number release date internal_revenue_service index numbers - ---------------------------------------- ----------------------------------------- ------------------------- ------------------------- --------------------- department of the treasury washington dc person to contact ----------------------------------------------------- -------- telephone number -------------------- refer reply to cc psi - plr-100331-06 date date legend x ----------------------------------------- --------- ----------- ----- ---------- ------------------ d1 country dear -------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an election to be treated as a disregarded_entity under the laws of country was acquired by a single owner with limited_liability on d1 x intended to be treated as a disregarded_entity for federal tax purposes effective d1 however x did not timely file a form_8832 entity classification election according to the information submitted all of the interest in x an entity formed 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 as provided in sec_301_7701-3 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes under sec_301_7701-3 except as provided in sec_301 b unless it elects otherwise a foreign eligible_entity is classified as an association if all members have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a sec_301_7701-3 provides that an election under sec_301_7701-3 member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member will be effective on the date specified on form_8832 or on the date filed if no such date is specified on the form the effective date specified on form_8832 cannot be more than days prior to the date the form is filed and cannot be more than months after the date on which the form is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 sets forth the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 and elect to be treated as a disregarded_entity for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 based on the facts submitted and representations made we conclude that the except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the transaction described above under any other provision of the code sec_6110 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer on whose behalf it was requested in accordance with the power_of_attorney on file with this office a copy of this sincerely letter is being sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes heather c maloy associate chief_counsel passthroughs and special industries


internal_revenue_service number release date index number -------------------------------------- ------------------------------------- ----------------------- ---------------------- ----------------------------- in re --------------------------------------------------- ---------------------------------------------------- ------------------- department of the treasury washington dc person to contact --------------------- id no ------------ telephone number -------------------- refer reply to cc fip - plr-121707-04 date date -------------------------- ----------------------------------------- ----------------------- legend legend trustee trust annuity_contract --------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------- ------------------------------------------------- --------------------- -------------------------------- ---------------------------- -------------------------------- -------------------------------------------- ------------------------ settlor beneficiary life insurer life insurer life insurer ------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------------------------- dear ---------------- this is in reply to the letters dated date and date submitted on your behalf requesting rulings concerning the taxability of the annuity_contract held by trustee on behalf of beneficiary under sec_72 of the internal_revenue_code and the ------------------------------------------------- on november ------- trustee invested the entire dollar_figure----------- that the settlor the information submitted states that on june ------- the settlor established plr-121707-04 applicability of sec_72 to a distribution_in_kind of a portion of the annuity_contract to beneficiary trust for the sole benefit of his grandchild beneficiary the settlor made a single gift of dollar_figure----------- to trust upon its creation as represented below the settlor is not considered the owner of trust for purposes of sec_672 through of the code contributed to trust in a single premium annuity issued by life insurer in ------- trustee in a sec_1035 transaction exchanged the life insurer annuity for an annuity_contract issued by life insurer in ------ trustee in another sec_1035 transaction exchanged the life insurer annuity_contract for an annuity_contract issued by life insurer names beneficiary as the annuitant the annuity_contract is the only asset that trust owns may request that trustee distribute percent of the principal of trust to beneficiary outright when beneficiary attains the ages of and beneficiary may request that trustee distribute percent and percent respectively of the principal of trust to beneficiary outright the terms of trust provide further that if beneficiary elects not to request any of the distributions of principal mentioned above from trust upon attaining a designated age or trustee is required to hold the portion of the principal over which beneficiary has a power_of_withdrawal in a separate trust for the sole benefit of beneficiary beneficiary may direct trustee to distribute any portion of the principal of such separate trust to beneficiary outright and such separate trust may continue beyond the date on which beneficiary attains age the terms of trust provide further that if beneficiary attains age beneficiary the annuity_contract names trust as the owner of the annuity_contract and any distributions from the trust to beneficiary or to a separate trust for beneficiary will be in the form of distributions of an annuity_contract or annuity_contracts in_kind or entity in exchange for the aforementioned distribution of an annuity_contract or annuity_contracts trust will not receive any consideration from beneficiary or any other individual sec_72 of the code provides that if an annuity_contract is held by a person who is not a natural_person then such contract shall not be treated as an annuity_contract for purposes of subtitle a other than subchapter_l and the income_on_the_contract for any taxable_year of the policyholder shall be treated as ordinary_income the legislative_history to sec_72 of the code states that if an annuity_contract plr-121707-04 received or accrued by the owner during such taxable_year sec_72 further provides that if an annuity_contract is held by a_trust or other entity as an agent for a natural_person then sec_72 shall not apply is held by a person who is not a natural_person such as a corporation then the contract is not treated as an annuity_contract for federal_income_tax purposes and the income_on_the_contract for any taxable_year is treated as ordinary_income received or accrued by the owner of the contract during the taxable_year however the legislative_history further provides that in the case of an annuity_contract the nominal owner of which is not a natural_person eg a corporation or a_trust but the beneficial_owner of which is a natural_person the contract is treated as held by a natural_person h_r conf_rep no 99th cong 2d sess vol ii vol c b although trustee is the contract owner of the annuity its ownership_interest is nominal beneficiary is the beneficial_owner of the annuity_contract sec_72 of the code provides in part that if an individual who holds an annuity_contract transfers it without full and adequate_consideration such individual shall be treated as receiving an amount equal to the excess of the cash_surrender_value of such a contract at the time of transfer over the investment in such contract at such time under the contract as an amount not received as an annuity a distribution of the annuity_contract by trust to beneficiary does not constitute a transfer without full and adequate_consideration under sec_72 because trust is not an individual for purposes of sec_72 purposes of of the code contract described in this request to anyone other than beneficiary or other than to the separate trust described above for beneficiary’s sole benefit if beneficiary is living if beneficiary dies prior to attaining age the distribution will be made to beneficiary’s issue or if beneficiary dies without issue the distribution will be made to or for the benefit of persons related to beneficiary trustee that such beneficiary exercises her right to receive an annuity_contract or a beneficiary is a natural_person as that term is defined in sec_72 of the code the following representations were made in connection with this ruling_request f when beneficiary attains age beneficiary will deliver notice in writing to b settlor as the grantor of trust will not be considered the owner of trust for e under no circumstance will trust distribute any portion of the annuity d any annuity_contract s involved satisfy the terms of sec_72 c beneficiary is not employed by trust the distribution of all or any portion of an annuity_contract or annuity the annuity_contract is considered owned by a natural_person for purposes accordingly based solely on the information submitted and the representations plr-121707-04 annuity_contracts equal in value to of the principal and accumulated income or earnings_of trust and will actually receive such annuity_contract or annuity_contracts made we conclude as follows of sec_72 of the code contracts from trust to beneficiary pursuant to trust will not be treated as an assignment of an annuity_contract without full and adequate_consideration under sec_72 of the code treatment of the annuity_contract trust or the separate trust under the provisions of any other section of the code or the income_tax regulations specifically no opinion is expressed as to whether or not the annuity_contract is in fact an annuity_contract under sec_72 of the code no opinion is expressed as to whether the annuity_contract meets the requirements of sec_72 furthermore no opinion is expressed as to any_tax consequences under sec_72 if any distributions from trust are cash j of the code provides that it may not be used or cited as precedent temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in the ruling it is relevant a copy of this letter should be attached to any federal_income_tax return to which except as specifically set forth above no opinion is expressed as to the tax this ruling letter is directed only to the taxpayer who requested it section in accordance with the power_of_attorney on file in this office we are sending a copy of this letter to your authorized representative sincerely yours donald j drees jr senior technician reviewer branch office of associate chief_counsel financial institutions products s


t c memo united_states tax_court armando adames rivas petitioner v commissioner of internal revenue respondent docket no filed date armando adames rivas pro_se alexander n martini for respondent memorandum opinion lauber judge this case is before the court on cross-motions for sum- mary judgment under rule with respect to petitioner’s federal_income_tax for and the internal_revenue_service irs or respondent determined deficiencies additions to tax and penalties as follows all statutory references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure we round all dollar amounts to the nearest dollar year deficiency addition_to_tax sec_6651 penalty sec_6662 dollar_figure dollar_figure big_number big_number big_number dollar_figure with respect to the deficiencies the questions presented are whether petitioner failed to report certain items of income whether he is entitled to business_expense deductions and whether he is entitled to dependency_exemption deductions for certain children concluding as we do that all issues must be resolved in respondent’s favor we will grant his motion for summary_judgment and deny petitioner’s background the following facts are derived from the parties’ pleadings and motion papers including the affidavits and exhibits attached thereto see rule b petitioner resided in florida when he petitioned this court petitioner filed delinquent returns for and on date and date respectively the irs selected both returns for examination on date the irs sent petitioner a timely notice_of_deficiency determining deficiencies in tax additions to tax for late filing and accuracy-related_penalties in the amounts shown above two of the adjustments involved unreported income for the irs de- termined that petitioner had cancellation_of_indebtedness_income of dollar_figure as re- ported on a form 1099-c cancellation of debt issued by jp morgan chase bank the irs determined that the discharged debt did not relate to petitioner’s principal_residence and that he ha d not verified that he met the criteria for insolvency as claimed for the irs determined that petitioner had unreported gambling winnings of dollar_figure as reported to the irs on a form w2-g certain gambling winnings the irs included this amount in petitioner’s gross_income because he did not verify that this income was inadvertently added to the gross_receipts amount for his sole_proprietorship business as claimed for each year at issue petitioner included in his return a schedule c profit or loss from business reporting income and expenses of a consulting business called global business financial investments gbfi although gbfi was ap- parently an s_corporation petitioner treated it as a sole_proprietorship on both tax returns he reported on these schedules c net profit and loss as follows item dollar_figure dollar_figure gross_receipts business_expenses big_number big_number home-office expense big_number -0- -0- net profit petitioner reported no wages or other income on either return he thus reported zero taxable_income for and a loss of dollar_figure for of the schedule c deductions petitioner claimed the notice_of_deficiency disallowed the following for lack of substantiation expense advertising travel car truck utilities home_office total disallowed dollar_figure dollar_figure --- big_number big_number big_number big_number --- big_number --- big_number big_number as a corollary of these adjustments the irs determined that petitioner was liable for self-employment_tax of dollar_figure and dollar_figure for and respectively and that he was entitled to corresponding deductions under sec_164 allow- ing as a deduction an amount equal to one-half of the taxes imposed by sec_1401 for petitioner claimed personal_exemption deductions under sec_151 for himself and four children the notice_of_deficiency disallowed the depen- dency exemption deductions claimed for the children since another taxpayer has also claimed these dependents on his her tax_return as a corollary of this deter- mination the irs determined that petitioner was not entitled to head-of- household filing_status petitioner timely petitioned this court on date in his petition he did not assign error with respect to either item of unreported income with respect to any of the disallowed schedule c deductions or with respect to the disallowed dependency_exemption deductions for the children he asserted vaguely i lost over dollar_figure in my business and have my legal rights to write it off although he did not claim a net_operating_loss_deduction on either tax_return he asserted i have evidence of my losses that by law i can write off as losses and carry over he did not allege when or how the supposed losses occurred he as- serted that the irs examining agent was very arrogant and bossy and that this is a complete shake-down by the irs on date petitioner filed a document captioned motion to strike respondent affirmative answers and demanding admissions he asserted that the examination of his tax returns was an illegal shake-down by the irs and corrupted and unconstitutional behavior toward petitioner he again alleged without any specificity that he had lost more than dollar_figure on real_estate and other investments and that he was legally able to write off and carry the losses over we denied that motion without prejudice one month later petitioner filed a motion virtually identical to the motion he had filed on may continuing to assert frivolous arguments and maintaining his right to deduct unspecified losses we denied that motion on july peti- tioner filed a motion for reconsideration that same day asserting that the denial of his motion violated the due process clause we denied that motion on date petitioner filed on august another motion identical to the first two we denied that motion on september in date petitioner filed amended returns for and on the amended return he admitted receiving cancellation_of_indebtedness_income of dollar_figure he offset this income by claiming a loss of dollar_figure on schedule f profit or loss from farming and a loss of dollar_figure on schedule e supplemental income or loss the dollar_figure loss reported on that schedule e was identical in dollar amount to the advertising expenses claimed on his schedule c the irs rejected both amended returns on date petitioner filed a document captioned initial brief and facts alleging among other things that the irs was acting illegally and was shaking me down and wanting to tax me on debts that were forgiven on march we ordered that document stricken from the record because it improperly inclu- ded evidentiary material we noted that petitioner’s statements resembled those appearing in the four motions he had filed previously and warned him as follows the court regards some of these statements as frivolous including assertions that the internal_revenue_service is a corrupt agency that the irs examining agent was conducting a shake down and that the irs examination violates petitioner’s due process rights under the fifth and fourteenth amendments petitioner is advised that the court is authorized to impose a penalty in an amount up to dollar_figure if it appears to the court that the taxpayer’s position in this proceeding is frivolous or groundless or that the taxpayer has maintained the proceeding primarily for delay sec_6673 the court advises petitioner to refrain from advancing frivolous contentions in further proceedings before this court the parties filed cross-motions for summary_judgment on date respondent attached as exhibits to his motion copies of petitioner’s tax returns and account transcripts for and petitioner attached as exhibits to his motion copies of his amended and returns and an irs request for sub- stantiation of his reported schedule c expenses on date this court ordered each party to file a response to the op- posing party’s motion for summary_judgment respondent filed his response on date petitioner filed his response on date he there admitted that he had received gambling winnings in the amount of dollar_figure for year he attached documents from a florida family court ordering him to pay child sup- port and maintain insurance for his children but no documentation relevant to his eligibility to claim the children as his dependents he attached no documentation relevant to the disallowed schedule c deductions he reiterated his assertions that the irs was engaged in extortion and criminal action against him and that irs’ actions are illegal and frivolous and are part of the retaliation by certain enemies who are using the irs to target me he again alleged without specificity or supporting documentation that he lost in excess of dollar_figure due to the unpunished crimes of banksters and wall street who defrauded me out of my wealth a summary_judgment standard discussion the purpose of summary_judgment is to expedite litigation and avoid costly time-consuming and unnecessary trials fla peach corp v commissioner 90_tc_678 either party may move for summary_judgment upon all or part of the legal issues in controversy rule a a motion for summary judg- ment will be granted only if it is shown that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law see rule b 118_tc_226 in deciding whether to grant summary_judgment we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party 98_tc_518 aff’d 17_f3d_965 7th cir however where the moving party properly makes and supports a motion for summary_judgment an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but must set forth specific facts by affidavit or otherwise showing that there is a genuine dispute for trial rule d although petitioner has filed a great deal of paper he has set forth no speci- fic facts showing that there is a genuine dispute for trial on any of the issues raised in the notice_of_deficiency nor has he set forth any specific facts showing that he is entitled to a net_operating_loss carryforward to or we accordingly conclude that this case may be adjudicated summarily under rule d see 675_f2d_1077 9th cir aff’g tcmemo_1979_ 39_tcm_611 b unreported income the irs’ determinations in a notice_of_deficiency are generally presumed correct and the taxpayer bears the burden of proving those determinations erro- neous rule a 290_us_111 for this pre- sumption to adhere in cases involving receipt of unreported income respondent must provide some reasonable foundation connecting the taxpayer with the in- come-producing activity see eg 994_f2d_1542 11th cir aff’g tcmemo_1991_636 596_f2d_358 9th cir rev’g 67_tc_672 tucker v commissioner tcmemo_2014_51 at once respondent has pro- duced evidence linking the taxpayer to an income-producing activity the burden_of_proof shifts to the taxpayer to prove by a preponderance_of_the_evidence that respondent’s determinations are arbitrary or capricious 293_us_507 87_tc_74 the notice_of_deficiency determined two adjustments involving unreported income for the irs received a form 1099-c from jpmorgan chase bank reporting that it had canceled petitioner’s debt of dollar_figure this was sufficient to link petitioner with an income-producing activity on hi sec_2011 amended_return petitioner admitted that he received dollar_figure of cancellation_of_indebtedness_income the irs determined that he was not insolvent during see sec_108 and that the discharged debt was not qualified_principal_residence_indebtedness see sec_108 petitioner has set forth no specific facts showing that there is a genuine dispute for trial concerning his entitlement to either of these exclusions from gross_income he has thus failed to prove that the irs erred by including this dollar_figure in income for the irs received a form w2-g reporting that petitioner had earned dollar_figure of gambling winnings in his response to respondent’s motion for summary_judgment petitioner admitted that he had received gambling winnings in the amount of dollar_figure for year petitioner has not alleged that he had gambling_losses that offset his gambling winnings and he has failed to prove that the irs erred by including this dollar_figure in gross_income we accordingly sustain the irs’ determinations of unreported income as set forth in the notice of defi- ciency see 181_f3d_1002 9th cir aff’g tcmemo_1997_97 powerstein v commissioner tcmemo_2011_271 102_tcm_497 c schedule c expenses deductions are a matter of legislative grace the taxpayer bears the burden of proving that claimed business_expenses were actually incurred and were ordi- nary and necessary sec_162 rule a the taxpayer also bears the bur- den of substantiating his claimed deductions by keeping and producing records sufficient to enable the irs to determine the correct_tax liability sec_6001 503_us_79 sec_1_6001-1 e in- come tax regs the failure to keep and present such records counts heavily against a taxpayer’s attempted proof rogers v commissioner tcmemo_2014_141 at petitioner has set forth no specific facts concerning and he has provided no documentation to substantiate his claimed deductions for home_office expenses dollar_figure for utilities expenses dollar_figure for or car and truck expenses dollar_figure in the aggregate as to each of these items his summary_judgment pa- pers do no more than allege that he incurred these costs petitioner has provided no documentation to substantiate his claimed travel expense dollar_figure for his only factual allegation concerning this item is that petitioner’s business was over miles round trip and he incurred much expense in caring for his business travel_expenses are subject_to heightened substantiation requirements see sec_274 petitioner’s unsubstantiated asser- tion does not suffice to create a triable issue of fact concerning his entitlement to a deduction for travel_expenses petitioner has provided no documentation to substantiate the existence or amount of his claimed advertising expenses dollar_figure for and dollar_figure for his only allegation concerning these expenses was that they related to horses purchased for business use and the losses he attached documents pur- porting to establish the horses’ pedigree this unsubstantiated assertion does not suffice to create a triable issue of fact concerning his ability to claim horse- related costs as advertising expenses of a financial consulting business we con- clude that petitioner has failed to prove his entitlement to any of the schedule c deductions that the irs disallowed d net operating losses petitioner has repeatedly claimed that he suffered losses of more than dollar_figure that he is entitled to carry forward for and see sec_172 he did not claim a net_operating_loss nol on his original return for or or on his amended_return for either year see sec_1_172-1 income_tax regs every taxpayer claiming a net_operating_loss_deduction for any taxable_year shall file with his return for such year a concise statement setting forth the amount of the net_operating_loss_deduction claimed and all material and pertinent facts relative thereto including a detailed schedule showing the computation of the net_operating_loss_deduction at no point in this case has petitioner alleged the precise amounts of the claimed losses or the years in which they were incurred his characterization of the supposed losses is vague and inconsistent although he asserted that he lost over dollar_figure in his business other statements suggest that the supposed losses occurred in real_estate transactions or in the stock market we conclude that petitioner has failed to allege specific facts sufficient to create a triable issue concerning his entitlement to nol deductions e personal exemptions and filing_status on hi sec_2011 return but not on hi sec_2013 return petitioner claimed depen- dency exemption deductions totaling dollar_figure dollar_figure for his four children the irs disallowed these deductions because petitioner’s ex-wife had claimed these four children as dependents on her return sec_151 provides an exemption from taxable_income for each depend- ent as defined in sec_152 sec_152 defines a dependent as either a qua- lifying child or a qualifying_relative of the taxpayer to be considered a qualifying_child of the taxpayer the child must among other things have the same principal_place_of_abode as the taxpayer for more than one-half of the taxable_year see sec_152 for a family_member to be a qualifying_relative a taxpayer must show among other things that he provided more than of that person’s support during the year petitioner has set forth no specific facts concerning and he has provided no documentation to substantiate how many days a year the children resided with him or the percentage of their support that he supplied he has thus failed to carry his burden of proving that any of the children was a qualifying_child or a qualifying_relative see sec_152 d c and d nor did he include with hi sec_2011 return a form_8332 release revocation of release of claim to exemption for child by custodial_parent or a similar signed declaration by which his ex-wife relinquished her entitlement to claim the children as her dependents see sec_152 petitioner has accordingly failed to carry his burden of proving his eligibility to claim any of the children as his dependents petitioner filed hi sec_2011 return claiming head-of-household filing_status to be entitled to this filing_status a taxpayer must maintain a home that constitutes for more than one-half of such taxable_year the principal_place_of_abode of at least one qualifying_child sec_2 since petitioner offered no evidence that he had a qualifying_child who lived with him during the irs properly disal- lowed his claim to head-of-household filing_status f additions to tax and penalties sec_6651 provides for an addition_to_tax of of the tax required to be shown on the return for each month or fraction thereof for which there is a failure_to_file the return not to exceed in toto respondent has the burden of pro- duction on this issue see sec_7491 respondent satisfied his burden of pro- duction by producing petitioner’s account transcripts for and which show that he filed his returns for those years on date and date respectively a taxpayer who files his return late is liable for this addition_to_tax unless he shows that his failure was due to reasonable_cause and not due to willful neglect sec_6651 469_us_241 in his petition petitioner did not assign error to respondent’s determination of an addition_to_tax for or for he has therefore conceded his liability see rule b 118_tc_358 in any event petitioner has set forth no specific facts sufficient to create a triable issue as to whether his late filing was due to reasonable_cause sec_6662 and b imposes a penalty upon the portion of any underpayment_of_tax that is attributable to a ny substantial_understatement_of_income_tax an understatement_of_tax is substantial if it exceeds the greater of dollar_figure or of the tax required to be shown on the return sec_6662 under sec_7491 respondent bears the burden of production with respect to the liability of an individual for any penalty see 116_tc_438 the notice_of_deficiency determined understatements of income_tax of dollar_figure for and dollar_figure for which we have sustained these amounts exceeded the greater of dollar_figure or of the total_tax required to be shown on each return respondent has thus carried his burden of production by demon- strating a substantial_understatement_of_income_tax for each year see sec_7491 once respondent has carried his burden of production the taxpayer bears the burden of proving reasonable_cause and good_faith sec_6664 higbee t c pincite petitioner has set forth no specific facts sufficient to create a triable issue as to whether he had good cause for the underpayments of tax on hi sec_2011 and sec_2013 returns we hold that he has failed to carry his burden of proving that he is not liable for the accuracy-related_penalties g frivolous position penalty sec_6673 authorizes the imposition of a monetary penalty in an amount up to dollar_figure whenever it appears to this court that a taxpayer has insti- tuted or maintained tax_court proceedings primarily for delay or has taken a posi- tion that is frivolous or groundless the purpose of sec_6673 is to compel taxpayers to conform their conduct to settled tax principles and to deter the waste of judicial resources see 791_f2d_68 7th cir salzer v commissioner tcmemo_2014_188 petitioner has persistently advanced frivolous positions at every stage of this proceeding despite our warning on march he continued to make frivolous arguments in his summary_judgment papers although we would be justified in imposing a sec_6673 penalty we will refrain from doing so now however petitioner is admonished not to advance frivolous arguments in any future filings he may make in this court because we are unlikely to show leniency next time to reflect the foregoing an appropriate order and decision will be entered


t c no united_states tax_court lear eye clinic ltd et al petitioners v commissioner of internal revenue respondent docket nos filed date gregory a robinson brad s ostroff and neil h hiller for petitioners anne w durning for respondent held for purposes of determining the limitation under sec_415 i r c on benefits of a plan the term service with the employer shall include service with businesses that antedate the plan_sponsor where the transition results in a mere technical change in the employment relationship and continuity otherwise cases of the following petitioners are consolidated herewith lear eye clinic ltd an arizona professional_corporation docket no and brody enterprises inc docket no this opinion supplements our previously filed opinion in 99_tc_379 affd in part and remanded in part 49_f3d_1410 9th cir exists in the substance and administration of the business held further in applying the foregoing to lear service with a sole_proprietorship which was incorporated and subsequently sponsored the plan will count as service with the employer held further in brody enterprises service with an alleged sole_proprietorship and a law firm neither of which had any continuous relationship to the sponsor of the plan does not constitute service with the employer supplemental findings_of_fact and opinion clapp judge these cases are before the court on remand from the u s court_of_appeals for the ninth circuit for further consideration consistent with that court's opinion 49_f3d_1410 9th cir affg in part and remanding in part 99_tc_379 subsequent to the remand of these cases the parties filed a stipulation of facts supplemental stipulation of facts and briefs relating to the issue on remand the issue for decision on remand is whether the plan participants properly counted their previous employment towards the sec_415 maximum benefit limitations we hold that the participant in the lear eye clinic plan properly counted his previous employment but the participant in the brody enterprises plan did not all section references are to the internal_revenue_code as in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated findings_of_fact in this opinion we incorporate by reference the facts set out in our opinion in 99_tc_379 we set forth and discuss in this opinion findings_of_fact arising from the supplemented record we also incorporate by reference the supplemental stipulation of facts lear eye clinic ltd in samuel pallin pallin commenced practice as an ophthalmic physician in phoenix arizona his practice grew over the years offering various medical procedures performed by pallin or other physicians in the practice he practiced as a sole_proprietor from until date from sometime in through date the proprietorship employed gerald walman walman as an associate physician on date pallin and walman incorporated lear eye clinic ltd lear pallin and walman owned percent and percent respectively of the lear stock the administration of the medical practice and pallin's duties and responsibilities did not change as a result of the formation of lear nor did the pallin and walman incorporated the eye center ltd and later changed the name to lear eye clinic ltd for convenience the term lear refers to the eye center ltd as well as lear eye clinic ltd unless otherwise indicated practice's staff physicians or patients change due to the formation of lear effective date lear adopted a defined_benefit_plan the lear plan pallin was the only participant in the plan the lear plan's enrolled_actuary used the following information for pallin for purposes of the actuarial calculations date of birth date of spouse's birth date of hire date of entry into the plan on form_5302 census attached to form_5300 application_for determination for defined_benefit_plan form lear declared that pallin had years_of_service with the employer as of date in pallin and walman decided to sever their individual medical practices to accomplish this lear formed a subsidiary which held walman's portion of the practice and then spun the subsidiary off to walman pallin retained ownership of lear on date lear received a favorable determination_letter from respondent qualifying the lear plan under sec_401 as of date lear had employees of those employees all but pallin were excluded or ineligible to participate in the lear plan the terms of the however the actuary included pallin's service as a sole proprietor from in his sec_415 computation lear plan limit the benefits payable under the plan to those allowable under sec_415 lear adopted a money purchase plan effective date the money purchase plan was restated in its entirety as of date and again as of date brody enterprises inc brody enterprises in the summer of marvin d brody brody began working as an estate and gift_tax examiner for the internal_revenue_service irs in chicago illinois brody worked with the irs until date while employed with the irs brody was covered by the civil service retirement_system brody was not covered by any other retirement_plan from through date from date to date brody worked as an associate attorney with the law firm of altheimer gray in chicago illinois in date brody moved from chicago to phoenix arizona and began working in the law firm of ehmann waldman p c in late or early ehmann waldman and brody formed ehmann waldman brody p c ewb p c with each owning one-third of the shares of the company ewb p c had three retirement plans the pension_plan a money_purchase_pension_plan adopted in and still in existence the profit the parties have not elaborated on the money purchase plan and we leave it for them to determine under rule the extent if any to which it affects the deficiencies in these cases sharing plan which merged with the pension_plan on date and the defined_benefit_plan ewb p c defined_benefit_plan none of these plans is at issue in this case in date after completing year_of_service with ewb p c brody became a participant in the pension_plan brody was a participant in the ewb p c defined_benefit_plan until its termination in the record does not reveal when brody became a participant in the ewb p c defined_benefit_plan brody has no other records or information concerning the ewb p c defined_benefit_plan on date brody terminated his employment with ewb p c and ewb p c redeemed his stock therein on date brody incorporated brody enterprises inc with brody as its sole shareholder and employee on date brody enterprises adopted the brody enterprises defined benefit pension_plan the brody enterprises plan effective date the brody enterprises plan is at issue in docket no the terms of the brody enterprises plan limit the benefits payable under the plan to those allowable under sec_415 on form_5302 brody enterprises declared that brody had years_of_service with the employer as of date brody incorporated marvin d brody p c and later changed the name to brody enterprises inc for convenience we refer to brody enterprises throughout this opinion on date ehmann waldman brody p a ewb p a was formed brody was not a shareholder or an officer of ewb p a the record does not reveal who formed ewb p a sometime around date brody ceased employment with brody enterprises and entered into an employment contract with ewb p a on date brody terminated his employment with ewb p a opinion each of petitioners' plans was a small defined benefit pension_plan a defined benefit pension_plan provides a participant at retirement with the benefit stated in the plan the costs of benefits payable from such plans are funded incrementally on an annual basis over the preretirement period sec_404 sec_412 contributions made to the plans within certain limits are deductible sec_404 earnings on the contributions are not taxed as they accumulate sec_501 plan assets are taxed to participants only as they are paid out as benefits sec_402 the payment of benefits under a qualified_plan is limited sec_415 these cases focus on the limitations in sec_415 sec_415 was added to the internal_revenue_code by section a of the employee_retirement_income_security_act_of_1974 erisa publaw_93_406 88_stat_829 the enactment of erisa was a legislative attempt to assure equitable and fair administration of pension plans and to remedy problems that had arisen which prevented many of those plans from achieving their full potential as a source for retirement income citrus valley estates inc v commissioner t c pincite in conjunction with its effort to expand the number of employees participating in employer-financed plans congress also placed limits on the amounts of pension contributions and benefits available under those plans i t is not in the public interest to make the substantial favored tax treatment associated with qualified_retirement_plans available without any specific limitation as to the size of the contributions or the amount of benefits that can be provided under such plans the fact that present law does not provide such specific limitations has made it possible for extremely large contributions and benefits to be made under qualified_plans for some highly paid individuals while there is of course no objection to large retirement benefits in themselves your committee believes it is not appropriate to finance extremely large benefits in part at public expense through the use of the special tax treatment moreover to prevent abuse the full sec_415 maximum benefit may be paid only to individuals who have years or more service where an individual has served for less than years the maximum permissible benefit is reduced proportionately h rept pincite c b supp sec_415 precludes qualified_plans from providing for payment of annual benefits in excess of an amount determined under subsection b sec_415 establishes an annual_benefit_limitation as the lesser_of a dollar amount dollar_figure as adjusted under sec_415 for the years at issue or percent of the participant's average compensation_for hi sec_3 highest paid years with the plan_sponsor for the years at issue sec_415 reduced the subsection b dollar limitation as follows reduction for service less than years -- in the case of an employee who has less than years_of_service with the employer the limitation referred to in paragraph shall be the limitation determined under such paragraph multiplied by a fraction the numerator of which is the number of years or part thereof of service with the employer and the denominator of which is thus a qualified defined benefit pension_plan may not provide for payment of benefits in excess of the dollar limitation of sec_415 as further limited by sec_415 in citrus valley we held that sec_404 limits deductible contributions to the amount necessary to fund the benefits payable under sec_415 determined at the time of the contribution in question citrus valley estates inc v commissioner t c pincite the dispute in these cases focuses on the amounts of benefits payable under sec_415 determined at the time of the contributions in question specifically at issue is whether pallin's and brody's prior employment with entities other than the plans' sponsors constitutes service with the employer as that term is used in sec_415 for plan years beginning after date sec_415 was amended to restrict the sec_415 dollar limitation for participants with less than years of participation in the plan see tax_reform_act_of_1986 publaw_99_514 sec 100_stat_2085 we begin with the presumption that respondent's determination is correct and petitioners have the burden of proving otherwise rule a 290_us_111 83_tc_269 deductions and credits are a matter of legislative grace and petitioners bear the burden of proving entitlement to any deduction or credit claimed on their returns 503_us_79 292_us_435 in construing a statute courts generally seek the plain and literal meaning of its language 471_us_84 310_us_534 for that purpose courts generally assume that congress uses common words in their popular meaning 480_us_23 see also 322_us_607 moreover words in a revenue act generally are interpreted in their 'ordinary everyday senses' 506_us_168 quoting 383_us_569 quoting 331_us_1 words with a fixed legal or judicially settled meaning on the other hand generally must be presumed to have been used in that sense unless such an interpretation will lead to absurd results see 263_us_179 101_tc_260 we must rely on the words of the statute as generally understood for to do otherwise would be to redraft the statute united_states v locke supra pincite lenz v commissioner supra pincite citing united_states v american trucking associations inc supra pincite in interpreting any statue we attempt to determine congress' intent in using the statutory language being construed united_states v american trucking associations inc supra pincite 293_us_84 103_tc_216 moreover where the statute is ambiguous we may look to its legislative_history and to the reason for its enactment united_states v american trucking associations inc supra pincite 88_tc_177 affd 865_f2d_750 6th cir in addition we may seek out any reliable evidence as to the legislative purpose even where the statute is clear united_states v american trucking associations inc supra 92_tc_612 affd 920_f2d_1335 7th cir the relevant language in sec_415 includes in the case of an employee who has less than years_of_service with the employer there is no dispute that the years_of_service with the business organization that established and maintained the plan that is lear or brody enterprises constitute years_of_service with the employer for purposes of sec_415 the issue we must decide is whether the term service with the employer includes service with businesses that antedate lear and brody enterprises while we have never been faced with this exact issue in the context of sec_415 we find guidance from the analysis in cases dealing with the meaning of separation from the service as used in sec_402 see 99_tc_622 85_tc_511 ridenour v united_states cl_ct we conclude that for purposes of sec_415 service with the employer includes service with businesses that antedate the corporation where formation of the corporation results in a mere formal or technical change in the employment relationship and continuity otherwise exists in the substance and administration of the business operations of the previous business and the corporation we turn to the parties' respective arguments lear argues that pallin's years as a sole_proprietor and his years with lear constitute years_of_service with the employer for purposes of sec_415 respondent concedes and it is clear that pallin's years with lear constitute years_of_service with the employer for purposes of sec_415 thus we need only address pallin's years as a sole_proprietor on the surface pallin's service as a sole_proprietor followed by the formation of lear and the continuation of the medical practice as a corporation technically involved a change in the employer lear was the employer after the incorporation and lear did not exist prior to that time this analysis however ignores that pallin continued performing the same services in the corporate form that he had performed as a sole_proprietor there was no lapse in time between the medical practice's transition from a sole_proprietorship to a corporation pallin continued to own a majority interest in the practice and the practice remained in phoenix pallin's professional duties and responsibilities did not change under the corporate form nor did the administration of the medical practice under the corporate form the composition of the medical practice's staff physicians or patients did not change as a result of the transition to corporate form these factors lead to the conclusion that the administration of the medical practice and the substance of pallin's business operations remained the same despite the technical change in pallin's employment relationship after the formation of lear accordingly we conclude that pallin's years as a sole_proprietor constitute years_of_service with the employer for purpose of sec_415 to conclude otherwise would elevate form over the obvious continuity in pallin's service before and after the formation of lear our conclusion is buttressed by case law addressing separation from the service in which we have looked to the substance of the employment relationship rather than the formal or technical change in that relationship in burton v commissioner supra burton was a practicing physician burton incorporated his medical practice and was the sole shareholder of the professional association the professional association maintained a qualified_pension plan and burton was a participant in that plan burton eventually liquidated the professional association immediately after the liquidation burton resumed his medical practice in the form of a sole_proprietorship the pension_plan was terminated and its assets were distributed to the participants burton reported the distribution using the 10-year forward averaging method which had the effect of reducing the tax impact in the year of the distribution the commissioner argued that burton's change in status from a sole shareholder-employee to sole_proprietor was merely a change in form and that there had been no separation from the service within the meaning of sec_402 the commissioner reasoned that since there was no separation from the service the 10-year forward averaging method was not available to burton we held that burton's change_of status from that of an employee of a professional association to that of a sole_proprietor was not a separation from the service within the meaning of sec_402 we first noted that on its face the liquidation of burton's professional association and the continuation of his medical practice in the sole_proprietorship form satisfied the formality of separation from the service burton v commissioner supra pincite after reviewing the continuity between burton's practice as a professional association and the subsequent practice as a sole_proprietorship we concluded that there was only a technical change in the employment relationship that did not result in separation from the service id pincite we stated our conclusion that there was only a technical change in the employment relationship is supported by the fact that dr burton continued performing the same services as a sole_proprietor as he had performed in the corporate form id pincite see also reinhardt v commissioner supra change from shareholder- employee to independent_contractor does not constitute separation from the service ridenour v united_states supra change from employee to partner does not constitute separation from the service cf devinaspre v commissioner tcmemo_1985_435 employee transfer between unrelated entities constituted separation from the service the analysis and reasoning in burton apply with equal strength to the cases before us similar reasoning has been applied where a partnership converted to a corporation see 216_f2d_418 9th cir former partners given credit for past service with the partnership for purposes of the 3-year eligibility requirement for participation in the association's plan 62_tc_150 former partners permitted to use a year_of_service as partners to meet the eligibility requirements of the corporate plan the situations in kintner and farley dealt with years_of_service for participation and vesting nonetheless the rationale of those cases regarding continuity of service supports the conclusion we reach today moreover the approach we adopt fulfills the congressional objective to prevent abuse while at the same time giving proper weight to the years that an individual has served the house report states where an individual has served for less than years the maximum benefit is reduced proportionately h rept pincite c b supp the continuity in pallin's practice is clear pallin continued performing the same services in the corporate form as he had performed as a sole_proprietor we see no abuse in his counting those years as service with the employer for purposes of sec_415 precluding pallin from counting those years as service with the employer would deny him the benefit envisioned by congress we now turn to brody enterprises brody enterprises originally argued that the following years constitute years_of_service with the employer for purposes of sec_415 brody's years with brody enterprises year with ehmann waldman when he did not participate in that firm's pension_plan years with altheimer gray and years in which he allegedly conducted as a sole_proprietor a private law practice while employed full time with the irs after remand of these cases brody enterprises has abandoned the argument that brody' sec_1 year with ehmann waldman constitutes service with the employer respondent concedes that brody's years with brody enterprises constitute years_of_service with the employer for purposes of sec_415 thus brody' sec_5 years with altheimer gray and years in which he allegedly conducted a private law practice remain at issue we address first the years in which brody allegedly conducted a private law practice while employed with the irs brody enterprises argues that under sec_414 brody' sec_4 years as a sole_proprietor allegedly conducted while employed by the irs must be combined with his years with brody enterprises as years_of_service with the employer for purposes of sec_415 brody enterprises has failed to show that brody conducted a private law practice during the years that brody was employed by the irs brody testified that in or he began a part-time law practice during the time he worked for the irs he kept no records of the hours spent on his part- time law practice he worked for the irs full time and there is no evidence of the extent of the alleged part-time practice we conclude that these years do not constitute years_of_service with the employer for purposes of sec_415 the remaining years in dispute include brody' sec_5 years with altheimer gray we apply criteria analogous to those applied to lear we assume that brody provided legal services for brody enterprises and for altheimer gray brody owned brody enterprises but there is no indication that brody had an ownership_interest in altheimer gray brody enterprises has shown no relationship between its business operations and those of altheimer gray we think it unlikely that the clients of brody enterprises in phoenix corresponded with the clients of altheimer gray in chicago we have no indication that the personnel at brody enterprises related in any way with those at altheimer gray other than of course brody himself indeed brody enterprises seems to contend that service with any employer constitutes service with the employer for purposes of sec_415 but the language of the statute refutes this contention the only shred of continuity between brody enterprises and altheimer gray was the fact that brody worked for both accordingly we conclude that brody' sec_5 years with altheimer gray do not constitute years_of_service with the employer for purposes of sec_415 petitioners contend that sec_414 anticipates circumstances in which service with a predecessor employer must be credited as years_of_service for the employer sec_414 provides sec_414 definitions and special rules a service for predecessor employer --for purposes of this part-- in any case in which the employer maintains a plan of a predecessor employer service for such predecessor shall be treated as service for the employer and in any case in which the employer maintains a plan which is not the plan maintained by a predecessor employer service for such predecessor shall to the extent provided in regulations prescribed by the secretary be treated as service for the employer no regulations have been issued pursuant to sec_414 the cases before us do not involve the situation in sec_414 in which the employer maintains a plan of a predecessor employer petitioners apparently do not ask us to interpret sec_414 in their favor and we doubt such a request would prove beneficial see 951_f2d_1083 9th cir 799_f2d_1464 11th cir interpreting the erisa counterpart to sec_414 and concluding that congress intended to leave to the secretary_of_the_treasury the question of whether to require such service with a predecessor employer be taken into account petitioners instead argue that in the absence of regulations under sec_414 the plan_sponsor or the plan_administrator had the discretion to include the disputed years as years_of_service with the employer under their respective plans subject only to the limitation that the determination not be arbitrary or capricious petitioners cite 489_us_101 216_f2d_418 9th cir and 62_tc_150 in support of their argument in firestone tire the supreme court established the standard of review by which a plan administrator's decision to deny benefits is to be reviewed in a challenge under erisa that issue is not raised in these cases we find kintner and farley relevant only to the extent that the courts examined the substance of the employment relationship as discussed above the issue before us is the interpretation of sec_415 congress did not leave that issue to the discretion of plan administrators to reflect the foregoing and the concessions by the parties decisions will be entered under rule


law office of john h eggertsen p c petitioner v commissioner of internal revenue respondent docket no filed date r filed a motion for reconsideration of findings or opinion in 142_tc_110 eggertsen i and a motion to vacate decision collectively r’s motions in eggertsen i we addressed whether sec_4979a imposes a federal excise_tax excise_tax on p for its taxable_year we held that it does we also addressed in eggertsen i whether the period of limitations for assessing that tax has expired statute_of_limitations issue it was r’s position with respect to the statute_of_limitations issue in eggertsen i that sec_4979a not sec_6501 controls resolution of that issue in eggertsen i we accepted that position we held that the period of limitations under sec_4979a for assessing the excise_tax that sec_4979a imposes on this supplemental opinion supplements 142_tc_110 united_states tax_court reports petitioner has expired it is r’s position in r’s motions that sec_6501 not sec_4979a controls resolu- tion of the statute_of_limitations issue according to r because p did not file form_5330 return of excise_taxes related to employee benefit plans or any other document that qualifies as a return for sec_4979a excise_tax purposes within the meaning of sec_6501 sec_6501 permits r to assess at any time the excise_tax that sec_4979a imposes on p held upon reconsideration of the statute_of_limitations issue in eggertsen i sec_6501 not sec_4979a controls resolution of that issue because p did not file form_5330 or any other document that qualifies as a return for sec_4979a excise_tax purposes within the meaning of sec_6501 sec_4979a serves only to extend under the circumstances set forth therein the period of limitations prescribed by sec_6501 held further the excise_tax that sec_4979a imposes on p for its taxable_year may be assessed at any time under sec_6501 stephen wasinger for petitioner david s weiner john w stevens and shawn p nowlan for respondent supplemental opinion chiechi judge this case is before us on respondent’s motion for reconsideration of findings or opinion respond- ent’s motion for reconsideration and respondent’s motion to vacate decision respondent’s motion to vacate we shall grant respondent’s motions background we incorporate herein by reference the facts set forth in 142_tc_110 eggertsen i we repeat here only those facts relevant to this supplemental opinion respondent filed a memorandum respondent’s memorandum in sup- port of respondent’s motion for reconsideration we shall refer collectively to respondent’s motion for reconsideration respondent’s motion to vacate and respondent’s memorandum as respondent’s motions petitioner filed a response to each of respondent’s motion for reconsideration and respond- ent’s motion to vacate and respondent filed a reply to each of those re- sponses the parties stipulated all of the facts in 142_tc_110 and submitted the case under rule tax_court rules_of_practice and procedure law office of john h eggertsen p c v comm’r at all relevant times of the stock of petitioner was allocated to john h eggertsen under an employee_stock_ownership_plan that petitioner an s_corporation maintained esop in question around date petitioner filed form_1120s u s income_tax return for an s_corporation for its taxable_year form_1120s petitioner attached to that form schedule_k-1 shareholder’s share of income deductions credits etc in petitioner’s form_1120s petitioner showed inter alia that during the esop in question owned of the stock of petitioner on a date not established by the record during the esop in question filed form_5500 annual return report of employee_benefit_plan employee_benefit_plan annual return for its taxable_year the esop in question attached to that form schedule e esop annual information the esop in question also attached to the employee_benefit_plan annual return schedule i financial information- small plan and schedule ssa annual registration state- ment identifying separated participants with deferred vested benefits in the employee_benefit_plan annual return the esop in question showed that its effective date was date it was maintained by petitioner during it had three participants during two of whom were not identified and were described as active partici- pants and one of whom was identified as kerry c duggan and described as other retired or separated participants entitled to future_benefits it held assets at the end of valued at dollar_figure and its assets consisted exclu- sively of employer_securities on a date not established by the record the esop in ques- tion filed an amended form_5500 amended employee_benefit_plan annual return for its taxable_year the esop in question attached to that form schedule i in the amended employee_benefit_plan annual return the esop in question showed information that was identical in most respects to the information that it had showed in the employee_benefit_plan annual return except that the esop in question did not identify in the amended employee_benefit_plan annual return the individual described in united_states tax_court reports that return as other retired or separated participants enti- tled to benefits and the esop in question showed in the amended employee_benefit_plan annual return that it held assets at the end of valued at dollar_figure which included employer_securities valued at that yearend at dollar_figure petitioner did not file form_5330 return of excise_taxes related to employee benefit plans for its taxable_year respondent filed a substitute for form_5330 for petitioner for that taxable_year in eggertsen i we addressed whether sec_4979a imposes a federal excise_tax excise_tax on petitioner for its taxable_year we held that it does we also addressed in eggertsen i whether the period of limitations for assessing that tax has expired statute_of_limitations issue in eggertsen i it was respondent’s position that sec_4979a not sec_6501 controls resolution of the statute_of_limitations issue on brief respondent argued in eggertsen i sec_6501 is not the governing period of limitations under the facts of this case by its terms sec_4979a d is the applicable statute_of_limitations in this case the specific triggering requirement to begin the running of the statute under the circumstances of this case is the later of the date of the alloca- tion or ownership at issue or the date when the taxpayer provides notification to the respondent of the ownership or allocation at issue sec_4979a d by contrast the event that triggers the running of sec_6501 is the filing of an original return sec_6501 see also 82_tc_766 this specific triggering device ie the filing of a return was not incorporated into sec_4979a 4to the extent sec_4979a and sec_6501 might create differing results here this court should be guided by the rules of resolving statutory con- flicts first the court should look for means to harmonize apparently conflicting statutes 13_bta_677 if they may not be harmonized only when two statutes irreconcilably con- flict and the conflict cannot be resolved by interpretation then the more specific statute controls over the more general one 133_tc_402 citing 2b singer singer stat- utes and statutory construction sec_51 pincite18 7th ed in addition where two irreconcilably conflicting statutes are involved the more recent of the two prevails id all section references are to the internal_revenue_code code in effect for the year at issue law office of john h eggertsen p c v comm’r in this case if the court applies these statutory conflict rules both rules point to the primacy of sec_4979a d over sec_6501 first sec_4979a is the more specific statute and second it was more recently amended in eggertsen i we accepted respondent’s position that sec_4979a not sec_6501 controls resolution of the statute_of_limitations issue we held that the period of limitations under sec_4979a for assessing the excise_tax that sec_4979a imposes on petitioner has expired discussion the granting of a motion for reconsideration rests within our discretion see 68_f3d_868 5th cir aff ’g per curiam tcmemo_1993_634 928_f2d_751 6th cir aff ’g in part remanding in part tcmemo_1988_286 385_f2d_398 7th cir aff ’g tcmemo_1965_328 a motion for reconsider- ation will be denied unless substantial error or unusual cir- cumstances are shown see westbrook v commissioner f 3d pincite estate of quirk v commissioner f 2d pincite 95_tc_467 aff ’d without published opinion sub nom stell v commis- sioner 999_f2d_544 9th cir 87_tc_164 in eggertsen i it was respondent’s position that sec_4979a not sec_6501 controls resolution of the statute_of_limitations issue in support of that position respondent advanced the following arguments on brief in eggertsen i sec_6501 is not the governing period of limitations under the facts of this case by its terms sec_4979a d is the applicable statute_of_limitations in this case the specific triggering requirement to begin the running of the statute under the circumstances of this case is the later of the date of the alloca- tion or ownership at issue or the date when the taxpayer provides notification to the respondent of the ownership or allocation at issue sec_4979a d by contrast the event that triggers the running of sec_6501 is the filing of an original return sec_6501 see also 82_tc_766 this specific triggering device ie the filing of a return was not incorporated into sec_4979a united_states tax_court reports 4to the extent sec_4979a and sec_6501 might create differing results here this court should be guided by the rules of resolving statutory con- flicts first the court should look for means to harmonize apparently conflicting statutes 13_bta_677 if they may not be harmonized only when two statutes irreconcilably con- flict and the conflict cannot be resolved by interpretation then the more specific statute controls over the more general one 133_tc_402 citing 2b singer singer stat- utes and statutory construction sec_51 pincite18 7th ed in addition where two irreconcilably conflicting statutes are involved the more recent of the two prevails id in this case if the court applies these statutory conflict rules both rules point to the primacy of sec_4979a d over sec_6501 first sec_4979a is the more specific statute and second it was more recently amended in eggertsen i we accepted respondent’s position that sec_4979a not sec_6501 controls resolution of the statute_of_limitations issue we held that the period of limitations under sec_4979a for assessing the excise_tax that sec_4979a imposes on petitioner has expired in respondent’s motions it is the position of respondent that sec_6501 not sec_4979a controls resolu- tion of the statute_of_limitations issue in support of that position respondent advances the following arguments in respondent’s motions t he limitations_period under sec_4979a supplements but does not replace the general limitations_period under sec_6501 or the specific limitations_period under sec_6501 in this case because the interaction between sec_6501 and sec_4979a was not dis- cussed the opinion contains a substantial error of law when it implies that sec_4979a replaces sec_6501 instead because the limita- tions period under sec_6501 is not superseded and has not expired the period during which respondent can assess the excise_tax under sec_4979a remains open upon reconsideration of our holding in eggertsen i that the for period of assessing the excise_tax that sec_4979a imposes on p for its taxable_year has expired we conclude that we committed substantial error that is because in so holding limitations under sec_4979a the circumstances involved here are materially distinguishable from the circumstances involved in certain other cases where we denied motions for reconsideration because theories or issues were raised in those motions that could have been but were not raised before we issued our original law office of john h eggertsen p c v comm’r we concluded implicitly as respondent had argued expressly that sec_4979a a specific statute applicable to the excise_tax imposed by sec_4979a took precedence over sec_6501 a general statute applicable to all taxes imposed by the code we conclude upon reconsideration that sec_4979a serves only to extend under the cir- cumstances set forth therein the period of limitations pre- scribed by sec_6501 cf 133_tc_431 114_tc_533 we consider now whether the period of limitations under sec_6501 has expired for assessing the excise_tax under sec_4979a for petitioner’s taxable_year that was triggered by an event described in sec_4979a peti- tioner is liable for that excise_tax see sec_4979a form_5330 is the form that the commissioner of internal revenue has prescribed as the form in which inter alia the excise_tax under sec_4979a is required to be reported we found in eggertsen i that petitioner did not file form_5330 for its tax- able year unless petitioner filed another document that qualifies as a return for sec_4979a excise_tax purposes within the meaning of sec_6501 the excise_tax that sec_4979a imposes on petitioner for its taxable_year may be assessed at any time under sec_6501 we shall examine the record that the parties fully stipu- lated in eggertsen i see supra note in order to determine whether petitioner filed for its taxable_year a document that qualifies as a return for sec_4979a excise_tax pur- poses within the meaning of sec_6501 in order for a document filed by a taxpayer to qualify as a return within the meaning of sec_6501 it must contain sufficient information to calculate the taxpayer’s tax_liability pur- opinion see eg 79_tc_1054 we will generally not grant reconsideration to resolve issues which could have been raised during the prior proceedings supplementing 79_tc_86 aff ’d 755_f2d_790 11th cir lowry v commissioner tcmemo_2004_10 slip op pincite on motions for reconsideration we do not except under extraordinary circumstances address any new issue which a party could have addressed but failed to address prior to the court’s deciding the case supplementing tcmemo_2003_225 aff ’d 171_fedappx_6 9th cir united_states tax_court reports port to be a return constitute an honest and reasonable attempt by the taxpayer to satisfy the requirements of the federal tax law and be executed under penalties of per- jury see 82_tc_766 aff ’d per curiam 793_f2d_139 6th cir the record contains the form_1120s that petitioner filed around date the employee_benefit_plan annual return that the esop in question filed on a date not established by the record during and the amended employee_benefit_plan annual return that the esop in question filed on a date not established by the record we turn first to petitioner’s form_1120s in that form petitioner showed inter alia that during the esop in question owned of the stock of petitioner in order for the form_1120s to qualify as a return for sec_4979a excise_tax purposes within the meaning of sec_6501 it must inter alia contain sufficient informa- tion to calculate petitioner’s excise_tax liability for its taxable_year under sec_4979a see beard v commis- sioner t c pincite the information necessary to calculate petitioner’s excise_tax liability under sec_4979a for its taxable_year includes information regarding the total value of all deemed-owned_shares of all disqualified persons with respect to the esop in question see sec_4979a e c petitioner’s form_1120s did not contain that information on the record in eggertsen i we find that petitioner’s form_1120s does not qualify as a return for sec_4979a excise_tax purposes within the meaning of sec_6501 we turn next to the employee_benefit_plan annual return that the esop in question filed on a date not estab- lished by the record during and the amended employee as pertinent here sec_6501 provides that for purposes of sec_6501 the filing of a return for a specified period in which an entry has been made with respect to a tax imposed under inter alia sec_4979a in- cluding a return in which an entry has been made showing no liability for such tax for such period shall constitute the filing of a return of all amounts of such tax which if properly paid would be required to be re- ported in such return for such period petitioner made no entry in petitioner’s form_1120s with respect to an excise_tax imposed by sec_4979a not even an entry that showed no liability for that tax for taxable_year see supra note law office of john h eggertsen p c v comm’r benefit plan annual return that that esop filed on a date not established by the record in the employee_benefit_plan annual return the esop in question showed that its effective date was date it was main- tained by petitioner during it had three participants during two of whom were not identified and were described as active participants and one of whom was identified as kerry c duggan and described as other retired or separated participants entitled to future_benefits it held assets at the end of valued at dollar_figure and its assets consisted exclusively of employer_securities in the amended employee_benefit_plan annual return the esop in question showed information that was identical in most respects to the information that it had showed in the employee_benefit_plan annual return except that the esop in question did not identify in the amended employee_benefit_plan annual return the individual described in that return as other retired or separated participants enti- tled to benefits and the esop in question showed in the amended employee_benefit_plan annual return that it held assets at the end of valued at dollar_figure which included employer_securities valued at that yearend at dollar_figure as discussed above petitioner is liable for its taxable_year for the excise_tax under sec_4979a that we found in eggertsen i was triggered by an event described in sec_4979a see sec_4979a the esop in question not petitioner filed the employee_benefit_plan annual return and the amended employee_benefit_plan annual return assuming arguendo that petitioner had filed those returns they did not contain the information regarding the total value of all deemed-owned_shares of all disqualified persons with respect to the esop in question that was nec- essary to calculate petitioner’s excise_tax liability under sec_4979a for its taxable_year see sec_4979a e c the esop in question made no entry in the employee_benefit_plan annual return that it filed with respect to an excise_tax imposed by sec_4979a not even an entry that showed no liability for that tax for taxable_year see supra note united_states tax_court reports on the record in eggertsen i we find that neither the employee_benefit_plan annual return nor the amended employee_benefit_plan annual return that the esop in question filed qualifies as a return for sec_4979a pur- poses within the meaning of sec_6501 on the record in eggertsen i we find that petitioner did not file with respondent any document that qualifies as a return for purposes of sec_4979a within the meaning of sec_6501 on that record we hold that the excise_tax under sec_4979a for petitioner’s taxable_year may be assessed at any time under sec_6501 we have considered all of the contentions and arguments of the parties that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing an order granting respondent’s motions and vacating the decision for petitioner entered on date and decision for respondent will be entered


internal_revenue_service number release date index number ---------------------------- ---------------------------------------------- ------------------------------------ ---------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ------------------ id no ---------------- telephone number ---------------------- refer reply to cc intl b02 plr-123448-17 date date ty ------- legend taxpayer country company businesses cpa date year ------------------------------------------------ ----------------------- ----------------------------------- -------------------- -------------------------------- --------------- ----------------- ------- dear ------------------ this is in response to taxpayer’s letter submitted by your authorized representative and received by our office on date requesting an extension of time under sec_301_9100-3 to make the election provided by sec_953 of the internal_revenue_code code to be treated as a domestic_corporation for u s tax purposes effective for year the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in plr-123448-17 support of the request for a ruling verification of the factual information representations and other data may be required as part of the audit process taxpayer is an associated reinsurance company organized under the laws of country taxpayer reinsures certain finance and insurance products sold by a company a third party unrelated program administrator and b related businesses taxpayer engaged the services of company to manage its operations maintain compliance with all applicable laws and regulations and prepare taxpayer’s federal_income_tax returns company employed cpa to conduct tax compliance management for its clients including taxpayer cpa has many years of experience with captive_insurance_company formations and operations both company and cpa were tasked with the responsibility of filing taxpayer’s federal_income_tax returns including making valid elections when appropriate taxpayer intended to make the sec_953 election by filing an election statement with the irs when filing its corporate_income_tax return for year further company filed an income_tax return on taxpayer’s behalf consistent with that position for year and subsequent years however taxpayer was unaware that such election was not made taxpayer became aware of the missing election in date and took corrective action taxpayer’s failure to make the sec_953 election was not discovered by the internal_revenue_service before taxpayer submitted its ruling_request in addition taxpayer represents that it does not seek to alter a return position for which the accuracy-related_penalty has been or could have been imposed under sec_6662 at the time taxpayer requested relief and the new position requires or permits a regulatory election for which relief is requested finally taxpayer represents that it has not used hindsight to seek an extension of time to make the election taxpayer represents that granting relief will not result in a lower tax_liability than it would have had if it had filed the sec_953 election timely sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the plr-123448-17 commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that except as provided in paragraphs b i through iii of that section a taxpayer is deemed to have acted reasonably and in good_faith if it meets one of the conditions described in sec_301 b i through v sec_301_9100-3 provides that relief will be granted only when the interests of the government will not be prejudiced revproc_2003_47 2003_2_cb_55 provides that the election to be treated as a domestic_corporation under sec_953 to be effective for a taxable_year must be filed by the due_date prescribed in sec_6072 with extensions for the united_states income_tax return that is due if the election becomes effective in the present situation revproc_2003_47 fixes the time to make the election under sec_953 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards set forth under sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to make the election provided by sec_953 in accordance with the procedural rules set forth in revproc_2003_47 to be treated as a domestic_corporation for federal_income_tax purposes effective for year the above extension of time is conditioned on taxpayer’s tax_liability if any being not lower in the aggregate for all years to which the sec_953 election applies than it would have been if the election had been timely filed taking into account the time_value_of_money no opinion is expressed as to taxpayer’s tax_liability for the taxable years involved further the granting of the above extension is not a determination that taxpayer is otherwise eligible to make the sec_953 election sec_301_9100-1 taxpayer should attach a copy of this letter_ruling to its federal_income_tax return for the relevant year this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-123448-17 pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representative sincerely kristine a crabtree senior technical reviewer branch international cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b01-plr-128040-00 date date legend x date this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on date the shareholder of x desired that x elect s_corporation treatment effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date 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 sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not file an election to be treated as an s_corporation under sec_1362 x plr-128040-00 has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative s matthew lay sincerely assistant to the branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si br 1-plr-114739-99 date date legend x d1 this responds to your letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on d1 x intended to be treated as an s_corporation for federal_income_tax purposes effective on d1 but the s election was not timely filed 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 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 if the 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 no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the plr-114739-99 secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under sec_1362 effective on d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes 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 a copy of this letter must be attached to any income_tax return to which it is relevant signed david r haglund sincerely david r haglund senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------------------- ---------------------------- --------------------------------------------- ---------------------- ------------------------- ----------------------------- department of the treasury washington dc person to contact ------------------------------- -------- ------------- ----------------------------------------------------- telephone number --------------------- refer reply to cc psi - plr-163020-04 date april ------------------ --------------------- ---------------------------------------------------------------- legend x ------------------------------------------------- country date dear ------------------- correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to elect under sec_301_7701-3 to be classified as an association_taxable_as_a_corporation for federal tax purposes formed on date x intended to be classified as an association_taxable_as_a_corporation for federal tax purposes effective date however no form_8832 entity classification election was timely filed on behalf of x federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-2 provides that a business_entity is any entity recognized for the information submitted states that x a country limited_partnership was this letter responds to a letter dated date and subsequent sec_301_7701-3 provides that for purposes of sec_301_7701-3 a sec_301_7701-3 provides that an eligible_entity may elect to be sec_301_7701-3 provides that an election made under sec_301 sec_301_7701-3 provides that a business_entity that is not classified as a sec_301_7701-3 provides that unless the entity elects otherwise a plr-163020-04 corporation under sec_301 b or an eligible_entity can elect its classification for federal tax purposes foreign eligible_entity is a partnership if it has two or more members and at least one member does not have limited_liability member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member classified other than as provided under sec_301_7701-3 by filing form_8832 with the service_center designated on the form c i will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on the form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or an announcement published in the internal_revenue_bulletin commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic_extension of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government that x has satisfied the requirements of sec_301_9100-3 as a result x is granted an based solely on the facts submitted and the representations made we conclude sec_301_9100-1 defines the term regulatory election as an election sec_301_9100-1 through provide the standards the except as specifically set forth above no opinion is expressed or implied a copy of this letter should be attached to the election a copy is enclosed for pursuant to the power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer who requested it sec_6110 plr-163020-04 extension of time of sixty days from the date of this letter to file a form_8832 with the appropriate service_center electing to be treated as an association effective date that purpose concerning the federal tax consequences of the facts described above under any other provision of the code of the internal_revenue_code provides that it may not be used or cited as precedent being sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes heather c maloy associate chief_counsel passthroughs and special industries sincerely