t c no united_states tax_court kenneth l nordtvedt petitioner v commissioner of internal revenue respondent docket no filed date p adjusted the basis in his retirement annuity by an inflation factor to take account of inflation between the date of his contributions to the retirement_plan and the annuity_starting_date for purposes of calculating the amount of his pension annuity subject_to federal_income_tax p further adjusted the basis in his retirement annuity to account for expected inflation over his actuarial life for purposes of calculating the amount of his pension annuity subject_to federal_income_tax held p may not adjust the basis in his retirement annuity to account for inflation for purposes of calculating the amount of his pension annuity subject_to federal_income_tax kenneth l nordtvedt pro_se virginia l hamilton for respondent -- - opinion ruwe judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax the issues for decision are whether petitioner may adjust the basis in his retirement annuity by an inflation factor to take account of inflation between the date of his contributions to the retirement_plan and the annuity_starting_date thereby increasing his basis from the amount of dollar_figure to an adjusted_basis of dollar_figure for purposes of calculating the amount of his pension annuity subject_to federal_income_tax and whether petitioner may further adjust the basis in his retirement annuity to take into account expected inflation over his actuarial life for purposes of calculating the amount of his pension annuity subject_to federal_income_tax background the parties submitted this case fully stipulated pursuant to rule the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in friday harbor washington at the time he filed his amended petition petitioner was employed by montana state university from ‘unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure september of until he retired in july of montana state university participates in the montana teachers retirement_system of the state of montana mtrs a qualified defined benefit pension_plan under sec_401 a during his employment petitioner made mandatory after-tax contributions to the mtrs from july of to july of petitioner made after-tax contributions in accordance with montana state law allowing for additional contributions to build up a retirement base petitioner’s contributions to the mtrs were as follows year taxed contribution dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number total big_number petitioner’s nominal basis in his pension_plan is dollar_figure since petitioner’s retirement in july of he has been receiving a q4e- gross pension payment of dollar_figure annually the formula used by the mtrs to determine the taxable_portion of petitioner’s pension based on his after-tax contributions the formula is in accordance with the rules prescribed by the regulations promulgated under the internal_revenue_code see sec_1_72-4 income_tax regs according to the formula the portion of petitioner’s pension income that is subject_to tax in based on the nominal value of his after- tax contributions and the age of petitioner at his retirement in is dollar_figure petitioner reported dollar_figure as the amount of his pension that was subject_to tax in to arrive at this figure petitioner first adjusted the basis in his retirement annuity by an inflation factor to take account of inflation between the date of his contributions to the retirement_plan and the annuity_starting_date according to his calculation petitioner’s basis as of his retirement in was dollar_figure instead of the nominal basis of dollar_figure petitioner then adjusted the basis in his annuity as of the date of his retirement to account for expected inflation over his actuarial life discussion petitioner’s total pension income in was dollar_figure pursuant to the applicable regulation which allows for recovery_of petitioner’s basis in the pension the taxable_portion of - - petitioner’s pension was dollar_figure see sec_1_72-4 income_tax regs petitioner agrees that the determination of the taxable_portion of dollar_figure is in accordance with the regulations however petitioner maintains that the taxable_amount should be reduced by dollar_figure for in order to take into account the effect of inflation on his contributions petitioner’s contention that he is entitled to adjust the basis in his annuity pension to account for inflation is incorrect sec_61 provides that gross_income includes all income from whatever source derived unless otherwise specifically excluded sec_61 provides that gross_income includes income from annuities the supreme court has reasoned that congress intended ‘to use the full measure of its taxing power’ when it created the income_tax 434_us_77 quoting 309_us_331 the court explained that congress intended to tax all gains except those specifically exempted ’ id pincite quoting 348_us_426 there is no statutory or regulatory provision permitting petitioner to exempt gain which may be attributable solely to inflation by adjusting the basis in his annuity pension to account for such inflation ’ we note that when congress intends for inflation to be taken into account it does so by providing for it by statute continued -- - the pension_plan administered by the mtrs is a qualified defined benefit pension_plan as provided for in sec_401 a the taxation of the distributee of such a plan is governed by sec_402 sec_402 provides that the amounts distributed under a sec_401 plan shall be taxable to the distributee under sec_72 sec_72 provides in general that amounts received under an annuity_contract are includable in gross_income except to the extent that such amounts are considered to be a reduction or return of consideration paid specifically sec_72 a provides that unless otherwise provided gross_income includes any amount_received_as_an_annuity under an annuity_contract sec_72 however provides that a portion of the annuity will be excluded from gross_income in particular gross_income does not include that part of any amount_received_as_an_annuity under an annuity_contract which bears the same ratio to such amount as the investment_in_the_contract as of the annuity_starting_date bears to the expected_return under the contract as of such date see sec_72 sec_1_72-4 income_tax regs this ratio is referred to as the exclusion_ratio sec_72 sec_1_72-4 income_tax regs sec_72 as relevant here defines the investment_in_the_contract to be the aggregate amount continued see eg sec_1 d bartley v commissioner tcmemo_1998_322 n - of premiums or other consideration paid for the contract or in the instant case petitioner’s after-tax basis the expected_return amount is determined by multiplying at the commencement of the annuity the total of the annuity payments_to_be_received annually by a multiple based on the annuitant’s age and for contributions prior to on the annuitant’s sex sec_1 a income_tax regs the application of the exclusion_ratio to each annuity_payment determines the amount excluded from the gross_income of the annuitant and thus not subject_to federal_income_tax this excluded amount represents that part of the annuity_payment which accounts for the return of the annuitant’s investment in the annuity in the relevant statutes governing the determination of the taxable_amount of a pension_plan annuity there is no provision for or mention of any adjustment to an annuitant’s basis or investment in his annuity to take account of inflation from the date the annuitant first began to contribute to the annuity to the annuity_starting_date nor is there any provision permitting an adjustment to take account of inflation via a discount factor from the date of the commencement of the annuity until the nontaxable basis has been fully repaid to the annuitant when a statute is clear on its face we require clear unequivocal evidence of legislative purpose before construing a --- - statute to override the plain meaning of the words used therein see 89_tc_1216 83_tc_742 the legislative_history of the statutes relevant to this case contains no evidence that congress intended that there be any adjustment to account for inflation as with the statutes the regulations also contain no mention of inflation adjustments the regulations under sec_72 are interpretative regulations such regulations must be upheld unless unreasonable and plainly inconsistent with the revenue statutes 333_us_496 the regulations under sec_72 are not unreasonable and are not plainly inconsistent with the statute with respect to the issue presented in the instant case the regulations promulgated under sec_72 are of long standing originally adopted on date by t d 1956_2_cb_29 while there have been numerous amendments to the regulations none have affected the issue at bar with respect to the longevity of these regulations the supreme court has stated that long-standing rules should not be overruled except for weighty reasons see 348_us_187 as discussed below there are no such weighty reasons in the instant case while there are no cases directly on point dealing with pension plans or annuities the issue decided in 77_tc_1361 involved the same principles in hellermann v commissioner supra the taxpayers argued that gain that was realized from the sale of property should be adjusted to take into account the inflation that occurred during the ownership of the property we disagreed first we relied upon the well-established doctrine that congress has the power and authority to establish the dollar as a unit of legal value with respect to the determination of taxable_income independent of any value the dollar might also have as a commodity id pincite for this proposition we relied upon ‘this court has consistently denied taxpayers deductions for losses due to inflation and has repeatedly rejected the argument that inflation is a proper ground for failing to report income see 68_tc_422 affd 611_f2d_1260 9th cir 67_tc_181 affd without published opinion 578_f2d_1383 8th cir bartley v commissioner tcmemo_1998_322 ruben v commissioner tcmemo_1987_277 downing v commissioner tcmemo_1983_97 warren v commissioner tcmemo_1982_696 notter v commissioner tcmemo_1982_96 cunninghman v commissioner tcmemo_1981_365 milkowski v commissioner tcmemo_1981_225 crossland v commissioner tcmemo_1976_ other courts have reached the same conclusions when faced with similar situations see 804_f2d_868 5th cir the taxpayers’ contention that they are entitled to an inflation adjustment to their interest_income is plainly incorrect 646_f2d_1185 7th cir the market price of gold in terms of dollars is irrelevant to the determination of taxable_income affg tcmemo_1979_201 108_f2d_407 7th cir attaching no significance to the statutory gold content of the dollar as a factor in the determination of gain from the sale of capital assets daugherty v united_states cl_ct taxpayer not entitled to inflation factor deduction - cases upholding congress’ right to provide for a currency having a uniform legal value that did not necessarily correspond to the market_value of gold bullion which backed the currency see 294_us_330 294_us_317 294_us_240 legal tender cases u s wall as a second ground for rejecting the taxpayers’ position in hellermann v commissioner supra we relied upon the doctrine_of common interpretation ie defining income on the basis of the understanding of a lay person not an economist see id pincite under this doctrine the taxpayers’ gain must be measured on the basis of the nominal gain on the sale of property not on the basis of a gain reduced by an inflation factor or the real gain in an economic sense see id n jeither the constitution nor tax laws ‘embody perfect economic theory ’ id quoting 279_us_333 in hellermann v commissioner supra the taxpayers were arguing that the government’s failure to take inflation into account to determine gain_or_loss resulted in the taxation of return_of_capital this is the essence of petitioner’s argument in the instant case however as previously stated the applicable statutes and regulations do not provide that petitioner may take inflation into account see sec_72 sec_401 and hellermann v commissioner supra pincite sec_1 and income_tax regs accordingly we hold that petitioner may not adjust the basis in his retirement annuity to account for inflation for purposes of calculating the amount of his pension annuity subject_to federal_income_tax decision will be entered for respondent


internal_revenue_service number release date index number ------------------------ --------------------------------------------------------- ---------------------- ------------------- ---------------------- --------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-135132-08 date date x --------------------------------------------------------- ----------------------- legend legend country ------ date ------------------- dear ----------- this letter responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an entity classification election under sec_301_7701-3 facts the information submitted states that x was formed under the laws of country on date x represents that x is a foreign_entity eligible to elect to be treated as a partnership for federal tax purposes x intended to elect to be treated as a partnership for federal tax purposes effective on date however x did not timely file a form_8832 entity classification election law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can plr-135132-08 elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the appropriate service_center sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an plr-135132-08 extension of time of sixty days from the date of this letter to elect to be treated as a partnership for federal tax purposes effective date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to your authorized representative sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------ ---------------------------------- ------------------------------------------------------------ ----------- ---------------------------------------------------- ----------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-107792-06 date date --------------------------------------------------------------------------------------------------- --------------- --------------------------------------------------------------------------------------------------- legend x y ------------------------- ----------------- date country ---------------------------------------- dear ------------- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting a ruling under sec_301_9100-3 of the procedure and administration regulations x requests an extension of time to make a foreign disregarded_entity election under sec_301_7701-3 facts x was formed on date under country law x is a wholly owned subsidiary of y a country company x represents that it is eligible to elect foreign disregarded_entity status however x inadvertently failed to file timely a form_8832 entity classification election to elect foreign disregarded_entity status effective date plr-107792-06 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 sec_301_7701-3 provides that unless the entity elects otherwise a sec_301_7701-3 provides that an election made under sec_301_7701-3 provides that an eligible_entity may elect to be sec_301_7701-3 provides that a member of a foreign eligible_entity foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability 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 this determination is based solely on the statute or law pursuant to which the entity is organized classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed association elects under sec_301_7701-3 to be disregarded as an entity separate from its owner the following is deemed to occur the association distributes all its assets and liabilities to its single owner in liquidation of the association 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 provides the standards the commissioner sec_301_7701-3 provides that if an eligible_entity classified as an plr-107792-06 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 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 conclusion based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center electing to be a foreign disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the election except as specifically set forth herein we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code the internal_revenue_code provides that it may not be used or cited as precedent letter is being sent to x’s authorized representative this ruling is directed only to the taxpayer requesting it sec_6110 of in accordance with the power_of_attorney on file with this office a copy of this plr-107792-06 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely s william p o'shea associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------------------ ------------------------------- --------------------------- ---------------------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ---------------- telephone number -------------------- refer reply to cc psi bo1 plr-123066-15 date december x -------------------------------------------------- ------------------------------- y --------------------------------------------------- ------------------------------ a -------------------------------------------- ---------------------------- b -------------------------------------------- --------------------- date date date date state --------------------- -------------------- ------------------- ------------------------ ------------ dear ---------------------- this responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting relief under sec_1362 of the internal_revenue_code the code plr-123066-15 facts according to the information submitted and representations made within x was incorporated on date under the laws of state a community_property_state and made a valid s election effective date on date all of the shares of x were transferred to y y was formed on date under the laws of state and is wholly owned by a and b a husband and wife as community_property y was treated as a partnership for income_tax purposes on date x discovered that y is an ineligible shareholder that caused x’s s election to termination effective date x represents that if its s_corporation_election terminated it was inadvertent and was not motivated by tax_avoidance or retroactive tax planning x also represents that x and its shareholders agree to make any adjustments required as a condition of obtaining relief under the inadvertent_termination_rule as provided under sec_1362 of the code that may be required by the secretary x further represents that x and its shareholders have filed consistently with x continuing to be a valid s_corporation law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for the year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in subsection c or an organization described in subsection c who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides in part that if an election under sec_1362 by any corporation was terminated under sec_1362 the secretary determines that the circumstances resulting in the termination were inadvertent no later than a reasonable period of time after the discovery of the circumstances resulting in the termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder in such corporation at any time plr-123066-15 during the period of inadvertent termination of the s election agrees to makes such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the termination the corporation shall be treated as an s_corporation during the period specified by the secretary revproc_2002_69 2002_2_cb_831 provides guidance on the classification of a business_entity owned by a husband and wife as community_property if the husband and wife treat a qualified_entity as a disregarded_entity for federal_income_tax purposes the service will respect that treatment if the husband and wife treat a qualified_entity as a partnership for federal_income_tax purposes and file the appropriate partnership returns the service will respect that treatment a change in reporting position will be treated as a conversion of the entity a business_entity is a qualified_entity if it is wholly owned by a husband and wife as community_property under the laws of a state a foreign_country or a possession_of_the_united_states no person other than one or both spouses would be considered an owner for federal tax purposes and the business_entity is not treated as a corporation under sec_301_7701-2 conclusion based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election terminated on date because x had an ineligible shareholder however we conclude that the termination was inadvertent within the meaning of sec_1362 therefore x will be treated as an s_corporation effective date and thereafter provided that y and a and b treat y as a disregarded_entity for federal income taxes for all open taxable years and x’s s_corporation_election is not otherwise terminated under sec_1362 except as specifically ruled upon above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding x’s eligibility to be an s_corporation this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-123066-15 pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely david r haglund david r haglund branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


t c memo united_states tax_court mary k moylan petitioner v commissioner of internal revenue respondent docket no filed date mary k moylan pro_se robin w denick for respondent memorandum opinion powell special_trial_judge respondent determined a deficiency in petitioner's federal_income_tax in the amount of dollar_figure unless otherwise indicated section references are to the internal_revenue_code in effect for the year in issue and rule references are to the tax_court rules_of_practice and procedure - - after concessions ’ the issue is whether petitioner is entitled to deduct certain schedule c expenses the facts may be summarized as follows petitioner resided in baltimore maryland at the time the petition was filed in petitioner was employed by the board_of education for prince georges county maryland as an interpreter for the deaf petitioner also engaged in work as an interpreter for the deaf as an independent_contractor in during petitioner was also engaged in the trucking business petitioner purchased a truck tractor in during petitioner hired an independent_contractor to drive the tractor petitioner would enter into contracts with shippers to have the tractor used to haul their freight petitioner sold the tractor in on schedule c for petitioner reported income and claimed deductions for both the interpreting work and the trucking business respondent disallowed certain expenses and the following items remain in dispute respondent concedes that petitioner is entitled to the following deductions dollar_figure in depreciation an insurance expense of dollar_figure and dollar_figure in toll charges respondent also concedes that if petitioner's income falls below the threshold_amount petitioner is entitled to an earned_income_credit petitioner concedes that she is subject_to self-employment taxes she is therefore entitled to a deduction for self-employment taxes claimed allowed disallowed auto truck expenses dollar_figure dollar_figure sbig_number insurance expenses big_number big_number legal expenses big_number -q- big_number office expenses -q- repair expenses big_number -q- big_number taxes licenses big_number -0- big_number utilities big_number -0- big_number tolls big_number big_number a491 miscellaneou sec_902 -0- test expense -q- except as discussed infra petitioner presented no documentary_evidence to support the deductions that were disallowed petitioner's testimony concerning these items was sparse petitioner testified that the truck expenses dollar_figure were for diesel_fuel but she had receipts for only dollar_figure with respect to the legal expenses petitioner testified that they were incurred in connection with selling the tractor the sale of which was completed in petitioner could not state what the deduction for taxes was although from her testimony it appears that at least some part was paid to the internal_revenue_service the office expenses and utilities were for an alleged home_office she did not know however how the expenses had been allocated between the personal and business use of the residence petitioner did not know what the miscellaneous expenses were for with respect to the repair expenses petitioner agreed that some of the claimed expenses were for her personal automobile with regard to the test expense this apparently was an expense for q4e- a drug test for the driver who operated as an independent_contractor discussion sec_162 allows deductions for ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business deductions are a matter of legislative grace and taxpayers must prove that they are entitled to the claimed deductions see rule a 503_us_79 sufficient records to establish deduction amounts must be maintained see sec_6001 willits v commissioner tcmemo_1999_230 a taxpayer's inability to produce records does not relieve the taxpayer of the burden_of_proof see 64_tc_651 affd 566_f2d_2 6th cir in the present case petitioner has failed to produce sufficient documentation to support the claimed deductions petitioner introduced into evidence a number of so-called settlement sheets sheets these sheets were produced by the various companies for which petitioner's driver hauled freight the sheets contain various information on the trucking runs eg the location of the containers the distances pick-up dates etc the sheets also note the costs of each run and in some cases the amounts paid out by the company contracting for the runs - - there is however no means by which to ascertain from the sheets what expenses claimed by petitioner as deductions were incurred the sheets do not specify amounts paid_by petitioner and the information is simply too general petitioner did not provide any receipts canceled checks or any type of documentation that would connect the information provided on the sheets with the claimed deductions petitioner provided nothing more than her own curiously vague testimony in an effort to prove the expenses were actually incurred this court is not bound to accept the self-serving unverified testimony of a taxpayer see 99_tc_202 with respect to the attorney's_fees incurred in the sale of the tractor in even if they were substantiated they would not be deductible as an ordinary and necessary business_expense in see 499_f2d_754 4th cir revg en bane 59_tc_146 furthermore with regard to the test expense this was an expense of the driver who was an independent_contractor and was not petitioner's expense with respect to other items such as insurance and taxes clearly petitioner could have obtained some documentation rather than obtain evidence to support her claims petitioner's litigation tactic seems to have been to attempt to blame respondent for her lack of records but as far as we can determine respondent allowed deductions for all expenses that were substantiated -- - in sum petitioner must establish that the deductions claimed are ordinary and necessary expenses and further must substantiate the deductions claimed see also 65_tc_87 affd per curiam 540_f2d_821 5th cir petitioner has failed to do so except for respondent's concessions respondent's determinations are sustained decision will be entered under rule


internal_revenue_service department of the treasury number release date index number s washington dc person to contact telephone number refer reply to cc fip plr-100302-03 date date legend taxpayer target state a year year year year year year year dear this responds to your request for our consent to taxpayer’s revocation of its election under sec_831 to be taxed only on its investment_income effective for year taxpayer is a calender year mutual property insurance association operating continuously in state a since year and incorporated in that state since year the risks taxpayer assumes are generally limited to coverage against the loss of or damage to property taxpayer elected to be taxable only on its investment_income under sec_831 for the tax years beginning on january of year target prior to the january of year was a mutual property insurance_company organized under state a law target generally limited the risks it assumed to coverage against losses to property from january of year through the end of year target for federal_income_tax purposes was a non-life insurance_company exempt from taxation under sec_501 because its net written premiums or if greater direct written premiums for these taxable years did not exceed dollar_figure on january of year target merged into taxpayer under the laws of state a sec_831 provides generally that insurance_companies other than life_insurance_companies are taxed on their taxable_income sec_831 allows certain small non-life insurance_companies to elect to be taxed on their taxable_investment_income only this election is found under sec_831 and a company is eligible to make the election if as provided in sec_831 its net written premiums or if greater direct written premiums for the taxable_year exceed dollar_figure but do not exceed dollar_figure once the election is made the company’s taxable_investment_income is computed under sec_834 at the time taxpayer made the sec_831 election in year the make-up of the types of policies that taxpayer was writing was predominately farm policies with the reduction of the number of farms in state a taxpayer’s current writings are growing towards homeowner and light commercial agricultural policies a light commercial agricultural policy involves such situations as a farmer operating a farm implement repair shop on his farm in order to increase his revenue such coverage presents additional risk as compared to a traditional property policy the risk limits of the policies written have increased over the years since taxpayer filed its election specifically taxpayer’s average risk quadrupled since year at the time taxpayer made the sec_831 election for year it was only allowed to write insurance in counties within state a in contrast in year taxpayer amended its charter such that it could insure property in any county in state a provided it received permission from the state a insurance commissioner currently taxpayer can insure property in counties in state a insuring a farm implement repair shop requires not only insurance for the farm buildings but also for any farm equipment that may be damaged while being repaired for example a normal farm policy would not cover a combine that was damaged by a fire while the combine was in the custody and care of the insured for repairs in fact a normal farm policy would specifically exclude such coverage at the beginning of year target merged with taxpayer nearly doubling the number of policyholders of the combined entity measured by year-end year figures compared with year-end year figures the merger resulted in an increase of in gross premiums a increase in gross assets and a increase in taxable_investment_income as a result of the merger taxpayer had to adopt the broadest policy provisions that were previously issued by either target or taxpayer more perils of coverage are now included as standard coverage under the new taxpayer policies particularly in the area of farm personal_property coverage the discounts on the new homes homes less than years of age preferred property discounts and higher deductible credits that were offered by one company but not the other must now be applied to the new taxpayer policies the rate structures of both target and taxpayer were combined allowing the lowest rate for similar risks to be changed so that policyholders did not suffer higher premiums as a result of the merger further under taxpayer’s present and future reinsurance contracts it will have to purchase more facilitative reinsurance due to the size of risks that are encounter on today’s farmsteads taxpayer submitted data for the five taxable years prior to year comparing its actual tax results as an electing company under sec_831 with the tax results that taxpayer would have had if it had not made the election further taxpayer represents that it will not make an election under sec_831 to be taxed on only its investment_income for any of the first five taxable years following the year year to which the consent relates section f of the technical_and_miscellaneous_revenue_act_of_1988 added the flush paragraph following sec_831 a ii which states the election under clause ii shall apply to the taxable_year for which made and for all subsequent years for which the requirements of clause i are met such election once made may be revoked only with the consent of the secretary in making the change congress indicated that in adopting the amendment it intended that the election not be used as a means of eliminating tax_liability eg by making the election only for years when the taxpayer did not have net operating losses rather it is intended that the election be a simplification measure for small companies h_r rep no 100th cong 2d sess s rep no 100th cong 2d sess as indicated above taxpayer has shown that since the time it made the election to be taxed only on its investment_income in year the nature of its business has changed substantially in view of the foregoing taxpayer requests that consent be granted to the revocation to its sec_831 election provided that taxpayer has not postponed the securing of reinsurance on its risks or any other underwriting expense item in anticipation of securing our consent to its revocation consent is hereby granted to the revocation of taxpayer’s sec_831 election effective for year no opinion is expressed under other sections of the code and income_tax regulations that may also be applicable this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax returns to be filed by taxpayer with respect to the taxable_year with respect to which the consent is granted and the next succeeding five taxable years pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely yours donald j drees jr senior technician reviewer branch office of associate chief_counsel financial institutions products cc


internal_revenue_service number release date index number ---------------- ------------------------------ --------------------------------------------- ---------------------------- in re ------------------------------ ------------------------------ ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ telephone number -------------------- refer reply to cc tege eb ec plr-118744-08 date date legend corporation ------------------------------ partnership -------------------------------------------------- subsidiary -------------------------------------- x percent -------- -------------------------- dear ------------ this letter is in response to a letter dated date submitted by your authorized representative requesting a ruling under sec_162 of the internal_revenue_code code specifically you requested a ruling that the deduction limitation of sec_162 does not apply the facts as represented are as follows corporation owns approximately x percent of the common limited_partnership interests in partnership corporation elected to be taxed as a real_estate_investment_trust reit as defined under sec_856 of the code virtually all of corporation's interests in properties and other assets are held through the partnership partnership and its wholly owned entities hold substantially_all of its properties and assets both corporation and partnership have common equity securities that are required to be registered under sec_12 of the securities exchange act of exchange act corporation has employees who are covered employees covered employees within the meaning of sec_162 of the code certain covered employees of corporation are also employees and senior executives of partnership the covered employees are compensated for the services they perform for both entities under a variety of arrangements the covered employees provide only a small portion of their services as employees of corporation and the vast majority of their time and effort is devoted to managing partnership subsidiary is a subsidiary of partnership and it manages all payroll activities for partnership and corporation plr-118744-08 the total compensation of one or more of the covered employees will exceed dollar_figure----------- and will not be qualified_performance-based_compensation within the meaning of sec_162 of the code sec_162 of the code allows a deduction for all of the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business including a reasonable allowance for salaries or other compensation_for_personal_services actually rendered sec_162 of the code provides that for any publicly_held_corporation no deduction shall be allowed for applicable_employee_remuneration with respect to any covered_employee to the extent that the amount of such remuneration for the taxable_year exceeds dollar_figure million sec_162 of the code defines publicly_held_corporation to mean any corporation issuing any class of common equity securities required to be registered under sec_12 of the exchange act sec_1_162-27 of the income_tax regulations regulations provides that whether a corporation is publicly held is determined based solely on whether as of the last day of its taxable_year the corporation is subject_to the reporting obligations of sec_12 of the exchange act under sec_1_162-27 of the regulations a publicly_held_corporation includes an affiliated_group_of_corporations as defined in sec_1504 of the code determined without regard to sec_1504 which lists exceptions to the definition for purposes of sec_162 an affiliated_group_of_corporations does not include any subsidiary that is itself a publicly_held_corporation sec_162 of the code defines covered_employee as any employee of the taxpayer if a as of the close of the taxable_year such employee is the chief_executive_officer of the taxpayer or is an individual acting in such capacity or b the total compensation of such employee for the taxable_year is required to be reported to shareholders under the exchange act by reason of such employee being among the four highest compensated officers for the taxable_year other than the chief_executive_officer sec_1_162-27 of the regulations generally provides that whether an individual is a covered_employee for purposes of sec_162 is determined pursuant to the executive compensation disclosure rules under the exchange act sec_1504 of the code defines affiliated_group to mean one or more chains of includible corporations connected through stock ownership with a common parent_corporation if the common parent directly own sec_80 percent of the total voting power of the stock and has a value equal to at least percent of the total value of the stock of the corporation plr-118744-08 based solely on the facts presented we rule as follows the deduction limitation of sec_162 of the code does not apply to partnership with respect to remuneration paid to a covered_employee as compensation_for services performed by the covered_employee as an employee of partnership the deduction limitation of sec_162 of the code does not apply to corporation with respect to its distributive_share of income or loss from partnership that includes the compensation expense of the covered employees to the extent such compensation expense is attributable to services performed by the covered employees as employees of partnership except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in this regard note that we specifically express no opinion concerning the limited_partnership agreement of partnership including any amendments thereto or the allocation of the compensation between partnership and corporation 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely kenneth m griffin senior technician reviewer executive compensation branch office of division counsel associate chief_counsel tax exempt government entities


department of the treasury p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si - plr-113096-98 date october internal_revenue_service index no number release date legend decedent child will trust charitable_trust trustees this is in response to your letter dated date in which you requested rulings under sec_2518 and sec_2055 of the internal_revenue_code specifically you request rulings that the irrevocable and unqualified refusal by child to accept certain property passing under decedent’s trust will constitute a qualified_disclaimer under sec_2518 the property disclaimed by child and segregated in the disclaimed property fund of charitable_trust will qualify for an estate_tax charitable deduction under sec_2055 according to your submission decedent died testate on date a resident of new york article fifth of decedent's will provides that decedent's residuary_estate is to be distributed to trust a revocable_trust created by decedent during her lifetime under article fifth a of the trust child is bequeathed an amount equal to the greater of a one-third of decedent’s total gross_estate minus the sum of funeral and administration_expenses debts mortgages and liens all as shown on the federal estate_tax_return for decedent’s estate but before any death taxes and as adjusted for any increase in the amount so determined resulting from any audit of said return or other cause or b dollar_figure under article fifth b of the trust after the bequests to child and the other specified individuals and charitable institutions are satisfied the entire balance of the assets in the trust fund is to be distributed to charitable_trust previously established by the decedent and decedent’s spouse it is represented that charitable_trust is exempt from federal_income_tax as an organization described in sec_501 under the trust if charitable_trust is not an organization described in sec_170 sec_2055 and sec_2522 at the time any distribution is to be made trustees are to distribute the remaining balance of trust to such organizations as they select that are described in these code sections article iii a of charitable trust’s governing instrument provides that charitable_trust is to be managed by a committee the committee must consist of at least three members one of whom must be child for so long as child is living and competent and wishes to serve as a member of the committee under article iii b for so long as child is a member of the committee child shall solely exercise all powers duties and functions of the committee article vi of charitable_trust provides that the trust is created and shall be operated exclusively for religious charitable scientific literary or educational_purposes or for the prevention of cruelty to children or animals article vii of charitable_trust states that trustees shall not make any payments from the charitable_trust fund which may jeopardize the tax exempt status of the trust under sec_501 such payments shall be made only upon and in accordance with the written directions of the committee or as may be required by restricted donations article xii of charitable_trust permits child to amend charitable_trust however no such amendment shall permit any part of the trust fund to be used administered or distributed for any purpose other than those set forth in article vi nor can any amendment result in termination or revocation of the trust article xiv permits the committee to remove the trustees at any time the estimated value of decedent’s gross_estate exceeds dollar_figure therefore child will receive a bequest under article fifth a of the trust of an amount in excess of dollar_figure child proposes to execute a disclaimer pursuant to which she will disclaim dollar_figure of this bequest under applicable state law child will be treated as predeceasing decedent with respect to the disclaimed amount accordingly under article fifth b of the trust the disclaimed amount will pass to charitable_trust in addition child proposes to disclaim any right to make any decisions or vote on any proposals regarding the distribution of any part of the disclaimed funds and any right to amend charitable_trust under article xii with respect to the disclaimed funds child will also waive any right to discharge or elect any member of the committee having any authority over the disclaimed funds child will also amend charitable_trust pursuant to the authority granted in article xii of charitable_trust the amendments will provide that the disclaimed funds are to be placed in a disclaimed property fund of charitable_trust and held separate from all other assets of charitable_trust child will have no right under article xii to amend charitable_trust with respect to the disclaimed property fund the charitable_trust committee will then be divided into two subcommittees one subcommittee will be known as the unrestricted funds committee and will manage any assets of the charitable_trust fund which are not disclaimed assets the other subcommittee will be known as the disclaimed property funds committee and will manage the assets of the charitable_trust fund which have been disclaimed by child child may only serve as a member of the unrestricted funds committee child is prohibited from serving on the disclaimed property funds committee as a result child will not be entitled to direct or vote on any distributions from the disclaimed property fund the independent members of the disclaimed property funds committee that is those persons other than child or anyone related or subordinate to child within the meaning of sec_672 of the internal_revenue_code will have the sole authority to direct the distribution of the entire principal of the disclaimed property fund and any income generated by the assets in the disclaimed property fund child will have no right to discharge appoint or elect any member of the disclaimed property fund committee only independent members of the committee currently in office or hereafter appointed will exercise this authority sec_2046 provides that for estate_tax purposes disclaimers of property interests passing upon death are treated as provided in sec_2518 sec_2518 provides that if a person makes a qualified_disclaimer with respect to any interest in property the federal estate gift and generation-skipping_transfer_tax provisions will apply to that interest as if it had never been transferred to such person under sec_2518 the term qualified_disclaimer means an irrevocable and unqualified refusal by a person to accept an interest in property provided such refusal is in writing the disclaimer is received by the transferor of the interest his legal_representative or the holder of the legal_title to the property to which the interest relates not later than the date which is months after the later of the date on which the transfer creating the interest in such person is made or the day on which such person attains age the person disclaiming the interest has not accepted the interest or any of its benefits and as a result of such refusal the interest passes without any direction on the part of the person making the disclaimer and passes either to the spouse of the decedent or to a person other than the person making the disclaimer under sec_25_2518-1 of the gift_tax regulations if a qualified_disclaimer is made the property is treated for federal gift estate and generation-skipping_transfer_tax purposes as passing directly from the transferor and not from the disclaimant to the person entitled to receive the property as a result of the disclaimer thus the disclaimant is not treated as making a gift sec_25_2518-2 states that if a beneficiary who disclaims an interest in property is also a fiduciary the disclaimant cannot retain a wholly discretionary power to direct the enjoyment of the disclaimed interest for example a fiduciary's disclaimer of a beneficial_interest does not meet the requirements of a qualified_disclaimer if the fiduciary exercised or retains a discretionary power to allocate enjoyment of that interest among members of a designated class under sec_25_2518-2 in general a disclaimer is not a qualified_disclaimer unless the disclaimed interest passes without any direction on the part of the disclaimant to a person other than the disclaimant the disclaimer will not be qualified if the disclaimant either alone or in conjunction with another directs the redistribution or transfer of the property or interest in property to another person or has the power to direct the redistribution or transfer of the property or interest in property to another person unless such power is limited by an ascertainable_standard sec_25_2518-3 states that a disclaimer of a specific pecuniary amount out of a pecuniary or nonpecuniary bequest or gift which satisfies the other requirements of a qualified_disclaimer under sec_2518 and the corresponding regulations is a qualified_disclaimer provided that no income or other benefit of the disclaimed amount inures to the benefit of the disclaimant either prior to or subsequent to the disclaimer thus following the disclaimer of a specific pecuniary amount from a bequest or gift the amount disclaimed and any income attributable to such amount must be segregated from the portion of the gift that was not disclaimed the segregation of assets making up the disclaimer of a pecuniary amount must be made on the basis of the fair_market_value of the assets on the date of the disclaimer or on the basis that is fairly representative of value changes that may have occurred between the date of transfer and the date of disclaimer under new york law any beneficiary of a disposition may renounce all or part of the beneficiary’s interest unless the creator of the disposition has otherwise provided the filing of a renunciation has the same effect with respect to the renounced interest as though the renouncing person had predeceased the creator or the decedent n y estates powers and trusts law 2-dollar_figure mckinney under sec_2055 for estate_tax purposes the value of the taxable_estate shall be determined by deducting from the value of the gross_estate the amount of all bequests legacies devises or transfers to or for_the_use_of any corporation organized and operated exclusively for religious charitable scientific literary or educational_purposes a_trust that qualifies under sec_501 is one that is organized and operated exclusively for these purposes sec_20_2055-2 of the estate_tax regulations states that in the case of a bequest devise or transfer made by a decedent dying after date the amount of a bequest devise or transfer for which a deduction is allowable under sec_2055 includes an interest which falls into the bequest devise or transfer as the result of a qualified_disclaimer under sec_2518 in revrul_72_552 1972_2_cb_525 the decedent who was the president and a director of a corporation organized under sec_501 transferred property to the corporation in his capacity as president and a director the decedent in conjunction with the other directors of the corporation had the power to direct the disposition of the corporation’s funds for charitable purposes the ruling holds that because the decedent retained the right in conjunction with others to designate the entities that would possess or enjoy the property transferred to the corporation the property transferred by the decedent to the corporation was included in the decedent’s gross_estate at his death under sec_2036 issue in the present case any property that is disclaimed by child will under applicable state law and according to the terms of the trust pass to charitable_trust the disclaimed property will be placed in a disclaimed property fund in charitable_trust child is precluded from serving on the disclaimed property funds committee and cannot participate in any decisions or vote on any proposals to direct the distribution of any part of the disclaimed funds child is also prohibited from discharging or electing any member of the committee having any authority over the disclaimed property we conclude that assuming the other requirements of sec_2518 are satisfied including the requirements of sec_25_2518-3 the disclaimer will constitute a qualified_disclaimer under sec_2518 issue it is represented that charitable_trust is a_trust described in sec_2055 and is exempt from taxation under sec_501 under applicable state law and the terms of trust any amount disclaimed by child will pass to charitable_trust accordingly based on the representations noted above and assuming the disclaimers are qualified disclaimers under sec_2518 the property passing to charitable_trust as a result of child’s disclaimer and segregated in the disclaimed property fund will qualify for an estate_tax charitable deduction under sec_2055 the amount deductible under sec_2055 is limited to the amount disclaimed dollar_figure and does not include any income attributable to the disclaimed amount under sec_25_2518-3 this ruling is based on the representations noted above and the facts and applicable law in effect on the date of this letter if there is a change in material fact or law local or federal before the transactions considered in this ruling take effect the ruling will have no force or effect if the taxpayer is in doubt whether there has been a change in material fact or law a request for reconsideration of this ruling should be submitted to this office except as specifically ruled herein we express no opinion as to the consequences of this transaction under the cited provisions of the code or under any other provisions of the code this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely industries assistant chief_counsel passthroughs and special george masnik chief branch by enclosure copy for sec_6110 purposes


internal_revenue_service uniform issue list easury department of pr washington dc contact person telephone number in reference to t ep ra t3 date oct legend employer a company b company c company d project m congregation n plan x plan y dear this is in response to your request for a ruling dated date submitted by your authorized representative with respect to an arrangement under sec_403 of the internal_revenue_code letters dated date date date date and date supplemented the request employer a is an organization described in sec_501 of the code the board_of trustees of employer a established plan x effective empioyer a has amended and restated plan x effective as of t all contributions under plan x are used to purchase individual annuities issued to each participant under plan x employees can purchase tax-sheltered annuities from ts page company b company c or company d all contributions made by employer a are used to purchase annuities from companies b c or d as directed by participants all contracts are designed to meet the requirements of sec_403 of the code only eligible employees may participate in plan x eligible_employee is defined in article xi of plan x as any regular faculty_member or any regular non-faculty employee classified as exempt who is employed by employer a however certain administrators who were first employed by employer a prior to and who made an irrevocable election to participate in plan y shall not be an eligible_employee a non-faculty employee i who was first employed by employer a prior to ii who was eligible to participate in plan y prior to and ji whose position was classified as exempt pursuant to project m shall not be an eligible_employee if such employee made an irrevocable election effective to remain a participant in plan y a non-faculty employee i who was first employed by employer a prior to ii who was eligible to participate in plan x prior to and iii whose position was classified as non-exempt pursuant to project m shail be an eligible_employee if such employee made an irrevocable election effective to continue participating in plan x any leased_employee deemed to be an employee of employer a shall not be an eligible_employee eligible_employee shall not include i employees whose employment is incidental to their educational program ii adjuncts iii post-doctoral research associates iv interns v visiting scholars vi employees whose employment with employer a is temporary vii employees hired on a project basis or for a short-term assignment or viii exempt employees in any subcategory of an employee classification level a member of a religious_order other than a member of congregation n shall be an eligible_employee only in the event the member or the member's order so elects and a member of congregation n shall be a member only in the event that order so elects plan x provides for three types of contributions non-elective non-matching contributions including mandatory participant contributions under sec_3_1 of plan x which are required of all eligible employees as a condition_of_employment and university contributions under sec_3_1 salary reduction contributions under sec_3_1 b and rollover_contributions of eligible rollover distributions under sec_3_1 participants may contribute under the salary reduction agreement a percentage of their regular salary to plan x in excess of percent of such regular salary subject_to the limits on elective_deferrals an eligible_employee may enter into a salary reduction agreement with employer a agreeing to contribute each pay_period elective_deferral contributions to plan x such contributions are made on a tax-deferred basis and such contributions shall reduce the regular salary otherwise payable to the participant and shall be paid in cash to companies b c or d the salary reduction agreement shall be effective only with respect to regular salary received on or after the date such agreement is executed and shall be binding on the parties and irrevocable with respect to the regular salary earned while the salary reduction agreement is in effect a participant may suspend the salary reduction agreement with respect to amounts not yet earned page an eligible_employee may contribute to plan x in cash as a rollover_contribution a prior distribution from a tax-sheltered annuity plan described in sec_403 of the code sec_3_7 of plan x provides that a distributee receiving an eligible_rollover_distribution under plan x may elect to have the distribution rolled over in a direct_rollover to an eligible retirement pian contributions to plan x in any plan_year when combined with any other contributions made on behalf of a participant in plan x are limited to the amount of the exclusion_allowance as set forth in sec_403 of the code as provided in sec_3_2 of plan x the maximum amount of elective_deferrals under plan x combined with elective_deferrals under any cash or deferred arrangements under sec_401 sec_408 or sec_403 are limited under sec_3_2 of plan x to dollar_figure as increased by the cost of living adjustment for the year pursuant to sec_3_2 of plan x this limitation may be increased by a qualified_participant if a participant has more than years_of_service with employer a sec_3_2 of plan x limits overall annual_additions to those of sec_415 of the code under sec_3_2 of plan x the limits set forth in plan x pertaining to sec_415 of the code shall be adjusted to take benefits accrued under other plans of employer a into account under plan x all contributions to plan x will be nontransferable sec_4 and nonforfeitable sec_5 pursuant to section of plan x the entire_interest of each participant will commence distribution beginning no later than april of the calendar_year following the calendar_year in which the participant attains age over the life of the participant or over the lives of the participant and a designated_beneficiary in the case of a participant who attained age before date distributions need not commence until april following the calendar_year in which the participant terminates service with employer a effective date and notwithstanding anything to the contrary in section each participant who has attained age in calendar years or may elect to defer commencement of his or her entire_interest under plan x until april of the calendar_year following the later of the calendar_year in which such participant attains age or the calendar_year in which such participant actually retires pursuant to section a of plan x distributions from the annuity_contracts may not be made prior to the time any participant separates from service dies or becomes disabled or attains age no distributions may be made on account of a participant's financial hardship except to the extent that the participant is otherwise entitled to a distribution under plan x section provides that all distributions will be made in accordance with sec_401 of the code including the minimum distribution incidental benefit requirements of sec_1 a -2 of the proposed income_tax regulations based on the foregoing you request the following rulings ll7 page plan x satisfies the requirements of the internal_revenue_code as applicable to a b program and amounts contributed on behalf of employees by employer a other than employee after-tax contributions shall be excluded from the employees’ gross_income in the year of contribution to the extent such amounts do not exceed the applicable limits described in the code plan x as designed satisfies the nondiscrimination requirements applicable to b plans plan x correctly sets forth the limitations of sec_401 sec_402 sec_403 and sec_415 and e of the code applicable to b plans plan x’s method_of_accounting for benefits accruing under plan y is permissible under sec_403 of the code plan x’s treatment of contributions which exceed the limits under sec_403 of the code is permissible plan x correctly sets forth the method to calculate the any year limit under sec_415 of the code sec_403 of the code provides that amounts contributed by an employer to purchase an annuity_contract for an employee are excludable from the gross_income of the employee in the year contributed to the extent of the applicable_exclusion allowance provided the employee performs services for an employer which is exempt from tax under sec_501 of the code as an organization described in sec_501 or the employee performs services for an educational_institution as defined in sec_170 of the code which is a state a political_subdivision of a state or an agency_or_instrumentality of any one or more of the foregoing the annuity_contract is not subject_to sec_403 of the code the employee's rights under the contract are nonforfeitable except for failure to pay future premiums such contract is purchased under a plan which meets the nondiscrimination requirements of paragraph except in the case of a contract purchased by a church and in the case of a contract purchased under a plan which provides a salary reduction agreement the contract meets the requirements of sec_401 sec_403 of the code provides further that the employee shall include in his gross_income the amounts actually distributed under such contract in the year distributed as provided in sec_72 of the code sec_403 of the code requires that arrangements pursuant to sec_403 of the code must satisfy requirements similar to the requirements of sec_401 and similar to the incidental death_benefit requirements of sec_401 with respect to benefits accruing after date in taxable years ending after such date the requirements of sec_401 regarding direct rollovers are met in addition this section requires that for distributions made after date page sec_401 of the code generally provides that the required_beginning_date for commencement of benefits is april of the calendar_year following the later of the calendar_year in which the employee attains age or the calendar_year in which the employee retires sec_401 specifies required_minimum_distribution rules for the payment of benefits from qualified_plans sec_403 of the code provides generally that sec_403 annuity_contract distributions attributable to contributions made pursuant to a salary reduction agreement within the meaning of sec_402 may be paid only when the employee attains age separates from service dies becomes disabled within the meaning of sec_72 or in the case of hardship such contract may not provide for the distribution of any income attributable to such contributions in the case of hardship sec_401 of the code requires that the contract be nontransferable sec_403 of the code provides that in the case of a contract purchased under a plan which provides a salary reduction agreement the contract must meet the requirements of sec_401 sec_401 requires a sec_403 arrangement which provides for elective_deferrals to limit such deferrals under the arrangement in combination with any other qualified_plans or arrangements of an employer maintaining such plan providing for elective_deferrals to the limitation in effect under sec_402 for taxable years beginning in such calendar_year sec_402 of the code provides generally that the elective_deferrals of any individual for any taxable_year shall be included in such individual's gross_income to the extent the amount of such deferrals exceeds dollar_figure sec_402 of the code provides that the limitation under paragraph shall be increased but not to an amount in excess of dollar_figure by the amount of any employer contributions for the taxable_year used to purchase an annuity_contract under sec_403 under a salary reduction agreement sec_402 of the code provides that in the case of a qualified_employee of a qualified_organization with respect to employer contributions used to purchase an annuity_contract under sec_403 under a salary reduction agreement the limitation of sec_402 as modified by sec_402 for any taxable_year shall be increased by whichever of the following is the least i dollar_figure ii dollar_figure reduced by amounts not included in gross_income for prior taxable years by reason of this paragraph or iii the excess of dollar_figure multiplied by the number of years_of_service of the employee with the qualified_organization over the employer contributions described in paragraph made by the organization on behalf of such employee for prior taxable years determined in the manner prescribed by the secretary a qualified_organization for these purposes means any educational_organization hospital home health service agency health and welfare service agency church_or_convention_or_association_of_churches and includes any page organization described in sec_414 and a qualified_employee means any employee who has completed years_of_service with the qualified_organization sec_415 of the code provides in relevant part that an annuity_contract described in sec_403 shall not be considered described in sec_403 unless it satisfies the sec_415 limitations in the case of an annuity_contract described in sec_403 the preceding sentence applies only to the portion of the annuity_contract exceeding the sec_415 limitations and the amount of the contribution for such portion shall reduce the exclusion_allowance as provided in sec_403 sec_415 of the code states that in the case of amounts contributed for an annuity_contract described in sec_403 for any year in the case of a participant who is an employee of an educational_organization a hospital a home health service agency a health and welfare service agency or a church convention or association of churches or an organization described in sec_414 at the election of the participant there is substituted for the amount specified in paragraph b the least of i percent of the participant's includible_compensation as defined in sec_403 plus dollar_figure ii the amount of the exclusion_allowance determined for the year under sec_403 or iii dollar_figure in this case you represent that employer a an employer described in sec_501 of the code has established plan x as its sec_403 program for its employees all contributions and the eamings thereon are fully vested and nonforfeitable at all times plan x does not meet the requirements of a sec_403 annuity_contract the restrictions of transferability are present in plan x as required by sec_401 g of the code plan x satisfies the limits under sec_403 of the code that amounts attributable to elective_deferrals shall not be distributable earlier than upon the attainment of age separation_from_service death disability or hardship in addition plan x satisfies the sec_403 requirements and limits contributions in accordance with sec_403 and sec_415 of the code also the salary reduction agreement which each eligible_employee of employer a who becomes a participant in plan x may elect to enter into meets all of the applicable_requirements of the code and regulations accordingly we conclude with respect to ruling requests one three and six that plan x satisfies the requirements of the internal_revenue_code as applicable to a b program and amounts contributed on behalf of employees by employer a other than employee after-tax contributions shall be excluded from the employees’ gross_income in the year of contribution to the extent such amounts do not exceed the applicable limits described in the code we also conclude that plan x correctly sets forth the limitations of sec_402 sec_403 and sec_415 including c b and e of the code applicable to b plans this ruling is contingent upon the adoption of the amendments to plan x as stipulated in your correspondence dated date date and date and will have no effect unless such proposed amendments are adopted ozold page we are unable to address ruling_request two that part of ruling_request three that asks us to rule on sec_401 and ruling requests four and five because this ruling is limited to the form rather than the operation of pian x excluding any form defects that may violate the nondiscrimination requirements of sec_403 and sec_401 this ruling does not extend to any operational violations of sec_403 of the code by plan x now or in the future this ruling is directed only to the taxpayer who requested it sec_61 k of the code provides that this ruling may not be used or cited by others as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely yours frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures notice deleted copy of ruling letter cc sed


t c memo united_states tax_court jason e phillips petitioner v commissioner of internal revenue respondent docket no filed date jason e phillips pro_se brett chmielewski eric r skinner and louis f meizlish student for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined a deficiency in petitioner’s federal_income_tax tax for his taxable_year of dollar_figure the issues for decision for petitioner’s taxable_year are is petitioner entitled under sec_151 a to depend- ency exemption deductions for his two children ep and rp we hold that he is not is petitioner entitled to the child_tax_credit under sec_24 with respect to ep and rp we hold that he is not is petitioner entitled to the additional_child_tax_credit under sec_24 with respect to ep and rp we hold that he is not findings_of_fact some of the facts have been stipulated and are so found petitioner resided in michigan at the time he filed the petition at a time not disclosed by the record petitioner married lindsay m schouw ms schouw they have two children ep and rp we shall sometimes refer collectively to ep and rp as the children on date petitioner and ms schouw divorced pursuant to the judgment of divorce divorce judgment that the family division of the circuit_court for the county of clinton clinton circuit_court entered petitioner and ms schouw were 1all section references are to the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure awarded joint legal custody of ep and rp ms schouw was awarded physical custody of them and petitioner was entitled to reasonable and liberal parenting time the divorce judgment also provided in pertinent part support it is further ordered and adjudged that defendant jason phillips petitioner shall pay to the state of michigan disbursement unit for remittance to plaintiff ms schouw for the support of the minor children ep and rp monthly support as follows which includes dollar_figure monthly child care costs and dollar_figure monthly for ordinary health care when there are two minor chil- dren and dollar_figure per month child care costs and dollar_figure per month ordinary health care when there is one mi- nor child dollar_figure per month for two minor children dollar_figure per month when one minor child remains on date the clinton circuit_court entered an order regarding parenting time parenting-time order the terms of which petitioner and ms schouw had previously stipulated that order provided that petitioner was to continue to have reasonable and liberal parenting time with ep and rp and that the parties petitioner and ms schouw will change the alter- nate weekend schedule after the start of and the change will take place by father having two weekends in a row and the parties alternating weekends thereafter the parenting-time order did not modify the provision in the divorce judgment with respect to support as of the end of both ep and rp were under the age of and neither of them provided over one-half of his own support for that year each of ep and rp spent more than one-half of the nights during with ms schouw and less than one-half of those nights with petitioner ms schouw did not at any time waive her right to claim dependency_exemption deductions for ep and rp for her taxable_year petitioner timely filed form_1040 u s individual_income_tax_return for his taxable_year return in that return petitioner claimed with respect to his children ep and rp dependency_exemption deductions the child_tax_credit and the additional_child_tax_credit petitioner did not attach to his return a written declaration that ms schouw signed in which she waived her right to claim dependency_exemption deductions for ep and rp respondent issued to petitioner a notice_of_deficiency notice for his taxable_year in that notice respondent determined inter alia that petitioner is not entitled to dependency_exemption deductions the child_tax_credit 2petitioner and ms schouw prepared separate summary docu- ments setting forth their respective views regarding the nights during which ep and rp spent with each of them according to petitioner ep and rp spent nights with him and nights with ms schouw during according to ms schouw ep and rp spent nights with petitioner and nights with her during and the additional_child_tax_credit that he claimed with respect to his children ep and rp opinion petitioner has the burden of establishing that the determi- nations in the notice are wrong see rule a 290_us_111 dependency_exemption deductions sec_151 provides that the exemptions provided by this section shall be allowed as deductions to a taxpayer sec_151 provides an exemption for each dependent of the taxpayer as defined in sec_152 sec_152 defines the term dependent to mean either a qualifying_child or a qualifying_relative sec_152 defines the term qualifying_child as an individual who satisfies the relationship requirement in sec_152 the principal-place-of-abode require- ment in sec_152 the age requirement in sec_152 and the support requirement in sec_152 3in his pretrial memorandum petitioner indicated under the heading burden_of_proof jason e phillips petitioner will provide documentation to support the number of overnights and the accuracy of the dates on which the over nights took place at jason e phillips’ residence in petitioner thus acknowl- edged in his pretrial memorandum that he has the burden_of_proof in this case as pertinent here an individual satisfies the relationship requirement if that individual is a child of the taxpayer sec_152 as pertinent here an individual satisfies the age requirement if that individual is under age as of the close of the calendar_year in which the taxpayer’s taxable_year begins sec_152 an individual satisfies the principal- place-of-abode requirement if that individual has the same principal_place_of_abode as the taxpayer for more than one-half of the taxpayer’s taxable_year sec_152 the parties agree that each of ep and rp satisfies the relationship requirement in sec_152 the age re- quirement in sec_152 and the support requirement in sec_152 the parties also agree that each of the children spent more than one-half of the nights during with ms schouw and less than one-half of those nights with peti- tioner as a result the parties agree that each of ep and rp does not satisfy the principal-place-of-abode requirement in sec_152 nevertheless petitioner argues on brief is the issue of who receives the dependant sic deduction for the tax_year to be decided by who has more overnights when there are so few days of a difference petitioner appears to disagree with the requirement that congress prescribed in sec_152 to allow a taxpayer a 4see supra note dependency_exemption deduction for an individual only if inter alia the individual has the same principal_place_of_abode as the taxpayer for more than one-half of the taxable_year we are bound to follow the law as congress wrote it on the record before us we find that each of ep and rp does not satisfy the principal-place-of-abode requirement in sec_152 on that record we further find that for peti- tioner’s taxable_year each of ep and rp is not his qualify- ing child as defined in sec_152 and that therefore each of them is not his dependent as defined in sec_152 based upon our examination of the entire record before us we find that petitioner has failed to carry his burden of estab- 5although the parties do not address whether each of ep and rp is petitioner’s qualifying_relative as defined in sec_152 for the sake of completeness we shall consider that question on the record before us we find that petitioner has failed to carry his burden of establishing that for his taxable_year each of the children is his qualifying_relative as defined in sec_152 and that therefore each of them is his dependent as defined in sec_152 in this regard we find on that record that petitioner has failed to carry his burden of establishing inter alia that the support requirement in sec_152 is satisfied with respect to each of ep and rp for his taxable_year respondent but not petitioner addresses whether the special rule for divorced parents in sec_152 is applicable in the instant case on the record before us we find that the special rule for divorced parents in sec_152 is not applica- ble here in this regard we have found that ms schouw did not at any time waive her right to claim dependency_exemption deduc- tions for ep and rp for her taxable_year and that petitioner did not attach to his return a written declaration that ms schouw signed in which she waived her right to claim dependency_exemption deductions for the children lishing that he is entitled for his taxable_year to depend- ency exemption deductions under sec_151 for ep and rp child_tax_credit sec_24 provides a credit with respect to each quali- fying child of the taxpayer as pertinent here sec_24 defines the term qualifying_child as a qualifying_child of the taxpayer as defined in sec_152 who has not attained age sec_24 we have found that each of ep and rp is not petitioner’s qualifying_child as defined in sec_152 for his taxable_year on the record before us we find that petitioner has failed to carry his burden of establishing that each of the children is his qualifying_child as defined in sec_24 for his taxable_year on that record we find that peti- tioner has failed to carry his burden of establishing that he is entitled for his taxable_year to the child_tax_credit under sec_24 with respect to ep and rp additional_child_tax_credit the child_tax_credit provided by sec_24 may not exceed the taxpayer’s regular_tax_liability sec_24 where a taxpayer is eligible for the child_tax_credit but the taxpayer’s regular_tax_liability is less than the amount of the child_tax_credit potentially available under sec_24 sec_24 makes a portion of the credit known as the addi- tional child_tax_credit refundable we have found that petitioner has failed to carry his burden of establishing that he is entitled for his taxable_year to the child_tax_credit under sec_24 with respect to the children on the record before us we find that petitioner has failed to carry his burden of establishing that he is entitled for his taxable_year to the additional_child_tax_credit under sec_24 with respect to ep and rp we have considered all of petitioner’s contentions and arguments that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing decision will be entered for respondent