internal_revenue_service number release date index number ------------------------------ ----------------------------- --------------------------------------------- ------------------------------------------- ty --------------- ty --------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------ id no ------------ --------- telephone number --------------------- refer reply to cc ita b02 plr-125235-08 date date ------------------------- ------------------------ ------------------------------------------- --------------------------------------------------------------------------------- taxpayer-husband taxpayer-wife taxpayers a ---------------------------------------------------------------------------------------------------------- b cpa year1 year2 ---------------------------------------------- ----------------------------------------------------------------- ------- ------- dear ---------------------------- this is in response to the letter dated ------------------ submitted on your behalf by your authorized representative in the letter you request an extension of time to make a late election to treat net gain from the disposition of investment_property as investment_income for purposes of calculating the allowable_amount of investment_interest deductible under sec_163 of the internal_revenue_code the request to make the late election is based on sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations facts taxpayer-husband is a full-time resident manager of a ------------------------ in --------- he receives his compensation on a ---------------------- and reports the income on --------------- of their tax_return beginning in ------- taxpayer-husband began investing in real_estate primarily in ----------- and ------------------- taxpayer-husband hired a tax plr-125235-08 professional a to prepare their joint federal_income_tax returns for year1 and year2 he hired and relied upon a because he had previously used the services of her grandmother b for over years when b passed away taxpayers continued their professional relationship with a for year1 and year2 a prepared taxpayers’ return incorrectly taking a deduction for the interest_expense on the investment properties as ------------------------------------ a did not discuss the rules related to investment_interest expenses with them the first time taxpayers heard of these rules was when their year1 and year2 returns were selected for audit examination taxpayers supplied an affidavit from a detailing the reliance of taxpayers on a in the preparation of their returns and a’s treatment of the interest_expense on the investment properties applicable law sec_163 provides that in the case of a taxpayer other than a corporation the amount allowed as a deduction for investment_interest for any taxable_year shall not exceed the net_investment_income of the taxpayer for the taxable_year sec_163 provides in part that investment_income means the sum of -- i gross_income from property_held_for_investment other than any gain taken into account under clause ii l ii the excess if any of -- l the net gain attributable to the disposition of property_held_for_investment over ll the net_capital_gain determined solely by taking into account gains and losses from dispositions of property_held_for_investment plus iii so much of the net_capital_gain referred to in clause ii ll or if lesser the net gain referred to in clause ii l as the taxpayer elects to take into account under this clause such term shall include qualified_dividend_income as defined in sec_1 only to the extent the taxpayer elects to treat such income as investment_income for purposes of this subsection sec_1_163_d_-1 of the income_tax regulations provides that the election for qualified_dividend_income must be made on or before the due_date including extensions of the income_tax return for the taxable_year in which the qualified_dividend_income is received sec_1_163_d_-1 provides that the election under sec_163 is revocable with the consent of the commissioner plr-125235-08 sec_301_9100-1 through of the procedure and administration regulations provide the standards the commissioner uses to determine whether to grant an extension of time to make a regulatory election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for extensions of time for regulatory elections other than automatic changes covered under sec_301_9100-2 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 will be deemed to have acted reasonably and in good_faith if the taxpayer -- i requests relief before the failure to make the regulatory election is discovered by the service ii inadvertently failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 provides that a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer -- i seeks to alter a return position for which an accuracy-related_penalty could be plr-125235-08 imposed under sec_6662 at the time the taxpayer requests relief and the new position requires a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief sec_301_9100-3 provides that the commissioner will grant a reasonable extension of time only when the interests of the government will not be prejudiced by the granting of relief under paragraph c i the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made under paragraph c ii the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made is closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section conclusion taxpayers’ election is a regulatory election as defined under b because the due_date of the election is prescribed in the regulations under sec_1_163_d_-1 in the present situation the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been satisfied the information and representations made by taxpayers establish that taxpayers acted reasonably and in good_faith with this request the affidavits presented show that taxpayers reasonably relied on a tax professional for the filing of their returns however the tax professional failed to make or advise taxpayers to make the elections the affidavits presented show that taxpayers were unaware of the necessity for the elections and upon discovery of the errors promptly requested relief the information and representations made by taxpayers further establish taxpayers are not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time relief is requested taxpayers were not informed in all material respects of the required election and its related tax consequences furthermore taxpayers are not using hindsight in requesting relief taxpayers have represented that specific facts have not changed since the original deadline that make the election advantageous to taxpayers moreover the taxable years in which the regulatory elections should have been made and any taxable years that would have been affected by the elections had they been timely made are not closed by the period of assessment plr-125235-08 finally granting an extension will not prejudice the interests of the government it is represented that the taxpayers will not have a lower tax_liability in the aggregate for all taxable years affected by the election if given permission to make the election in the appropriate amount at this time than taxpayers would have if the election were made in the appropriate amount by the original deadline for making the election accordingly taxpayers are granted an extension of time for making the election until days following the date of this ruling except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative s a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination see section dollar_figure of revproc_2008_1 2008_1_irb_1 sincerely george blaine associate chief_counsel income_tax accounting _thomas moffitt _______ thomas d moffitt chief branch


tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c - os l ull numbers - date sep contact person identification_number telephone number t eo b3 employer_identification_number legends foundation foundation il a b x dear sir or madam this is in reference to your ruling_request dated date concerning the federal income and excise_tax consequences of the proposed transfer of x of the net assets of foundation to foundation ii both foundation and i have received determination letters stating they are tax-exempt under sec_501 of the internal_revenue_code code as a sec_509 private_foundation six individuals manage both foundation and il either a's or b's family the managers have developed a plan whereby the assets of both foundations would be equalized and the contro of foundation and foundation ii would later be transferred to members of a’s family and b's family respectively the proposed plan would place members of the family in equal standing with respect to both foundations’ net assets the same persons control both foundations because the members officers and directors of each foundation are the same individuals the distribution would enable the family members to pursue separate charitable goals all six individuals are members of you propose to distribute approximately x of foundation i’s net assets to foundation i to equalize the assets held by each foundation you represent that subsequent to the transfer of x of foundation i’s net assets to foundation ii foundation and foundation ii will continue to operate and maintain their tax-exempt status as private_foundations under sec_509 of the code zl you have requested the following rulings the transfer of x of foundation i’s net assets to foundation ii qualifies as a sec_507 of the code transfer and will not terminate foundation i’s status as a private_foundation nor subject it to a termination_tax under sec_507 the transfer to foundation ii will not generate gross_investment_income or capital_gains or losses as defined in sec_4940 of the code therefore foundation will not be subject_to tax under sec_4940 the transfer will not be an act of self-dealing as defined in sec_4941 d of the code by foundation foundation i or any foundation_manager as defined in sec_4946 therefore no tax will be imposed under sec_4941 foundation and foundation i will not be subject_to tax under sec_4943 of the code because the transfer will not generate excess_business_holdings nor will foundation il receive excess_business_holdings in the transfer the transfer will not constitute an investment which may jeopardize foundation ’s exempt purposes therefore foundation will not be subject_to tax under sec_4944 of the code the transfer will not be a taxable_expenditure by foundation provided foundation exercises the capital endowment grant expenditure_responsibility required by sec_4945 of the code and sec_53_4945-5 of the foundation and similar excise_taxes regulations foundation reguiations therefore foundation will not be subject_to tax under sec_4945 foundation il will succeed to x of the aggregate tax_benefit of foundation as determined under sec_1_507-3 of the income_tax regulations regulations foundation will be treated as if it were foundation for purposes of sections of the code and chapter because both foundations are effectively controlled within the meaning of sec_1_482-1 of the regulations directly or indirectly by the same persons and because foundation will have transferred x of its net assets to foundation il foundation ii shall be treated as if it were foundation in the proportion which the fair_market_value of the assets less encumbrances transferred to foundation i bears to the fair_market_value of the assets less encumbrances of foundation immediately before the transfer foundation i may reduce its distributable_amount as defined in sec_4942 of the code by foundation i’s excess_distribution carryovers if any permitted by sec_4942 to the extent foundation ii is treated as foundation under sec_1 a of the regulations qn aa any person who is a substantial_contributor as defined in sec_507 of the code with respect to foundation shall also be considered a substantial_contributor with respect to foundation pursuant to sec_1_507-3 of the regulations the transitional rules and savings provisions of sec_1_507-3 i - ii of the regulations will apply to foundation ii the merger and transfer of x of foundation i’s net assets will not adversely affect the sec_501 of the code tax-exempt status of foundation or foundation ii pursuant to sec_53_4945-6 of the foundation regulations the legal accounting and other expenses if reasonable in amount incurred by foundation and foundation ii in connection with the merger transaction and submission of this letter_ruling request will not constitute taxable_expenditures under sec_4945 of the code sec_507 of the code states that except as provided in sec_507 an exempt_organization which is a private_foundation can terminate its private_foundation_status only if it notifies the service of its intent to terminate or if it commits acts or failures to act giving rise to tax under chapter and if it pays the termination_tax imposed by sec_507 or has the tax abated sec_507 of the code provides that in the case of a transfer of assets of any private_foundation to another private_foundation pursuant to any liquidation merger redemption recapitalization or the adjustment organization or reorganization the transferee foundation shall not be treated as a newly created organization sec_507 of the code imposes an excise_tax on each terminating private_foundation equal to the lower_of the aggregate tax_benefit resulting from such termination or the value of its net assets sec_507 of the code provides that for purposes of sec_507 the value of the net assets shall be determined at whichever time such value is higher the first day on which action is taken which culminates in its ceasing to be a private_foundation or the date on which it ceases to be a private_foundation chapter imposes excise_taxes on private_foundations for net_investment_income under sec_4940 of the code acts of self-dealing under sec_4941 undistributed_income under a excess_business_holdings under sec_4943 jeopardy investments under sec_4944 and taxable_expenditures under sec_4945 sec_4940 of the code provides for the imposition of a tax on the net_investment_income of private_foundations o2t9 sec_4941 of the code provides for the imposition of tax on each act of self-deaiing between a disqualified_person and a private_foundation sec_4941 of the code states that the term self dealing means any direct or indirect transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation sec_4944 of the code imposes a tax ona private_foundation if it invests any amount in a manner as to jeopardize the carrying out of any of its exempt purposes sec_4945 of the code imposes a tax on the taxable_expenditures of a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an organization unless such organization is described in paragraph or of sec_509 or is an exempt_operating_foundation or the private_foundation exercises expenditure_responsibility with respect to such grant sec_4945 of the code provides that the term taxable_expenditure does not include amounts paid_or_incurred by a private_foundation as a grant to another organization for purposes specified in sec_170 sec_4945 of the code provides that the expenditure_responsibility referred to in subsection d means that the private_foundation is responsible to exert all reasonable efforts and to establish adequate procedures to see that the grant is spent solely for the purpose for which made to obtain full and complete reports from the grantee on how the funds are spent and to make full and detailed reports with respect to such expenditures to the secretary sec_4946 of the code provides in part that the term disqualified_person shall not include any organization which is described in sec_501 c other than an organization described in sec_509 sec_4946 of the code defines a disqualified_person to include with respect to a private_foundation a foundation_manager sec_4946 of the code states that the term foundation_manager includes a trustee of a foundation having the authority or responsibility over the activities of the foundation sec_1_507-1 of the regulations provides that a transfer of all or part of a private foundation’s assets to one or more private_foundations pursuant to a transfer described in sec_507 of the code and sec_1_507-3 such transferor foundation will not have terminated its private_foundation_status under sec_507 e sec_1_507-1 of the regulations provides that neither a transfer of all the assets of a private_foundation nor a significant disposition of assets by a private_foundation shall be deemed to result in a termination of the transferor private_foundation under sec_507 of the code unless the transferor private_foundation elects to terminate pursuant to sec_507 or sec_507 is applicable sec_1_507-3 of the regulations provides that for purposes of sec_507 of the code the terms other adjustment organization or reorganization shall include any partial_liquidation or any other significant disposition of assets to one or more private_foundations other than transfers for full and adequate_consideration or distributions out of current income sec_1_507-3 of the regulations provides that the term significant disposition of assets to one or more private_foundations shall include any disposition for a taxable_year where the aggregate of the dispositions to one or more private_foundations for the taxable_year i sec_25 percent or more of the fair_market_value of the net assets of the foundation at the beginning of the taxable_year sec_1_507-3 of the regulations provides that in the case of a significant disposition of assets to one or more private_foundations within the meaning of paragraph c of this section the transferee organization shall not be treated as a newly created organization a transferee organization to which this paragraph applies shall be treated as possessing those attributes and characteristics of the transferor organization sec_1_507-3 i of the regulations provides that a transferee organization to which sec_507 of the code applies shall succeed to the aggregate tax_benefit of the transferor organization in an amount equal to the amount of the aggregate tax_benefit multiplied by a fraction of the numerator of which is the fair_market_value of the assets less encumbrances transferred to such transferee and the denominator of which is the fair market of the assets of the transferor less encumbrances immediately before the transfer fair_market_value shall be determined as of the time of the transfer sec_1_507-3 of the regulations provides that except as provided in subparagraph of sec_1_507-3 a private_foundation is required to meet the distribution_requirements of sec_4942 of the code for any taxable_year in which it makes a sec_507 transfer of all or part of its net assets to another private_foundation sec_1_507-3 of the regulations provides that the provisions enumerated in subparagraphs a through g of this subdivision shall apply to the transferee private_foundation with respect to the assets transferred to the same extent and in the same manner that they would have applied to the transferor private_foundation had the transfer described in sec_507 not been effected sec_1_507-3 of the regulations provides that if a private_foundation transfers all or part of its net assets to one or more private_foundations which are effectively controlled within the meaning of sec_1_482-1 directly or indirectly by the same persons which 220s effectively controlled the transferor private_foundation for purposes of chapter and sections of the code such a transferee private_foundation shall be treated as if it were the transferor where only part of the transferor foundation’s net assets are transferred the transferee foundation shail be treated as if it were the transferor foundation in the proportion which the fair_market_value of the assets less encumbrances transferred to the transferee foundation bears to the fair_market_value of the assets less encumbrances of the transferor foundation immediately before the transfer sec_1_507-3 of the regulations provides that unless a private_foundation gives notice pursuant to sec_507 of the code a transfer of assets described in sec_507 will not constitute a termination of the transferor’s private_foundation_status under sec_507 sec_1_507-4 of the regulations provides that private_foundations that make transfers described in sec_507 or of the code are not subject_to the termination_tax imposed under sec_507 with respect to such transfers sec_53_4945-5 of the foundation regulations provides that if a private_foundation makes a grant described in sec_4945 toa private_foundation which is exempt from taxation under sec_501 for endowment for the purchase of capital equipment or for other capital purposes the grantor foundation shall require reports from the grantee on the use of the principal and the income if any from the grant funds the grantee shall make such reports annually for its taxable_year in which the grant was made and the immediately succeeding taxable years only if it is reasonably apparent to the grantor that before the end of such second succeeding taxable_year neither the principal the income from the grant funds nor the equipment purchased with the grant funds has been used for any purpose which would result in liability for tax under sec_4945 the grantor may then ailow such reports to be discontinued sec_53_4946-1 of the foundation regulations provides that for purposes of sec_4941 of the code only the term disqualified_person does not include any organization described in sec_501 other than an organization described in sec_509 revrul_78_387 1978_2_cb_270 holds that when a transferee foundation is treated as the transferor under sec_1_507-3 of the regulations the transferee is entitled to reduce its distributable_amount under sec_4942 of the code by the amount of the transferor’s excess qualifying_distribution carryover a transfer of x of foundation i's net assets to foundation ii does not terminate foundation i’s private_foundation_status and thus does not subject it to the termination_tax under sec_507 of the code transfers qualifying as sec_507 transfers do not terminate private_foundation_status under sec_507 additionally transferee foundations are not considered newly created organizations under sec_507 subsequent to a sec_507 of the code transfer an organization's status as a private_foundation is not terminated unless the private_foundation voluntarily gives notice to that effect under sec_507 or sec_507 sec_507 transfers include those in which a private_foundation transfers all or part of its assets to another private_foundation pursuant to any liquidation merger redemption recapitalization or other adjustment sec_1 c of the regulations provides that sec_507 transfers include any significant dispositions of assets defined a sec_25 or more of the fair_market_value of a private foundation’s net assets foundation and foundation ii are private_foundations within the definition of sec_509 of the code the transaction proposed is an adjustment by means of a capital grant to equalize the assets held by each foundation foundation will transfer x of its net assets to foundation il in a sec_507 transfer foundation i’s private_foundation_status does not terminate additionaily foundation ii is not considered a newly created organization the transfer does not result in the imposition of tax on investment_income under sec_4940 of the code sec_4940 imposes an excise_tax on investment_income received by private_foundations investment_income includes capital_gains from the sale_or_other_disposition of property the transfer of assets by foundation is not considered a sale_or_other_disposition of property and so does not generate capital_gain which would be subject_to the sec_4940 excise_tax the transfer also does not result in the imposition of tax as an act of self-dealing under sec_4941 of the code the excise_tax on self-dealing is imposed where a private_foundation and a disqualified_person engage in prohibited_transactions such as the sale_or_exchange of property an organization described in sec_501 is nota disqualified_person for purposes of sec_4941 the transfer is not an act of self-dealing because foundation ii has received a determination_letter stating that itis a tax-exempt_organization under sec_501 also the transfer does not subject the foundations to the tax_on_excess_business_holdings imposed by sec_4943 of the code private_foundations are taxed if they hold an excessive_amount of a business_enterprise in corporate or partnership form foundation has represented that it does not currently hold excess_business_holdings and therefore will not be transferring such to foundation tl the transfer does not result in the imposition of tax for a jeopardy investment under sec_4944 of the code sec_4944 imposes a tax on investments by private_foundations which jeopardize their charitable purposes the transfer pursuant to sec_507 is not considered an investment for purposes of sec_4944 the transfer does not result in the imposition of tax for a taxable_expenditure under sec_4945 of the code because foundation will exercise the capital endowment grant expenditure_responsibility required by sec_4945 of the code and sec_53_4945-5 of the regulations regarding taxes imposed on private_foundations in chapter of the code a sec_507 transfer results in foundation ii succeeding to a proportionate share of the tax_attributes of foundation where both foundations are effectively controlled by the same vel persons effective_control is defined under sec_482 and means any kind of control direct or indirect whether legally enforceable or not and however exercisable or exercised it is the reality of the control that is decisive and not its form if the transferee foundation receives less than of the net assets of the transferor foundation in a sec_507 transfer the transferee foundation is treated as if it were the transferor foundation for purposes of chapter and sections in the proportion which the fair_market_value of the assets less encumbrances transferred to the transferee foundation bear to the fair_market_value of the assets less encumbrances of the transferor foundation immediately before the transfer foundation and foundation i are effectively controlled by the same persons because the members officers and directors of each foundation are the same individuals further foundation will have transferred x of its net assets to foundation il foundation should therefore be treated as if it were foundation for purposes of chapter and sections to the extent provided in sec_1_507-3 of the regulations foundation il’s minimum distribution_requirements under sec_4942 of the code should be increased with respect to the assets received in the sec_507 transfer as if the assets were held by foundation ii for the full tax_year additionaily pursuant to revrul_78_387 1978_2_cb_270 foundation ii should reduce its distributable_amount by any carryover excess qualifying distributions of foundation to the extent foundation ii is treated as foundation under sec_1_507-3 of the regulations neither foundation should be subject_to tax under sec_4942 because both have represented that they will adhere to the special rules regarding minimum distributions foundation ii also will succeed to a proportionate amount of the aggregate tax_benefit of foundation as defined in sec_1_507-3 of the regulations foundation i's substantial contributors as defined in sec_4946 of the code continue to be classified as substantial contributors of foundation it the transfer does not adversely affect the tax-exempt status of either foundation the tax- exempt status of these foundations is not adversely affected because the transfer qualifies under sec_507 of the code and is made to a sec_501 c organization finally the foundations have represented that the legal accounting and other expenses_incurred by the foundations in connection with this ruling_request in implementing the proposed transfer will be reasonable and necessary expenses paid to accomplish one or more purposes described in sec_170 of the code therefore such expenses will not constitute taxable_expenditures under sec_4945 therefore we rule that the transfer of x of foundation i’s net assets to foundation il qualifies as a sec_507 of the code transfer and will not terminate foundation i’s status as a private_foundation nor subject it to a termination_tax under sec_507 a8 o- the transfer to foundation ii will not generate gross_investment_income or capital_gains or losses as defined in sec_4940 of the code therefore foundation will not be subject_to tax under sec_4940 the transfer will not be an act of self-dealing as defined in sec_4941 d of the code by foundation foundation ii or any foundation_manager as defined in sec_4946 therefore no tax will be imposed by sec_4941 a foundation and foundation 1i will not be subject_to tax under sec_4943 of the code because the transfer will not generate excess_business_holdings nor wili foundation ll receive excess_business_holdings in the transfer the transfer will not constitute an investment which may jeopardize foundation i's exempt purposes therefore foundation will not be subject_to tax under sec_4944 of the code the transfer will not be a taxable_expenditure by foundation provided foundation exercises the capital endowment grant expenditure_responsibility required by sec_4945 of the code and sec_53_4945-5 of the foundation regulations therefore foundation will not be subject_to tax under sec_4945 foundation ii will succeed to x of the aggregate tax_benefit of foundation as determined under sec_1_507-3 of the regulations foundation ii will be treated as if it were foundation for purposes of sections of the code and chapter because both foundations are effectively controlled within the meaning of sec_1_482-1 of the regulations directly or indirectly by the same persons and because foundation will have transferred x of its net assets to foundation ii foundation ii shall be treated as if it were foundation in the proportion which the fair_market_value of the assets less encumbrances transferred to foundation bears to the fair_market_value of the assets less encumbrances of foundation immediately before the transfer foundation i may reduce its distributable_amount as defined in sec_4942 of the code by foundation i’s excess_distribution carryovers if any permitted by sec_4942 to the extent foundation i is treated as foundation under sec_1 a of the regulations any person who is a substantial_contributor as defined in sec_507 of the code with respect to foundation shall also be considered a substantial_contributor with respect to foundation ii pursuant to sec_1_507-3 of the regulations the transitional rules and savings provisions of sec_1_507-3 i - ii of the regulations will apply to foundation tt ta the merger and transfer of x of foundation t's net assets will not adversely affect the sec_501 of the code tax-exempt status of foundation or foundation il pursuant to sec_53_4945-6 of the foundation regulations the legal accounting and other expenses if reasonable in amount incurred by foundation and foundation li in connection with the merger transaction and submission of this letter_ruling request will not constitute taxable_expenditures under sec_4945 of the code this ruling is directed only to the organization that requested it sec_6110 of the code provides that this ruling may not be used or cited by others as precedent this ruting is limited to the applicability of the provisions of the sections of the code as noted above this ruling is based on the understanding that there will be no material changes in the facts upon which it is based if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter - sincerely ge lack chapol d robert c harper jr manager exempt_organizations ib technical group


t c memo united_states tax_court donna m keitz petitioner v commissioner of internal revenue respondent docket no filed date donna m keitz pro_se richard a stone for respondent memorandum findings_of_fact and opinion dean special_trial_judge this is a case arising under sec_6015 unless otherwise indicated section references are to the internal_revenue_code respondent determined sec_6015 was enacted as part of the internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_734 and is effective for any liability for tax arising after date and any liability for tax arising on or before date but remaining unpaid as of date petitioner was not entitled to relief for a dollar_figure underpayment_of_tax for tax_year pursuant to sec_6015 the issue for decision is whether respondent abused his discretion by denying petitioner's request for relief from joint_and_several_liability under sec_6015 for the underpayment_of_tax some of the facts have been stipulated and are so found the stipulation of facts and the exhibits received into evidence are incorporated herein by reference at the time the petition was filed with the court petitioner resided in baltimore maryland findings_of_fact petitioner married in and bore four children during the marriage as of the time of respondent's determination in june of three of the children were still minors petitioner has an eleventh grade education and was primarily a homemaker during petitioner worked part time earning dollar_figure from which taxes were withheld petitioner's spouse william a keitz owned and operated his own electrical business a k electric petitioner had no involvement at all with mr keitz's business during their marriage mr keitz handled the family financial matters he gave petitioner a weekly amount to cover food and other necessities and an allowance of dollar_figure per week for herself when the children needed clothes mr keitz would give petitioner additional money mr keitz demanded that petitioner not open any bills that came in the mail and that if she did he could have her handled during and petitioner filed joint income_tax returns with mr keitz for petitioner filed as head_of_household for the tax filing petitioner gave her form w-22 to mr keitz shortly after the end of the taxable_year the keitzes' adjusted_gross_income agi as reported on the return was dollar_figure of this amount dollar_figure was documented by forms w-2 wage and tax statement or forms 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc the remaining dollar_figure of agi comprised a dollar_figure taxable refund dollar_figure in dividend income and dollar_figure in capital_gains only dollar_figure of the total agi was attributable to petitioner mr keitz had the joint tax_return prepared at h_r block by a person or persons unknown to petitioner when mr keitz told petitioner to sign the tax_return she signed a computerized document in the 1040pc format of a u s individual_income_tax_return irs publication ed describes a form 1040pc prepared using a personal computer as follows 2in their stipulations of facts the parties referred to forms w-4 employee's withholding allowance certificate the court assumes the parties meant forms w-2 wage and tax statement the computer prints the return in a three-column answer sheet format it prints line numbers and dollar amounts only for lines on which you made an entry as a result an 11-page conventional return requiring forms and schedules can be printed as a two-page 1040pc return vaksman v commissioner tcmemo_2001_165 affd 54_fedappx_592 5th cir at the time petitioner signed form 1040pc mr keitz and the paid preparer had already signed it the return was filed electronically petitioner did not discuss the return with her husband nor did she question him about the return mr keitz had always told petitioner he would take care of the taxes in when petitioner and her husband legally_separated for the first time mr keitz memorialized his intention to pay their tax_liabilities their voluntary separation and property settlement agreement states the parties agree that they will file a joint income_tax return for the tax_year of and split the refund accordingly with regard to both federal and state tax requirements in the event that there is a tax payment due for either the state or federal payment husband will pay the entire tax_assessment petitioner and her husband separated for the final time in the parties have stipulated that pursuant to a consent order petitioner received approximately dollar_figure per month from mr keitz for child care and alimony during and according to the consent order beginning in may of mr keitz was ordered to pay petitioner dollar_figure per month consisting of dollar_figure per week for child_support and dollar_figure per month in alimony additionally petitioner earned dollar_figure in on date respondent withheld petitioner's federal_income_tax refund and applied it toward the outstanding tax_liability for that is when petitioner became aware that there was a problem with their taxes initially petitioner did not pursue the matter because mr keitz said he was taking care of it respondent then withheld petitioner's federal_income_tax refund and applied it toward the outstanding tax_liabilities on date respondent received a form_8857 request for innocent spouse relief from petitioner for the years and on date petitioner submitted to respondent her responses to respondent's innocent spouse questionnaire in her response petitioner provided a listing of her monthly expenses those expenses total dollar_figure and are as follows house payment dollar_figure oil gas electric auto fuel car insurance phone clothing recreation credit card food medical hair cut sec_42 cable lawyers child care on date respondent determined petitioner was not entitled to relief from the deficiency for tax_year pursuant to sec_6015 because petitioner did not file a joint tax_return for that year respondent granted petitioner relief from joint liability for the deficiencies for and pursuant to sec_6015 despite the parties' agreement that the underpayment is solely attributable to mr keitz and respondent's examiner's determination that mr keitz bears the legal_obligation for the underpayment respondent determined petitioner was not entitled to relief for the dollar_figure underpayment_of_tax for tax_year pursuant to sec_6015 respondent contended that petitioner failed to prove a belief that the tax would be paid did not fulfill her duty to inquire as to whether the tax would be paid and failed to show that it would be an economic hardship for her if relief were denied petitioner filed a timely petition under sec_6015 for a determination of relief from joint_and_several_liability for an underpayment_of_tax on a joint_return opinion the court's determination as to whether petitioner is entitled to equitable relief under sec_6015 is made in a trial de novo and is not limited to matter contained in respondent's administrative record ewing v commissioner t c ___ ___ slip op pincite the court reviews respondent's denial of relief under sec_6015 for abuse_of_discretion see 115_tc_183 affd 282_f3d_326 5th cir 114_tc_276 petitioner bears the burden of proving that respondent abused his discretion in denying that relief see 120_tc_137 118_tc_106 affd 353_f3d_1181 10th cir in order to prevail petitioner must demonstrate that in not granting relief respondent exercised his discretion arbitrarily capriciously or without sound basis in fact or law see 112_tc_19 91_tc_1079 whether petitioner is entitled to equitable relief sec_6015 grants the commissioner discretion to relieve from joint_and_several_liability an individual who files a joint_return the parties agree that relief from the underpayment is not available to petitioner under sec_6015 or c thereby satisfying sec_6015 as contemplated by sec_6015 the commissioner has prescribed guidelines in revproc_2000_15 sec_4 2000_1_cb_447 to be used in determining whether an individual qualifies for relief under that section revproc_2000_15 sec_6015 provides in pertinent part as follows sec_6015 relief from joint_and_several_liability on joint_return f equitable relief --under procedures prescribed by the secretary if-- taking into account all the facts and circumstances it is inequitable to hold the individual liable for any unpaid tax or any deficiency or any portion of either and relief is not available to such individual under subsection b or c the secretary may relieve such individual of such liability 4respondent's determination is subject_to revproc_2000_ 2000_1_cb_447 which was in effect when respondent evaluated petitioner's request and when respondent issued the notice_of_determination revproc_2000_15 supra has been superseded by revproc_2003_61 2003_32_irb_296 effective for requests for relief filed on or after date sec_4 c b pincite sets forth the threshold conditions that must be satisfied before the commissioner will consider a request for equitable relief under sec_6015 respondent does not dispute that petitioner has satisfied those threshold conditions circumstances where irs ordinarily grants equitable relief where the requesting spouse satisfies the threshold conditions set forth in revproc_2000_15 sec_4 then revproc_2000_15 sec_4 sets forth the circumstances in any case where a liability reported in a joint_return is unpaid under which the commissioner will ordinarily grant relief to that spouse under sec_6015 the commissioner will ordinarily grant relief to a requesting spouse who satisfies all of the following elements as set forth in revproc_2000_15 c b pincite a at the time relief is requested the requesting spouse is no longer married to or is legally_separated from the nonrequesting spouse or has not been a member of the same household as the nonrequesting spouse at any time during the 12-month_period ending on the date relief was requested b at the time the return was signed the requesting spouse had no knowledge or reason to know that the tax would not be paid the requesting spouse must establish that it was reasonable for the requesting spouse to believe that the nonrequesting spouse would pay the reported liability and c the requesting spouse will suffer economic hardship if relief is not granted for purposes of this section the determination of whether a requesting spouse will suffer economic hardship will be made by the commissioner or the commissioner's delegate and will be based on rules similar to those provided in sec_301_6343-1 of the regulations on procedure and administration petitioner's marital status petitioner was legally_separated from mr keitz at the time she filed the claim for relief in this case they were divorced at the time of trial the court concludes that petitioner has satisfied this element petitioner's knowledge or reason to know the tax would not be paid in determining whether a taxpayer in an underpayment case is entitled to equitable relief under sec_6015 the court considers whether the requesting spouse knew or had reason to know when the return was signed that the tax would be unpaid 121_tc_73 wiest v commissioner tcmemo_2003_91 respondent contends that petitioner did not prove that she did not know or did not have reason to know at the time the return was signed that the unpaid tax_liability would not be paid and did not fulfill her duty to inquire in washington v commissioner supra pincite the taxpayer a high school graduate signed a return jointly with her husband a self-employed carpenter she had no involvement in her husband's business id pincite nor did he discuss with her the preparation or filing of their joint_return id pincite the sole involvement of the taxpayer in washington in preparing the tax_return was to provide her form_w-2 to the paid preparer and sign the return id pincite the tax on her wages was paid through withholding id pincite the remaining tax_liability was attributable to her husband id pincite in according her relief from liability the court found that mrs washington did not know and had no reason to know at the time the return was signed that mr washington would not pay the tax id pincite she believed her husband would pay the liability because it was solely related to his business operations id pincite this case has similarities to washington mrs keitz had no involvement in her husband's business she gave mr keitz her form_w-2 and he had their tax_return prepared by h_r block what he told petitioner to sign was a return in the 1040pc format in essence a computer printout of lines and numbers it is reasonable to conclude that mrs keitz believed that mr keitz would pay the tax in fact mr keitz constantly assured petitioner that their taxes would be paid further as in the washington case the liability here was solely attributable to mr keitz since mrs keitz's taxes on her wages had been paid through withholding given these facts the court concludes that petitioner at the time she signed the return did not know or have reason to know that the tax due would not be paid the court rejects respondent's argument that she possessed such knowledge or failed to fulfill a duty_of inquiry the court concludes that petitioner has satisfied this element petitioner will suffer economic hardship respondent contends that petitioner failed to show that she would suffer economic hardship if relief were denied in determining whether a requesting spouse will suffer economic hardship if the relief is not granted revproc_2000_15 supra looks to sec_301_6343-1 proced admin regs for guidance revproc_2000_15 sec_4 c economic hardship is present if satisfaction of the tax_liability in whole or in part will cause the taxpayer to be unable to pay her reasonable basic living_expenses sec_301_6343-1 proced admin regs in petitioner earned dollar_figure and received approximately dollar_figure per month from mr keitz for alimony and child_support for three minor children petitioner had monthly expenses of dollar_figure after which she had dollar_figure per month remaining petitioner did not present any other evidence regarding any additional claimed expenses petitioner has failed to establish that she will suffer economic hardship if equitable relief is not granted the court concludes that petitioner has not satisfied this element accordingly the court concludes that petitioner fails to qualify for relief under revproc_2000_15 sec_4 balancing factors for determining whether to grant equitable relief under revproc_2000_15 where as here the requesting spouse fails to qualify for relief under revproc_2000_15 sec_4 the commissioner may nonetheless grant the requesting spouse relief under revproc_2000_15 sec_4 revproc_2000_15 sec_4 lists the following two factors which if present the commissioner weighs in favor of granting relief the taxpayer is separated or divorced from the nonrequesting spouse and the taxpayer was abused by his or her spouse and the following two factors which if present the commissioner weighs against granting relief the taxpayer received significant benefit from the unpaid liability or the item giving rise to the deficiency and the taxpayer has not made a good_faith effort to comply with federal_income_tax laws in the tax years following the tax_year to which the request for relief relates ewing v commissioner t c at ____ slip op pincite revproc_2000_15 supra implies that the commissioner will generally not consider the absence of factor or in determining whether to grant relief under sec_6015 however on the basis of caselaw deciding whether it was equitable to relieve a taxpayer from joint liability under former sec_6013 the court considers the factor that a taxpayer did not significantly benefit from the unpaid liability or item giving rise to the deficiency as a factor in favor of granting relief to that taxpayer ewing v commissioner supra at ____ slip op pincite ferrarese v commissioner tcmemo_2002_249 citing 93_tc_434 foley v commissioner tcmemo_1995_16 robinson v commissioner tcmemo_1994_557 klimenko v commissioner tcmemo_1993_340 and hillman v commissioner t c memo revproc_2000_15 supra lists the following four factors which if present the commissioner weighs in favor of granting relief and if not present the commissioner weighs against granting relief the taxpayer would suffer economic hardship if relief is denied in the case of a liability that wa sec_5cases deciding whether a taxpayer was entitled to equitable relief under sec_6013 are helpful in deciding whether a taxpayer is entitled to relief under sec_6015 292_f3d_800 d c cir affg tcmemo_2000_332 282_f3d_326 ndollar_figure 5th cir affg 115_tc_183 properly reported but not paid the taxpayer did not know and had no reason to know that the liability would not be paid the liability for which relief is sought is attributable to the nonrequesting spouse and the nonrequesting spouse has a legal_obligation pursuant to a divorce decree or agreement to pay the outstanding liability weighs against relief only if the requesting spouse has the obligation ewing v commissioner supra at ____ slip op pincite revproc_2000_15 sec_4 states that no single factor will be determinative of whether equitable relief will or will not be granted in any particular case rather all factors will be considered and weighed appropriately the list is not intended to be exhaustive as discussed next most of the factors the commissioner uses in making sec_6015 determinations do not support respondent's determination in this case petitioner's marital status respondent determined that the marital status factor weighs in favor of petitioner as discussed supra the court agrees that this factor favors petitioner spousal abuse mr keitz did not abuse petitioner lack of spousal abuse is not a factor listed in revproc_2000_15 sec_4 that weighs against granting equitable relief washington v commissioner t c pincite the court concludes that this factor is neutral significant benefit respondent determined that petitioner did not gain any significant benefit from the unpaid liability the court concludes that this factor favors petitioner see ewing v commissioner supra at _____ slip op pincite compliance with tax laws petitioner filed returns for tax years through and respondent concedes that petitioner has complied with tax laws at least since revproc_2000_15 supra lists tax compliance as a factor which the commissioner will consider only against granting relief the court concludes that this factor is neutral economic hardship as discussed supra petitioner has failed to establish that she will suffer economic hardship if equitable relief is not granted the court concludes that this factor weighs against petitioner knowledge or reason to know the court has considered supra respondent's argument that petitioner at the time she signed the return knew or had reason to know that the tax due would not be paid the court rejects respondent's argument that she possessed such knowledge or failed to fulfill a duty_of inquiry the court concludes that this factor favors petitioner whether the underpayment_of_tax is attributable to petitioner's husband respondent concedes that the underpayment_of_tax for is attributable to mr keitz the court concludes that this factor favors petitioner legal_obligation to pay tax during the evaluation process respondent's examiner determined that mr keitz bears the legal_obligation for the tax_liability as neither party has introduced any additional evidence on this point the court accepts this determination and concludes that this factor favors petitioner conclusion petitioner has presented a strong case for relief from joint liability under the factors promulgated by the commissioner in revproc_2000_15 supra all of the factors except one economic hardship either weigh in favor of petitioner or are neutral while the economic hardship factor weighs against petitioner it does not outweigh the positive and neutral factors revproc_2000_15 sec_4 petitioner is no longer married to mr keitz she did not significantly benefit from the underpayment the underpayment was solely attributable to mr keitz petitioner has complied with federal tax laws at least since she did not know or have reason to know mr keitz would not pay the unpaid tax for and mr keitz bears the legal_obligation to pay the tax the neutral factors include petitioner's compliance with the tax laws and lack of spousal abuse the court determines that respondent's denial of relief under sec_6015 was an abuse_of_discretion and that on the basis of the facts and circumstances it would be inequitable to hold petitioner liable for the underpayment_of_tax for to reflect the foregoing decision will be entered for petitioner


t c memo united_states tax_court roger w miller petitioner v commissioner of internal revenue respondent docket no filed date robert j chicoine larry n johnson john mark colvin and darrell d hallett for petitioner william a mccarthy for respondent memorandum opinion cohen chief_judge petitioner roger w miller's unopposed motion for a separate trial on the exclusionary issue was granted and evidence was taken on this preliminary matter the issue now before the court is whether the exclusionary rule should be applied to suppress at a separate trial on the deficiency issue evidence seized at the bellingham washington airport by a u s border patrol agent and evidence obtained as a result of that seizure petitioner resided in east orland maine at the time he filed his petition background border patrol seizure on date petitioner and a companion james goncalo goncalo arrived at the bellingham washington airport intending to board a flight to los angeles california petitioner and goncalo arrived at the airport to minutes before their flight was scheduled to depart as the two men walked towards the airport terminal from the airport lot where they had parked their car george t reese reese a senior patrol agent of the u s border patrol border patrol noticed the men reese was working alone at the bellingham airport and bus station looking for illegal aliens headed towards the interior of the united_states as a border patrol officer reese's primary function was the enforcement of immigration laws of the united_states as a secondary function reese was authorized by letters from the u s drug enforcement administration dea and the u s customs service customs service to investigate certain federal narcotics and currency violations the enforcement of customs laws sometimes involves the seizure of cash being illegally transported across the international border in reese's experience narcotics and currency couriers who frequently use bellingham airport travel lightly reese dressed in full border patrol uniform to include a visible sidearm approached petitioner and goncalo at the entrance of the airport petitioner and goncalo were each carrying one small carry-on bag reese asked the two men where they were from and for identification petitioner unzipped his carry-on bag to obtain his driver's license petitioner and goncalo each handed his driver's license to reese who examined the licenses after asking where petitioner and goncalo were from and looking at their driver's licenses reese no longer suspected that petitioner and goncalo were not u s citizens reese did not return the driver's license to petitioner at that time after looking at petitioner's and goncalo's driver's licenses reese asked to see their airplane tickets petitioner's and goncalo's tickets were in the names of r johnson and j johnson petitioner claimed that the tickets were not in his and goncalo's names because he had purchased them from a man in a bar who offered him a good buy although reese knew that traveling under fictitious names is a common practice he did not believe petitioner's explanation about the tickets and his suspicions regarding petitioner increased petitioner's explanation about the tickets was untrue and was the first of numerous lies that petitioner told reese and other law enforcement officers that day reese did not give the tickets back to petitioner reese next inquired about the purpose of petitioner's trip petitioner replied that he and goncalo were traveling to los angeles to purchase automobiles because this explanation is commonly used by currency violators and narcotics dealers who carry large amounts of money reese began to suspect that petitioner and goncalo were narcotics or currency smugglers reese asked petitioner how he intended to pay for the automobiles petitioner told reese that he was carrying approximately dollar_figure in cash reese discovered that petitioner and goncalo were carrying dollar_figure of currency in their bags after reese discovered the currency he petitioner and goncalo went to the border patrol station in a border patrol vehicle patrol car by the time they arrived at the border patrol station reese suspected that the currency that petitioner had been carrying could be proceeds from criminal activity at the station reese had petitioner and goncalo empty their pockets and placed them in a holding cell the border patrol station had limited space reese continued to question petitioner and goncalo together and individually when not being questioned petitioner and goncalo sat in the holding cell during questioning at the border patrol station reese asked petitioner if he had filed tax returns in the past reese noted these tax questions in his routine report of the incident asking questions about tax returns is not standard practice for border patrol agents after questioning petitioner and goncalo on his own at the border patrol station reese telephoned dea special_agent robert d parks parks at his home and asked him to come to the station to talk with petitioner after parks arrived and asked petitioner questions parks telephoned customs service agents and asked them to talk to petitioner two or three customs service agents came to the station and asked petitioner questions after petitioner was questioned by a total of four or five officers he was told he was free to leave the officers did not return petitioner's wallet or any of the seized currency before petitioner left the station reese did not inform petitioner that petitioner could refuse to answer his questions refuse to accompany him to the border patrol station or terminate the encounter at any time reese did not provide miranda warnings to petitioner or goncalo at the airport or at anytime that day reese had received training in how to determine in a given situation whether there is probable cause that a crime has been committed reese had also received training both at the border patrol academy and at numerous post-academy training courses in how to conduct appropriately an investigative search in the course of reese's 27-year career at the border patrol he had participated in approximately narcotics seizures at the bellingham airport and approximately currency seizures agency relationships there was no formal or informal agreement to exchange information between the internal_revenue_service irs and the border patrol in bellingham washington the irs did not participate in the subject search and seizure special_agent james howisey howisey a criminal_investigation_division cid agent for the irs traveled to the dea office in blaine washington approximately once a year while he was assigned to the everett washington irs office howisey met with dea agents at the blaine dea office to discuss irs cid functions and describe types of cases that might make good tax cases when howisey visited he would tell the dea agents what kinds of things interested him and they would try to recall cases that might fit his criteria dea agents in the blaine office understood that howisey would be interested in cases involving large amounts of currency or assets with a clear drug connection when howisey visited the blaine dea office on date dea agents mentioned that he might want to look at petitioner's file as well as approximately six other files that might have potential as tax cases during the period in question date to date parks was the resident agent in charge of the blaine washington dea office parks personally selected files that he thought would be most relevant to share with the irs dea agents in the blaine office work closely with the customs service and the border patrol on currency cases the blaine dea office operated drug task forces that included representation from the border patrol the royal canadian mounted police and state and local police but not the irs procedural history the government brought an action in the u s district_court for the western district of washington to forfeit the money seized from petitioner and goncalo on the theory that it was the proceeds of narcotics_trafficking petitioner filed a claim in district_court asserting that he owned the currency that it was not the proceeds of narcotics_trafficking and that evidence of the currency should be suppressed in the district_court proceeding because it was the product of an unconstitutional search and seizure in violation of the fourth_amendment the district_court granted petitioner's motion to suppress the evidence seized in the search and all statements made by petitioner after the search as fruit of the unlawful seizure stating what happened on date as shown by the evidence is that an experienced officer had a hunch that two young men might be transporting drug proceeds he did not have probable cause or a reasonable suspicion supported by articulable facts he stopped and questioned the two men in a way that placed them under his control after the first few moments consent given under what the subject feels to be compulsion is not voluntary here if consenting words were in fact uttered they were not spoken voluntarily united_states v dollar_figure in u s currency no c93-1116wd slip op pincite w d wash date order on motion to suppress the district_court held that the government did not sustain its burden_of_proof to show consent and there was no other basis on which the warrantless search could be held lawful id pincite petitioner subsequently consented to forfeiture of dollar_figure of the seized currency and the remaining dollar_figure was returned to him respondent determined deficiencies in income_tax resulting from unreported income earned from to as well as amounts due for failure to pay estimated_tax discussion petitioner contends that under the principles of collateral_estoppel respondent is barred from contesting the district_court finding that petitioner's constitutional rights were violated in the search and seizure we assume for purposes of this proceeding that petitioner's constitutional rights were violated by the seizure at the bellingham airport cf 96_tc_184 assuming that his rights were violated petitioner contends that the exclusionary rule must be applied if tax violations were within reese's zone of primary interest there was a demonstrable understanding that information gathered by one agency could be utilized by another or reese did not act in good_faith during the search and seizure petitioner further contends that all three of these things occurred and that all evidence obtained as a result of the seizure at the bellingham airport should be suppressed in this case respondent maintains that none of the three circumstances describe the instant case and that the exclusionary rule should not be applied we consider these contentions seriatim zone of primary interest in 428_us_433 the u s supreme court mentioned a seizing officer's zone of primary interest but did not elaborate on the phrase courts have focused on officers' zones of primary interest to predict whether applying the exclusionary rule in various contexts would deter future unlawful searches and seizures see 82_f3d_286 9th cir 13_f3d_189 6th cir affg tcmemo_1992_432 745_f2d_541 9th cir affg tcmemo_1982_ 689_f2d_307 2d cir affg 74_tc_14 78_tc_1004 presumably if the proposed use of the evidence is close to a seizing officer's zone of primary interest the inference is stronger that the officer had this use in mind when making the seizure tirado v commissioner supra pincite to estimate an officer's zone of primary interest courts rely on commonsense assumptions about human nature and the interrelationship of the various components of the law enforcement system united_states v janis supra pincite grimes v commissioner supra pincite estimations of an officer's zone of primary interest might also include whether an officer likely contemplated the particular challenged use of the evidence at the time of seizure and if so whether such use likely motivated him or her see tirado v commissioner supra pincite as a member of the border patrol reese's primary function was to enforce immigration laws of the united_states as a secondary function reese was authorized by the dea and customs service to enforce certain federal narcotics and currency laws on the day of the subject search and seizure reese was assigned to surveillance at the bellingham airport and bus station considering his primary and secondary functions and specific assignment on the day the search and seizure occurred we conclude that tax concerns were not within reese's zone of primary interest see grimes v commissioner supra pincite enforcement of civil tax law secondary to fbi agent tirado v commissioner supra pincite dea agents have no general motivating interest to assist enforcement of civil tax obligations although incongruous conduct of a seizing officer might affect our determination of an officer's zone of primary interest eg tirado v commissioner supra pincite we find no such conduct in the instant case although it is not standard practice in the border patrol to ask people who are carrying large amounts of currency questions about tax returns reese explained that he asked petitioner tax questions to determine whether petitioner had a legitimate source for his income reese's questions about petitioner's tax returns in the circumstances of this case do not indicate that tax violations were in his zone of primary interest agreement between agencies petitioner contends that an agreement to share information between agencies in this case mandates application of the exclusionary rule courts frequently examine whether agreements exist between agencies to determine whether suppressing evidence illegally obtained by one agency and offered by another will deter future unlawful searches and seizures grimes v commissioner supra pincite wolf v commissioner supra pincite tirado v commissioner supra pincite 78_tc_173 black forge inc v commissioner supra pincite although generally recognizing that such agreements increase the likelihood that deterrence will be achieved by applying the exclusionary rule courts have considered a variety of elements in determining whether the arrangements before them are of the sort that would warrant excluding the evidence grimes v commissioner supra pincite no preexisting implicit or explicit agreement wolf v commissioner supra pincite no explicit agreement tirado v commissioner supra pincite no general policy liaison agreement or specific agreement on specific case regarding exchange of information no explicit and demonstrable understanding guzzetta v commissioner supra pincite discretionary liaison insufficient black forge inc v commissioner supra pincite no prior agreement we reject petitioner's contention that the blaine washington dea office practice of periodically permitting irs agents to review case files mandates application of the exclusionary rule petitioner's position that a seizing officer's agency need not be involved in an agreement to mandate application of the exclusionary rule is unsupported and unpersuasive see united_states v janis supra pincite seizing officer is primary object of sanction petitioner argues that suppressing the evidence will achieve deterrence because although the alleged agreement was between the irs and dea the border patrol officer who seized the evidence was authorized by the dea to enforce certain federal narcotics violations we cannot conclude that deterrence would be achieved through this attenuated connection see united_states v janis supra pincite discussing effect attenuation has on deterrence in application of exclusionary rule there is no evidence of an agreement that directly links the border patrol and the irs moreover even if instead of the dea the practice were between the border patrol and the irs the type of informal voluntary and discretionary one-way transfer of information that occurred in this case would be insufficient to justify application of the exclusionary rule see guzzetta v commissioner supra pincite therefore no agreements between agencies in this case justify imposition of the exclusionary rule bad faith petitioner's contention that the exclusionary rule should be applied because reese did not act in good_faith when he seized the subject evidence is based on the supposition that although primary deterrence is not the only consideration for exclusionary rule application see ins v lopez-mendoza 468_us_1032 egregious fourth_amendment violations might transgress notions of fundamental fairness and undermine the probative value of the evidence obtained 364_us_206 in addition to deterrence the rule works to preserve judicial integrity petitioner urges the application of a negligence standard of bad faith and relies in part on events occurring at the border patrol station subsequent to the seizure of cash at the airport petitioner recognizes that reese's conduct at the airport was not a significant departure from the rules of engagement enjoyed by border patrol agents at the border we are not persuaded that reese's actions are the type of egregious violations that should lead to exclusion of evidence other than as previously ordered by the district_court even in cases where questionable conduct is attributable to irs agents suppression of evidence generally is not a suitable sanction in a civil tax case 919_f2d_115 9th cir affg tcmemo_1988_586 97_tc_7 nothing about this case causes us to reexamine the consistent refusal of courts to apply the exclusionary rule in this context we have considered the other arguments of the parties and they are either without merit or unnecessary in view of our resolution of the issues there is no basis for suppressing evidence in this case an order calendaring this case for further trial will be issued


internal_revenue_service number release date index number -------------------------- -------------------------------- -------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number -------------------- refer reply to cc psi b07 plr-144722-07 date date ----------------------------- ----------------------------- legend taxpayer -------------------------- trailer model a ------------------------------------------------- trailer model b ------------------------------------------- trailer model c ---------------------------------- dear -------------------------- this replies to a letter_ruling request dated date submitted on your behalf by your authorized representative with regard to whether certain truck and truck semitrailer bodies that you sell at retail are exempt under sec_4053 of the internal_revenue_code the code from the tax imposed by sec_4051 taxpayer designs manufactures and sells specialty trailers primarily to end users although sometimes to third-party distributors and primarily customized to the end user’s particular anticipated use taxpayer manufactures three different types of walking floor or live floor trailers herein live floor each type of live-floor trailer is designed and built for a specific use at issue in this case is taxpayer’s trailer model a trailer model a is specifically designed and built by taxpayer to haul and unload various agricultural commodities that are used as livestock feed and fertilizer to and on farms and feed lots the trailer is an open-top rectangular box taxpayer has recently redesigned trailer model a replacing many of its high tensile steel components with extruded aluminum components eacs the purpose of the design change was to reduce the trailer’s weight so as to increase its hauling capacity thereby making it better suited to end users desiring to haul agricultural commodities for use as livestock feed and fertilizer although some strength and durability was plr-144722-07 sacrificed in the redesign the strength and durability that was lost was not needed to haul and unload agricultural commodities used as livestock feed and fertilizer because trailer model a is not unloaded on a tip dumper discussed below taxpayer represents that trailer model a is not strong and durable enough to be unloaded on a tip dumper taxpayer represents that farms dairies and feed lots generally do not have tip dumpers taxpayer represents that even with the increased hauling capacity gained by using eac’s trailer model a is not efficient for use in hauling on the highways because it costs about twice as much as a general purpose freight trailer and has only about three- fourths of the legal load-carrying capacity of a comparably-sized conventional general purpose freight trailer according to taxpayer other features also indicate that trailer model a was primarily designed for use on a farm for example it is loaded from the top and unloaded through doors at the rear using live floor technology the unloading process takes about minutes trailer model a has heavy-duty eac rails at the top of the trailer that slope inward to self-clean which prevents fertilizer from contaminating feed trailer model a’s lower rails support the live floor are designed to prevent the sidewalls from buckling under stress and are critical in limiting corrosion and contamination of the cargo the front coupler landing gear live floor mechanism and rear suspension subframe are fastened to the lower rails to enhance the rigidity of the trailer taxpayer further represents that trailer model a is not suitable for hauling a commodity for human consumption such as corn because during harvest all farmers in the area deliver to a common processing plant within a compressed period of time processing plants have tip loaders to accommodate quick delivery as noted above trailer model a is not suitable for tip loading in the alternative if the owner of trailer model a processes its own commodity and or hauls it on the highway directly to the consumer the owner needs a refrigerated truck and or a truck capable of being unloaded by forklift trailer model a is neither in contrast with trailer model a trailer model b is designed for forest products trailer model b is designed to withstand the extraordinary stress placed on the frame from unloading with a tip dumper loading with a hopper or driving on rutted uneven or unpaved ground causing great torsional stress a tip dumper elevates the front of a trailer up to degrees in the air and unloads a truck in two or three minutes a hopper drops wood chips into the trailer and can occasion great stress if the chips become hung up and all fall at once because of design features intended to be used in these circumstances trailer model b is heavier and costs more than trailer model a trailer model c which is designed for hauling refuse and other waste material is constructed of heavier and more durable material than either trailer model a or trailer plr-144722-07 model b trailer model c’s deck is sometimes fabricated from water-resistant materials trailer model c is also more expensive than taxpayer’s other live floor trailers sec_4051 imposes a tax on the first_retail_sale of among other things automobile truck bodies and truck trailer and semitrailer bodies sec_4053 provides that the tax imposed by sec_4051 shall not be imposed on any body primarily designed- a to process or prepare seed feed or fertilizer for use on farms b to haul feed seed or fertilizer on farms c to spread feed seed or fertilizer on farms d to load or unload feed seed or fertilizer on farms or e for any combination of the foregoing revrul_69_579 1969_2_cb_200 holds that certain automotive truck bodies equipped with heavy-duty unloading equipment and used primarily for hauling feed seed and fertilizer to and on farms are exempt from the manufacturers tax under sec_4063 the predecessor to the sec_4053 exemption provided for retailers tax purposes revrul_69_579 describes truck trailer and semitrailer bodies that contain heavy-duty mechanical or pneumatic type unloading equipment specially designed to facilitate unloading on the farm the unloading equipment is built into and forms an integral part of the bodies adding substantially to their cost and weight and limiting their load- carrying capacity the mechanical system uses conveyors and augers and unloads from the top of the body the pneumatic system uses a blower and hose and usually unloads from the bottom and rear of the body each system is activated by a power take-off from the truck engine the bodies are usually divided into separate compartments and are either open at the top or completely enclosed the revenue_ruling states that the elaborate and expensive unloading systems built into these bodies and the modifications of the bodies required to accommodate the unloading systems make it impracticable to purchase the bodies for use other than in hauling feed seed or fertilizer to and unloading it on farms the revenue_ruling concludes that the bodies are primarily designed to haul and unload feed seed or fertilizer on farms and are exempt from the manufacturers tax by virtue of the sec_4063 exemption revrul_75_462 1975_2_cb_419 provides that highway bodies that are used for the general hauling of feed seed or fertilizer over the highway are subject_to the manufacturers excise_tax unless they have specific features that indicate they are primarily designed to haul feed seed or fertilizer to and on farms revrul_2004_80 2004_2_cb_164 addresses the definition of the term primarily designed as that term is used in distinguishing a truck from a tractor for purposes of plr-144722-07 sec_4051 the revenue_ruling states that the term primarily designed means principally designed it does not mean exclusively designed the exemption from tax provided by sec_4053 does not extend to bodies primarily designed for general use even though the bodies may be capable of hauling feed seed and fertilizer to and on farms or performing other functions described in sec_4053 to be exempt a body must be primarily designed for one or a combination of functions described in sec_4053 in requesting tax-exempt treatment for trailer model a taxpayer submitted a letter_ruling request that was detailed and comprehensive to complement the extensive factual discussion the letter_ruling request included engineering schematics full-color brochures and a matrix comparing and contrasting the different types of live floor trailers produced by taxpayer as well as a comprehensive legal analysis with regard to the trailer model a truck and semitrailer bodies at issue in this case each of the bodies contains an unloading system that is built into and forms an integral part of the body the special unloading equipment is elaborate and expensive adds substantially to the cost and weight of each body and limits its load-carrying capabilities thus like the specially designed bodies described in revrul_69_579 purchase of the subject bodies for use other than in hauling feed seed or fertilizer to and unloading it on farms would be impractical further the detailed information provided by taxpayer highlights a number of specific features including the unloading system the use of eacs which reduces the strength and durability of the trailers the sloped design and self-cleaning nature of the rails at the top of the trailer and the fabrication of the lower rails to limit corrosion and contamination of the trailer’s cargo that indicate trailer model a is primarily designed for use on farms accordingly the truck and semitrailer bodies described herein as trailer model a fall within the exemption provided by sec_4053 and taxpayer's retail sales thereof are exempt from the tax imposed by sec_4051 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-144722-07 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 stephanie n bland senior technician reviewer branch passthroughs special industries


internal_revenue_service number release date index number ---------------------------------------- ----------------- --------------------------- legend legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number --------------------- refer reply to cc ita plr-128399-09 date november ------- ------- year year property a -------------------------------------------------------------------- property b --------------------------------------------------------------------- dollar_figurec dollar_figured dollar_figuree f dollar_figureg dollar_figureh ------------ --------- ----------- ----- ----------- ----------- dear ----------------------------- this letter refers to your request to revoke an election out of installment_method reporting under sec_453 of the internal_revenue_code and sec_15a_453-1 of the temporary regulations under the installment_sales_revision_act_of_1980 facts in year you sold property a and property b to unrelated third parties you sold property a for dollar_figurec receiving dollar_figured of cash and a promissory note for dollar_figuree payable in f months you sold property b for dollar_figureg receiving dollar_figured of cash and a promissory note for dollar_figureh payable in f months inadvertently your accountant did not report the gain from the sales on the installment_method but instead reported all of the gain on your year federal_income_tax return you first became aware of the error when your accountant began to prepare your year federal_income_tax return you then requested this ruling law and analysis plr-128399-09 sec_453 provides that income from an installment_sale is taken into account under the installment_method sec_453 provides that sec_453 does not apply to any disposition if the taxpayer elects not to have sec_453 apply to the disposition sec_453 provides that except as otherwise provided by regulations an election under sec_453 for a disposition may be made only on or before the due_date prescribed by law including extensions for filing the taxpayer's return for the taxable_year in which the disposition occurs the election is made in the manner prescribed by the regulations sec_453 provides that an election under sec_453 for any disposition may be revoked only with consent of the secretary sec_15a_453-1 states that an election out of the installment_method may be revoked only with consent of the internal_revenue_service a revocation is retroactive a revocation will not be permitted when one of its purposes is the avoidance of federal taxes or when the taxable_year in which any payment was received is closed you represent that your accountant did not prepare your year federal_income_tax return in accordance with your intent to report the sales of property a and property b on the installment_method your accountant represents that he should have reported the sales of property a and property b on the installment_method as soon as you became aware of the error you requested consent to revoke the election out of the installment_method conclusion based on the information submitted and the representations made we conclude that your election out of the installment_method reporting for the sales of property a and property b was due to inadvertence rather than hindsight or a purpose of avoiding federal taxes accordingly you may revoke your election out of the installment_method reporting for the sales of property a and property b but only if you revoke the election during the period ending days after the date of this letter by filing an amended federal_income_tax return for year caveats we do not express or imply an opinion concerning the tax consequences of any aspect of these transactions other than those expressed under conclusion above for example we do not express or imply an opinion concerning how much if any of the gain on the sales of property a and property b qualifies for installment_method reporting under sec_453 or whether the sales were dealer dispositions under sec_453 plr-128399-09 we based the rulings contained in this letter upon information and representations that you and your accountant submitted under the penalties of perjury while we have not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination you must attach to any income_tax return to which it is relevant a copy of this letter or if you file your returns electronically a statement providing the date and control number of this letter_ruling this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent attached is a copy of the letter showing the deletions proposed to be made when it is released under sec_6110 in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting


internal_revenue_service number release date index number -------------------- ------------------------------ -------------------------------------------------- ----------------------------------------- -------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc ita b04 plr-112200-06 date date ------- taxpayer ---------------------------------------------------------------------------- year dear ---------------- this is in reference to taxpayer’s request that its form_1128 application to adopt change or retain a tax_year be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations taxpayer filed a form_1128 to change its accounting_period for federal_income_tax purposes from a taxable_year ending july to a taxable_year ending december effective december year revproc_2002_37 2002_1_cb_1030 provides procedures for certain corporations to obtain automatic approval to change their annual_accounting_period under sec_442 of the internal_revenue_code a corporation complying with all the applicable provisions of this revenue_procedure has obtained the consent of the commissioner of the internal_revenue_service to change its annual_accounting_period section of revproc_2002_37 provides that a form_1128 filed pursuant to the revenue_procedure will be considered timely filed for purposes of sec_1_442-1 only if it is filed on or before the time including extensions for filing the return for the short_period required to effect such change the information furnished indicates that the taxpayer did not file its form_1128 by the due_date of the return for the short_period required to effect such change however the taxpayer requested an extension of time to file its form_1128 under sec_301_9100-3 soon thereafter sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions plr-112200-06 such as the instant case must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government based on the facts and information submitted and the representations made we hold that the taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government accordingly the requirements of the regulations for the granting of relief have been satisfied in this case and the taxpayer's late filed form_1128 requesting to change to december effective december year is considered timely filed since a change in accounting_period under revproc_2002_37 is under the jurisdiction of the director internal_revenue_service center where the taxpayer’s returns are filed we have forwarded the application to the director ------------------------------ any further communication regarding this matter should be directed to the service_center the ruling contained in this letter is based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as part of an examination process this ruling addresses the granting of sec_301_9100-3 relief only no opinion is expressed regarding the tax treatment of the instant transaction under the provisions of any other sections of the code or regulations that may be applicable thereto or regarding the tax treatment of any conditions existing at the time of or effects resulting from the instant transaction specifically no opinion is expressed as to whether the taxpayer is permitted under the code and applicable regulations to change to the tax_year requested in the subject form_1128 or whether the change may be effected under revproc_2002_37 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the taxpayer’s application_for a change in accounting_period will be processed under revproc_2002_37 plr-112200-06 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely michael j montemurro branch chief income_tax accounting


o f f i c e o f t h e c h i e f c o u n s e l number info release date department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc ita b04 ------------ conex-129444-09 uil the honorable john j hall member u s house of representative sec_40 gleneida avenue 3rd floor carmel ny attention ---------------- dear congressman hall i am responding to your letter dated date on behalf of ------------------------------- ------------------------------------------------------------- --------------asks whether ----------must issue forms to homeowners who participate in the ----------------------------------------- ------------ program --------------states that under the program ----------will repair or replace a homeowner’s failing ------------------- system at no cost to the homeowner the purpose of the program is ------------------------------------------------------------------------ thus homeowners located ----------------------------------------------------------------------are eligible to participate participating homeowners must grant ---------- an irrevocable license to enter their property to inspect the existing system and to repair or replace it all repair or replacement work is performed by a contractor that is selected by ---------- ---------- inspects and approves the contractor’s work and pays the contractor directly upon completion of the work participating homeowners must maintain the newly installed system in accordance with ------------ recommendations and guidelines participating homeowners also must grant ---------- a permanent easement running with the land so that ---------- may enter the property to repair or maintain the new system if the homeowner fails to do so participation in the program is voluntary however any homeowner eligible for the program or not who is cited by ----------for a failing system must repair or replace it ---- --------- may assess severe penalties on a homeowner who does not repair or replace a conex-129444-09 failing system under certain circumstances a judge may order the homeowner evicted from his or her home gross_income includes all accessions to wealth clearly realized and over which the taxpayer has complete dominion government grants and cost sharing benefits generally constitute gross_income for federal_income_tax purposes courts however have held that taxpayers do not have gross_income where the recipient of the grant lacks complete dominion and control_over the grant see 88_tc_1293 acq 1989_1_cb_1 recipient of a façade grant lacked complete dominion and control where recipient was required to grant an easement to the city to rehabilitate the façade and subsequently to repair the façade at the recipient’s expense if the recipient did not maintain it and where city controlled the rehabilitation work the terms of the program indicate that ---------- retains significant dominion and control_over the system improvements of participating homeowners thus the value of the repair or replacement of system is not gross_income to any homeowner participating in the program and is excluded from the home’s basis consequently ---------- is not required to file or furnish forms with respect to homeowners for the value of repairs or replacements made under the program i hope this information is helpful if you have any questions please call me or --------- -------------------------at --------------------- sincerely michael j montemurro branch chief office of associate chief_counsel income_tax accounting