t c memo united_states tax_court melvin j irions petitioner v commissioner of internal revenue respondent docket no filed date melvin j irions pro_se horace crump for respondent memorandum opinion wells judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax the issues to be decided are whether petitioner is entitled to a dependency_exemption deduction for his minor child pursuant to sec_151 whether petitioner is entitled to a child_tax_credit pursuant to sec_24 whether petitioner is entitled to head-of-household filing_status and whether petitioner is entitled to an earned_income_tax_credit pursuant to sec_32 at the time he filed the petition petitioner resided in background mississippi in the notice_of_deficiency respondent sent petitioner for taxable_year respondent determined that petitioner did not qualify for a dependency_exemption deduction a child_tax_credit head-of-household filing_status or an earned_income_tax_credit petitioner timely filed a petition with this court for redetermination of the deficiency g j i is the minor child of petitioner and martha irions ms irions petitioner and ms irions are divorced ms irions had legal and physical custody of g j i during g j i visited petitioner on weekends and during the summer in petitioner provided no evidence of the total amount of time that g j i lived with petitioner during petitioner paid child_support of dollar_figure in 1unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure 2the court refers to minor children by their initials see rule a the property settlement and child custody agreement states that ms irions will claim g j i for income_tax purposes ms irions did not sign a document stating that she would not claim g j i as a dependent for the taxable_year discussion generally the commissioner’s determinations in the statutory_notice_of_deficiency are presumed correct see rule a 290_us_111 deductions are a matter of legislative grace and taxpayers bear the burden of proving that they are entitled to the deductions claimed see rule a 503_us_79 292_us_435 dependency_exemption deduction sec_151 allows a taxpayer to deduct an annual exemption_amount for each dependent of the taxpayer sec_152 defines dependent as a qualifying_child or a qualifying_relative the parties agree that g j i is the child of petitioner the child of a taxpayer is a qualifying_child if that child has the same principal_place_of_abode as the taxpayer for more than one-half of the taxable_year and meet sec_3petitioner has not raised any issue regarding sec_7491 and because he has failed to substantiate his claims or introduce credible_evidence for any of the issues in this case sec_7491 would not apply see sec_7491 and a certain age and self-support restrictions not at issue here sec_152 petitioner has introduced no evidence that g j i ’s principal_place_of_abode was with petitioner for more than months in as required by sec_152 petitioner made vague assertions that g j i lived with him on weekends and during the summer petitioner did not provide specific dates or any documentation to support his claims we conclude that petitioner has not carried his burden of proving that g j i was a qualifying_child of petitioner in for the child of a taxpayer to be a qualifying_relative the taxpayer must provide over one-half of that child’s support for the year sec_152 additionally the child must meet certain income restrictions and must not be a qualifying_child of any taxpayer for the year in issue id petitioner claims that he provided over one-half of the support of g j i in including among other things child_support insurance clothing and school supplies petitioner introduced evidence showing that he paid child_support of dollar_figure during petitioner did not however provide any credible_evidence regarding other_amounts he 4if petitioner and ms irions provided over one-half of the support for g j i in and it is not clear from the record that they did the special rule_of sec_152 would apply to determine who was entitled to claim g j i as a dependent ms irions had legal and physical custody of g j i in and she did not execute a document relinquishing that right to petitioner as required by sec_152 accordingly petitioner would not be entitled to claim g j i as a dependent if the special rule_of sec_152 did apply paid for the support of g j i in he offered only his vague and unsubstantiated testimony additionally petitioner offered no credible_evidence that would prove that g j i was not the qualifying_child of ms irions ms irions had legal and physical custody of g j i during and there is no evidence in the record to support a conclusion that g j i ’s principal_place_of_abode was not with ms irions for more than months in we hold that petitioner has not carried his burden of proving that g j i was his qualifying_relative in for purposes of sec_152 because petitioner has failed to establish that g j i is either a qualifying_child or a qualifying_relative for purposes of sec_152 we conclude that petitioner is not entitled to a dependency_exemption deduction for child tax_credits subject_to limitations based on adjusted_gross_income a taxpayer is entitled to a child_tax_credit with regard to each qualifying_child of the taxpayer sec_24 and b for purposes of the child_tax_credit a qualifying_child is a child that is under the age of and is a qualifying_child pursuant to sec_152 for purposes of the dependency_exemption deduction sec_24 as discussed above g j i is not a qualifying_child of petitioner for purposes of sec_152 and therefore g j i is not a qualifying_child for purposes of sec_24 consequently we hold that petitioner is not entitled to a child_tax_credit for taxable_year head-of-household filing_status sec_1 provides a special tax_rate for an individual filing as a head_of_household as relevant herein sec_2 defines head_of_household as an unmarried individual who maintains as his home a household that for more than one-half of the year constitutes the principal_place_of_abode of a qualifying_child as defined in sec_152 or any other person who is a dependent of the taxpayer for purposes of sec_151 we have concluded above that petitioner has failed to establish that g j i was a qualifying_child of petitioner for purposes of sec_152 and that g j i therefore was not a dependent of petitioner for purposes of sec_151 accordingly we hold that petitioner has failed to establish that he is entitled to head-of-household filing_status for taxable_year earned_income_tax_credit sec_32 provides an earned_income_tax_credit to eligible individuals sec_32 provides that a taxpayer qualifies as an eligible_individual if the taxpayer has a qualifying_child as defined by sec_152 we have concluded above that petitioner failed to establish that g j i is a qualifying_child of petitioner for tax_year sec_32 provides that a taxpayer with no qualifying children may qualify as an eligible_individual if the taxpayer has a principal_place_of_abode in the united_states for more than one-half of the tax_year is between the ages of and before the close of the tax_year and is not a dependent for whom a deduction is allowable petitioner meets the requirements of sec_32 however with respect to his taxable_year no credit is allowed for an unmarried taxpayer without a qualifying_child if the taxpayer’s adjusted_gross_income is greater than dollar_figure revproc_2004_71 sec_3 2004_2_cb_970 petitioner’s adjusted_gross_income for was dollar_figure consequently petitioner is not entitled to an earned_income_tax_credit for tax_year for the foregoing reasons we conclude that for taxable_year petitioner is not entitled to a dependency_exemption deduction or a child_tax_credit with respect to g j i that petitioner is not entitled to head-of-household filing_status and that petitioner is not entitled to an earned_income_tax_credit we have considered all of the contentions and arguments of the parties that are not discussed herein and we find them to be without merit irrelevant or moot to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court troy k dixon petitioner v commissioner of internal revenue respondent docket no 1455-14l filed date troy k dixon pro_se karen lynne baker for respondent memorandum findings_of_fact and opinion paris judge this case is before the court on a petition for review of a notice_of_determination concerning collection action s under sec_6320 and or dated date notice_of_determination the notice of 1unless otherwise indicated all section references are to the internal continued determination sustained two notices of federal_tax_lien nftl filings with respect to trust fund recovery penalties tfrps under sec_6672 assessed against petitioner for failing to collect and pay over employment_taxes owed by crown staffing inc for taxable quarter sec_2 from through the notice_of_determination also sustained a proposed levy to collect tfrps assessed against petitioner for failing to collect and pay over employment_taxes owed by crown staffing inc for taxable quarter sec_3 from through the issues for decision are as follows whether petitioner is entitled to challenge the underlying liabilities and if so whether he is a responsible_person who willfully failed to pay over employment_taxes under sec_6672 and whether the settlement officer in the internal_revenue_service irs office of appeals appeals abused his discretion in sustaining the collection actions continued revenue code in effect at all relevant times 2the nftl filings included taxable quarters march and date date march june september and date march june and date march june september and date and march june and date 3the proposed levy included taxable quarters march june and date march june and date march june september and date and march june and date the notice_of_determination sustained the proposed levy on all of the above and also included date and date findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and attached exhibits and the exhibits admitted at trial are incorporated herein by this reference petitioner resided in texas when he timely filed his petition at all relevant times petitioner had the same home address of record i petitioner grew up around the staffing solution industry and his parents james and sharon dixon owned various staffing agencie sec_4 over the years petitioner returned to texas in after having attended college out of state in his father invited him to work at the family staffing business a petitioner’s involvement with crown staffing inc crown staffing inc corporation was incorporated in the state of texas on date as an employment staffing agency at the age of petitioner was named the corporation’s sole director and president and he held those positions from the corporation’s incorporation through and including businesses for which the corporation provided staffing solutions paid the corporation directly the people who were staffed at the businesses were 4see 141_tc_173 dixon v commissioner tcmemo_2013_207 classified as the corporation’s employees and the corporation was responsible for paying their wages and for withholding federal taxes from those wages despite his being established as the sole director and president of the corporation on paper petitioner initially worked under the control and direction of his parents petitioner was directed to work on third-shift labor crews drive fork lifts and do other dirty jobs while his parents actively managed the corporation he worked at locations offsite from the corporate office initially he had meetings with clients and focused on the labor side of the business later he became more involved in sales and spent more time in the corporate office in petitioner became the safety coordinator for the corporation and handled some sales petitioner continued to work on safety and sales offsite and checked in with the corporate office in the mornings and evenings when he was at the corporate office he would often have a stack of documents to sign he did so without reviewing them occasionally petitioner checked the mail and made bank_deposits but primarily he left the mail for his parents to open and review up through petitioner did not exercise any hiring or firing authority over employees and instead would have made any personnel recommendations to his father he had access to the corporation’s checking accounts but was not responsible for them most checks were signed by one of his parents he occasionally signed completed forms employer’s annual federal unemployment futa_tax return and form sec_941 employer’s quarterly federal tax_return on behalf of the corporation when his mother asked him to do so but he did not complete or review them b tax_liabilities the corporation did not pay in full its form_941 employment_taxes for the taxable quarters ending date and march and date in date the irs received from petitioner’s mother a form_4180 report of interview with individual relative to trust fund recovery penalty or personal liability for excise_taxes the form reflected petitioner’s name as the person interviewed and included his signature however his mother had completed the form and asked him to sign it in fall irs revenue_officer feris ro feris appeared at the corporation unannounced and spoke with petitioner ro feris explained to petitioner that the corporation had a tax issue and owed taxes during that meeting petitioner did not see any documentation regarding the corporation’s taxes after the meeting petitioner called his parents to obtain guidance and was told that they and later the corporation’s attorneys would handle the tax issues on date respondent sent by certified mail a letter trust fund recovery penalty letter and a form_2751 proposed assessment of trust fund recovery penalty with respect to the corporation’s unpaid employment_taxes for taxable quarters ending date and march and date the certified mail was returned to the irs on date unclaimed petitioner testified that he did not recall receiving notice of the certified mailing on date respondent assessed tfrps against petitioner for taxable quarters ending date and march and date as follows taxable quarter date date date amount assessed dollar_figure dollar_figure dollar_figure ii a petitioner’s involvement with the corporation in and new corporate bank accounts were opened at woodforest national bank petitioner had signatory authority over the following accounts 5the sec_6672 civil penalty liability for date has been paid in full was not included in the notice_of_determination and will not be discussed further a business checking general fund account a business checking labor payroll account and a business checking special fund in trust for u s under sec_7512 irc trust fund account petitioner was named trustee of and had sole signatory authority over the trust fund account petitioner believed that the trust fund account would help ensure that the corporation paid its tax_liabilities in and petitioner continued to work in sales and customer service operations for the corporation by petitioner began taking over internal operations for the company he worked on matters related to the corporation’s insurance and worker’s compensation from through and including he was being groomed to take over the corporation in preparation for his parents’ retirement during that period petitioner had the authority to hire and fire employees he signed leases on behalf of the corporation he also transferred funds from the corporation’s general fund to its labor payroll account petitioner continued to sign any documents his parents requested that he sign including the corporation’s tax returns petitioner had a corporate credit card on which he was authorized to and did make purchases b tax_liabilities in the corporation although paying form_941 deposits in the hundreds of thousands of dollars underpaid its tax deposits and its form sec_941 consistently reflected balances due by fall the corporation’s form_941 deposits were far less than the balance due and the corporation oftentimes owed several hundred thousand dollars of unpaid tax on each quarter’s return the corporation filed form_941 and paid a deposit each quarter but the large delinquencies continued to accrue through date for each taxable quarter from through the corporation’s general fund account held funds sufficient to pay the corporation’s delinquent form_941 employment_taxes during that period petitioner wrote checks out of the general fund for periodic_payments to a professional sports team and a country club totaling dollar_figure and payments to himself totaling dollar_figure in contrast petitioner wrote checks out of the general fund to the irs totaling only dollar_figure additionally the funds in the labor payroll account for the corporation were sufficient to have fully paid the balances reflected on the form sec_941 for the taxable quarters ending march and date and date between date and date the trust fund account also had a total of dollar_figure transferred out of it that was not used to pay the corporation’s employment_tax liabilities on date james dixon pleaded guilty to tax_evasion sharon dixon was later convicted for other federal tax crimes see 141_tc_173 goeke j concurring by petitioner had fully taken over managing the day-to-day operations of the corporation because his parents had both been convicted and were set to be incarcerated in petitioner closed the business on date petitioner was interviewed by irs revenue_officer boozer ro boozer as reflected on a form_4180 the record contains form_4183 recommendation re trust fund recovery penalty assessment showing that the initial determination of the tfrps with respect to the taxable quarters in issue from through was approved in writing on date by group manager cynthia l brunson whose electronic signature is on the form on date respondent sent petitioner letter 3164-a indicating that petitioner might have some responsibility regarding the unpaid taxes of the corporation on the same date by certified mail respondent sent petitioner a 6the court takes judicial_notice of the factual basis for james dixon’s guilty plea see fed r evid 87_tc_1016 james dixon was a person who had the duty to collect to truthfully account for and to pay over to the irs the employment_taxes of a company named crown staffing inc for all employment_tax quarters of the years through the present united_states v dixon no 12cr00521-0018 s d tex date letter and a form_2751 for the corporation’s unpaid employment_taxes for the taxable quarters ending date march june september and date march june and date march june september and date and march june and date petitioner testified that he did not recall receiving the date mailing the u s postal service usps returned the certified mail to respondent on date with the notation return to sender refused unable to forward dated date on date respondent assessed tfrps against petitioner for all of the taxable quarters reflected in the letter for the following amounts taxable quarter date date date date date date date date date date date date date date date amount assessed dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure iii collection_due_process on date respondent issued petitioner a letter notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 for the tfrps with respect to the taxable quarters ending march and date on date respondent issued petitioner another letter for tfrps with respect to the taxable quarters ending date march june september and date march june and date march june september and date and march june and date on date respondent issued petitioner a letter final notice notice_of_intent_to_levy and notice of your right to a hearing under sec_6330 for tfrps for taxable quarters ending march june and date march june and date march june september and date and march june and date levy notice the levy notice did not include the taxable quarters ending date and date petitioner timely filed three forms request for a collection_due_process or equivalent_hearing cdp hearing requests in response to the two nftl filings and the levy notice the cdp hearing requests sought relief from the liens and proposed levy and acceptance of an offer-in-compromise or an installment_agreement petitioner’s cdp hearing requests stated that he never received notice of the proposed tfrps as required by sec_6672 and consequently never had an opportunity to contest the assessments petitioner argues he was not a responsible_person and never had the actual authority or ability to pay the taxes because the corporation and its taxes were controlled by his parents petitioner’s cdp hearing requests were assigned to settlement officer green so green so green confirmed that the letters were timely mailed to petitioner’s last_known_address that there were balances due when the nftl filings and levy notice were issued and that petitioner had been appropriately notified of the forthcoming lien and levy actions so green and petitioner’s attorney scheduled several phone conferences between april and date during that period petitioner provided extensive financial information including form 433-a collection information statement for wage earners and self-employed individuals dated date over the same period petitioner’s attorney continued to supply supporting financial documents as requested by so green so green concluded that the unclaimed and refused certified mailings of letters addressed to petitioner’s last_known_address satisfied receipt of the letters and constituted prior opportunities to dispute the tax_liabilities so green did not review the underlying liabilities for any of the taxable quarters in issue instead so green focused on petitioner’s request for an offer-in- compromise or an installment_agreement so green faxed a letter to petitioner’s attorney determining that petitioner’s monthly income was dollar_figure and monthly expenses were dollar_figure allowing for monthly payments of dollar_figure so green also determined that petitioner had equity in assets to pay toward the liabilities petitioner had equity in a chevrolet corvette a vacant lot and his personal_residence in a letter dated date petitioner’s attorney argued that petitioner could not make monthly payments of dollar_figure without incurring economic hardship and instead offered a monthly payment of dollar_figure to pay the sec_6672 civil penalty liabilities so green reduced the proposed payments to dollar_figure after recalculating certain expenses petitioner’s attorney informed so green in date that petitioner intended to close the business by the end of and would be unable to make any proposed payments on date appeals issued petitioner the notice_of_determination sustaining the nftl filing for tfrps for taxable quarters ending march and date the nftl filing for tfrps for taxable quarters ending date march june september and date march june and date march june september and date and march june and date and the proposed levy to collect tfrps for tax quarters ending date march june september and date march june and date march june september and date and march june and date the attachment to the notice_of_determination noted that the collection actions would be sustained because petitioner was not willing to agree to an installment_agreement based on his current ability to pay in response to the notice_of_determination petitioner timely petitioned this court see sec_6330 petitioner asserted that he was not a person responsible for paying over and did not willfully fail to pay over the corporation’s form_941 employment_taxes his parents controlled the business and his father controlled the employment_taxes neither petitioner nor petitioner’s attorney ever received the letters and consequently never had an opportunity to contest the liabilities and respondent wrongfully rejected his proposed partial payment installment_agreement 7the proposed levy itself did not include taxable quarters ending date and date opinion i sec_6672 tfrps an employer is required to withhold or collect from an employee’s wages the employee’s share of federal taxes8 and then must pay over the withheld amounts to the federal government jarrett v commissioner tcmemo_2018_ at such withheld amounts are known as trust_fund_taxes id citing 132_tc_21 ndollar_figure because they are held to be a special fund in trust for the united_states sec_7501 sec_6672 imposes the tfrp on a ny person required to collect truthfully account for and pay over any_tax imposed by this title who willfully fails to collect such tax or truthfully account for and pay over such tax or willfully attempts in any manner to evade or defeat any such tax or the payment thereof the term person includes an officer_or_employee of a corporation who is under a duty to collect account for and pay over the tax sec_6671 such persons are referred to as responsible persons and the term may be applied 8these include the employee’s share of social_security_tax see sec_3101 sec_3102 medicare_tax see sec_3101 sec_3102 and federal_income_tax see sec_3402 sec_3403 9the irs collects the trust fund liability only once consequently the irs cross-references payments against the trust fund liability of the employer and continued broadly 132_tc_301 citing 195_f3d_229 5th cir and 988_f2d_1449 5th cir the tfrp shall be paid upon notice_and_demand by the commissioner of internal revenue and shall be assessed and collected in the same manner as taxes sec_6671 petitioner contends that he is not liable for tfrps because he was not a responsible_person who willfully failed to pay over the withheld taxes for any of the taxable quarters in issue before addressing petitioner’s contention the court must first decide whether petitioner is entitled to challenge the underlying liabilities ii sec_6330 and sec_6331 before imposing a tfrp under sec_6672 the irs must properly notify the responsible_person and properly assess the penalty against that person the irs must notify the responsible_person in writing by mail to the person’s last_known_address that the person will be subject_to an assessment of the tfrp secs continued payments against the tfrps of responsible persons see 138_tc_348 in addition for circumstances in which there is more than one responsible_person a taxpayer who paid the tfrp may bring a separate suit against the other responsible_person s claiming a right of contribution sec_6672 see weber v commissioner t c pincite n b b if the responsible_person fails to pay the tfrp after demand the amount becomes a lien in favor of the united_states upon that person’s property and rights to property sec_6321 the irs may then file an nftl to protect the validity and priority of the lien against certain third parties sec_6323 once the irs files an nftl it must notify the person of the filing and of the person’s right to a cdp hearing to appeal the nftl filing sec_6320 and b sec_6331 authorizes the irs to levy against property and property rights where a taxpayer who is liable for taxes fails to pay those taxes within days after notice_and_demand for payment sec_6331 requires the secretary to send the taxpayer written notice of the secretary’s intent to levy and sec_6330 requires the secretary to send the taxpayer written notice of his right to a cdp hearing at least days before any levy 125_tc_301 aff’d 469_f3d_27 1st cir if a taxpayer timely requests a cdp hearing appeals must conduct the hearing and determine whether to sustain the proposed collection action in making that determination sec_6330 requires appeals to consider whether the requirements of any applicable law or administrative procedures have been met any issues appropriately raised by the taxpayer and whether the proposed levy balances the need for the efficient collection_of_taxes and the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary at the hearing a taxpayer may raise any relevant issue including appropriate defenses challenges to the appropriateness of the collection action and collection alternatives such as an installment_agreement or an offer-in- compromise sec_6330 once appeals makes a determination the taxpayer may appeal the determination to the tax_court sec_6330 iii standard of review in general a taxpayer must raise an issue at a cdp hearing to preserve it for this court’s review 129_tc_58 118_tc_488 sec_301_6330-1 q a-f3 proced admin regs petitioner challenged the underlying liabilities during the cdp hearing by asserting that he was not a responsible_person for purposes of sec_6672 thus the issue of petitioner’s liability is properly before this court unless he was otherwise barred from challenging it at the cdp hearing a taxpayer may contest the existence or amount of the underlying tax_liability only if the taxpayer did not receive a statutory_notice_of_deficiency or otherwise have an opportunity to dispute the liability sec_6330 see also 114_tc_604 a taxpayer has the opportunity to dispute his liability for a tfrp when he receives a letter mason v commissioner t c pincite a letter that was not received but was not deliberately refused by a taxpayer does not constitute an opportunity to dispute the taxpayer’s liability id pincite in reviewing the determination the court has held that where the validity of the underlying tax_liability is properly at issue the court will review the matter de novo sego v commissioner t c pincite 114_tc_176 where the validity of the underlying tax_liability is not properly at issue the court will review the appeals officer’s administrative determination for abuse_of_discretion sego v commissioner t c pincite an abuse_of_discretion is any_action that is arbitrary capricious or without sound basis in law or fact 112_tc_19 iv tfrps on date the irs issued petitioner a letter to inform him of his potential liability for a tfrp as a responsible_person and his opportunity to protest the action the irs mailed letter by certified mail to petitioner’s last_known_address and it was postmarked on date on date the certified mail envelope was returned to the irs unopened the envelope did not bear any usps designations of being refused or rejected but merely unclaimed petitioner did not actually receive the date letter and he did not deliberately refuse it for those taxable quarters included in the date letter petitioner had not had a prior opportunity to dispute the liabilities and was therefore not barred from challenging them at the cdp hearing accordingly the court will review petitioner’s liability for the tfrps de novo petitioner’s liability for the tfrps rests on his being a responsible_person with respect to the taxable quarters in issuedollar_figure responsibility is based on an individual’s duty and authority to withhold and pay taxes barnett f 2d pincite it does not require actual knowledge that one has that duty and authority id factors indicative of such authority include whether the individual i is an officer or member of the board_of directors ii owns a substantial amount of stock in the company iii manages the day-to-day operations of the business iv has the authority to hire or fire employees v makes decisions as to the disbursements of funds and payment of creditors and vi possesses the authority to sign company checks id pincite at the beginning of petitioner was unaware that the corporation had failed to pay its form_941 taxes for the taxable quarters ending march and june 10the court reiterates that there may be more than one responsible_person petitioner worked under the control and direction of his parents he was not involved in the day-to-day management of the company he worked primarily offsite and signed papers when asked to do so he had recently started his role as safety coordinator after spending some time working on labor crews petitioner did not exercise any hiring or firing authority over employees and instead left personnel decisions to his father petitioner became aware of the corporation’s failure to pay its form_941 taxes in full only after ro feris so informed him in fall even then petitioner contacted his parents for guidance and was told that they and the corporation’s attorneys would handle any_tax matters petitioner did not take a more active role in the corporation until from through petitioner acted upon his authority as the president and sole director of the corporation he was being groomed to take over the business and participated more actively in the management of the corporation petitioner had signatory authority over the corporation’s bank accounts in particular he had sole signatory authority over the corporation’s trust fund account which was opened to ensure the corporation paid its tax_liabilities petitioner was more involved in the day-to-day operations of the corporation he wrote checks from the corporate accounts and chose to make payments to a professional sports team a country club and himself the stark contrast between petitioner’s duties in and his role starting in show that his role in the corporation in was nominal at most petitioner’s duties and authority did not make him a responsible_person in accordingly the court does not sustain appeals’ determination relating to the nftl filing for the tfrps for the taxable quarters ending march and date v tfrps a second letter for taxable quarters ending date through date was mailed by certified mail to petitioner’s last_known_address on date the certified mail contained a letter and a form_2751 for the corporation’s unpaid form_941 taxes on date the certified mail was returned to the irs with the usps notation return to sender refused unable to forward on the face of the envelope petitioner’s testimony that he did not receive the date letter is not credible at that point petitioner was aware of the corporation’s delinquent tax_liabilities and had been interviewed by ro boozer about the outstanding tax_liabilities less than two months before the letter was mailed with respect to the date letter petitioner could not have reasonably expected that his parents would resolve the corporation’s tax issues because they were about to be incarcerated the court concludes that petitioner deliberately refused the date letter even though petitioner did not actually receive letter because he deliberately refused it the letter is considered as having provided a prior opportunity to dispute the liabilities see 142_tc_425 aff’d 638_fedappx_5 d c cir mason v commissioner t c pincite giaquinto v commissioner tcmemo_2013_150 thus for the taxable quarters included in the date letter petitioner did have a prior opportunity to dispute the liabilities therefore petitioner’s liability with respect to the through tfrps is not properly before the court and the court will review appeals’ administrative determination with respect to the collection action for an abuse_of_discretion in determining whether so green abused his discretion the court must consider whether he properly obtained verification that the requirements of applicable law and administrative procedure had been met considered any relevant issues petitioner raised and considered whether the proposed collection action was no more intrusive than necessary see sec_6330 so green sustained the irs’ levy notice with respect to the taxable quarters ending date and date but neither quarter was included in the levy notice sec_6330 requires that a levy notice include the amount of unpaid tax by failing to verify that the irs had complied with sec_6330 so green abused his discretion in sustaining the levy action with respect to the taxable quarters ending date and date therefore the court does not sustain appeals’ determination with respect to the levy for the taxable quarters ending date and date with respect to the remaining taxable quarters from through however so green satisfied his obligation to verify that the requirements of applicable law and administrative procedure had been metdollar_figure he confirmed that petitioner received timely and proper notice of the proposed assessments and the forthcoming collection actions the commissioner is authorized to enter into written agreements allowing taxpayers to pay any_tax in installment payments if he deems that the agreement will facilitate full or partial collection of such liability sec_6159 the 11petitioner has not argued that so green failed to obtain verification of compliance with the supervisory approval requirement under sec_6751 in any event the court need not address the applicability of sec_6751 to tfrps because form_4183 in the administrative record supports so green’s verification see blackburn v commissioner 150_tc_218 decision to accept or reject installment agreements lies within the discretion of the commissioner sec_301_6159-1 c i proced admin regs the court does not normally make an independent determination of what would be an acceptable alternative murphy v commissioner t c pincite if appeals follows all statutory and administrative guidelines and provides a reasoned and balanced decision the court will not reweigh the equities 140_tc_173 petitioner argues that so green abused his discretion by not considering his collection alternative and by offering unreasonable installment options so green offered a partial pay installment_agreement based on the financial information petitioner provided of his current income assets and expenses upon request and after recalculating certain expenses for petitioner so green offered a partial pay installment_agreement with lower monthly payments petitioner rejected the proposed installment_agreement stating that he would be unable to make any monthly payments once the business was closed so green did not abuse his discretion when he relied on petitioner’s current income and expenses to determine a collection alternative vi conclusion in view of the foregoing the court sustains the notice_of_determination for the nftl filing for taxable quarters ending date march june september and date march june and date march june september and date and march june and date the court also sustains the notice_of_determination for the levy notice for the taxable quarters ending march june and date march june and date march june september and date and march june and date the court concludes that petitioner was not a responsible_person for the taxable quarters ending march and date and does not sustain the notice_of_determination for the nftl filing for those taxable quarters the court also does not sustain the notice_of_determination for the proposed levy for taxable quarters ending date and date because those quarters were not included in the levy notice the court has considered all arguments by the parties and to the extent not specifically mentioned above concludes that they are moot irrelevant or without merit to reflect the foregoing an appropriate decision will be entered


internal_revenue_service department of the treasury number release date index number 468a washington dc person to contact telephone number refer reply to cc psi 6-plr-157175-02 date date re revised schedule of ruling amounts taxpayer plant location commission a commission b commission c cooperative a cooperative b cooperative c fund independent engineer a independent engineer b dear this letter responds to the request of taxpayer filed and supplemental information submitted by your authorized representative for an extension of the most recent schedule of ruling amounts for the fund issued by the internal_revenue_service on the prior schedule the service limited the prior schedule to the years through because at the time the request for the prior schedule was pending with the service taxpayer intended to transfer its ownership interests in the plant during as part of a corporate_reorganization however the corporate_reorganization did not occur in accordingly taxpayer is requesting an extension of the prior schedule ruling amounts information was submitted pursuant to sec_1_468a-3 of the income_tax regulations we understand the facts as submitted by taxpayer to be as follows plr-157175-02 taxpayer owns a interest as tenant-in-common in plant which is situated at location plant's amended operating license expires in taxpayer is subject_to the jurisdiction of commission a which covers percent of the taxpayer's total electric sales and commission c which covers percent these percentages may vary slightly from year to year taxpayer is also subject_to the jurisdiction of commission b but commission b has not authorized the recovery_of decommissioning costs with regard to plant commission a in docket no effective approved rates to be included in taxpayer's cost of service for ratemaking purposes this order also provided that taxpayer include decommissioning costs for the plant in taxpayer's cost of service commission a based the amounts included in cost of service upon the testimony of at least two expert witnesses in determining the amount of decommissioning costs for the plant included in taxpayer's cost of service commission a used an estimated cost of dollar_figure dollars as a base cost for decommissioning the plant with taxpayer's ownership share being dollar_figure the cost is based upon the decommissioning study prepared by independent engineer a dated the estimated cost of decommissioning the plant set forth in the decommissioning study is premised on the prompt removal dismantlement method the base cost for decommissioning the plant was escalated at the rate of annually resulting in an estimated future decommissioning cost of dollar_figure through taxpayer's ownership portion of the future expense is dollar_figure for purposes of determining certain estimated dates relevant to the funding_period the level_funding limitation period and the qualifying percentage the ratemaking assumptions used by commission a to determine the rates in the last ratemaking proceedings are identical to the ratemaking assumptions used to determine the rates in the first ratemaking proceeding in which commission a included the plant in taxpayer's rate base with respect to commission a's jurisdictional amount the funding_period and the level_funding limitation period for plant as these terms are defined in sec_1_468a-3 extend through the assumed after-tax rate of return expected to be earned by assets of the fund under the jurisdiction of commission a is commission a determined this rate after taking into account the removal of investment restrictions under sec_468a by the energy policy act of the amount expected to be earned by assets of the fund over the period that begins on the first day of the first taxable_year to which the revised schedule of ruling amounts will apply and the last day of the funding_period is approximately dollar_figure plr-157175-02 with respect to commission a the date that plant began sustained and substantial generation of electricity for sale to customers was and the date that plant first was included in taxpayer's rate base was the estimated period for which the fund will be in effect is years through thus taxpayer has calculated its qualifying percentage to be percent pursuant to sec_1_468a-3 the estimated_useful_life of plant is years through the estimated life of plant was not adjusted by commission a before there are no pending proceedings before commission a that may result in an increase or decrease in the amount of decommissioning costs for plant included in taxpayer's cost of service for ratemaking purposes as of the fair_market_value of commission a's jurisdictional portion of the fund was dollar_figure commission c in docket no effective approved rates that taxpayer negotiated with cooperative a and cooperative b commission c in determining the amount of decommissioning costs for the plant to be included in taxpayer's cost of service used an estimated cost of dollar_figure dollars as a base cost for decommissioning plant with taxpayer's ownership share being dollar_figure this cost is based upon the decommissioning study prepared by independent engineer b the estimated base cost of decommissioning plant set forth in the decommissioning study is premised on the removal dismantlement method the base cost for decommissioning plant was escalated at the rate of approximately annually resulting in an estimated future decommissioning cost of dollar_figure through taxpayer's ownership portion of the future expense is dollar_figure the after-tax rate of return assumed by commission c to be earned by commission c's cooperative a and cooperative b jurisdictional assets of the fund was commission c in docket no effective approved rates that taxpayer negotiated with cooperative c commission c authorized nuclear decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes for plant in determining the amount of decommissioning costs for plant included in taxpayer's cost of service commission c used an estimated cost of dollar_figure dollars as a base cost for decommissioning plant with taxpayer's ownership share being dollar_figure this cost is based upon the decommissioning study prepared by independent engineer a the estimated base cost of decommissioning plant set forth in the decommission study is premised on the removal dismantlement method the base cost for decommissioning plant was escalated at the rate of approximately annually resulting in an estimated future decommissioning cost of dollar_figure through taxpayer's ownership portion of the future expense is dollar_figure the after-tax rate of return assumed by commission c to be earned by commission c's cooperative c jurisdictional assets of the fund was plr-157175-02 with respect to commission c's jurisdictional amount the funding_period and the level_funding limitation period for plant as defined in sec_1_468a-3 extend through moreover commission c determined the after-tax rate of return in both docket no and docket no without taking into account the removal of investment restrictions under sec_468a by the energy policy act of the amount expected to be earned by the assets of the fund over the period that begins on the first day of the first taxable_year to which the revised schedule of ruling amounts will apply and the last day of the funding_period is approximately dollar_figure with respect to commission c the date that the plant began sustained and substantial generation of electricity for sale to customers was and the date that the plant first was included in taxpayer's rate base was the estimated period for which the fund will be in effect is years through for commission c cooperative a and cooperative b and years through for commission c cooperative c thus taxpayer has calculated the qualifying percentage to be for commission c cooperative a and cooperative b and for commission c cooperative c pursuant to sec_1_468a-3 the estimated_useful_life of the plant is years through the estimated life of the plant was not adjusted by commission c before as of the fair_market_value of commission c's jurisdictional portion of the fund was dollar_figure there are no pending proceedings before commission a commission b or commission c that may result in an increase or decrease in the amount of decommissioning costs for the plant included in taxpayer's cost of service for ratemaking purposes sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any_tax year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is in effect bears to the estimated_useful_life of the plant this term is further defined to plr-157175-02 include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year within ½ months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or the ruling_amount applicable to the nuclear decommissioning fund for such tax_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 bases the schedule of ruling amounts on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a tax_year sec_1_468a-3 of the regulations permits the service to provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any taxable_year in the level_funding plr-157175-02 limitation period shall not be less than the ruling_amount specified in such schedule for any earlier taxable_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the funding_period for a nuclear decommissioning fund is the period that begins on the first day of the first taxable_year for which a deductible payment is made or deemed to be made to such nuclear decommissioning fund and ends the later of i the last day of the taxable_year that includes the estimated date on which decommissioning costs of the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's cost of service for ratemaking purposes or ii the last day of the taxable_year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant under section plr-157175-02 468a-3 f this separate determination shall be based on the reasonable assumptions and determinations used by the relevant public_utility commission and shall take into account only that portion of the total estimated cost of decommissioning that is properly allocable to the ratepayer whose rates are established or approved by the public_utility commission according to sec_1_468a-3 the ruling amounts for any_tax year is the sum of the ruling amounts for such tax_year determined under the separate schedules of ruling amounts sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations provides that any taxpayer that has obtained a schedule of ruling amounts must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline for the 10th taxable_year that begins after the taxable_year in which the most recent schedule of ruling amounts was received the first taxable_year to which the revised schedule of ruling applies shall be the 10th taxable_year that begins after the taxable_year in which the most recent schedule of ruling amounts was received sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates a increases the proposed period over which decommissioning costs of such nuclear power plant will be included in cost of service for ratemaking purposes b adjusts the estimated date on which such nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes or c reduces the amount of decommissioning costs to be included in cost of service for any taxable_year the taxpayer's most recent request for a schedule of ruling amounts did not provide notice to the service of such action by the public_utility commission and in the case of a taxpayer that determines its schedule or ruling amounts under a formula or method obtained under sec_1_468a-3 the item increased adjusted or reduced is a fixed rather than a variable element of that formula or method sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a tax_year in response to a request for a schedule of ruling amounts that is filed after the deemed deadline date for such tax_year plr-157175-02 sections a and c of the act eliminated for taxable years beginning after date the investment restrictions contained in sec_468a sections b and c of the act revised sec_468a by lowering the tax_rate applicable to a nuclear decommissioning fund for taxable years beginning after date section dollar_figure of revproc_92_54 1992_2_cb_393 provides that if a public_utility commission places a nuclear power plant in a taxpayer's rate base within a reasonable period of time after the date the plant begins sustained and substantial generation of electricity for sale to customers the date of inclusion in rate base will be deemed to be the commercial operations date a reasonable period of time is one that ends on the last day of the second calendar_year after the calendar_year in which the nuclear power plant begins sustained and substantial generation of electricity for sale to customers we have examined the representations and data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely on these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commissions a and c have determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations the taxpayer as one the owners of the plant has calculated its share of the decommissioning costs under sec_1_468a-3 of the regulations the taxpayer subject_to the jurisdiction of two or more public_utility commissions for ratemaking purposes has calculated the total decommissioning costs allocable to commission a and to commission c as required by sec_1_468a-3 of the regulations the taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commissions a and c and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund pursuant to sec_1_468a-3 of the regulations taxpayer has determined that percent is the qualifying percentage the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the lesser amount of the plr-157175-02 decommissioning costs applicable to such fund or the ruling applicable to this fund as set forth under sec_1_468a-2 of the regulations based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts tax years through commissions a b and c year a b c total the approved schedule of ruling amounts for commission c is being limited to a five-year period as a result of the statutory changes made by the act the elimination of the investment restrictions and the reduction of the tax_rate applicable to income earned by the fund may result in a greater after-tax of return than was estimated prior to the enactment of the act by commission c which based its determinations as to the approved after-tax rate of return on restricted investments and a higher tax_rate this increased after-tax rate of return would over the life of the fund result in a balance in the fund on the last day of the funding_period that would exceed the amount of decommissioning costs allocable to the fund in order to prevent the excess accumulation in the fund this schedule of ruling amounts is limited to a five year period for commission c approval of a revised schedule of ruling amounts may be approved after a determination by the applicable public_utility commissions of an after-tax rate of plr-157175-02 return that accounts for the reduced_tax_rate and unrestricted investments approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated earlier payments made to such fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund pursuant to 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 is also being sent to the industry director natural_resources lm nrc sincerely yours peter friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries cc


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 plr-109037-17 date may internal_revenue_service number release date index number -------------------------- ------------------------ ------------------------------ re -------------- ------------------------ legend decedent ------------------------ ---------------------------------------------------- spouse date date -------------------------- --------------------------- ------------------ dear ----------------- this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election plr-109037-17 it is represented that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of decedent’s death including any taxable_gifts made during his lifetime you request an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-109037-17 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i 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 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means 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_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 plr-109037-17 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date it is represented that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed 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 if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-109037-17 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 associate chief_counsel passthroughs special industries lorraine e gardner by _____________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court lb m associates inc rudy j alvarado tax_matters_person petitioner v commissioner of internal revenue respondent docket nos filed date elizabeth k brown and james w bruce iii for petitioner o christopher meyers for participating shareholders gary l bloom for respondent memorandum opinion chiechi judge this matter is before us on respondent's motion to dismiss for lack of jurisdiction and to strike with respect to affected items respondent's motion we shall grant respondent's motion lb m associates inc lb m an s_corporation had its principal_place_of_business in lawton oklahoma at the time the respective petitions in these cases were filed the record in these cases establishes and or the parties do not dispute the following during except for rudy j alvarado mr alvarado who became a shareholder of lb m during that year when he purchased percent of its stock all of the shareholders of lb m selling lb m shareholders including james e ferguson john p purcell jr bloomer don sullivan steve doerfel anthony pokorny and howard rubin participating shareholders sold lb m a portion of their lb m stock stock sale in return for which lb m issued a promissory note to each such shareholder promissory note as a result of mr alvarado's purchase and the selling lb m shareholders' sales of lb m stock mr alvarado became a percent owner of the stock of lb m lb m and each of the selling lb m shareholders treated the promissory note issued to each such shareholder in the stock sale as reflecting an indebtedness of lb m to that shareholder alleged lb m liability each of the selling lb m shareholders treated the alleged lb m liability to each such shareholder as an increase in such shareholder's basis in the indebtedness of lb m to such shareholder and combined basis basis in lb m in a such indebtedness and b the lb m stock held by such shareholder during lb m made a cash distribution cash distribution to each of the selling lb m shareholders none of those shareholders reported any capital_gain with respect to the cash distribution in the federal_income_tax return that each such shareholder filed for that is because except for one of the selling lb m shareholders the treatment by each of those shareholders of the alleged lb m liability as an increase in such shareholder's basis in lb m caused such shareholder's basis in lb m to exceed such shareholder's cash distribution respondent mailed notices of final s_corporation administra- tive adjustment for fsaa and fsaa respectively to steve doerfel mr doerfel in his capacity as the tax_matters_person original tax_matters_person of lb m in the fsaa respondent made adjustments to certain subchapter_s items of lb m and purported to make adjustments to the capital_gains of certain shareholders of lb m on cash distribu- tions in excess of basis and the capital losses of certain of those shareholders because of the basis limitation provisions of sec_1366 the original tax_matters_person timely filed a petition with respect to the fsaa and a petition with respect to the one of the selling lb m shareholder's basis in lb m would have equaled or exceeded the cash distribution that such share- holder received even if such shareholder had not increased his or her basis in lb m by the alleged lb m liability to such share- holder fsaa paragraph of the amended petitions in these cases alleges in pertinent part petitioner disputes the determination of the commissioner regarding the basis of the individual shareholders in the stock of petitioner the dispute here does not arise from the adjustments to income and expenses at the corporate level the dispute arises in the computation of the basis of the individual share- holders in their stock this computation of basis at the shareholder level in turn determines the amount and timing of the loss amounts deductible to the sharehold- ers the commissioner erred in failing to include in the basis computation the amount of money loaned to petitioner by certain individual shareholders of petitioner during calen- dar year the basis computation used by commissioner at the share- holder level does not include an increase to basis as a result of these loans the amended petition in docket no relating to also alleges all of the adjustments except shareholders sic capital_gain on cash distributions in excess of basis in the amount of dollar_figure are agreed b petitioner disputes the said amount relating to the shareholders' capital_gain on date the court permitted mr alvarado current tax_matters_person to replace mr doerfel as the tax_matters_person in these cases the original tax_matters_person admitted in the amended petitions in these cases that the computation of the basis in lb m of each of the selling lb m shareholders is to be made at the shareholder level it is because that computation is to be made at the shareholder and not the corporate level that respondent argues the current tax_matters_person concedes and we conclude that this court has no jurisdiction in these proceed- ings over the determination of the basis in lb m of each lb m shareholder see 95_tc_1 sec_301 6245-1t c and temporary proced admin regs fed reg date see also sec_6231 sec_301_6231_a_5_-1t a and b temporary proced admin regs fed reg date nor do we have jurisdiction over the other affected items referred to in the amended petitions which also are matters that must be determined although the position of the participating shareholders is not altogether clear they appear to concede that the determination of the basis in lb m of each of the selling lb m shareholders is not a subchapter_s_item to the extent that the participating shareholders contend otherwise they are wrong see 95_tc_1 sec_301 1t c and temporary proced admin regs fed reg date we have considered all of the arguments of the participating shareholders that are not discussed herein and we find them to be without merit all section references are to the internal_revenue_code in effect at all relevant times sec extends and makes the partnership audit and litigation provisions applicable to subchapter_s items at the shareholder and not the corporate level viz for and the amount of loss if any deductible by each lb m shareholder and for the amount of capital_gain if any of each lb m shareholder see sec_6231 sec_301_6231_a_5_-1t a temporary proced admin regs fed reg date the only matters in dispute in these cases over which the court has jurisdiction are whether for each of the years at issue lb m was indebted to each of the selling lb m shareholders and if so the amount of such indebtedness see 97_tc_278 sec_301 6245-1t a v temporary proced admin regs fed reg date to reflect the foregoing an appropriate order will be issued granting respondent's motion


internal_revenue_service number release date index number ------------------------ ------------------------------------------ ---------------------- ------------------------------- -------------- -------------------------------- in re ------------------------------------------------ ----------------------- - department of the treasury washington dc person to contact -------------------- id no ------------- telephone number -------------------- refer reply to cc psi b04 - plr-116958-07 date date legend legend decedent ------------------------ date ----------------------- will ---------------------------------------------------------------------- ---------------------------------------- trust --------------------------------------------------------------------------- child ----------------------- child ------------------------------ grandchild ------------------------------------------------------ grandchild -------------------------------------------------------------------- date --------------------- grandchild ---------------------- ------------------------------------------------------- grandchild ------------------------ grandchild ------------------------------------------------------------- great grandchild --------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- --------------------------------------------------------------- great grandchild --------------------- --------------------------------------------------------------- great grandchild ---------------------- --------------------------------------------------------------- great grandchild ---------------------------- --------------------------------------------------------------- great grandchild ----------------------------- plr-116958-07 --------------------------------------------------------------- great grandchild ----------------------------------- --------------------------------------------------------------- great grandchild ------------------------- ---------------------------------------------------------------- great grandchild ----------------------------- --------------------------------------------------------------- great great grandchild ---------------------------- ----------------------------------------------------------------------- great great grandchild ------------------------------- ----------------------------------------------------------------------- bank ----------------------------- date ------------------------- court --------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ------------------------------------ date --------------------------- date ----------------------- date -------------------------- date ----------------------- date --------------------------- date --------------------- dear ---------------- this is in response to a letter dated date and other correspondence requesting rulings on behalf of trust regarding the income and generation-skipping_transfer gst tax consequences of a modification of trust under a settlement agreement facts date prior to date leaving a holographic will will decedent was survived by children child and child and by two children of child grandchild and grandchild subsequently child had two other children grandchild and grandchild child had one child grandchild the lifetime benefit of child child grandchild and grandchild income beneficiaries under the terms of trust each of the income beneficiaries received article xiii of will provided for the establishment of a residuary_trust trust for the facts submitted and representations made are as follows decedent died on plr-116958-07 one-fourth of the net_income quarterly for life trust terminates at the death of the last surviving income_beneficiary will provides for the following distributions when trust terminates t he entire principal of decedent’s estate real personal and mixed shall be divided equally between any living children of child any living child of child any living child or children of grandchild and any living child or children of grandchild and in the event that at the time this trust shall end i have no direct descendants living who are entitled to inherit under the terms of this will then in that case i empower the last living of my direct descendants to dispose_of my residuary_estate by his or her last will and testament in such manner as to him or her shall seem best on date bank as trustee of trust filed a verified complaint for advice and grandchild the last surviving income_beneficiary died on date grandchild all of the parties_in_interest listed in the attachment to verified complaint except and grandchild had died prior to date on date the following descendants of decedent were then living grandchild and three children of grandchild great grandchild the child of grandchild great grandchildren and the children of grandchild great grandchildren and the children of grandchild great grandchildren and the children of grandchild and great great grandchildren and the children of a predeceased child of grandchild direction with court verified complaint the complaint states that a dispute had arisen among the parties_in_interest regarding the proper interpretation of article xiii of will directing distribution of trust assets at termination the three children of grandchild who determined that their interests would be adequately represented by grandchild filed pleadings briefs and motions with court in response to the court’s order to show cause dated date the parties advocated several different interpretations of the will provision regarding distribution of the remaining assets of trust upon termination grandchild and great grandchild argued that the language of will requires the division of trust at termination among four classes of beneficiaries the then living children of child child grandchild and grandchild under state law the term child excludes a grandchild or more remote descendant none of child 2’s children survived the date of termination therefore under state law the corpus should be distributed one-third to grandchild one-third to great grandchild the child of grandchild and one third to be divided between great grandchild and great grandchild the children of grandchild great grandchild and advanced similar great grandchildren and and great great grandchildren and argued that great grandchildren and argued that the court had previously determined plr-116958-07 arguments except that they concluded that the corpus should be divided on a per capita basis equally between grandchild great grandchild great grandchild and great grandchild that trust income was to be distributed per stirpes to the issue of a predeceased grandchild thus construing the term living child to include issue and descendants further they argued that while decedent used the term living child in the termination provision of trust elsewhere in the trust provisions she employed child and issue interchangeably further the last sentence of the clause at issue provides for the ultimate disposition of the corpus if there are no direct descendants then living which language indicates that the decedent equated living child and descendants they also maintained that decedent did not intend to exclude them as beneficiaries accordingly they concluded that one-fifth of the remaining trust assets would be distributed to each then living grandchild grandchild or to the then living issue of a deceased grandchild per stirpes under the article xiii termination provision trust assets are to be divided equally among decedent’s descendants this language could be construed to provide that trust assets are to be distributed on a per stirpes basis to the issue of each of the four original income beneficiaries alternatively the language could be viewed as a direction to distribute the corpus per stirpes to the issue of child and the issue of child living on the termination_date finally the language could be construed to mean trust assets are to be distributed per capita among all of decedent’s descendants living at the termination of trust management order scheduling discovery on date court issued a supplemental case management order submitting the matter to mediation upon the consent of the parties on date the parties and their counsel appeared for mediation after three days of mediation the parties executed settlement agreement on date on date court issued consent order approving settlement agreement and incorporating the agreement into the order settlement agreement as incorporated in consent order provides that all of the income earned since the termination of trust and all of the principal remaining in trust at termination will be distributed as follows percent to grandchild 3’s revocable_trust to which he assigned his interest before the settlement percent to each of great grandchildren and percent to each of great great grandchildren and and percent to each of great grandchildren and percent to each of great grandchildren and court also ordered that trust assets may be distributed in_kind to the extent feasible court further ordered that one-half of the assets would be on date court deemed the matter a contested case and issued a case it is represented that no additions actual or constructive have been made to plr-116958-07 distributed upon entry of consent order and the balance will be distributed upon trustee’s receipt of a favorable letter_ruling from the internal_revenue_service court required trustee to submit its request for a letter_ruling to the internal_revenue_service within days of date and trustee complied trust since date allocation and distribution of trust assets among the beneficiaries under the court- approved settlement agreement will not cause trust to lose exempt status for gst tax purposes and will not result in a transfer that will subject trust or distributions from trust to the gst tax imposed under sec_2601 law and analysis the taxpayer has requested a ruling pursuant to sec_26 b that the sec_2601 imposes a tax on each generation-skipping_transfer made by a transferor to a skip_person under a of the tax_reform_act_of_1986 the generation-skipping_transfer_tax is generally applicable to generation-skipping transfers made after date however under b a of the tax reform act and sec_26_2601-1 the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax will not cause the trust to lose its exempt status the regulation provides that the rules contained in the paragraph are generally applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes unless noted otherwise the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 fide issue regarding the administration of a_trust or the construction of the terms of the sec_26_2601-1 provides that a court-approved settlement of a bona plr-116958-07 governing instrument will not cause an exempt trust to be subject_to the provisions of chapter if - the settlement is the product of arm's length negotiations and the settlement is within the range of reasonable outcomes under the governing instrument and applicable state law addressing the issues resolved by the settlement a settlement that results in a compromise between the positions of the litigating parties and reflects the parties' assessments of the relative strengths of their positions is a settlement that is within the range of reasonable outcomes in this case trust was created and irrevocable before date it is represented that no additions actual or constructive have been made to trust since it was created consequently based on these representations before any distributions were made under settlement agreement on date as ordered under consent order trust was exempt from gst tax we conclude that a bona_fide issue has been presented regarding the proper construction of article xiii of will as it pertains to the distribution of trust corpus on termination of trust and income accrued after the termination_date the issue has been the subject of litigation and the parties_in_interest have advanced several different interpretations of the termination provision the settlement agreement is the product of arm's length negotiation between the parties to the agreement and represents a compromise between the positions of the parties that reflects the parties' assessments of the relative strengths of their position the settlement agreement has been approved by the appropriate local court accordingly based on the facts submitted and the representations made we conclude that pursuant to sec_26 b i the allocation and distribution of trust assets among the beneficiaries under the court-approved settlement agreement will not cause trust to lose exempt status for gst tax purposes and will not result in a transfer that will subject trust or distributions from trust to the gst tax imposed under sec_2601 consequences of the proposed modifications of trust pursuant to the settlement agreement under the cited provisions or under any other provisions of the code except as specifically ruled herein we express no opinion on the federal tax plr-116958-07 this ruling is directed only to the taxpayer who requested it sec_6110 sincerely yours _________________________ george masnik chief provides that it may not be used or cited as precedent branch office of associate chief_counsel enclosure copy for sec_6110 purposes cc passthroughs and special industries