department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc pa cbs br1 uilc memorandum for associate area_counsel sb_se - from mitchel s hyman senior technician reviewer branch collection bankruptcy and summonses cc pa cbs br1 subject in response to your memorandum dated date we have reviewed five arguments that you intend to make in defending a collection_due_process_notice of determination this assignment was coordinated with branch of the office of assistant chief_counsel administrative provisions and judicial practice our analysis and recommendations follows this document may not be used or cited as precedent sec_6110 legend year amount a date date date issue sec_1 whether sec_6201 authorized the service’s assessment pursuant to the amended_return filed by taxpayers whether the amended_return filed by the taxpayers constitutes a waiver of the restrictions on assessment whether the taxpayers had an opportunity to dispute the tax_liability during the pendency of the prior tax_court case and are now precluded by sec_6330 from arguing that the assessment violated sec_6213 whether taxpayers are equitably estopped from contesting the validity of the assessment due to taxpayers’ prior position taken in the stipulated settlement whether the stipulated settlement that incorporated the assessment is a valid contract conclusion sec_1 yes the circumstances in the current case are distinguishable from those in 99_tc_466 no this argument is not consistent with chief counsel’s position and should not be made in this case no whether an assessment is premature under sec_6213 does not involve the existence or amount of the underlying tax_liability yes this argument is supported by the facts in addition it is recommended that the argument of the duty_of_consistency doctrine be asserted yes the law of contracts applies to settlement agreements including stipulated settlements however we recommend that this argument be developed more fully background the individual taxpayers who filed a joint income_tax return for year were issued a notice_of_deficiency containing several adjustments for year including an increase in gain on the sale of business property the taxpayers timely filed a petition with the tax_court assigning error to all of the service’s determinations in addition on the same date the taxpayers mailed the tax_court petition the taxpayers mailed to the service an amended year form 1040x wherein they reported an increase in income from the sale of business property resulting in an additional tax of dollar_figureamount a the service_center received the amended_return on date and made an assessment based on the amended_return on date the assessment was made because for unknown reasons the service did not enter a freeze code on taxpayers’ account indicating a tax_court petition had been filed until the same cycle as the one in which the assessment was made the taxpayers and appeals ultimately entered into a stipulated decision for year throughout the pendency of the case the taxpayers were aware that the service had made an assessment per their year form 1040x in fact the taxpayers were receiving notices from the service indicating that their account had been changed pursuant to the form 1040x in addition the appeals officer gave the taxpayers computations for settlement purposes and such computations noted that the form 1040x had been considered when issuing the report at no point during the pendency of the tax_court case did the taxpayers raise any objection to the assessment on date the service issued the taxpayers a form 1058-notice of intent to levy for the taxes due for year the taxpayers timely filed a request for a collection due process hearing subsequent to this hearing appeals issued a notice_of_determination sustaining the service’s collection actions taxpayers timely petitioned tax_court for review in this petition the taxpayers allege that the assessment of the dollar_figureamount a tax_liability was illegal and violated the restrictions on assessment under sec_6213 discussion sec_6201 authorized the service assessment pursuant to the amended_return filed by the taxpayers sec_6213 does not prohibit assessment in such cases response this argument can be made if an attempt is made to distinguish the present case from the fact situation in 99_tc_466 the essential thrust of this argument is that the dollar_figureamount a was voluntarily reported by the taxpayers on an amended_return and therefore is not a deficiency as defined by sec_6211 see sec_6211 because sec_6213 specifically refers to assessment of deficiencies that provision would be inapplicable to the situation in the instant case in powerstein the tax_court ruled that amounts shown on a taxpayers’ amended_return were still subject_to the restrictions of sec_6213 due to the circumstances surrounding the filing of that amended_return in that case however the amount the taxpayers indicated on the amended_return was an amount clearly in dispute with the service and within the jurisdiction of the tax_court at the time the amended_return was filed the court in powerstein further opined that the facts and circumstances surrounding the filing of the amended_return conclusively indicated that the taxpayers were protesting the amount in light of sec_301_6211-1 specifically the taxpayers included handwritten notations on the returns that referred to the notice_of_deficiency and tax_court proceedings that the tax_court viewed as indicia of protest in the present case there was no such situation the dollar_figureamount a increase in tax_liability shown on the amended_return was not being disputed while the amended_return was filed the same day as the taxpayers’ petition and the two could be taken together as indicia of protest each document was sent to a different entity and neither document contained a reference to the other moreover unlike powerstein there was nothing on the face of the return to indicate the amount shown remained in dispute further the taxpayers’ later actions acknowledging the dollar_figureamount a as part of the agreed tax_liability for the year belie any suggestion that they intended to dispute liability for the amount at the time the amended_return was filed this factual situation strongly suggests that there was no clear indicia of protest that could be perceived by recipients of these documents the present case therefore has several important distinctions from powerstein and we have a strong argument that it is not subject_to the determination made in that prior case the amended_return filed by the taxpayers constitutes a waiver of restrictions on assessment therefore the assessment was proper under sec_6213 response this argument is inconsistent with the position the office_of_chief_counsel has recommended in other cases to comply with relevant authority and ensure unity of position this argument should not be asserted in this case under sec_6213 taxpayers can waive restrictions on assessment and collection of any deficiency by filing a signed notice in writing at any time regardless of whether a notice_of_deficiency has been issued absent a statement that it is intended to be a waiver an amended_return form 1040x in general is not considered to be a waiver amended returns absent additional specific language do not contain statements indicating or implying that they are meant to serve as waivers of restrictions on collection and assessment the office_of_chief_counsel has previously expressed the opinion that amended returns unaccompanied by payment or other indication of intent to waive restrictions on assessment do not constitute a waiver of restrictions on assessment in gcm date the office_of_chief_counsel took the position that any waiver of restrictions on assessment imposed by sec_6213 must be clear and unambiguous in the situation contemplated in gcm and identical to the present case where the only communication from a taxpayer is a standard 1040x form too much ambiguity exists as to the intent of the taxpayer to construe the amended_return as a waiver taxpayers had opportunity to dispute the tax_liability during pendency of the prior tax_court case and are precluded from doing so now under sec_6330 response this argument should not be asserted in this case because the question of whether the assessment violated sec_6213 does not relate to the existence or amount of the tax_liability sec_6330 provides t he person may also raise at the hearing challenges to the existence or amount of the underlying tax_liability for any_tax period if the person did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability in the present case the taxpayers received a statutory_notice_of_deficiency for year and filed a petition to redetermine the deficiency with the tax_court thus it is clear that the taxpayers had a prior opportunity to dispute the existence or the amount of the underlying tax_liability and were precluded in the cdp hearing from contesting the underlying tax_liability under sec_6330 in the situation at bar the question is whether a taxpayer’s argument that the assessment was prohibited by sec_6213 relates to the existence or amount of the underlying tax_liability the internal_revenue_code provides that taxpayers are required to pay taxes owed without assessment or notice_and_demand from the secretary sec_6151 see teixeira v united_states a f t r 2d ria d s c persons are subject_to tax_liability as a matter of law and not as a consequence of assessment 80_f3d_1360 9th cir assessment is essentially a bookkeeping notation that is made when the secretary or_his_delegate establishes an account against the taxpayer 423_us_161 moreover it is not necessary that a tax be assessed for the taxpayer to be liable for the tax 28_fedclaims_756 in 284_us_281 the court held that although a statute_of_limitations barred the assessment of an additional sum it did not impair the right of the united_states to retain payment when these payments did not exceed the amount that might have been properly assessed thus the existence of a tax_liability is dependent upon the tax being imposed pursuant to the internal_revenue_code and not whether the tax was properly or timely assessed in a collection_due_process cdp hearing the secretary is to obtain verification that the requirements of any applicable law or administrative procedure have been met sec_6330 it is our position that determining whether a tax was properly assessed is a procedural question to be addressed under sec_6330 sec_6330 provides for an appeals hearing to address procedural matters such as the validity of an assessment spousal defenses and possible alternative means of collection the taxpayer’s argument that the assessment was made in violation of sec_6213 is specifically the type of issue meant to be raised in a cdp hearing thus our position is that the question of whether the assessment was premature under sec_6213 is a procedural matter that can be raised at a cdp hearing despite the prior issuance of the notice_of_deficiency and is not barred by sec_6330 taxpayers are equitably estopped from contesting the validity of the assessment due to the taxpayers’ prior position taken in the stipulated settlement wherein the assessment of the dollar_figureamount a was a clear term of that settlement response this argument has a likelihood of success in addition we recommend that you add an argument under the related duty_of_consistency doctrine equitable_estoppel is appropriately raised in the present case as discussed in the incoming memorandum from the field the elements of equitable_estoppel are present equitable_estoppel is designed to prohibit a party from inducing detrimental reliance by another party in a transaction and has six elements required for application which are described in the memorandum from field counsel the related equitable doctrine known as quasi-estoppel and commonly referred to as the duty_of_consistency should be raised as an alternative argument whereas equitable_estoppel is a general legal doctrine that can be applied to a broad range of legal issues the duty_of_consistency has been narrowly tailored to apply to cases arising under federal_income_tax laws see 495_f2d_211 8th cir 103_tc_525 72_tc_807 hollen v commissioner t c memo 79_tcm_1719 hughes and luce l l p v commissioner t c memo 68_tcm_1169 mertens the law of federal income_taxation steve r johnson the taxpayer’s duty_of_consistency tax l rev the duty_of_consistency has been developed by the courts into a specific doctrine with simplified applicability according to this argument where a taxpayer takes a defined position on an issue in one tax_year or makes a representation to the commissioner the duty_of_consistency prohibits the taxpayer from taking a different position on that same issue regarding a later tax_year or the same tax_year at a later time particularly where the commissioner would be prevented from recalculating or reassessing tax_liability stemming from the earlier year due to statutes of limitation there are only three commonly cited elements to the duty_of_consistency the taxpayer made a representation or reported an item for federal_income_tax purposes in one year the commissioner acquiesced in or relied on that representation or report for that year and the taxpayer attempts to change that representation or report in a subsequent year after the period of limitations has expired with respect to the year of the representation or report and the change is detrimental to the commissioner hughes and luce t c m pincite all other cases cited herein use these three elements with the same or similar language this simplified framework indicates that the duty_of_consistency is more easily applied with fewer elements to satisfy than other estoppel theories 75_tc_497 where the tax_court stated q uasi-estoppel or ‘duty of consistency ’ is akin to equitable_estoppel and has the same effect but is sometime applied when one of the technical elements of estoppel is not present it is based on the theory that the taxpayer owes the commissioner the duty to be consistent with his tax treatment of items and will not be permitted to benefit from his own prior error or omission mertens supra pincite stating that the duty_of_consistency can be raised even where all six elements of equitable_estoppel are not present specifically the duty_of_consistency differs from equitable_estoppel in that the duty_of_consistency is applied even where reliance by the party asserting estoppel is not based upon any misstatement of fact whether innocent or otherwise id the tax_court in hollen stated that the duty_of_consistency applies equally to a taxpayer who innocently misrepresents a fact in a time-barred year and one who misleads intentionally t c memo as used by the tax_court the duty_of_consistency and the attendant terminology and elements of applicability appear to be best suited for tax cases in each case cited above the taxpayer made a representation of fact that affected tax_liability in a particular year when next reporting on a different tax_year that involved the same fact or where reassessing items for the same tax_year at a later date the taxpayer made a different representation or sought to recharacterize the earlier-reported fact situation in each case the tax_court prevented the taxpayer from changing the representation of fact in any way from the initial representation of that same fact we recommend alternative arguments under the doctrine_of equitable_estoppel and duty_of_consistency we believe the facts support both theorie sec_5 the stipulated settlement that incorporated the assessment of the dollar_figure is a valid contract contesting the validity of the assessment at this point would require the service to vacate the entire settlement and enter the disputed assessment as a deficiency response the law of contracts is deemed to apply to settlement agreements including stipulated settlements entered by the tax_court kokernot v commissioner t c memo 70_tcm_1559 aff’d 112_f3d_1290 5th cir where the tax_court stated l ike contracts stipulations of settlement bind the parties thereto to the terms thereof several federal courts have stated that a settlement of tax_liability creates a contract between the taxpayer and the internal_revenue_service 850_f2d_242 5th cir 303_f2d_1 5th cir 301_fsupp_871 d s c aff’d per curiam 422_f2d_1331 4th cir cert_denied 400_us_904 100_tc_319 temple v united_states cl_ct a contract thus created the principles of contract law govern the behavior of the parties and the interpretation of the agreement cooper agency f_supp pincite the agreement itself is interpreted according to its language and the circumstances surrounding the formation of the agreement mcgivney v commissioner t c memo 80_tcm_94 52_tc_420 in this case this suggests both that the stipulated settlement between the taxpayers and the service is an enforceable contract and that the below-the-line references to the dollar_figureamount a assessment can be viewed as part of the contract if you have any questions please call the attorneys assigned to this case pincite-3610


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 b01 plr-165854-04 date date ------------------------------------ ----------------------- legend x ------------------------------------------------- y ------------------------------------------------- country d1 d2 dear --------------------------- ---------------- ----------- ----------------------- this is in response to a letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to treat y as an entity disregarded as separate from its owner for federal tax purposes under sec_301_7701-3 facts according to the information submitted and representations made within the request x is the ultimate parent of an affiliated_group_of_corporations among this affiliated_group is y which is an entity that was formed under the laws of country on d1 due to inadvertence a form_8832 entity classification election to treat y as an entity disregarded as separate from its owner effective d2 was not filed law and analysis sec_301_7701-3 provides guidance on the classification of a foreign plr-165854-04 eligible_entity for federal tax purposes generally unless the entity makes an election to be treated otherwise a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability if a foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 if a foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 further provides that an entity classification election must be filed on form_8832 entity classification election and can be effective up to days prior to the date the form is filed or up to months after the date on which the form 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 sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely upon the information submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result an extension of days from the date of this letter is granted to elect to treat y as disregarded as an entity separate from its owner for federal tax purposes effective d2 the entity classification election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter except as expressly provided herein no opinion is expressed or implied plr-165854-04 this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_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 enclosures copy of this letter copy for sec_6110 purposes cc sincerely heather c maloy heather c maloy associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury index numbers washington dc number release date person to contact telephone number refer reply to cc dom corp plr-117226-99 date date distributing distributing controlled parent target shareholder a business a business b business c business d business e plr-117226-99 business f a b this letter responds to your date request for rulings on certain aspects of the proposed transactions described below summary of facts publicly traded distributing is the common parent of a consolidated_group distributing directly conducts business a business b business c and business d only shareholder a owns five percent or more of distributing distributing wholly owns distributing which engages through its subsidiaries in business a business b business c business d business e and business f distributing wholly owns controlled which engages directly and through its subsidiaries in business f we have received financial information indicating that each of businesses a through f has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years controlled wishes to acquire unrelated target which is wholly owned by parent and engages in business f parent will not agree to the acquisition unless controlled is first separated from the distributing group proposed transactions to accommodate parent distributing proposes the following series of transactions i controlled will undergo a stock split ii distributing will transfer approximately a dollars in cash to distributing iii distributing will transfer the cash received in step ii to controlled the contribution plr-117226-99 iv distributing will distribute the controlled stock to distributing distribution v distributing will distribute the controlled stock to its shareholders pro_rata distribution in lieu of distributing fractional shares of controlled common_stock distributing will transfer these shares to an exchange agent the exchange agent for sale in the open market the proceeds will then be delivered to the distributing shareholders who would otherwise have received the shares vi controlled will acquire the stock of target from parent in exchange for b percent of the controlled stock plus cash the acquisition distributing and controlled will enter into a distribution agreement a tax_allocation_agreement and an employee matters agreement as part of the proposed transactions representations contribution and distribution the taxpayer makes the following representations regarding the contribution and distribution a no part of the consideration distributed by distributing will be received by distributing as a creditor employee or in any capacity other than that of a shareholder of distributing b the five years of financial information submitted on behalf of distributing and controlled represents the present operations of each corporation and there have been no substantial operational changes to either corporation since the date of the last financial statement submitted c immediately after distribution at least percent of the fair_market_value of the gross assets of distributing will consist of stock of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 d following distribution distributing and controlled will each continue the active_conduct of its business es independently and with its separate employees e distribution will be carried out to facilitate the acquisition distribution is motivated in whole or substantial part by this corporate business_purpose f except for distribution there is no plan or intention by distributing to sell exchange transfer by gift or otherwise dispose_of any of its stock in either distributing plr-117226-99 or controlled after distribution g there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 h there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after distribution except in the ordinary course of business i no intercorporate debt will exist between distributing and controlled at the time of or after distribution j immediately before distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d c b and as currently in effect sec_1_1502-13 as published by t d k payments made in connection with any continuing transactions between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length l neither distributing nor controlled is an investment_company as defined in sec_368 and iv m distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of either distributing or controlled stock entitled to vote or percent or more of the total value of shares of all classes of either distributing or controlled stock_distribution the taxpayer has made the following representations regarding distribution n any indebtedness owed by controlled to distributing after distribution will not constitute stock_or_securities o no part of the consideration distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder plr-117226-99 of distributing p the five years of financial information submitted on behalf of distributing and controlled represents the present operations of each corporation and there have been no substantial operational changes to either corporation since the date of the last financial statement submitted q following distribution distributing and controlled will each continue the active_conduct of its business es independently and with its separate employees r distribution will be carried out to facilitate the acquisition distribution is motivated in whole or substantial part by this corporate business_purpose s there is no plan or intention by shareholder a and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of either distributing or controlled after distribution t there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after distribution other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 u there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after distribution except in the ordinary course of business v immediately before distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d and as currently in effect sec_1_1502-13 as published by t d further any excess_loss_account distributing may have in the controlled stock will be included in income immediately before distribution to the extent required by applicable regulations see sec_1_1502-19 w payments made in connection with any continuing transactions between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length y distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all plr-117226-99 classes of either distributing or controlled stock entitled to vote or percent or more of the total value of shares of all classes of either distributing or controlled stock z the payment of cash in lieu of fractional shares of controlled is solely for the purpose of avoiding the expense and inconvenience of issuing fractional shares and does not represent separately bargained for consideration the method used for handling fractional share interests is designed to limit the amount of cash received by any one shareholder to less than the value of one full share of controlled stock the total amount of cash paid in lieu of fractional shares will not exceed one percent of the fair_market_value of controlled stock distributed to distributing 2’s shareholders in distribution rulings contribution and distribution based solely on the information submitted and representations set forth above we rule as follows on the contribution and distribution the contribution followed by distribution will be a reorganization under sec_368 distributing and controlled each will be a_party_to_a_reorganization under sec_368 no gain_or_loss will be recognized by distributing on the contribution sec_361 and sec_357 no gain_or_loss will be recognized by controlled on the contribution sec_1032 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of distributing on distribution sec_355 revrul_62_138 c b no gain_or_loss will be recognized by distributing on distribution sec_361 the holding_period of the controlled stock received by distributing in distribution will include the holding_period of the distributing stock on which distribution is made provided the controlled stock is held as a capital_asset on the date of distribution sec_1223 the earnings_and_profits of distributing and controlled will be allocated in accordance with sec_312 sec_1_312-10 and sec_1_1502-33 plr-117226-99 distribution based solely on the information submitted and representations set forth above we rule as follows on distribution no gain_or_loss will be recognized by distributing on distribution sec_355 rev_rul no gain_or_loss will be recognized by and no amount will otherwise be included in the income of the distributing shareholders on distribution sec_355 the aggregate basis of the distributing stock and controlled stock in the hands of each distributing shareholder after distribution including any fractional shares of controlled stock to which the shareholder is entitled will equal the aggregate basis of distributing stock held by the distributing shareholder immediately before distribution allocated between the two in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 and c the holding_period of controlled stock received by each distributing shareholder will include the holding_period of the distributing stock on which distribution is made provided the distributing stock is held as a capital_asset on the date of distribution sec_1223 the earnings_and_profits of distributing and controlled will be allocated in accordance with sec_312 sec_1_312-10 and sec_1_1502-33 if cash is received by a distributing shareholder as a result of a sale of a fractional share of controlled stock by the exchange agent the shareholder will have gain_or_loss measured by the difference between the amount of cash received and the basis of the fractional share as determined in ruling above sec_1001 if the controlled stock is held by the shareholder as a capital_asset the gain_or_loss will be capital_gain or loss subject_to the provisions and limitations of subchapter_p of chapter of the code sec_1221 and sec_1222 caveats no opinion is expressed about the tax treatment of the proposed transactions under other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transactions that are not specifically covered by the above rulings in particular no opinion is expressed concerning the tax effect of the controlled stock split described above in step i the acquisition or any payments made under the distribution agreement tax_allocation_agreement or employee matters agreement plr-117226-99 this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer affected by the proposed transaction should attach a copy of this ruling letter to its his or her federal tax_return for the taxable_year in which the transaction is completed under the power_of_attorney on file in this office a copy of this letter is being sent to each of your authorized representatives sincerely yours assistant chief_counsel corporate by wayne t murray senior technician reviewer branch


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-103467-00 date march legend x d1 d2 state this responds to your letter dated date written on behalf of x requesting a ruling that x be given an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a corporation for federal tax purposes for its taxable_year beginning d1 facts according to the information submitted x intended that it be taxed as a corporation for federal tax purposes as of d1 but failed to elect timely corporate status as of d1 x learned of this failure during d2 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 a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code section plr-103467-00 a 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 a business_entity with only one owner is classified as a corporation or is disregarded sec_301_7701-3 provides that unless a domestic eligible_entity elects otherwise the entity is a partnership if it has two or more members or disregarded as an entity separate from its owner if it has a single owner to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center sec_301_7701-3 an election can be effective on the date specified on the form_8832 or on the date filed if no such date is specified the effective date specified on the form_8832 cannot be more than days prior to the date the election is filed sec_301_7701-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusions based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time to elect to be taxed as an association as of d1 x has until days from the date of this letter to file form_8832 with the applicable service_center to elect to be treated as an association for federal tax purposes as of d1 plr-103467-00 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item other than those explicitly set forth in this letter 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 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to x’s authorized representative signed paul f kugler sincerely paul f kugler 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 468a ----------------------------- --------------------------------------- -------------------------------- ---------------------------- ---------------------------- 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 b6 plr-129957-06 plr-129964-06 plr-129960-06 plr-129956-06 plr-129946-06 plr-129944-06 plr-129976-06 plr-129973-06 plr-129970-06 plr-129954-06 date date legend parent taxpayer a ------------------------------------------------------------ taxpayer b -------------------------------- --------------------------------- -------------------------------------------------------- ------------------------------------------------------ --------------------------------- --------------------------------------- ------------------------------ taxpayer c ------------------------------------------------------------ taxpayer d ------------------------------------------------------------ taxpayer e ------------------------------------------------------------ company state a state b plant director ----------------------------------------- --------------------------------------------- ------ ------------------ -------------------------------------------------- -- --------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ---------------------- -------------- location plr-129957-06 commission a commission b commission c commission d taxpayer f -------------------------------------------- ----------------------------------------------------- ------------------------------------------- ---------------------------------------------------- -------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------- ---------------------------------------- -------------------------------------------- ------------------------------------------------ ------------------------------------------------------------------------------------------------------- taxpayer g ------------------------------------------------------------ taxpayer h ------------------------------------------------------------ taxpayer i ---------------------------------------------------------------------------------- taxpayer j ------------------------------------------------------------ x y z dear ---------------- the tax consequences of the transaction described below under sec_468a of the internal_revenue_code -------------------------- -------------------------- ------------------- this letter responds to your request dated date for various rulings on taxpayers represent the following facts and information relating to the ruling_request parent directly owns all of the outstanding common_stock of taxpayer b taxpayer c and taxpayer d taxpayer d owns all of the outstanding commons stock of taxpayer e taxpayers b c and d are electric public_utility companies engaged in the generation transmission distribution and sale of electric energy in state a taxpayer b c and d are subject_to the jurisdiction of commission a and commission b with respect to the nuclear decommissioning costs included in its cost of service for regulatory purposes taxpayer e is an electric public_utility company engaged in the generation transmission distribution and sale of electric energy in state b taxpayer e is subject_to the jurisdiction of commission d and commission b with respect to the nuclear decommissioning costs included in its cost of service for regulatory purposes taxpayer a is a newly-formed generation company and is a wholly-owned subsidiary of company which is wholly-owned by parent taxpayer b has an ownership_interest of-- --------percent in the plant taxpayer c has a -------percent ownership_interest and a ----- plr-129957-06 --------leasehold interest in the plant for a total interest of --------percent taxpayer d has a --------percent ownership_interest and a --------percent leasehold interest in the plant for a total interest of --------percent and taxpayer e has a --------percent ownership_interest in the plant plant is situated at location taxpayers b c d and e are severally obligated to pay all expenditures_for the construction operation and maintenance of plant and are entitled to the proportionate share of the electric power produced thereby taxpayers b c d and e have obligations to decommission the plant and have established several funds for that purpose taxpayer b has established taxpayer g as a fund qualified under sec_468a as well as one or more nonqualified funds taxpayer c has established taxpayer h as a fund qualified under sec_468a as well as one or more nonqualified funds taxpayer d has established taxpayer i as a fund qualified under sec_468a as well as one or more nonqualified funds taxpayer e has established taxpayer j as a fund qualified under sec_468a as well as one or more nonqualified funds taxpayers b c d and e have received revised schedules of ruling amounts through ------- on x taxpayer b contributed the entire 12-month ruling_amount specified in its most recent schedule of ruling amounts to taxpayer g on x taxpayer c contributed the entire 12-month ruling_amount specified in its most recent schedule of ruling amounts to taxpayer h on x taxpayer d contributed the entire 12-month ruling_amount it anticipated would be specified in its schedule of ruling amounts and which amount was later specified for ------ to taxpayer i on x taxpayer e contributed the entire 12-month ruling_amount specified in its most recent schedule of ruling amounts to taxpayer j on y taxpayer b and taxpayer e transferred their interests in plant to taxpayer a on y taxpayer c and taxpayer d transferred their interests in plant to taxpayer a except for those interests subject_to sale leaseback arrangements taxpayer a assumed certain obligations with respect to plant including the obligation to decommission plant also on y taxpayer b transferred taxpayer g as well as all nonqualified decommissioning funds relating to the plant to taxpayer a taxpayer c transferred taxpayer h as well as all nonqualified decommissioning funds relating to the plant to taxpayer a taxpayer d transferred taxpayer i as well as all nonqualified decommissioning funds relating to the plant to taxpayer a and taxpayer e transferred taxpayer j as well as all nonqualified decommissioning funds relating to the plant to taxpayer a the assets in taxpayers g h i and j were transferred to taxpayer f a fund established by taxpayer a and qualified under sec_468a the transfers of the interests in plant were approved by commission b and commission c taxpayer d had applied for but not yet received its revised schedule of ruling amounts as of the submission of this ruling_request it has subsequently received this revised schedule plr-129957-06 as a result of the contributions of the entire ------- ruling amounts on x by taxpayer b to taxpayer g by taxpayer c to taxpayer h by taxpayer d to taxpayer i and by taxpayer e to taxpayer j excess_contributions were made to those funds on z taxpayer a withdrew from taxpayer f the excess_contributions made by taxpayers b c d and e along with earnings on those excess_contributions from the day after x thru and including the day before z taxpayer has requested the following rulings requested ruling taxpayer a taxpayer b taxpayer c taxpayer d taxpayer e taxpayer f taxpayer g taxpayer h taxpayer i and taxpayer j will not recognize any gain_or_loss or otherwise take any income_or_deduction into account by reason of the transfer of assets of taxpayer g taxpayer h taxpayer i and taxpayer j into taxpayer f and taxpayer f will have a basis in the assets received from taxpayers g h i and j equal to the basis of those assets immediately prior to the transfer requested ruling no portion of taxpayer g taxpayer h taxpayer i or taxpayer j is disqualified by receipt of the excess_contributions from taxpayer b taxpayer c taxpayer d and taxpayer e respectively and that no portion of taxpayer f is disqualified by the withdrawal of such excess_contributions and the earnings thereon law and analysis requested ruling sec_1_468a-5 sets out the qualification requirements for nuclear decommissioning funds it provides in part that a qualified nuclear decommissioning fund must be established and maintained pursuant to an arrangement that qualifies as a_trust under state law sec_1_468a-5 provides that an electing taxpayer can establish and maintain only one qualified nuclear decommissioning fund for each nuclear power plant if a nuclear power plant is subject_to the ratemaking jurisdiction of two or more public_utility commissions and any such public_utility commission requires a separate fund to be maintained for the benefit of ratepayers whose rates are established or approved by the public_utility commission the separate funds maintained for such plant whether or not established and maintained pursuant to a single trust agreement shall be considered a single nuclear decommissioning fund sec_1_468a-6 provides rules applicable to the transfer of an interest in a nuclear power plant and transfer of the qualified nuclear decommissioning fund where plr-129957-06 certain requirements are met specifically sec_1_468a-6 provides that sec_1_468a-6 applies if-- immediately before the disposition the transferor maintained a qualified nuclear decommissioning fund with respect to the interest disposed of and immediately after the disposition-- i the transferee maintains a qualified nuclear decommissioning fund with respect to the interest acquired ii the interest acquired is a qualifying interest of the transferee in the nuclear power plant iii either a proportionate amount which could include all of the assets of the transferor’s qualified nuclear decommissioning fund is transferred to a qualified nuclear decommissioning fund of the transferee or the transferor’s entire qualified nuclear decommissioning fund is transferred to the transferee provided in the latter case or if the transferee receives all of the assets in the transferor’s qualified nuclear decommissioning fund but not the transferor’s qualified nuclear decommissioning fund that the transferee acquires the transferor’s entire qualifying interest in the plant and iv the transferee continues to satisfy the requirements of sec_1_468a-5 which permits an electing taxpayer to maintain only one qualified nuclear decommissioning fund for each plant sec_1_468a-6 provides that a disposition that satisfies the requirements of sec_1_468a-6 will have the following tax consequences at the time it occurs neither the transferor nor the transferor’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not be considered a distribution of assets by the transferor’s qualified nuclear decommissioning fund plr-129957-06 neither the transferee nor the transferee’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not constitute a payment or a contribution of assets by the transferee to its qualified nuclear decommissioning fund transfers of assets of a qualified nuclear decommissioning fund to which this section applies do not affect basis thus the transferee’s qualified nuclear decommissioning fund will have a basis in the assets received from the transferor’s qualified nuclear decommissioning fund that is the same as the basis of those assets in the transferor’s qualified nuclear decommissioning fund immediately before the distribution under sec_1_468a-6 the service may treat any disposition of an interest in a nuclear power plant occurring after date as satisfying the requirements of the regulations if the service determines that such treatment is necessary or appropriate to carry out the purposes of sec_468a former sec_468a and sec_1 468a- b provide that for purposes sec_468a and sec_1_468a-2 provide that a taxpayer that elects the requested ruling application of sec_468a may deduct in the taxable_year the election is made any payments made by the taxpayer to a qualified nuclear decommissioning fund in that year of sec_1_468a-2 the amount that a taxpayer may pay into a qualified nuclear decommissioning fund for any taxable_year shall not exceed the lesser_of the amount of nuclear decommissioning costs allocable to the fund which is included in the taxpayer's cost of service for ratemaking purposes for the taxable_year or the ruling_amount applicable to fund for that the taxable_year sec_1_468a-2 provides further that if the amount of cash payments made or deemed made to a qualified nuclear decommissioning fund during any taxable_year exceeds the limitation of sec_1 468a- b the excess is not deductible by the electing taxpayer sec_1_468a-5 prohibits a nuclear decommissioning fund from accepting any contribution for which a deduction is not permitted under sec_468a and sec_1_468a-2 sec_1_468a-5 provides that if at any time during a taxable_year of a nuclear decommissioning fund the fund does not satisfy the requirements of sec_1_468a-5 the service may in its discretion disqualify all or sec_1_468a-5 defines an excess_contribution for purposes of section plr-129957-06 any portion of the fund as of the date that the fund does not satisfy the requirements of sec_1_468a-5 sec_1_468a-2 provides that the amount of any cash payment made by an electing taxpayer to a qualified nuclear decommissioning fund on or before the 15th day of the third calendar month after the close any taxable_year shall be deemed made during that taxable_year if the electing taxpayer irrevocably designates the amount as relating to that taxable_year on its timely filed federal_income_tax return for that taxable_year 468a-5 c as the amount by which cash payments made or deemed made to a qualified nuclear decommissioning fund during any taxable_year exceed the payment limitation in former sec_468a and sec_1_468a-2 sec_1_468a-5 provides that a qualified nuclear decommissioning fund will not be disqualified under sec_1_468a-5 by reason of an excess_contribution or the withdrawal of that excess_contribution by an electing taxpayer if the amount of the excess_contribution is withdrawn by the electing taxpayer on or before the date prescribed by law including extensions for filing the return of the fund for the taxable_year for which the excess_contribution relates contribution as defined in sec_1_468a-5 by an electing taxpayer pursuant to the rules of sec_1_468a-5 shall not be included in the gross_income of the electing taxpayer conclusions sec_1_468a-2 provides that the amount of a withdrawal of an excess taxpayer a taxpayer b taxpayer c taxpayer d taxpayer e taxpayer f taxpayer g taxpayer h taxpayer i and taxpayer j will not recognize any gain_or_loss or otherwise take any income_or_deduction into account by reason of the transfer of assets of taxpayer g taxpayer h taxpayer i and taxpayer j into taxpayer f and taxpayer f will have a basis in the assets received from taxpayers g h i and j equal to the basis of those assets immediately prior to the transfer with respect to the excess_contributions and the subsequent withdrawal of those excess_contributions the service will not disqualify any part of taxpayer g taxpayer h taxpayer i or taxpayer f as a result of these transactions the rulings contained in this letter are based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of plr-129957-06 the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above effective date amendments were made to sec_468a by the energy tax incentives act of publaw_109_58 119_stat_594 regulations based on these amendments are being developed but have not yet been proposed the discussion above is based on the law in effect prior to date however 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 letter_ruling see section dollar_figure of revproc_2007_1 2007_1_irb_1 however when the criteria in section dollar_figure of revproc_2007_1 2007_1_irb_50 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances this ruling is directed only to the taxpayers who requested it sec_6110 of the code provides 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 the taxpayer we are also sending a copy of this letter_ruling to the director pursuant to ' 468a-7 a a copy of this letter must be attached with the required election statement to the taxpayers' federal_income_tax return for each tax_year if any in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch passthroughs special industries


internal_revenue_service number info release date index number ------------------------------------------------------------ ---------------------------------------------- ---------------------------- ---------------------------- - department of the treasury washington dc person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 - genin-156437-03 date march dear -------------- this is in response to your letter dated date requesting late s_corporation relief under sec_1362 of the internal_revenue_code seeking an effective date of date in revproc_2003_43 2003_23_irb_998 copy attached the internal_revenue_service provides special procedures that permit taxpayers in certain situations to obtain automatic late s_corporation relief instead of applying for a private_letter_ruling the facts presented in your situation appear to be covered by section dollar_figure of revproc_2003_43 the cincinnati service_center has updated your records to reflect date as your s_corporation effective date if you fail to receive a confirmation letter from the service_center within the next days you may contact the person indicated above please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely s james a quinn senior counsel branch office of associate chief_counsel passthroughs special industries enclosure revproc_2003_43


internal_revenue_service number release date index number ---------------------------- ------------- -------------------------------------------------- ------------------------- --------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc ita b03 plr-106175-11 date date ty ------- ty ------- legend taxpayer ---------------------------------------- parent -------------------------------------------------------- subsidiary --------------------------------------------------------- fund group -------------------------------- owning funds ---------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- --------------------- year ------- extended due_date --------------------------- discovery date ------------------------- dear -------------------- this is in response to your letter dated date in your letter you requested an extension of time to file the forms necessary to make a consent_dividend election under sec_565 of the internal_revenue_code for the tax_year ending december year the request is based on sec_301_9100-1 and sec_301_9100-3 of the procedure and administrative regulations facts taxpayer a corporation is a regulated_investment_company owned by parent subsidiary and the owning funds in parent’s fund group parent administers the various funds in the fund group parent and subsidiary hold shares of each of the funds in the fund group in separate_accounts established for the purpose of funding variable_annuity contracts and variable life_insurance policies investors in parent and subsidiary may select one of the funds in the fund group including taxpayer as an investment option for a variable_annuity contract or life_insurance_policy taxpayer must plr-106175-11 make minimum distributions each tax_year to continue to be subject_to tax as a regulated_investment_company for future tax years parent prepared taxpayer’s form 1120-ric u s income_tax return for regulated_investment_companies for the tax_year ending december year and filed it before the extended due_date before filing taxpayer’s form 1120-ric the board_of directors approved taxpayer’s issuance of consent dividends to parent subsidiary and the owning funds to satisfy the taxpayer’s year distribution_requirements parent’s employees had no prior experience issuing consent dividends after consulting outside accountants and lawyers parent’s employees prepared an internal memorandum outlining the process of how funds in the fund group should issue consent dividends and the tax consequences of issuing them the memorandum stated that parent needed to file a form_973 corporation claim for deduction for consent dividends with each form 1120-ric of each fund in the fund group but the memorandum did not mention the additional regulatory requirement that parent file a form_972 consent of shareholder to include specific amount in gross_income with each fund’s return for each consent_dividend paid to a different shareholder of taxpayer time passed between when parent’s employees prepared the memorandum and when they began preparing the forms 1120-ric for each fund in the fund group when parent prepared form 1120-ric on behalf of taxpayer parent’s employees followed the memorandum’s instructions thus taxpayer’s return included an executed form_973 with the filing but not any executed form sec_972 the form sec_972 were not attached even though parent’s employees possessed two executed originals of form_972 one authorizing the inclusion of consent dividends in parent’s gross_income and the other authorizing the inclusion of consent dividends in subsidiary’s gross_income parent’s employees never obtained executed form sec_972 authorizing the inclusion of consent dividends in the gross_income of the various owning funds because they were inexperienced in issuing consent dividends they believed the law did not require them to obtain form sec_972 for the owning funds because the gross_income would flow through to parent and subsidiary for whom they had obtained executed form sec_972 taxpayer’s shareholders parent subsidiary and the various owning funds each included the appropriate amount of consent_dividend income in their respective gross incomes on parent’s consolidated_income_tax_return for year after the extended due_date but before the discovery date parent’s auditor discovered that no form sec_972 had been attached to taxpayer’s form 1120-ric to taxpayer’s knowledge the irs was not aware of the omission of the form_972 and has not contacted parent about the year consent_dividend election nor has it notified parent that taxpayer’s year form 1120-ric is under examination law and analysis plr-106175-11 sec_852 provides that a regulated_investment_company may claim a deduction for dividends_paid as defined in sec_561 in computing its investment_company_taxable_income sec_852 provides that a regulated_investment_company may claim a deduction for dividends_paid as defined in sec_561 in computing its net capital_gains determined with reference to capital_gain dividends only sec_561 provides that the deduction for dividends_paid includes consent dividends for the taxable_year as determined under sec_565 sec_565 of the code provides that if any person owns consent_stock as defined in sec_565 in a corporation on the last day of the taxable_year of such corporation and such person agrees in a consent filed with the return of such corporation in accordance with the regulations to treat as a dividend the amount specified in such consent the amount so specified shall except as provided in sec_565 constitute a consent_dividend for purposes of sec_561 relating to the deduction for dividends_paid consent_stock which is the type of stock with respect to which consent dividends are allowed sec_565 includes what is generally known as common_stock and participating preferred_stock the participation rights of which are unlimited sec_1_565-6 of the income_tax regulations sec_1_565-1 provides that the dividends_paid deduction as defined in sec_561 includes the consent dividends for the taxable_year a consent_dividend is a hypothetical distribution as distinguished from an actual distribution made by certain corporations to any person who owns consent_stock on the last day of the taxable_year of such corporation and who agrees to treat the hypothetical distribution as an actual dividend subject_to specified limitations by filing a consent at the time and in the manner specified in sec_1_565-1 sec_1_565-1 provides that a consent may be filed no later than the due_date of the corporation's income_tax return for the taxable_year for which the dividends_paid deduction is claimed with such return and not later than the due_date the corporation must file form sec_972 for each consenting shareholder and a return on form_973 showing by classes the stock outstanding on the first and last days of the taxable_year the dividend rights of such stock distributions made during the taxable years to shareholders and give all other information required by the form under revrul_78_296 1978_2_cb_183 the due_date for purposes of sec_1_565-1 includes the extended due_date of a return filed pursuant to an extension of time to file sec_301_9100-1 through of the procedure and administration regulations provide the standards the commissioner uses to determine whether to grant an extension of time to make a regulatory election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides plr-106175-11 extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides extensions of time to make a regulatory election under code sections other than those for which sec_301_9100-2 expressly permits automatic extensions requests for extensions of time for regulatory elections will be granted when the taxpayer provides evidence including affidavits described in the regulations 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 sec_301_9100-3 states that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer -- i requests relief before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election under sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer -- i seeks to alter a return position for which an accuracy related penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief taking into account sec_1_6664-2 and the new position requires or permits a regulatory election for which relief is requested plr-106175-11 ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief taxpayer in this case requested relief before the failure to make the regulatory election was discovered by the service and thus under sec_301_9100-3 the taxpayer will be deemed to have acted reasonably and in good_faith taxpayer has also represented that none of the circumstances listed in sec_301_9100-3 apply sec_301_9100-3 provides in part that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides in part that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under these criteria the interests of the government are not prejudiced in this case taxpayer has represented that granting relief would not result in a lower tax_liability in the aggregate for all taxable years affected by the election than taxpayer would have had if the election had been timely made taking into account the time_value_of_money furthermore the taxable_year in which the regulatory election should have been made and any taxable years that would have been affected had it been timely made are not closed by the period of assessment conclusion taxpayer's election is a regulatory election as defined under sec_301_9100-1 because the due_date of the election is prescribed in the regulations under sec_1_565-1 in the present situation the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been satisfied the information and representations made by taxpayer establish that taxpayer acted reasonably and in good_faith furthermore granting an extension will not prejudice the interests of the government taxpayer represented that it will not have a lower tax_liability in the aggregate for all taxable years affected by the election if given permission to make the election than taxpayer would have if the election were made by the original deadline for making the election taxpayer also represented that the period of assessment for year plr-106175-11 will not be closed before receipt of a ruling accordingly taxpayer is granted an extension of time for making the election to issue consent dividends until days following the date of this ruling the election should be made by filing the forms necessary to make the sec_565 consent_dividend election for year and by including a copy of this ruling with an amended_return for year this ruling is limited to the timeliness of the consent_dividend election taxpayer wishes to make for year this ruling’s application is limited to the facts representations code sections and regulations cited herein except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of any aspect of any transaction or item discussed or referenced in this ruling this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling 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 robert casey acting branch chief branch income_tax accounting


t c summary opinion united_states tax_court denis m katchmeric petitioner v commissioner of internal revenue respondent docket no 12051-05s filed date denis m katchmeric pro_se andrew m stroot for respondent dawson judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the year in issue the trial was conducted by special_trial_judge carleton d powell who died after the case was submitted the parties have declined the opportunity for a new trial or for supplementation of the record and have expressly consented to reassignment of the case for opinion and decision respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax for the only issue remaining for decision is whether petitioner may deduct as alimony under sec_215 certain payments he made to his wife in this requires us to decide whether the payments were made pursuant to a written_separation_agreement under sec_71 and therefore qualify as alimony as defined by sec_71 background most of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are 1in his amended petition filed in this case petitioner who had filed his federal_income_tax return for as married_filing_separately asserted that he should be entitled to file an amended joint income_tax return for that year even though his wife would not agree to sign such a return or consent thereto special_trial_judge powell ruled on that issue at trial stating that you are not entitled to a joint_return status your wife has not joined in a joint_return that question is resolved against you moreover if either spouse files a separate tax_return for a taxable_year sec_6013 provides that an election thereafter to file a joint_return may not be made after there has been mailed to either spouse with respect to such taxable_year a notice_of_deficiency under sec_6212 if the spouse as to such notice files a petition with the tax_court within the time prescribed in sec_6213 incorporated herein by this reference when the petition was filed petitioner resided in fairfax county virginia petitioner and karen a deluca ms deluca were married in on date they separated her attorney notified petitioner by letter dated date that he had been retained by ms deluca for the purpose of obtaining a divorce in the letter the attorney stated that he was in the process of preparing a separation and property settlement agreement that would incorporate a provision requiring petitioner to pay ms deluca dollar_figure per month as spousal support until their marital home was sold and that after the sale his obligation would be reduced to dollar_figure per month the letter further stated that the separation agreement when prepared would incorporate the following additional terms a karen will file for divorce on a no-fault basis based upon living separate and apart from you continuously without cohabitation for the appropriate time required under virginia law c you will continue to pay the mortgage on the marital home until it is sold upon the sale of the home after deduction of the customary costs of sale you and karen will divide equally the proceeds d you will continue to provide health insurance for karen e you will retain as your separate_property all investments titled in your name alone karen will retain as her separate_property all investments titled in her name alone in addition karen shall retain as her separate_property all investments now titled in your joint names f karen will receive a share of your pension upon your retirement from the government g each of you will remain responsible for the loan payments maintenance and insurance for your respective automobiles h you will pay karen’s attorney fees in connection with completing the separation and property settlement agreement and obtaining a no-fault divorce there is nothing in the record showing that petitioner responded in writing or orally agreeing to any of the items including spousal support contained in the letter he received from ms deluca’s attorney however each month from january through date and again in november and december petitioner sent ms deluca a check for dollar_figure bearing the notation support each check was endorsed by ms deluca and deposited in her personal bank account petitioner did not make any payments to her for september and october because he learned in date that ms deluca had directed that their federal_income_tax refund for the tax_year claimed on their joint_return be deposited into her personal bank account the tax_refund amount was greater than dollar_figure ms deluca’s attorney never prepared a separation and property settlement agreement containing the terms described in his letter to petitioner dated date apparently both ms deluca and petitioner were dissatisfied with their negotiations regarding spousal support and other assets and property items because she filed a divorce proceeding in against petitioner in the circuit_court of fairfax county virginia chancery no in which she sought pendente lite relief their negotiations continued unsuccessfully finally after conducting hearings the circuit_court judge entered a pendente lite order on date which provided among other things that petitioner was to pay directly to ms deluca dollar_figure per month as spousal support beginning date both parties were represented by counsel in that proceeding petitioner and ms deluca did not enter into any other agreement purporting to be a written_separation_agreement prior to the issuance of the pendente lite order on date a final decree of divorce was entered by judge keith of the circuit_court of fairfax county virginia which provided for the distributions of marital assets as well as a further reduction in spousal support as follows ordered adjudged and decreed that beginning in the month of july defendant shall pay complainant for spousal support and maintenance the sum of nine hundred and no dollars dollar_figure per month payments shall be made on the first 1st day of each month beginning date and continuing on the first 1st day of each month thereafter in accordance with section code of virginia as amended until the death of either party or until the remarriage of complainant or until the complainant cohabits with an unrelated male in a relationship analogous to a marriage for a period of more than one year and it is further ordered support is to be paid_by a payroll deduction order to karen ann deluca listing her savings account number the parties shall give each other and the court at least thirty days written notice in advance via certified mail return receipt requested of any change_of address and any change_of telephone number within thirty days after such change in determination of a support obligation the support obligation as it becomes due and unpaid creates a judgment by operation of law on his federal_income_tax return for which was filed as married_filing_separately petitioner claimed an alimony deduction of dollar_figure for amounts he paid to ms deluca in that tax_year respondent disallowed petitioner’s claimed alimony deduction in the deficiency_notice because verification and acceptable documents were not provided discussion a taxpayer may deduct alimony or separate_maintenance payments sec_215 alimony is any payment in cash if among other requirements it is received by or on behalf of a spouse under_a_divorce_or_separation_instrument sec_71 the term divorce_or_separation_instrument means a a decree of divorce or separate_maintenance or a written instrument incident to such a decree b a written_separation_agreement or c a decree not described in subparagraph a requiring a spouse to make payments for the support or maintenance of the other spouse sec_71 no decree or order by the circuit_court of fairfax county was in effect when petitioner made his payments to ms deluca in thus we must decide whether there was a written_separation_agreement in effect before date when the pendente lite order fixing spousal support was entered by that court the term written_separation_agreement is not defined in the internal_revenue_code the applicable regulations or in the legislative_history 59_tc_97 a written_separation_agreement is a clear written_statement of the terms of support for separated parties in bogard v commissioner supra pincite we stated logically it appears congress was interested in a clear statement in written form of the terms of support where the parties are separated in this manner it is administratively convenient for the commissioner to apprise himself of the amount of gross_income to the wife and the corresponding deduction allowable to the husband see also leventhal v commissioner tcmemo_2000_92 ewell v commissioner tcmemo_1996_253 letters which do not show a meeting of the minds between the parties cannot collectively constitute a written_separation_agreement 84_tc_809 affd without published opinion 800_f2d_260 4th cir however we have recognized that where one spouse assents in writing to a letter proposal of support by the other spouse a valid written_separation_agreement has been held to exist see azenaro v commissioner tcmemo_1989_224 petitioner contends that he is entitled to an alimony deduction of dollar_figure for the payments he made to ms deluca in because the date letter he received from her attorney contained an offer among other items for separation support payments of dollar_figure per month which he accepted when he made payment by checks marked support payable to ms deluca and cashed by her in although petitioner never answered either by letter or orally the proposal for spousal support mentioned in the letter from ms deluca’s attorney he argues that he performed pursuant to an executory_contract which satisfied the written_separation_agreement requirement of sec_71 to the contrary respondent contends that the facts and circumstances in this case do not establish that petitioner’s payments to ms deluca in were made pursuant to a written_separation_agreement entered into by them we agree with respondent for the following reasons first the most that can be said about the attorney’s letter to petitioner is that it is only evidence of a prospective course of action it contained proposals of several terms that might have been included in a future separation and property settlement agreement favorable to ms deluca it was simply the beginning of a negotiation process by them with respect to spousal support and the division of their assets and property petitioner obviously did not agree with all of the proposed items listed in the letter at best there was nothing more than a unilateral offer to enter into a separation agreement 59_tc_846 second petitioner’s action in writing checks to ms deluca bearing the notation support does not qualify as a writing showing assent to the attorney’s proposal as required by the statute the fact that petitioner made the notations on the checks does not show that he agreed to provide support under a written_separation_agreement see ewell v commissioner supra there is no evidence in this record that there was ever any pre- existing written_agreement between ms deluca and petitioner that set monthly support payments the parties continued to negotiate without success and under contentious conditions during most of petitioner testified that he retained an attorney in march of that year and then we started negotiating their failure to reach an agreement on the terms of their separation resulted in ms deluca’s attorney’s filing for her divorce from petitioner in the circuit_court of fairfax county virginia hearings in that proceeding culminated in the pendente lite order that required spousal support payments of dollar_figure per month beginning date third there was no meeting of the minds between petitioner and ms deluca with respect to any spousal support payments before the circuit_court entered its pendente lite order on date grant v commissioner supra pincite that order is strong evidence of the failure of the parties to come to a prior meeting of the minds petitioner testified at trial in the instant case that he wasn’t going to pay any more it was then that ms deluca went to the circuit_court of fairfax county and sought the pendente lite order for spousal support if there had been an existing written_separation_agreement at that time the circuit_court would surely have honored and enforced it as a binding contract we think petitioner’s declaration to ms deluca that he would no longer continue making monthly payments to her shows that there was not a meeting of the minds with respect to the proposed terms set forth in her attorney’s letter of date what triggered the breakdown in their negotiations for the amount of spousal support was that ms deluca was seeking more while petitioner wanted to pay less the circuit_court of fairfax county resolved their controversy first by fixing the amount of monthly spousal support at dollar_figure in its pendente lite order and finally in the final decree of divorce on date at dollar_figure per month accordingly on the basis of the facts and circumstances in this record we hold that petitioner is not entitled to an alimony deduction for the payments he made to ms deluca in because there was no written_separation_agreement in reaching our holding we have considered the arguments made by the parties and to the extent not mentioned we conclude that they are irrelevant moot or without merit to reflect the foregoing decision will be entered for respondent