_value of the gross assets of controlled will consist of the stock and securities of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 e following distribution distributing and controlled through its controlled corporations will each continue the active_conduct of their respective businesses independently and with separate employees f following distribution distributing through distributing and controlled through its controlled corporations will each continue the active_conduct of their respective businesses independently and with separate employees g the distribution of the stock of the controlled_corporation is carried out for the following corporate business_purpose to facilitate a stock offering by controlled the distribution of the stock of the controlled_corporation is motivated in whole or substantial part by this corporate business_purpose h except for the disposition of controlled stock pursuant to distribution there is no plan or intention by any shareholder who own sec_5 percent or more of the stock of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of either distributing or controlled after distribution i there is no plan or intention by any shareholder who own sec_5 percent or more of the stock of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of either distributing or controlled after distribution j there is no plan or intention by either distributing distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution or distribution other than through stock purchases meeting the requirements of b of revproc_96_30 and other than that it is possible that distributing will utilize excess cash to purchase small amounts of outstanding distributing stock from distributing shareholders who do not own within the meaning of sec_318 or more of the distributing stock k there is no plan or intention to liquidate distributing distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after distribution or distribution except in the ordinary course of business l no intercorporate debt will exist between distributing or distributing and controlled at the time of or subsequent to distribution or distribution m immediately before distribution and distribution items of income gain loss deduction and credit will be taken into account as required by the applicable inter-company regulations further any distributing and distributing excess_loss_account that may exist with respect to the controlled stock will be included in income immediately before distribution and distribution n payments made in connection with all continuing transactions between distributing or distributing and controlled and entities in their respective groups will be at fair_market_value based on the terms and conditions arrived at by the parties bargaining at arm’s length o no two parties to distribution and distribution are investment companies as defined in sec_368 and iv p distribution is not part of a plan or series of related transactions within the meaning of code sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled q distribution is not part of a plan or series of related transactions within the meaning of code sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled r immediately after the distributions no person will hold disqualified_stock in distributing or controlled which constitutes a percent or greater interest in such corporations within the meaning of section sec_355 s distributing represents that at least percent of the gross assets of distributing corporation a corporation b and corporation c are used in an active trade_or_business t none of the shares of controlled series a preferred_stock and controlled series b preferred to be distributed in the distributions is non-qualified preferred_stock because it holds none of the attributes stated in code sec_351 based solely on the facts submitted and the representations made above it is held as follows as to distribution no gain_or_loss will be recognized by distributing upon the transfer of assets to controlled in actual and constructive exchange for controlled stock as described above sec_351 no gain_or_loss will be recognized by controlled upon the receipt of assets in actual and constructive exchange for controlled stock described above sec_1032 controlled’s basis in the assets received from distributing will be the same as the basis of such assets on the hands of distributing immediately prior to the transfer sec_362 controlled’s holding_period for the assets received from distributing includes the holding_period distributing had in such assets sec_1223 no gain_or_loss will be recognized by controlled upon the transfer of assets by controlled to corporations b and c in actual or constructive exchange for stock of corporations b and c as described above sec_351 no gain_or_loss will be recognized by corporations b and c upon the receipt of assets in actual or constructive exchange for stock of corporations b and c as described above sec_1032 corporation b’s and c’s basis in the assets received from controlled will be the same as the basis of such assets in the hands of controlled immediately prior to the transfer sec_362 corporation b’s and c’s holding_period for the assets received from controlled includes the holding_period controlled had in such assets sec_1223 no gain_or_loss will be recognized to distributing upon the distribution of all of the controlled stock to its shareholder sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of the shareholder of distributing upon the receipt of the stock of controlled code sec_355 the basis of the controlled and distributing stock in the hands of distributing 1's shareholder distributing will be the same as the basis of distributing 1's stock held immediately before distribution allocated in proportion to the fair_market_value of each in accordance with sec_1_358-2 of the income_tax regulations code sec_358 the holding_period of the stock of controlled received by the distributing shareholder distributing will include the holding_period of distributing 1's stock with respect to which distribution will be made provided that such stock is held as a capital_asset on the date of the exchange code sec_1223 as provided in code sec_312 a proper allocation of earnings_and_profits between distributing and controlled will be made sec_1_312-10 based solely on the facts submitted and the representations made above it is held as follows as to distribution no gain_or_loss will be recognized to distributing upon the distribution of all of the controlled stock to its shareholders sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of the shareholders of distributing upon the receipt of the stock of controlled code sec_355 the basis of the controlled and distributing stock in the hands of distributing 2's shareholders will be the same as the basis of distributing 2's stock held immediately before distribution allocated in proportion to the fair_market_value of each in accordance with sec_1_358-2 of the income_tax regulations code sec_358 the holding_period of the stock of controlled received by the distributing shareholders will include the holding_period of distributing 2’s stock with respect to which distribution will be made provided that such stock is held as a capital_asset on the date of the exchange code sec_1223 as provided in code sec_312 a proper allocation of earnings_and_profits between distributing and controlled will be made sec_1_312-10 it is further held that corporation i will realize gain upon distribution of its v ownership_interest in corporation f to distributing under code sec_311 this gain will be taken into account when such f corporation stock leaves the distributing group upon the distribution of controlled stock by distributing sec_1_1502-13 example a and c the basis of such corporate f stock will be its fmv at the time it is distributed from corporation i to distributing i see code sec_301 and sec_1_1502-13 example a the distribution of the corporation f stock to distributing i will not be included in distributing i’s income see sec_1_1502-13 and -13 f example b but will cause a reduction to the stock basis of distributing i in its corporation i stock to the extent of the fmv that corporation f stock sec_1_1502-32 -13 f ii and -13 f example b corporation i will realize gain upon distribution of its u ownership_interest in corporation e to distributing i under code sec_311 this gain will be taken into account when such e corporation stock leaves the distributing group upon the distribution of controlled stock by distributing sec_1_1502-13 example a and c the basis of such corporation e stock will be its fmv at the time it is distributed form corporation to distributing see code sec_301 and sec_1_1502-13 example a the distribution of the corporation e stock to distributing i will not be included in distributing i’s income see sec_1_1502-13 and -13 f example b but will cause a reduction to the stock basis of distributing i in its corporation i stock to the extent of the fmv of that corporation e stock sec_1_1502-32 -13 f ii and -13 f example b no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not directly covered by the above rulings this ruling letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated sincerely assistant chief_counsel corporate by alfred bishop jr chief branch


internal_revenue_service number release date index number -------------------- ---------------------------- ----------------------- ----------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ----------------- telephone number --------------------- refer reply to cc ita b07 plr-104597-10 date date re -------------------------------------------------------------------------------------------------------------- re -------------------------------------------------------------------------------------------------------------- ----------------------------- ------------------------------------------------ taxpayer subsidiaries ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- date a -------------------------------- dear ------------- this ruling responds to a letter dated date submitted by taxpayer on behalf of subsidiaries requesting an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file a duplicate copy with signature of form_3115 application_for change in accounting_method with the internal_revenue_service irs national_office facts taxpayer represents that the facts are as follows taxpayer is an s_corporation and subsidiaries are qualified subchapter_s subsidiaries of taxpayer taxpayer timely filed its federal_income_tax return for the taxable_year ended date a taxpayer attached to the federal_income_tax return an original form_3115 filed under the automatic procedures of revproc_2008_52 2008_36_irb_587 as amplified clarified and modified by revproc_2009_39 2009_38_irb_371 taxpayer filed form_3115 to change the method_of_accounting for certain depreciable_property of subsidiaries plr-104597-10 taxpayer relied on its accounting firm to file a copy of the form_3115 with signature with the irs national_office taxpayer discovered subsequently that the copy was not filed with the irs national_office as required by section a of revproc_2008_52 ruling requested taxpayer requests an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file a copy with signature of the form_3115 at issue with the irs national_office law and analysis revproc_2008_52 provides the procedures by which a taxpayer may obtain automatic consent to change certain methods_of_accounting a taxpayer complying with all the applicable provisions of this revenue_procedure has obtained the consent of the commissioner to change the taxpayer’s method_of_accounting under sec_446 of the internal_revenue_code and the regulations thereunder section a of revproc_2008_52 provides that a taxpayer changing a method_of_accounting pursuant to revproc_2008_52 must complete and file a form_3115 in duplicate the original must be attached to the taxpayer’s timely filed including extensions original federal_income_tax return for the year_of_change and a copy with signature of the form_3115 must be filed with the irs national_office no earlier than the first day of the year_of_change and no later than when the original is filed with the federal_income_tax return for the year_of_change under sec_301_9100-1 the commissioner has discretion to 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 sec_301_9100-1 defines a 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 announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 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 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the plr-104597-10 commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusions based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly taxpayer is granted calendar days from the date of this letter to file the required duplicate copy with signature of the form_3115 at issue with the irs national_office please attach a copy of the ruling to the copy of the form_3115 when it is filed except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provisions of the code specifically no opinion is expressed or implied concerning whether taxpayer is qualified to file the form_3115 for the change in method_of_accounting for the treatment of certain depreciable_property under revproc_2008_52 or whether taxpayer otherwise meets the requirements of revproc_2008_52 in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer's authorized representative we are also sending a copy of this letter to the appropriate industry director lmsb this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely willie armstrong jr senior technical reviewer branch office of associate chief_counsel income_tax and accounting enclosures copy of this letter copy for sec_6110 purposes


tcmemo_2003_156 united_states tax_court michael w duncan petitioner v commissioner of internal revenue respondent docket no filed date michael w duncan pro_se jason w anderson and kathleen c schlenzig for respondent memorandum opinion chiechi judge this case is before the court on respon- dent’s motion for summary_judgment respondent’s motion petitioner filed a response to respondent’s motion petitioner’s response we shall grant respondent’s motion background pursuant to the court’s order issued under rule c on date all of the affirmative allegations in paragraph of the answer and consequently all of the facts on which respondent relies in respondent’s motion are deemed admitted petitioner had a mailing address in glenview illinois at the time he filed the petition in this case during and petitioner operated and was the president corporate secretary and sole shareholder of duncan associates inc duncan associates a subchapter_c corpora- tion during those years duncan associates engaged in the insurance brokerage business as of date petitioner had an outstanding loan balance of dollar_figure with respect to amounts that duncan associ- ates had lent petitioner for which that company did not charge petitioner any interest we shall refer to the interest that duncan associates did not charge petitioner on his outstanding loan from that company as forgone_interest during and petitioner did not pay duncan associates any interest on petitioner’s outstanding loan balance with that company during when petitioner was approximately years old he withdrew dollar_figure from duncan associates’ money purchase 1all rule references are to the tax_court rules_of_practice and procedure all section references are to the internal_revenue_code code in effect for the years at issue pension_plan trust and dollar_figure from duncan associates’ profit sharing plan trust we shall refer collectively to those withdrawals as petitioner’s retirement_plan withdrawals at all relevant times petitioner knew that petitioner’s retirement_plan withdrawals constitute income to him for on or about april and date duncan associates received checks totaling dollar_figure which petitioner retained and or deposited in his bank account at all relevant times petitioner knew that dollar_figure of the total dollar_figure in such checks constitutes income to him for we shall refer to such dollar_figure of such checks as petitioner’s check amount during and respectively after taking into account mr duncan’s payments or other transfers to or on behalf of duncan associates of amounts totaling dollar_figure and dollar_figure duncan associates made payments or transfers to or for the benefit of petitioner of amounts totaling at least dollar_figure and dollar_figure we shall refer to those respective amounts paid or used for petitioner’s behalf during and as petitioner’s and personal-benefit amounts at all relevant times petitioner knew that petitioner’s and 2the amounts deemed established under rule c with re- spect to the amounts that duncan associates paid to or expended for the benefit of petitioner during exceed the amounts for such purposes determined in the notice_of_deficiency for that year respondent does not claim an increased deficiency for with respect to that excess we accept respondent’s position personal-benefit amounts constitute income to him for and respectively at a time not disclosed by the record before date respondent commenced examinations of petitioner and of duncan associates with respect to their respective taxable years and on date petitioner filed federal_income_tax tax returns for his taxable years return and return after the respective due dates for such returns had passed petitioner did not file returns for his taxable years and until after respondent commenced an examination of those returns because he did not want to pay the respective tax due for such years when petitioner filed his return and return on date petitioner knew and understood that each such return understated his income for each such year to illustrate in his return and or his return peti- tioner did not report as income the following the forgone_interest on petitioner’s outstanding loan balance with duncan associates for and petitioner’s retirement_plan withdrawals and petitioner’s and personal- benefit amounts including petitioner’s check amount moreover in his return petitioner did not report the percent additional tax imposed by sec_72 on petitioner’s retirement_plan withdrawals in addition although peti- tioner was married at the end of his taxable years and petitioner claimed a filing_status of single in his respective returns for those years during respondent’s examinations of petitioner and of duncan associates with respect to their respective taxable years and petitioner fraudulently and corruptly obstructed and impeded and endeavored to obstruct and impede the due adminis- tration of the code by knowingly creating and causing the cre- ation of false and fraudulent documents for the purpose of obstructing and impeding respondent’s examinations of petitioner and of duncan associates with respect to their respective taxable years and and for the purpose of concealing from respondent the falsity of petitioner’s return for each of his taxable years and and of duncan associates’ return for each such year on date petitioner entered into a plea agreement with the united_states attorney for the northern district of illinois in which petitioner pleaded guilty to one count of obstructing and impeding the due administration of the code in violation of sec_7212 sec_7212 provides sec_7212 attempts to interfere with administration of internal revenue laws a corrupt or forcible interference --whoever continued on date respondent issued to petitioner a notice_of_deficiency notice with respect to his taxable years and in that notice respondent determined deficiencies in additions under sec_6651 to and fraud penalties under sec_6663 on petitioner’s tax as follows year deficiency under sec_6651 under sec_6663 addition_to_tax fraud_penalty dollar_figure big_number dollar_figure dollar_figure dollar_figure dollar_figure respondent further determined in the notice that petitioner has imputed dividend income for and under sec_7872 of dollar_figure and dollar_figure respectively as a result of the forgone_interest on petitioner’s outstanding loan balances with duncan associates during those respective years respondent also determined in the notice that petitioner ha sec_3 continued corruptly or by force or threats_of_force including any threatening letter or communication endeavors to intimidate or impede any officer_or_employee of the united_states acting in an official capacity under this title or in any other way corruptly or by force or threats_of_force including any threatening letter or communication obstructs or impedes or endeavors to obstruct or impede the due administration of this title shall upon conviction thereof be fined not more than dollar_figure or imprisoned not more than years or both except that if the offense is committed only by threats_of_force the person convicted thereof shall be fined not more than dollar_figure or imprisoned not more than year or both the term threats_of_force as used in this subsection means threats of bodily harm to the officer_or_employee of the united_states or to a member of his family constructive_dividend income for and of dollar_figure and dollar_figure respectively as a result of petitioner’s and personal-benefit amounts during those respective years respondent further determined in the notice that petitioner has income for of dollar_figure as a result of petitioner’s retirement_plan withdrawals respondent also determined in the notice that petitioner is liable for the 10-percent additional tax under sec_72 of dollar_figure as a result of petitioner’s retirement_plan withdraw- als respondent further determined in the notice that peti- tioner’s filing_status for each of his taxable years and was married filing separate discussion the court may grant summary_judgment where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir all of the facts on which respondent relies in respondent’s motion have been deemed admitted those facts include the material facts on which we may proceed to resolve the issues in respondent’s motion including the issue relating to the fraud penalties under sec_6663 see eg 77_tc_334 we conclude that there are no genuine issues of material fact regarding the issues raised in respondent’s motion with respect to respondent’s determinations that petitioner has a deficiency in tax for each of the years at issue and that he is liable for each of those years for an addition_to_tax under sec_6651 on the record presented we sustain those determinations 5in petitioner’s response petitioner does not dispute respondent’s determinations that he has deficiencies in tax for the years at issue in fact petitioner admits in that response that there clearly are monies due and owing the irs which the petitioner admits to and wants to settle petitioner’s response however does not address the balance of the issues presented in respondent’s motion to illustrate petitioner’s response states in part the respondent has filed a motion for summary_judgment based upon lack of response and stated allegations and to this end i we request that you consider mitigating circumstances as follows petitioner does not have funds to hire legal counsel needed to prepare briefs and re- sponses to motions petitioner sic records were destroyed in a flood sic date at a warehouse facility in glenview illinois petitioner sustained a disabling injury re- sulting in two surgeries to his left foot with continuing care through mayo clinic rochester minnesota petitioner requests the court to consider the six year delay during which the irs did not assess outstanding taxes in excess of of amounts due and owing irs are accrued interest and penalties resulting continued with respect to the fraud_penalty under sec_6663 that respondent determined against petitioner for each of his taxable years and sec_6663 imposes a penalty equal to percent of the portion of any underpayment that is attribut- able to fraud for purposes of sec_6663 if the commis- sioner of internal revenue commissioner establishes that any portion of an underpayment is attributable to fraud the entire underpayment is to be treated as attributable to fraud except with respect to any portion of the underpayment that the taxpayer establishes by a preponderance_of_the_evidence is not attribut- able to fraud sec_6663 in order for the fraud_penalty to apply the commissioner must prove by clear_and_convincing evidence sec_7454 rule b that an underpayment exists and that some portion of such underpayment is attributable to fraud 99_tc_202 to prove the existence of an underpayment the commissioner continued from the irs admitting to losing misplacing mr duncan’s and duncan associates’ files petitioner and legal counsel mr fred fore- man former u s attorney sic for the 7th district requested on numerous occasions amounts due and owing the irs for tax years and only to be told that cases involving fraud or allegations of fraud could not be paid until concluded we note that the so-called mitigating circumstances quoted above in paragraph of petitioner’s response is inconsistent with petitioner’s petition in which he alleges that his records for the years at issue were discarded due to their age may not rely on a taxpayer’s failure to carry his or her burden_of_proof with respect to the underlying deficiency 94_tc_654 92_tc_661 the commissioner must prove only that an underpayment exists and not the precise amount of such underpayment 96_tc_858 affd 959_f2d_16 2d cir petzoldt v commis- sioner supra pincite petitioner did not report as income in his return and or his return the following the forgone_interest on petitioner’s outstanding loan balance with duncan associates for and petitioner’s retirement_plan with- drawals and petitioner’s and personal-benefit amounts including petitioner’s check amount nor did petitioner report in his return the 10-percent additional tax imposed by sec_72 with respect to petitioner’s retirement_plan withdrawals moreover in petitioner’s response petitioner admits that there clearly are monies due and owing the irs which the petitioner admits to and wants to settle on the instant record we find that respondent has estab- lished by clear_and_convincing evidence that there was an under- payment of petitioner’s tax for each of his taxable years and in order to prove fraudulent intent the commissioner must prove by clear_and_convincing evidence that the taxpayer intended to evade tax which he or she believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such tax 889_f2d_910 9th cir affg norman v commissioner tcmemo_1987_265 parks v commissioner supra pincite the existence of fraud is a question of fact to be resolved upon consideration of the entire record dileo v commissioner supra pincite 67_tc_181 affd without published opinion 578_f2d_1383 8th cir fraud is never presumed or imputed and should not be found in circumstances which create at most only suspicion 743_f2d_309 5th cir affg tcmemo_1984_25 petzoldt v commissioner supra pincite direct evidence of the requisite fraudulent intent is seldom available petzoldt v commissioner supra pincite 80_tc_1111 consequently the commissioner may prove fraud by circumstantial evidence toussaint v commissioner supra pincite rowlee v commissioner supra pincite see 544_f2d_883 5th cir affg tcmemo_1975_368 the courts have identified a number of badges_of_fraud from which fraudulent intent may be inferred including the understatement of income the making of false and inconsis- tent statements to revenue agents and the failure to cooper- ate with tax authorities see 796_f2d_303 9th cir affg tcmemo_1984_601 parks v commissioner supra pincite although no single factor is necessarily sufficient to establish fraud the existence of several indicia constitutes persuasive circumstantial evidence of fraud petzoldt v commissioner supra pincite see bradford v commissioner supra pincite the record in this case contains indicia of fraud by petitioner when petitioner filed his returns for and he knew and understood that each such return understated his income for each such year in addition petitioner did not file returns for his taxable years and until after respon- dent commenced an examination of those returns because he did not want to pay the respective tax due for such years moreover during respondent’s examinations of petitioner and of duncan associates with respect to their respective taxable years and petitioner fraudulently and corruptly obstructed and impeded and endeavored to obstruct and impede the due adminis- tration of the code by knowingly creating and causing the cre- ation of false and fraudulent documents for the purpose of obstructing and impeding respondent’s examinations of petitioner and of duncan associates with respect to their respective taxable years and and for the purpose of concealing from respondent the falsity of petitioner’s return for each of his taxable years and and of duncan associates’ return for each such year in addition although petitioner was married at the end of his taxable years and petitioner claimed a filing_status of single in his respective returns for those years based upon our examination of the entire record before us we find that respondent has established by clear_and_convincing evidence that petitioner intended to evade tax for his taxable years and which he believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such tax we have considered all of petitioner’s contentions argu- ments and requests that are not discussed herein and we find them to be without merit and or irrelevant on the record before us we shall grant respondent’s motion to reflect the foregoing an order granting respondent’s motion and decision will be entered for respondent


department of the treasury internal_revenue_service washington d c office_of_chief_counsel number info release date uil date cc psi b07 genin-154901-02 dear this letter responds to your letter dated date on behalf of requesting permission for to deduct currently under sec_174 of the internal_revenue_code research and experimental r e expenditures effective for the first taxable_year ending the following information is being provided pursuant to section dollar_figure of revproc_2003_1 2003_1_irb_1 date this information_letter is advisory only and has no binding effect on the internal_revenue_service sec_174 provides that a taxpayer may elect to treat r e expenditures as expenses that are not chargeable to capital_account r e expenditures to which the election applies are allowed as a deduction a taxpayer may elect this method without the consent of the secretary for the taxpayer’s first taxable_year for which r e expenditures are paid_or_incurred also with the consent of the secretary a taxpayer may adopt this method at any time if the taxpayer adopts this method the method must be adhered to in computing taxable_income for the taxable_year in which the election is made and all subsequent tax years unless with approval of the secretary a change to a different method is authorized with respect to all or part of the r e expenditures sec_174 provides that a taxpayer may elect in accordance with the regulations to amortize r e expenditures over a period of not less than months as may be selected by the taxpayer beginning with the month in which the taxpayer first realizes benefits from the expenditures if a taxpayer elects this method the method and the period selected by the taxpayer must be adhered to in computing taxable_income for the taxable_year in which the election is made and all subsequent taxable years unless with the approval of the secretary a change to a different method or to a genin-154901-02 different period is authorized with respect to part or all of the r e expenditures the election under sec_174 will not apply to any expenditure paid_or_incurred during any taxable_year before the taxable_year for which the taxpayer makes the election sec_1_174-1 of the income_tax regulations provides that r e expenditures that are neither treated as current expenses nor deferred and amortized under sec_174 must be charged to capital_account sec_1_174-1 also provides that the expenditures to which sec_174 applies may relate either to a general research program or to a particular project sec_1_174-3 provides rules for the election to expense r e expenditures under sec_174 and for requesting permission to change to or from that method in summary except for an initial election to deduct r e expenditures in the first tax_year they are paid_or_incurred all changes require the permission of the commissioner in addition all changes are effective for the taxable_year of the change and must be adhered to for all subsequent taxable years the regulations also make clear that a taxpayer may with permission adopt any of the authorized methods current deduction deferral or capitalization with respect to any particular project a taxpayer may not however adopt or change a method for any expenditure made prior to the taxable_year for which the adoption or change is requested and may not utilize in the same taxable_year more than one method for any particular project sec_1_174-4 provides rules for making the election to defer and amortize r e expenditures under sec_174 and for requesting permission to change to or from that method in summary except for an initial election to defer and amortize r e expenditures in the first year they are paid_or_incurred all changes require the permission of the commissioner in addition all changes are effective for the year_of_change and must be adhered to for all subsequent taxable years a taxpayer who does not elect to defer and amortize r e expenditures in the first year in which they are paid_or_incurred may only adopt the deferral method with permission a taxpayer may not adopt or change a method for any expenditure made prior to the year for which the adoption or change is requested and may not utilize in the same taxable_year more than one method for any particular project revproc_2002_9 2002_1_cb_327 provides procedures under which a taxpayer may obtain the automatic consent of the commissioner to change certain methods_of_accounting revproc_2002_9 provides procedures for taxpayers to obtain automatic consent to change their treatment of r e expenditures see section of revproc_2002_9 and sec_2a of the appendix to revproc_2002_9 we have enclosed a copy of revproc_2002_9 for your information genin-154901-02 this letter should not be regarded as a private_letter_ruling nor relied upon as such if you have any questions you may contact sincerely joseph h makurath joseph h makurath senior technician reviewer branch office of associate chief_counsel passthroughs and special industries


internal_revenue_service number release date index number ------------------------- -------------------------- -------------------------------------------------------- -------------------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number --------------------- refer reply to cc fip b04 plr-103536-12 date date -------------------------------------------------------------------------------------- --------------------------- --------------------------------- --------------------- ---------------------------------- --------------------------------- --------------- --------------- taxpayer parent separate_account disregard disregard separate_account separate_account dear ----------------- this is in response to the letter submitted by your authorized representative dated date and additional submissions requesting rulings on whether the assets held in certain segregated_asset accounts are to be treated as owned by taxpayer for federal_income_tax purposes i taxpayer facts taxpayer is a life_insurance_company within the meaning of sec_816 of the internal_revenue_code the code and is taxable under sec_801 taxpayer is a stock_life_insurance_company taxpayer is a wholly-owned indirect subsidiary of parent taxpayer and parent file a consolidated federal_income_tax return on a calendar_year basis taxpayer is engaged in the business of writing life_insurance and individual and group annuity_contracts plr-103536-12 ii the contracts taxpayer issues group annuity_contracts the contracts based on segregated_asset accounts collectively the separate_account with respect to the separate_account two types of contracts are sold to contract owners pension contracts that meet the definition of a pension_plan_contract under sec_818 and non- pension contracts that do not meet the definition of a pension_plan_contract under sec_818 taxpayer established the separate_account pursuant to state law as a pooled open-ended separate_account gains or losses realized or unrealized on assets held are credited or charged to the separate_account without any regard to any other income gains or losses of taxpayer all of the assets of the separate_account are owned by taxpayer but under no circumstances are deposits in the separate_account or income gains or losses in the separate_account credited or charged to taxpayer’s general account all funds in the separate_account are invested in real_estate investments taxpayer uses a real_estate investment affiliate to manage the assets of the separate_account as taxpayer deems appropriate amounts allocated to the separate_account are invested and reinvested primarily in existing income-producing real properties through direct property ownership or indirectly through such vehicles as joint ventures general or limited_partnerships limited_liability companies or reits mortgage loans and other loan or debt secured_by direct or indirect interests_in_real_property generally the assets of the separate_account consist of ownership interests in real_estate investments that are generally available to the public taxpayer balances the number and size of the investments so that the separate_account is adequately diversified within the meaning of sec_817 and the regulations thereunder taxpayer may from time to time decide not to accept additions by contract owners to the separate_account taxpayer will invest and reinvest the assets of the separate_account at the times and in the amounts taxpayer determines in its sole discretion taxpayer holds some of the separate_account assets directly and other assets indirectly through disregard a wholly-owned subsidiary of taxpayer that is a disregarded_entity for federal_income_tax purposes all assets of the separate_account held through disregard are owned by disregard a wholly-owned subsidiary of disregard that is a disregarded_entity for federal_income_tax purposes under the contracts a contract owner at any time may direct taxpayer to provide payment of life stated amount or stated period annuities with respect to amounts held under the contract and the purchase_price will be determined from the annuity purchase rate schedule guaranteed and set forth in the contract plr-103536-12 iii proposed restructuring for non-tax reasons including to facilitate further the administrative operation related to the separate account’s current investment_assets and the potential acceptance of additional cash flows for liquidity and diversification purposes taxpayer plans to change how it holds the assets in the separate_account taxpayer will engage in the following restructuring of the separate_account taxpayer will transfer to disregard substantially_all of the assets held by the separate_account not currently held through disregard disregard will contribute such assets to disregard taxpayer will create another entity newco for the purpose of providing real_estate investment through investment in disregard to the extent any non-pension contracts exist at such time taxpayer will divide the separate_account into two sub-accounts separate_account and separate_account if there are no non-pension contracts at such time taxpayer will not divide the separate_account into sub-accounts and the separate_account will be treated as separate_account separate_account will hold the pro_rata share of ownership interests in disregard allocable to the pension contracts and any directly held assets not transferred from the separate_account to disregard separate_account will hold the pro_rata share of ownership interests in disregard allocable to the non-pension contracts as part of the creation of newco taxpayer will contribute all of the assets allocated to separate_account ie the pro_rata share of the ownership_interest in disregard allocable to the non-pension contracts to newco at such time the sole investment held by taxpayer in separate_account will be ownership interests in newco and newco’s sole investment will consist of the contributed ownership_interest in disregard as part of the notification process regarding the proposed restructuring of the separate_account the non-pension contracts will be amended at the mutual agreement of taxpayer and the non-pension contract owners such that the non-pension contract owners’ investment will be limited to investment of the non-pension contract funds in newco in addition to taxpayer’s ownership interests in newco ownership interests in newco will be held directly or indirectly by non-insurance company investors that are unrelated to taxpayer ie ownership interests in newco will be publicly available iv representations in addition to the facts presented above taxpayer has also made the following representations the proposed restructuring and creation of disregard will not change taxpayer’s broad investment discretion over all future investments made plr-103536-12 with funds held in the separate_account or separate_account for the pension contracts taxpayer is not required to invest future money available to the separate_account or separate_account in disregard or any other particular asset and has not promised pension contract owners that it will do so neither the pension contract owners nor the non-pension contract owners have any legal equitable direct or indirect ownership_interest in any of the separate_account assets rather the contact owners only have a contractual claim against taxpayer to collect cash under the terms of the contracts the pension contract holders have no legal equitable direct or indirect ownership_interest in any of the separate_account assets rather the pension contract owners only have a contractual claim against taxpayer to collect cash under the terms of the contracts per taxpayer’s guidelines neither taxpayer nor the investment manager is permitted to solicit pension contract owners non-pension contract owners or prospective contract owners to make recommendations about the selection quality or rate or return of any specific investment or group of investments held in the separate_account per taxpayer’s guidelines neither taxpayer nor the investment manager is permitted to solicit pension contract owners or prospective contract owners to make recommendations about the selection quality or rate or return of any specific investment or group of investments held in separate_account access to separate_account will be available exclusively through the purchase of a variable_contract within the meaning of sec_817 the separate_account is adequately diversified within the meaning of sec_817 and the regulations thereunder the distribution-at-death provisions contained in the non-pension contracts satisfy the requirements of sec_72 law in revrul_77_85 1977_1_cb_12 the service concluded that an individual purchaser of a variable_annuity contract who retained significant incidents_of_ownership over the assets held in the custodial_account was treated as the owner of those assets for federal_income_tax purposes in revrul_80_274 1980_2_cb_27 the service applied revrul_77_85 to conclude that if a purchaser of an annuity_contract could select and control the certificates of deposit supporting the contract then the purchaser was considered the owner of the certificates of deposit for federal_income_tax purposes similarly in revrul_81_225 1981_2_cb_12 which was clarified and amplified by revrul_2003_92 2003_2_cb_350 the service concluded that investments in mutual_fund shares that funded annuity_contracts were considered to be plr-103536-12 owned by the purchasers of the annuity_contracts if the mutual_fund shares were available for purchase either directly or indirectly by the general_public in revrul_82_54 1982_1_cb_11 the amounts held in a segregated_asset_account underlying a variable_contract were invested as the contractholder directed in shares of any or all of three open-ended investment companies mutual funds each mutual_fund represented a different broad general investment strategy shares of the mutual_fund were available only to insurance_company segregated_asset accounts while the mutual funds were not available to the general_public the mutual funds held common stocks bonds and money market instruments all of which were available for purchase by members of the general_public the public availability of the assets held by the mutual funds did not lead to the conclusion that the issuing insurance_company was simply a conduit between the contractholders and the mutual funds or the underlying assets of the mutual funds instead revrul_82_54 held that the insurance_company not the contractholders was the owner of the mutual_fund shares for federal_income_tax purposes in revrul_2003_91 2003_2_cb_347 a variable contractholder did not have control_over segregated account assets sufficient to be deemed the owner of the assets the variable_contracts at issue were funded by a separate_account that was divided into sub-accounts the issuing insurance_company could increase or decrease the number of sub-accounts at any time but there would never have been more than sub-accounts available under the contracts each sub-account offered a different investment strategy interests in the sub-accounts were available solely through the purchase of a contract the investment activities of each sub-account were managed by an independent investment_advisor there was no arrangement plan contract or agreement between the contractholder and the issuing insurance_company or between the contractholder and the independent investment_advisor regarding the availability of a particular sub-account the investment strategy of any sub-account or the assets to have been held by a particular sub-account other than a contractholder's right to allocate premiums and transfer funds among the available sub-accounts all investment decisions concerning the sub-accounts were made by the issuing insurance_company or the independent investment_advisor in its sole and absolute discretion a contractholder had no legal equitable direct or indirect interest in any of the assets held by a sub- account but had only a contractual claim against the issuing insurance_company to collect cash in the form of death_benefits or cash surrender values under the contract the service concluded that based on all the facts and circumstances the contractholder did not have direct or indirect control_over the separate_account or any sub-account asset and therefore the contractholder did not possess sufficient incidents_of_ownership over the assets supporting the variable_contracts to be deemed the owner of the assets for federal_income_tax purposes in revrul_2003_92 2003_2_cb_350 the purchasers of variable_annuity and variable life_insurance contracts were able to allocate their premiums among different plr-103536-12 sub-accounts each sub-account invested in interests in a partnership none of the partnerships was a publicly_traded_partnership under sec_7704 and all of the partnerships were exempt from registration under the federal securities laws interests in each partnership were sold in private_placement offerings and were sold only to qualified purchasers that were accredited investors or to no more than accredited investors the service held that in situations in which the sub-accounts held interests in partnerships available for purchase other than by purchasers of annuity or variable_contracts from an insurance_company the contractholder was the owner of the interests in the partnerships held by the sub-accounts for federal_income_tax purposes the service further held that in a situation in which the sub-accounts held interests in partnerships available for purchase only by the purchase of an annuity life_insurance contact or other variable_contracts from an insurance_company the insurance_company was the owner of the interests in the partnerships held by the sub-accounts for federal_income_tax purposes analysis pension contracts the determination of whether the pension contract owners possess sufficient incidents_of_ownership over separate_account to be deemed the owners of the assets supporting the pension contracts for federal_income_tax purposes depends on all of the relevant facts and circumstances the pension contract owners may not select or direct a particular investment to be made with respect to separate_account the pension contract owners may not sell purchase or exchange assets held in separate_account all investment decisions concerning separate_account are made by taxpayer or its investment manager in its sole and absolute discretion the investment strategy of separate_account of investing in real_estate_assets is sufficiently broad to prevent the pension contract owners from making particular investment decisions through investment in separate_account only taxpayer may add or substitute investment strategies in the future taxpayer is not required to invest future money available to the separate_account or separate_account in disregard or any other particular asset and has not promised the pension contract owners that it will do so in addition per taxpayer’s guidelines neither taxpayer nor its investment manager is permitted to solicit the pension contract owners to make recommendations about the selection quality or rate or return of any specific investment or group of investments held in separate_account investment in separate_account is available solely through the purchase of a pension contract the possibility that the separate_account may invest in publicly available securities does not cause the pension contract owners to be treated as plr-103536-12 owners of separate_account 1’s assets for federal_income_tax purposes separate_account is not publicly available non-pension contracts through separate_account the non-pension contract owners hold interests only in newco the interests of which are available for purchase by the general_public interests in separate_account are not available exclusively through the purchase of a pension contract from taxpayer therefore the non-pension contract owners are the owners of the interests in separate_account for federal_income_tax purposes holdings following the proposed restructuring described above and assuming taxpayer is the owner for tax purposes of the assets that fund the pension contracts prior to the commencement of the proposed restructuring taxpayer will be considered the owner for federal_income_tax purposes of the separate_account assets following the proposed restructuring described above the non-pension contract owners will be treated as the owners for federal_income_tax purposes of the separate_account assets that fund the non-pension contracts the use of the term restructuring in this letter is for descriptive convenience only and is not intended to have any substantive legal effect except as expressly provided herein no opinion is expressed concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination 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 the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely donald j drees jr senior technician reviewer branch office of the associate chief_counsel financial institutions products


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-141956-14 date date legend x ------------------------------------------------- ------------------------------------ y1 ----------------------------------------------------- ----------------------------------------------------------------------------- y2 ---------------------------------------------------------------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------------------------------------------- y3 ----------------------------------------------------- ------------------------------------------------------------ y4 -------------------------------------------------- ------------------------------------------------------------- y5 ----------------------------------------------------- -------------------------------------------------------------- y6 ----------------------------------------------------- ----------------------------------------------------------------------- y7 ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------------------------------------------- y8 ----------------------------------------------------- ------------------------------------------------------------------------ plr-141956-14 y9 ------------------------------------------------- ----------------------------- y10 ----------------------------------------------------- ----------------------------------------------------------------------- y11 ----------------------------------------------------- ------------------------------------------------- y12 ---------------------------------------------------------------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------------------------------------------- country1 country2 country3 year date1 date2 date3 date4 date5 date6 date7 date8 date9 date10 date11 ------- --------------------- -------------- ------ ------------------------ -------------------------- ------------------- ------------------ -------------------- -------------------------- -------------------------- -------------------- -------------------------- -------------------- ------------------------- plr-141956-14 date12 -------------------- dear ---------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file entity classification elections on behalf of y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 the information submitted states that x is a domestic_corporation formed in year x is the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return x represents that it established or acquired twelve foreign entities y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 at various times x represents that it always expected that it would wholly own either directly or indirectly each of these twelve foreign entities upon formation or acquisition by x that x is the only party that has contributed capital to each of these twelve entities and that x has consistently reported all of the activities assets and liabilities of these twelve entities on its federal_income_tax returns beginning from each of their respective dates of formation or acquisition by x x further represents the following y1 was formed on date1 under the laws of country1 y2 was formed on date2 under the laws of country1 y3 was formed on date3 under the laws of country2 y4 was formed on date4 under the laws of country1 y5 was formed on date5 under the laws of country1 y6 was formed on date6 under the laws of country1 y7 was formed on date7 under the laws of country1 y8 was acquired by x on date8 after having been previously formed under the laws of country1 y9 was formed on date9 under the laws of country3 y10 was formed on date10 under the laws of country1 y11 was formed on date11 under the laws of country1 and y12 was acquired by x on date8 after having been previously formed under the laws of country1 x represents that y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 are all foreign entities that were eligible to elect to be treated as disregarded entities for federal tax purposes effective on each of their respective dates of formation or acquisition by x however no entity classification elections were filed for y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 at any of those times sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification plr-141956-14 sec_301_7701-3 provides default classification for an eligible_entity that does not make an election sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two 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 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 under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and no more than months after the date the election is filed sec_301_7701-3 provides that if an eligible_entity makes an election under sec_301_7701-3 to change its classification other than an election made by an existing entity to change its classification as of the effective date of this section the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election however the commissioner may permit the entity to change its classification by election within the sixty months if more than fifty percent of the ownership interests in the entity as of the effective date of the subsequent election are owned by persons that did not own any interests in the entity on the filing_date or on the effective date of the entity’s prior election sec_301_7701-3 provides in general that an election made under sec_301_7701-3 must be signed by a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organizational documents to make the election and who represents to having such authorization under penalties of perjury sec_301_7701-3 provides that for purposes of sec_301_7701-3 if an election under sec_301_7701-3 is made to change the classification of an entity each person who was an owner on the date that any transactions under sec_301_7701-3 are deemed to occur and who is not an owner at the time the election is filed must also sign the election sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides plr-141956-14 that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic_extension of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when a taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonable and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file forms with the appropriate service_center on behalf of y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 to elect to treat y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 as disregarded entities for federal tax purposes effective on each of their respective dates of formation as indicated above except that the elections for y8 and y12 will have an effective date of date12 rather than date8 a copy of this letter should be attached to each form_8832 a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code and the regulations thereunder in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 are otherwise eligible to make the elections in addition except as specifically set forth above we express no opinion concerning the assessment of any interest additions to tax additional_amounts or penalties for failure_to_file a timely income_tax or information_return with respect to any taxable_year that may be affected by this ruling for example we express no opinion as to whether a taxpayer is entitled to relief from any penalty on the basis that the taxpayer had reasonable_cause for failure_to_file timely any income_tax or information returns this ruling is conditioned on x filing within days from the date of this letter all income_tax or information returns that x would have been required to file on behalf of itself or on behalf of y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 and y12 under the internal_revenue_code for all taxable years affected by this ruling consistent with the relief provided in this letter a copy of this letter should be attached to any such returns to the extent appropriate these returns may include but are not limited to form_8858 information_return of u s persons with respect to foreign disregarded entities and plr-141956-14 form_5471 information_return of u s persons with respect to certain foreign_corporations such that these forms reflect the consequences of the relief granted in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely associate chief_counsel passthroughs special industries by __________________________ bradford r poston senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes