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 corp b05 plr-121327-12 date date legend parent ------------------------------------------------------------ ------------------------------------- date date date x --------------------------- --------------------------- ---------------------------- -- company official ----------------------------------------------------------------------- -------------------------------------------------- tax professional ----------------------------------------------------------------------- ----------------------------- dear ------------------- this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election in particular parent is requesting an extension of time for the consolidated_group of which parent is the common parent to elect an extended carryback period the election for a consolidated_net_operating_loss cnol additional information was submitted in letters dated date plr-121327-12 and date the material information submitted for consideration is summarized below parent is the common parent of a consolidated_group the parent group parent group incurred a cnol in the taxable_year ending date the year cnol parent seeks to carry back the year cnol x years to its taxable_year ending on date under sec_172 of the internal_revenue_code a portion of the year cnol is attributable to a corporate equity reduction interest loss within the meaning of sec_172 parent was required to file the election in order to carry back the year cnol to its taxable_year ending on date and to obtain the benefit of sec_56 the election was due on date but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election parent has represented that it is not seeking to alter a return position for which a penalty has been or could be imposed under sec_6662 at the time parent requested relief and the new position requires or permits a regulatory election for which relief is requested sec_172 generally permits a taxpayer to carry back a net_operating_loss nol to each of the taxable years preceding the taxable_year of the nol sec_172 permits a taxpayer to elect to carry back an applicable net_operating_loss applicable nol to each of the or taxable years preceding the taxable_year of the applicable nol in lieu of the 2-year period provided by sec_172 sec_172 provides that an applicable nol is the taxpayer’s nol for a taxable_year ending after date and beginning before date sec_172 provides that the election under sec_172 shall be made by the due_date including extension of time for filing the return for the taxpayer’s last taxable_year beginning in the election is irrevocable and in general may be made only with respect to one taxable_year sec_1502 provides that the secretary shall prescribe such regulations as he may deem necessary in order that the tax_liability of any affiliated_group_of_corporations making a consolidated_return and of each corporation in the group both during and after the period of affiliation may be returned determined computed assessed collected and adjusted in such manner as clearly to reflect the income_tax_liability and the various factors necessary for the determination of such liability and in order to prevent avoidance of such tax_liability in carrying out the preceding sentence the secretary may prescribe rules that are different from the provisions of chapter that would apply if such corporations filed separate returns plr-121327-12 sec_1_1502-21 of the income_tax regulations provides that losses taken into account in determining a cnol may be carried to other taxable years whether consolidated or separate only under paragraph b of sec_1_1502-21 sec_1_1502-21 provides that nol carryovers and carrybacks to a taxable_year are determined under the principles of sec_172 and sec_1_1502-21 sec_1_1502-21t provides that a consolidated_group may elect an extended carryback period pursuant to sec_172 with regard to a cnol arising in a taxable_year ending after date and beginning before date revproc_2009_52 2009_49_irb_744 provides when and how a taxpayer may make an election under sec_172 sec_4 of revproc_2009_52 provides that the common parent of a consolidated_group makes the election for the group sec_4 and of revproc_2009_52 permit the election to be made for consolidated taxpayers by attaching a statement to the original or amended consolidated_return for the taxable_year of the applicable cnol by attaching a statement to the taxpayer’s amended consolidated_return applying the applicable cnol to the carryback_year or by attaching a statement to a claim for a tentative_carryback_adjustment on form_1139 corporation application_for tentative refund sec_4 b and b of revproc_2009_52 require the election regardless of the manner in which made to be filed no later than the due_date including extensions for filing the return for the taxpayer’s last taxable_year beginning in under sec_301_9100-1 the commissioner has discretion to 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_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 the election by a consolidated_group to extend the carryback period under sec_172 for a cnol is a regulatory election therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent to file the election provided parent establishes to the satisfaction of the commissioner that it acted reasonably and in good_faith the requirements of sec_301_9100-1 and plr-121327-12 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the request for relief was filed before the failure to timely make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the affidavits submitted and the representations made we conclude that parent has shown it acted reasonably and in good_faith that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and that granting relief will not prejudice the interests of the government accordingly provided that and to the extent that the parent group qualifies substantively to file the election we grant an extension of time under sec_301_9100-3 until sixty days from the date on this letter for parent to file the election an election for an extended carryback period under sec_172 is not available for the portion of a net_operating_loss attributable to a corporate equity reduction interest loss with respect to a loss limitation_year within the meaning of sec_172 accordingly the extension granted in this letter does not apply with respect to the portion of the cnol that is attributable to a corporate equity reduction interest loss within the meaning of sec_172 additionally this letter does not extend the period of time described in sec_6511 by which a taxpayer is required to file a claim for credit or refund of an overpayment_of_tax the time in which parent may file a form_1139 for the year cnol has expired however parent may file the election under sec_172 to carry back the year cnol to its taxable_year ending on date on form 1120x amended u s_corporation income_tax return for the taxable_year ending date according to the procedures set forth in revproc_2009_52 a copy of this letter must be attached to the form 1120x if parent files form 1120x electronically parent may satisfy the requirement of attaching a copy of this letter by attaching a statement to the parent group’s amended_return that provides the date and control number plr-121327-12 of this letter_ruling the above extension of time is conditioned on the parent group’s tax_liability if any not being lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money we express no opinion as to the parent group’s tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the income_tax returns involved except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any item discussed or referenced in this letter in particular we express no opinion with respect to whether parent qualifies substantively plr-121327-12 to make the election in addition we express no opinion as to the tax effects or consequences of filing the election late under the provisions of any other section of the internal_revenue_code or regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in this letter for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made under penalty of perjury by parent company official and tax professional the director however should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable continue to apply this letter_ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely _ken cohen______________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


department of the treasury internal_revenue_service washington d c date number release date cc intl br2 spr index internal_revenue_service national_office taxpayer_advocate advice memorandum for don kurihara-nakasu i r s taxpayer_advocate_service honolulu hawaii from philip garlett senior technical reviewer cc intl br2 this letter is in response to your request for technical assistance concerning the tax treatment of consent dividends_paid by a personal_holding_company to its shareholders issue were interest and late payment penalty charges properly imposed when the taxpayer paid the tax under sec_565 of the internal_revenue_code with its form_1120 filed on date pursuant to an extension to file conclusion we conclude that the tax under sec_565 was due on the due_date of the form_1120 without extension an extension of time to file the form_1120 and the consent_dividend elections is not an extension of the time to pay the required tax facts the taxpayer is a personal_holding_company that files its tax_return on a calendar_year basis on or about date the taxpayer declared a consent_dividend to its shareholders under sec_565 of the internal_revenue_code all the shareholders signed the proper consents form - consent of shareholder to include specific amount in gross_income the taxpayer filed these consents and form_973 corporate claim for deduction for consent dividends with its form_1120 on date pursuant to an extension to file some of the taxpayer’s shareholders are foreign persons the taxpayer included a payment of percent of the amount of the consent dividends attributable to the foreign shareholders with its form_1120 because the taxpayer had already filed its form_1042 it filed an amended_return to report the consent dividends on date the philadelphia service_center assessed a late payment penalty and interest on the spr amount shown on the amended form_1042 from the due_date date until the date the tax was actually paid the taxpayer subsequently requested assistance from your office maintaining that the penalty and interest charges were improperly imposed for the reasons below we conclude that the assessments were proper law and analysis sec_565 of the internal_revenue_code provides that if any person owns consent_stock in a corporation on the last day of the taxable_year and that persons agrees in a consent form filed with the return of the corporation in accordance with regulations prescribed by the secretary to treat as a dividend the amount specified in the consent the amount specified shall constitute a consent_dividend for purposes of sec_561 relating to the deduction for dividends_paid sec_1_565-1 of the income_tax regulations provides that a consent may be filed at any time not later than the due_date of the corporation’s income_tax return for the taxable_year for which the dividends_paid deduction is claimed for purposes of the consent revrul_78_296 concludes that the due_date includes any applicable extensions revrul_78_296 1978_2_cb_183 sec_565 of the code provides that in the case of a consent_dividend which if paid in money would be subject_to the provisions of sec_1441 relating to withholding of tax on nonresident_aliens or relating to withholding of tax on foreign_corporations sec_565 does not apply unless the consent is accompanied by money in an amount equal to the amount that would be required to be deducted and withheld under sec_1441 or sec_1442 if the consent_dividend had been on the last day of the taxable_year of the corporation paid to the shareholder in money as a dividend that is the corporation cannot take into account the consent_dividend paid to a foreign shareholder for the dividends_paid deduction unless the election is accompanied by any_tax that would have been required to be withheld if the amount of the consent_dividend was actually distributed to the shareholder on the last day of the corporation’s tax_year note however that the tax is not withheld pursuant to sec_1441 but rather directed to be paid under sec_565 see sec_565 tax imposed on consent dividends that would be subject_to withholding if they were actually paid given the above the procedure for paying tax relating to consent dividends_paid to foreign shareholders is explicitly defined by statute code sec_565 provides that the tax shall accompany the form_972 code sec_565 provides that the form_972 shall accompany the taxpayer’s form_1120 although revrul_78_296 permits the consent to be filed by the extended due_date there is no corresponding rule that permits an extension for the payment of tax sec_6072 of the code provides that the due_date for filing a corporate tax_return for a calendar_year taxpayer is march 15th sec_1_6081-3 of the income_tax regulations provides that if certain requirements are met a corporation is allowed an automatic_extension of that time to september 15th among the requirements is the duty to make a remittance on or before the date prescribed for payment of the amount of the properly estimated unpaid tax spr liability sec_1_6081-3 therefore notwithstanding the extension to file the taxpayer must ensure that its tax_liability is fully satisfied by the actual return filing_date in the present case the taxpayer remitted the tax on the consent dividends it paid to its foreign shareholders with its extended form_1120 because that amount should have been remitted by date late payment penalties and interest assessments are appropriate from that date forward i hope this information assists you in responding to the taxpayer if you require additional information please do not hesitate to contact laurie hatten-boyd at ___________________________ philip garlett senior technical reviewer branch


department of the treasury internal_revenue_service washington d c date cc ebeo tl-n-5752-98 uilc 4980a number release date memorandum for baltimore district_counsel s office internal_revenue_service national_office field_service_advice from subject attn david ferguson chief branch office of associate chief_counsel ebeo cc ebeo --------------------------------------------- irc ' 4980a this field_service_advice responds to your request for assistance regarding the applicability of irc '4980a to the above-referenced case field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend tp --------------------------- x corporation ------------------------------------------------------- y plan ------------------------------------------------------------------- a ------- b -------------------------- c -------- d -------- e ----------- f ------- g ---------- h ----------- i ---------------------- issue whether irc '4980a as applicable to certain excess distributions from qualified_plans occurring before date applies to a corrective distribution from x corporation to tp conclusion the correct technical position is that the irc '4980a tax is applicable to tp facts we understand that x corporation was appointed trustee of y plan a qualified_plan under irc '401 a sometime prior to a upon conducting an audit of y plan x corporation discovered that tp a plan participant had been receiving a monthly benefit payment that was substantially less than that which should have been paid_by letter dated b x corporation advised tp that he was entitled to a monthly pension payment of c dollars instead of d dollars accordingly to correct the error including interest thereon x corporation made a one-time corrective distribution of e dollars to tp in f the service then assessed a g dollars irc '4980a excess_distribution excise_tax percent of h dollars the portion of the distribution exceeding the dollar_figure threshold law and analysis irc '4980a was repealed in by '1073 a of the taxpayer_relief_act_of_1997 p l effective for excess distributions received after date prior to its repeal irc '4980a imposed on any individual receiving an excess_distribution from a qualified_plan a tax in the amount of percent of the excess_distribution the term aexcess distribution as defined under irc '4980a c prior to its repeal means the aggregate amount of the retirement distributions of any individual during any calendar_year to the extent such amounts exceed the greater of a dollar_figure or b dollar_figure adjusted at the same time and in the same manner as under irc '415 d certain exclusions not relevant here are provided under irc '4980a c under irc '4980a e a prior to its repeal the term aretirement distributions includes with respect to any individual the amount distributed in any taxable_year under any qualified_employer_plan with respect to which such individual is or was the employee the term aqualified employer plan under prior irc '4980a e a includes any plan described in irc '401 a which includes a_trust exempt from tax under '501 a and which includes any plan or contract which at any time has been determined by the secretary to be such a plan or contract prior to its repeal in the tax on excess distributions from qualified_retirement_plans under irc '4980a had been strictly imposed see montgomery v commissioner t c memo - aff d sub nom 129_f3d_321 4th cir and powell v commissioner t c memo aff d 129_f3d_321 4th cir in this case y plan was a qualified_plan under irc '401 a and the service asserted the tax with respect to the excess_distribution portion of the f distribution of e dollars that tp received from x corporation as trustee of y plan maintained by tp s former employer in addition because the distribution occurred prior to i the irc '4980a tax applies to the extent of any aexcess distribution based on the facts it is clear that h dollars of e dollars tp received constituted an aexcess distribution under irc '4980a e since none of the exclusions of irc '4980a c apply case development hazards and other considerations review of the legislative_history indicates that in general irc '4980a was intended to prevent participants from accumulating excessive retirement savings see staff of joint_committee on taxation 100th cong 1st sess date in this case if tp had received the correct monthly annuity amount at the time he began receiving his monthly annuity benefit the same benefit would not have been an excess_distribution subject_to irc '4980a since it would have been payable as a monthly annuity without the additional accrued interest thus tp s situation is not of the type contemplated in enacting the irs '4980a tax further tp is in no way responsible for the events that resulted in the f corrective distribution by x corporation see murillo v commissioner tcmemo_1998_13 89_tc_287 aod cc-1988-010 april both of these factors could be seen as suggesting some litigating hazards -------------------- ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------thus we believe on balance that the correct technical position is that the irc '4980a tax is applicable to tp if you have any further questions please call the branch telephone number by michael roach chief branch cc ebeo


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc it a plr-127246-00 date date legend taxpayer partnership accountant a x accountant b accountant c dollar_figurex dear this is in reply to the private_letter_ruling request in which the taxpayer requests an extension of time to make an election under sec_108 of the internal_revenue_code specifically the taxpayer has requested an extension of time to make an election under sec_108 and sec_1 c -1 of the income_tax regulations to reduce the basis of depreciable_property and to exclude income resulting from the discharge of qualified_real_property_business_indebtedness facts partnership is a limited_liability_company which is treated as a partnership for federal_income_tax purposes taxpayer is an s_corporation and is a partner in partnership partnership was allocated dollar_figurex cancellation_of_indebtedness_income accountant a was responsible for preparing partnership’s federal_income_tax return accountant a delivered the k-1s to taxpayer after taxpayer had already filed its income_tax return for the year in which the cancellation_of_indebtedness_income should have been reported therefore taxpayer failed to include the cancellation_of_indebtedness_income and failed to make the election on form_982 however taxpayer filed its return consistent with having made the election if the late election is granted then the only change to plr-127246-00 taxpayer’s return will be the attachment of form_982 taxpayer’s president has submitted an affidavit consistent with the above stated facts applicable law sec_108 of the code provides that gross_income does not include any amount includible in gross_income by reason of the discharge_of_indebtedness if in the case of a taxpayer other than a c_corporation the indebtedness discharged is qualified_real_property_business_indebtedness sec_108 provides that the taxpayer must make an election in order to take advantage of the exclusion provided by sec_108 sec_108 of the code provides that in the case of a partnership sec_108 and sec_108 shall be applied at the partner level sec_1 c -1 b of the income_tax regulations provides that the election available under sec_108 must be made on the timely-filed including extensions federal_income_tax return for the taxable_year in which the taxpayer has discharge_of_indebtedness income that is excludible from gross_income under sec_108 the election is to be made on a completed form_982 sec_301_9100-3 of the regulations provides that requests for extensions of time for regulatory elections other than automatic changes covered in sec_301_9100-2 will be granted when the taxpayer provides evidence including affidavits to establish that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 states that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer-- i requests relief before the failure to make the regulatory election is discovered by the service ii 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 under sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer-- i seeks to alter a return position for which an accuracy-related_penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires a regulatory election for which relief is plr-127246-00 requested ii was fully informed 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 states 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 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 taking into account the time_value_of_money analysis taxpayer requested relief before the failure to make the election was discovered by the service therefore taxpayer is deemed to have acted reasonably and in good_faith under sec_301_9100-3 in addition based on the facts as represented we have determined that sec_301_9100-3 does not apply furthermore based on the facts as represented we have determined that the interests of the government will not be prejudiced by the granting of relief conclusion based solely on the facts as represented and the applicable law we conclude that the request for relief under sec_301_9100-3 of the regulations should be granted accordingly taxpayer is granted an extension of time of days from the date of this letter to file an amended_return making the election under sec_108 of the code the election is to be made on form_982 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 or facts assumed in support of the request for rulings it is subject_to verification on examination 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 letter does not rule on whether the income at issue is properly treated as cancellation_of_indebtedness_income this letter also does not rule on whether the income can be excluded from gross_income under sec_108 of the code plr-127246-00 a copy of this letter must be attached to any income_tax return to which it is relevant this ruling is directly only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely assistant chief_counsel income_tax accounting by christopher f kane assistant to the chief branch enclosure copy for sec_6110 purposes


os be interac revemue sthinge oct uniform issue list no - 2a ‘ty kkekkekekkkeekkekekekkeeeek kkekkkekekkekkkkekeekkekrkkekekkekekkkee kekkekrekkeekkkekkkkkekkeke legend individual a krrekrekekekkekekkekka kk rk kkk individual b kkekkeekkeekkkkkeekkeekekekeekkeee bank c kkk kkk rk rr kkk kr kkk kkk ira x krkkkkkekke kek kr kare kirke keek ke kkk ek rra e ‘ state v kkkkekekreekkekkkkkkkkekkekke kee dear kkkkkk this is in response to a request for a ruling submitted on date submitted on your behalf by your authorized representative concerning the federal_income_tax treatment of a proposed transfer of funds from one individual_retirement_account into another individual_retirement_account under sec_408 of the internal_revenue_code the facts and representations on which the ruling_request is based are as follows individual a whose date of birth was aied on her age at the date of death was age years and she was married at at the time of a’s death a maintained an individual death to individual b retirement account ira x and had not yet begun receiving distributions from ira x been made from ira x since a‘s death beneficiary of the account was appointed personal representative of her estate to a's estate individual a did not leave a will her entire net estate will - pass by intestate_succession under the laws of state v to her spouse b ira x was included in her estate and individual b individual a designated her estate as individual a had not attained age ira x has been transferred no distributions have at bank c individual b as surviving_spouse disclaimed a portion of the estate but did not disclaim the interest in ira x not disclaimed including ira x passed by intestacy to b individual b as surviving_spouse and beneficiary of the estate desires that b as sole personal representative and administrator of the estate transfer ira x maintained by the estate of a at bank c to an individual_retirement_account maintained by b at bank c therefore the balance of the estate as surviving_spouse rekkkkekkkkek kkk ek based on the facts and representations the taxpayer requests a ruling that a transfer from ira x maintained in the name of individual a’s estate at bank c to an individual_retirement_account maintained in the name of individual b the surviving_spouse qualify as sec_402 and that the transfer would not result in income to either the estate or the surviving_spouse in the year of the transfer under sec_408 a tax deferred transaction within the meaning of sec_408 a i of the code provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the account is maintained if the entire amount received including money and any other_property is paid into an ira other than an endowment_contract for the benefit of such individual not later than the 60th day after the day on which he or she receives the payment or distribution code sec_408 b not apply to any transfer described in sec_408 during the one-year period ending on the day of such receipt such individual received any other amount described in such subparagraph from an ira which was not includible in his gross_income because of the application of sec_408 d a of the code provides that sec_408 a does at any time a i if sec_408 c i of the code provides in pertinent part that in the case of an inherited ira sec_408 received by an individual from such account and no amount transferred from such account to another ira shall be excluded from income by reason of such transfer and such inherited account shall not be treated as an ira for purposes of determining whether any other amount is shall not apply to any amount a rollover_contribution c ii of the code provides that an ira shall be treated as sec_408 inherited if the individual for whose benefit the account is maintained acquired such account by reason of the death of another individual and such individual was not the surviving_spouse of such other individual sec_1_408-8 question and answer a-5 a of the proposed income_tax the only beneficiary of the individual who may elect to treat regulations provides in part that in the case of an individual dying after december the beneficiary's entire_interest in the trust or the remaining part of such interest if distribution thereof has commenced to the beneficiary as the beneficiary's own account is the individual’s surviving_spouse surviving_spouse makes such an election the spouse's interest in the account would then be subject_to the distribution_requirements of sec_401 a rather than those of sec_401 a b if the sec_1_408-8 q a-a7 of the proposed_regulations provides in pertinent part that if the surviving_spouse of an employee rolls over a distribution from the deceased spouse’s ira into another ira spouse may elect to treat the ira as the spouse's own ira in accordance with the provisions in sec_1_408-8 q a a-5 such surviving generally if a decedent's ira proceeds pass through a third party eg a_trust or an estate and then are distributed to the decedent's surviving_spouse said spouse will be treated as acquiring them from a third party and not krkekkkkkkkkkkkrkkrk from the decedent to roll over the ira proceeds into his or her own ira thus generally such surviving_spouse will not be eligible however in a situation where an estate is the beneficiary of the ira the surviving_spouse is the administrator of the estate and is the sole beneficiary of an intestate estate except for any non-ira portion of the estate the spouse has disclaimed then for purposes of sec_408 d surviving_spouse will be treated as having acquired the ira proceeds from the decedent and not from the estate of the code the in this case individual b administrator and the sole beneficiary except for any non-ira portion of the estate the spouse has disclaimed of a's estate individual a's estate is the beneficiary of ira x individual b who has not disclaimed any portion of ira x will transfer all ira x proceeds to an tra described in sec_408 a set up and maintained in b's name is the surviving_spouse of individual a and the accordingly we conclude that the transfer of all assets from ira x maintained in the name of the individual a at bank c to an individual_retirement_account maintained in the name of individual b a‘s surviving_spouse qualifies under sec_408 income for either the estate or the surviving_spouse b transfer under sec_408 of the code and will not result in an inclusion gross in the year of the this ruling is based on the assumption that individual a’s ira x and the ira to be established by individual b meet the requirements of sec_408 of the code at all times relevant to the transaction described herein and that the transfer will satisfy all other applicable_requirements of sec_408 this ruling is directed only to the taxpayer who requested it of the code provides that it may not be used or cited as sec_6110 precedent this ruling letter was prepared by at - he may be contacted the original and a deleted copy of this letter have been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely alan pipkin chief employee_plans technical branch tax exempt government entities enclosures deleted copy of this letter notice of intention to disclose notice


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si plr-118579-99 date date legend x a t d1 d2 d3 d4 d5 this letter responds to your letter dated date written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts according to the information submitted x is a former c_corporation that filed an election to be an s_corporation effective d1 a d2 judgment against one of x’s shareholders a resulted in a’s shares being sold at public auction to t on d3 t is a_trust that is not an eligible s_corporation shareholder under sec_1361 x’s shareholders did not discover that x had an ineligible shareholder until d4 shortly after d4 on d5 t’s shares were redeemed x represents that as soon as the termination was brought to its attention it took steps to obtain relief x also represents that there was no intent to knowingly terminate its s election and that the events that resulted in the termination were not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make plr-118579-99 any adjustments that the secretary may require consistent with the treatment of x as an s_corporation law and analysis sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 of the code provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate and other than a_trust described in sec_1361 who is not an individual sec_1362 provides that an s election under sec_1362 shall be terminated whenever at any time on or after the first day of the taxable_year for which the corporation is an s_corporation the corporation ceases to be a small_business_corporation the termination is effective on and after the day of the termination sec_1362 of the code provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under paragraph or of sec_1362 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to this subsection agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination the corporation shall be treated as an s_corporation during the period specified by the secretary s rep no 97th cong 2d sess 1982_2_cb_718 in discussing sec_1362 of the code states in part if the internal_revenue_service determines that a corporation's subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period plr-118579-99 the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts conclusions after applying the law to the facts submitted and the representations made we conclude that x’s s_corporation_election under sec_1362 was terminated when shares of x stock were transferred to t on d3 we conclude that the termination constituted an inadvertent termination within the meaning of sec_1362 therefore under the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d3 provided that x's s_corporation_election is not otherwise terminated under sec_1362 this ruling is contingent on x and all of its shareholders treating x as having been an s_corporation for the period beginning d2 and thereafter accordingly all of the shareholders in x in determining their respective income_tax liabilities for the period beginning d2 and thereafter must include their pro_rata share of the separately and nonseparately computed items of x as provided in sec_1366 make adjustments to stock basis as provided in sec_1367 and take into account any distributions made by x as provided by sec_1368 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter will be sent to x sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number department of the treasury washington dc person to contact telephone number refer reply to cc corp br2-plr -127322-00 date date legend distributing1 distributing2 controlled1 controlled2 c2sub a business a business b state x country y continent z exchange date a date b date c plr-127322-00 this is in reply to a letter dated date requesting rulings as to the federal_income_tax consequences of a proposed transaction additional information was provided in letters dated february may june august and date the pertinent information is substantially as summarized below distributing2 a state x corporation is the parent of a controlled_group that comprises both domestic and foreign_corporations distributing2 joins with its includible affiliates in filing a consolidated federal_income_tax return distributing2 is directly and indirectly through members of its controlled_group engaged in business a and business b distributing2 has a single class of common_stock outstanding which is widely held and publicly traded on exchange a is the only five_percent_shareholder of distributing2 distributing1 a country y corporation was formed to effectuate the proposed transaction controlled1 has a single class of common_stock outstanding all of which is initially held by distributing1 controlled2 a state x corporation was formed to effectuate the proposed transaction controlled2 has a single class of common_stock outstanding all of which is initially held by distributing2 financial information has been submitted indicating that business a and business b have had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years in order to resolve certain fit and focus problems that prevent the optimal development of both business a and business b to allow controlled2 to issue equity on materially enhanced terms to fund increased research_and_development acquisitions and an enlarged marketing and sales infrastructure and to permit key employees of business b to receive a direct equity_interest in its operations management has determined that it is in the best interests of each of business a and business b that they be separate from each other the taxpayers have provided documentation that management systemic and other problems exist letters from an investment banker have advised distributing2 that an offering of controlled2 stock will raise substantially more funds per share than an offering of distributing2 stock and that an offering of controlled2 stock will raise substantially more money if distributing2 has announced that controlled will become a stand-alone company than if controlled2 were to remain a subsidiary of distributing2 the taxpayers have also documented that distributing2 had conducted unsuccessful negotiations for a business combination with another company via a merger or joint_venture under terms whereby distributing2 and its shareholders would plr-127322-00 retain more than fifty percent of the combined company in addition the taxpayers indicated their belief that a combination of business b with another party would be more likely if it were separate from business a to accomplish this separation the following transaction is proposed the proposed transaction internal distribution i distributing1 formed controlled1 on date a by transferring a nominal amount of cash for minimum capitalization requirements distributing1 immediately prior to step ii below will transfer all but an immaterial portion of the assets associated with business b conducted outside of continent z to controlled1 in exchange for additional stock and the assumption by controlled1 of certain liabilities associated with the business transferred and a country y tax_liability ii immediately_after_the_transfer of assets as described in step i distributing1 will distribute all of the stock of controlled1 to distributing2 ipo and public distribution iii iv v distributing2 formed controlled2 on date b by transferring a nominal amount of cash for minimum capitalization requirements immediately after step ii distributing2 will transfer its continent z business b assets and the controlled1 stock to controlled2 in exchange for stock and the assumption by controlled2 of certain liabilities associated with the business transferred for country y tax reasons controlled2 will then transfer the continent z business b assets and the controlled1 stock to its wholly owned subsidiary c2sub in exchange for c2sub stock and the assumption by c2sub of certain liabilities associated with the business transferred controlled2 will then recapitalize its stock and within months of receiving a ruling from the irs will sell less than percent of its common_stock in an initial_public_offering ipo vi within months after the ipo distributing2 will distribute all of its controlled2 stock pro_rata for each share of distributing2 stock owned no fractional shares of controlled2 stock will be issued to the holders of distributing2 in lieu thereof each stockholder of distributing2 who would otherwise be entitled to receive a fractional share of controlled2 stock will receive cash as soon as practical after the distribution a dividend agent will aggregate and sell all fractional shares of controlled2 stock in the plr-127322-00 open market at then prevailing market prices and will distribute the aggregate proceeds net of fees pro_rata to stockholders entitled thereto the following representations have been made concerning the proposed transaction a b c d e f g internal distribution the indebtedness if any owed by controlled1 to distributing1 after the internal distribution will not constitute stock_or_securities no part of the consideration to be distributed by distributing1 will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing1 the years of financial information submitted on behalf of distributing1 is representative of the corporation’s present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted the years of financial information submitted with respect to business b conducted outside of continent z is representative of the present operation of such business and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted following the transaction distributing1 and controlled1 will each continue the active_conduct of its business independently and with its separate employees the distribution of the stock of controlled1 is being carried out for the following corporate business purposes i to alleviate certain fit and focus problems that currently obstruct the optimal development of both business a and b ii to allow controlled2 to issue equity on materially enhanced terms and iii to permit business b to issue equity interests in its operations to its key employees the distribution of the stock of controlled1 is motivated in whole or substantial part by one or more of these corporate business purposes except for the transfer by distributing2 of the controlled1 common_stock to controlled2 there is no plan or intention by distributing2 to sell exchange transfer by gift or otherwise dispose_of its stock in either distributing1 or controlled1 after the transaction plr-127322-00 h i j k l m n there is no plan or intention by either distributing1 or controlled1 directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 there is no plan or intention to liquidate either distributing1 or controlled1 to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business the distribution of controlled1 common_stock will not be a disqualified_distribution within the meaning of sec_355 because immediately after the internal distribution i no person will hold disqualified_stock in distributing1 that will constitute a percent or greater interest in distributing1 and ii no person will hold disqualified_stock in controlled1 that will constitute a percent or greater interest in controlled1 within the meaning of sec_355 d the total adjusted bases and the fair_market_value of the assets transferred to controlled1 by distributing1 each equals or exceeds the sum of the liabilities assumed by controlled1 plus any liabilities to which the transferred assets are subject plus the fair_market_value of any other_property and the amount of any money distributed to its shareholders pursuant to the plan_of_reorganization or its creditors in connection with the plan_of_reorganization the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred no intercorporate debt will exist between distributing1 and controlled1 at the time of or subsequent to the internal distribution of the controlled1 common_stock except for i accounts_payable incurred in the ordinary course of business and ii obligations resulting from agreements for shared services or facilities or pursuant to any indemnification payments payments made in connection with all continuing transactions if any between distributing1 and controlled1 will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length except for certain transactions to be undertaken under i transitional services agreements for which the consideration paid either will be based on cost or other terms or ii leasing agreements for which the consideration paid will be based on cost or other terms plr-127322-00 o p no two parties to the transaction are investment companies as defined in sec_368 and iv the internal distribution is not part of a plan or a series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock entitled to vote of either distributing1 or controlled1 or stock possessing percent or more of the total value of all classes of stock of either distributing1 or controlled1 public distribution q the indebtedness if any owed by controlled2 to distributing2 after the public distribution will not constitute stock_or_securities r s t u v w no part of the consideration to be distributed by distributing2 will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing2 the years of financial information submitted on behalf of distributing2 is representative of the corporation’s present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted the years of financial information submitted with respect to business b conducted within continent z is representative of the present operation of such business and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted immediately after the public distribution at least percent of the fair_market_value of the gross assets of controlled2 will consist of stock and securities of a controlled_corporation c2sub that is engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 following the transaction distributing2 and c2sub will each continue the active_conduct of business independently and with its separate employees the distribution of the stock of controlled2 is being carried out for the following corporate business purposes i to alleviate certain fit and focus problems that currently obstruct the optimal development of both business a and b ii to allow controlled2 to issue equity on materially enhanced plr-127322-00 x y z aa bb terms and iii to permit business b to issue equity interests in its operations to its key employees the distribution of the stock of controlled2 is motivated in whole or substantial part by one or more of these corporate business purposes there is no plan or intention by any shareholder who own sec_5 percent or more of the stock of distributing2 and the management of distributing2 to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder of distributing2 to sell exchange transfer by gift or otherwise dispose_of any stock in either distributing2 or controlled2 after the transaction there is no plan or intention by either distributing2 or controlled2 directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 there is no plan or intention to liquidate either distributing2 or controlled2 to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business the distribution of controlled2 common_stock will not be a disqualified_distribution within the meaning of sec_355 because immediately after the public distribution i no person will hold disqualified_stock in distributing2 that will constitute a percent or greater interest in distributing2 and ii no person will hold disqualified_stock in controlled2 that will constitute a percent or greater interest in controlled2 within the meaning of sec_355 the total adjusted bases and the fair_market_value of the assets transferred to controlled2 by distributing2 each equals or exceeds the sum of the liabilities assumed by controlled2 plus any liabilities to which the transferred assets are subject plus the fair_market_value of any other_property and the amount of any money distributed to its shareholders pursuant to the plan_of_reorganization or its creditors in connection with the plan_of_reorganization cc the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred dd no intercorporate debt will exist between distributing2 and controlled2 at plr-127322-00 the time of or subsequent to the public distribution of the controlled common_stock except for i accounts_payable incurred in the ordinary course of business or ii obligations resulting from agreements for shared services or facilities or pursuant to any indemnification payments immediately before the public distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_32_irb_6 and as currently in effect sec_1_1502-13 as published by t d further distributing2's excess_loss_account if any with respect to the controlled2 common_stock will be included in income immediately before the distribution see sec_1_1502-19 payments made in connection with all continuing transactions if any between distributing2 and controlled2 will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length except for certain transactions to be undertaken under i transitional services agreements for which the consideration paid either will be based on cost or other terms or ii leasing agreements for which the consideration paid will be based on cost or other terms no two parties to the transaction are investment companies as defined in sec_368 a f iii and iv the public distribution is not part of a plan or a series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock entitled to vote of either distributing2 or controlled2 or stock possessing percent or more of the total value of all classes of stock of either distributing2 or controlling2 the payment of cash in lieu of fractional shares of controlled2 common_stock if any will be undertaken solely for the purposed of saving the expense and inconvenience of issuing and transferring fractional shares and does not represent separately bargained for consideration ee ff gg hh ii other representations jj neither distributing1 nor controlled2 is a foreign_corporation plr-127322-00 kk ll each of distributing1 and controlled1 will be a corporation within the meaning of sec_7701 at all times before and immediately after the internal distribution before and after the internal distribution distributing1 and controlled1 will be controlled_foreign_corporations cfcs within the meaning of sec_957 but neither corporation is or will be a passive foreign investment corporation as defined by sec_1297 mm neither distributing2 nor controlled2 has been or will be a us real_property holding corporation usrphc within the meaning of sec_897 at any time during the five-year period ending on the date of the public distribution and none of distributing2 controlled2 or c2sub will be a usrphc immediately after the public distribution nn oo pp distributing1 will not transfer any cfcs or any us branch operations of foreign_corporations to controlled1 as part of its transfer of the assets of business b held outside of continent z to controlled1 distributing2 will not transfer any cfcs other than controlled1 or any us branch operations of foreign_corporations to controlled2 as part of its transfer of the continent z business b to controlled2 controlled2 will transfer no cfcs other than controlled1 to c2sub in its transfer of the continent z business b to c2sub qq with respect to each of distributing1 and controlled1 distributing2 will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 immediately before and after the internal distribution rr ss tt the notice requirements of sec_1_367_b_-1 will be met for distributing1's transfer of the assets of business b held outside of continent z to controlled1 and for distributing1's distribution of controlled1's common_stock to distributing2 distributing1's transfer of the assets of business b held outside of continent z to controlled1 in exchange for all of the outstanding_stock of controlled1 is not an exchange described in sec_1_367_b_-4 sec_1_367_b_-4 or sec_1_367_b_-4 none of distributing2 controlled2 nor c2sub will transfer property directly or indirectly to a foreign_corporation in an exchange described in sec_367 in the proposed transaction plr-127322-00 based on the information submitted and representations set forth above and provided that controlled1 and distributing1 are each a corporation within the meaning of sec_7701 a and the requirements of sec_1_367_b_-1 are met for the proposed transaction we rule as follows on the proposed transaction internal distribution the transfer by distributing1 to controlled1 of its assets relating to business b conducted outside of continent z in exchange for stock of controlled1 and controlled1's assumption_of_liabilities followed by the distribution by distributing1 of all of the stock of controlled1 to distributing2 will qualify as a reorganization within the meaning of sec_368 distributing1 and controlled1 will each be a party to the reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing1 on the transfer of business b conducted outside of continent z in exchange for controlled1 common_stock and controlled1's assumption of certain liabilities sec_361 and sec_357 no gain_or_loss will be recognized by controlled1 on the receipt of business b conducted outside of continent z in exchange for controlled1 common_stock sec_1032 the basis_of_property received by controlled1 will be the same as the basis of such property in the hands of distributing1 immediately prior to the transfer of business b conducted outside of continent z to controlled1 sec_362 the holding_period of the property received by controlled1 will include the period during which distributing1 held such property sec_1223 no gain_or_loss will be recognized by distributing1 upon the internal distribution of all of the stock of controlled1 to distributing1's sole shareholder distributing2 sec_361 no gain_or_loss will be recognized by and no amount shall be includible in the income of distributing1's sole shareholder distributing2 upon its receipt of the controlled1 common_stock in the internal distribution sec_355 the holding_period of the controlled1 common_stock received by distributing1's sole shareholder distributing2 in the internal distribution will include the holding_period of its distributing1 common_stock with respect to which the internal distribution will be made provided that such shares of distributing1 common_stock are held as a capital_asset on the date of the internal distribution sec_1223 plr-127322-00 public distribution the transfer by distributing2 to controlled2 of its assets relating to business b conducted within continent z and the controlled1 common_stock in exchange for stock of controlled2 and controlled2’s assumption_of_liabilities followed by the distribution by distributing2 of all the stock of controlled2 to distributing2’s shareholders will qualify as a reorganization within the meaning of sec_368 distributing2 and controlled2 will each be a party to the reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing2 on the transfer of business b conducted within continent z and the controlled1 common_stock in exchange for controlled2 common_stock and controlled2's assumption of certain liabilities sec_361 and sec_357 no gain_or_loss will be recognized by controlled2 on the receipt of business b conducted within continent z and the controlled1 common_stock in exchange for controlled2 common_stock sec_1032 the basis of the property received by controlled2 will be the same as the basis of such property in the hands of distributing2 immediately prior to the transfer of the assets of business b conducted within continent z and the controlled1 common_stock to controlled sec_362 the holding_period of the property received by controlled2 will include the period during which distributing2 held such property sec_1223 no gain_or_loss will be recognized by distributing2 upon the public distribution of all of the stock of controlled2 to distributing2's shareholders sec_361 c no gain_or_loss will be recognized by and no amount shall be includible in the income of distributing2's shareholders upon their receipt of the controlled2 common_stock in the public distribution sec_355 the holding_period of the controlled2 common_stock including fractional shares if any received by distributing2's shareholders in the public distribution will include the holding_period of the distributing2 common_stock with respect to which the public distribution will be made provided that such shares of the distributing2 common_stock are held as a capital_asset on the date of the public distribution sec_1223 the payment of cash if any in lieu of fractional shares of controlled2 common_stock will be treated for federal_income_tax purposes as if the fractional shares had been distributed as part of the public distribution and then had been plr-127322-00 sold by the holders accordingly a shareholder will recognize gain_or_loss equal to the difference between the cash received and the basis of the fractional share as determined under sec_1001 if the controlled2 common_stock is held by the shareholder as a capital_asset the gain_or_loss will be subject_to the provisions and limitations of subchapter_p of chapter of the code sec_1221 and sec_1222 proposed transaction-international rulings distributing1’s transfer of business b engaged in outside of continent z to controlled1 is an exchange to which sec_1_367_b_-1 and sec_1_367_b_-4 apply no gain_or_loss will be recognized under sec_367 on distributing1's transfer of business b conducted outside of continent z to controlled1 sec_1_367_b_-4 distributing1 and controlled1 will be treated as corporations for purposes of distributing1's distribution of controlled1's common_stock to distributing2 sec_1_367_b_-1 and sec_1_367_b_-5 and c distributing1's distribution of controlled1's common_stock to distributing2 in the internal distribution is a distribution to which sec_1_367_b_-1 sec_1 b - a sec_1_367_b_-5 and sec_1_367_b_-5 apply if distributing2's postdistribution amount with respect to distributing1 or controlled1 is less than distributing2's predistribution amount with respect to distributing1 or controlled1 then distributing2's basis in such stock immediately after the distribution must be reduced by the amount of the difference however distributing2's basis in such stock must not be reduced below zero and to the extent the foregoing reduction would have reduced basis below zero distributing2 must instead include such amount in income as a deemed_dividend from such corporation if distributing2 reduces the basis in the stock of distributing1 or controlled1 or has an income inclusion with respect to such stock distributing2 must increase its basis in the stock of the other corporation to the extent provided in sec_1 b -5 c the earnings_and_profits of controlled1 transferred from distributing2 to controlled2 to the extent attributable to such stock under sec_1_1248-2 or sec_1_1248-3 whichever is applicable which were accumulated in taxable years of controlled1 beginning after date during the period distributing2 held controlled1 or was considered as holding such stock by application of sec_1223 while controlled1 was a cfc will be attributable to controlled1 stock held by controlled2 sec_1_1248-1 the earnings_and_profits of controlled1 transferred from controlled2 to c2sub to the extent attributable to such stock under sec_1_1248-2 or sec_1_1248-3 whichever is applicable which were accumulated in taxable years of plr-127322-00 controlled1 beginning after date during the period controlled2 held such controlled1 stock or was considered as holding such stock by application of sec_1223 while controlled1 was a cfc will be attributable to controlled1 stock held by c2sub sec_1_1248-1 distributing2 will recognize no gain_or_loss under sec_367 on its distribution of controlled2 common_stock to its shareholders sec_1_367_e_-1 we express no opinion about the federal_income_tax treatment of this transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings in particular we express no opinion on the tax treatment of the proposed transaction under sec_355 of the code moreover no opinion is expressed on whether any or all of the above-described foreign_corporations are passive foreign investment companies within the meaning of sec_1297 if it is determined that any of the above-described foreign_corporations are passive foreign investment companies no opinion is expressed related to the application of sec_1291 through to the proposed transaction specifically in a transaction in which gain is not recognized regulations under sec_1291 may require gain recognition notwithstanding any other provision of the code the rulings in this letter are based on the facts and representations submitted under penalties of perjury in support of the request verification of that information may be required as part of the audit process this ruling has no effect on any earlier documents and is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in this transaction should attach a copy of this ruling letter to the taxpayer’s federal_income_tax return for the taxable_year in which the transaction is consummated in accordance with the power_of_attorney on file in this office a copy of this ruling letter is being sent to the taxpayer sincerely yours gerald b fleming senior technician reviewer branch office of associate chief_counsel corporate


t c memo united_states tax_court rosemary v cocozza petitioner v commissioner of internal revenue respondent docket no filed date rosemary v cocozza pro_se j scot simpson for respondent memorandum opinion beghe judge this case is before the court on cross- motions for summary_judgment under rule for the year respondent determined a deficiency of dollar_figure in petitioner’ sec_1 all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect for the year in issue federal_income_tax an addition_to_tax of dollar_figure under sec_6651 for failure_to_file an income_tax return and an addition_to_tax of dollar_figure under sec_6654 for failure to make payments of estimated_tax background the parties have stipulated that during petitioner received total wage income of dollar_figure from three employers telecable supply corp lynn electronics corp and dial america marketing inc and had income_tax_withholding of only dollar_figure and that petitioner did not file an income_tax return or make any estimated_tax payments for the year respondent’s statutory notice based its determination on reports by the payers of wages paid allowed a personal_exemption allowance and the standard_deduction and computed the tax based on single filing_status the statutory notice in its summary of income sources also refers to an aggregate loss of dollar_figure and realized loss of dollar_figure paid to petitioner by lind- waldock co but does not take any such loss into account in computing petitioner’s tax_liability petitioner was a resident of port richey florida at the time of filing her petition paragraph of the petition in which we would expect to find assignments of error states in its entirety as follows petitioner did not engage in any income excise taxable activities during the year in question and title cfr is inapplicable to deficiency assessments herein the petition neither contains a paragraph nor alleges any facts on which petitioner bases her position in this case notwithstanding the failure of the petition to set forth any assignment of error or supporting statements of fact respondent did not file a motion to dismiss petitioner’s petition for failure to state a claim on which relief can be granted respondent instead filed a pro forma answer setting forth the following denials denies that respondent’s determination_of_a_deficiency and additions to tax is erroneous denies denies generally each and every allegation of the petition not hereinbefore specifically admitted qualified or denied on date the court’s notice setting case for trial at the court’s date tampa florida trial session and standing_pretrial_order were served on petitioner respondent timely submitted a trial memorandum respondent’s trial memorandum asserts notwithstanding petitioner’s failure_to_file a tax_return for that she filed returns for through reporting wage income of the same order of magnitude for each of those years as the total wage income reported by petitioner’s payers for neither respondent’s trial memorandum nor any other document filed or served on petitioner by respondent in this case contains any reference to the insufficiency of petitioner’s petition under rule b which sets forth the required contents of a petition the lack of merit of her legal position the failure to allege any facts or the possibility of a penalty under sec_6673 petitioner and respondent appeared at the calendar call and filed a stipulation of facts at the calendar call petitioner lodged and served on respondent a memorandum of law in support of petition at the hearing respondent’s counsel indicated in response to the court’s questions that respondent would allow a loss with respect to lind-waldock co if petitioner would otherwise concede the case petitioner rejected respondent’s offer she replied i would truly like to stand on the memorandum of law that i submitted to the court and would not be willing to make that agreement your honor the court thereupon caused petitioner’s memorandum to be filed as petitioner’s motion for summary_judgment and respondent countered with an oral motion for summary_judgment the court informed the parties that respondent need not file any papers in support of respondent’s cross-motion and that it was taking the matter under advisement discussion although we have inherent power to dismiss a party’s case for failure to state a claim see rule b 752_f2d_1301 8th cir tax_protester arguments including denial that wages are income dismissal for failure to state a claim we believe it is preferable in the circumstances of this case briefly to address the issue raised by the parties’ cross-motions for summary_judgment petitioner’s memorandum of law which the court filed as her motion for summary_judgment looks like a canned brief it rehashes discredited arguments that the income_tax is an indirect_tax or excise_tax that cannot be laid upon property that not only an individual’s labor but also the income therefrom is his or her property that an excise_tax is a privilege_tax that it is unlawful to impose upon the individual’s inalienable right to exist which includes his labor and that the holdings of the supreme court in 240_us_103 and 240_us_1 as interpreted and applied in 972_f2d_723 6th cir support her position summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials 90_tc_678 summary_judgment may be granted with respect to all or any part of the legal issues in controversy if the pleadings answers to interrogatories depositions admissions and any other acceptable materials petitioner’s memorandum of law makes no mention of the argument in her petition regarding title c f_r and we deem it to have been abandoned together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule b 477_us_242 98_tc_518 affd 17_f3d_965 7th cir 90_tc_753 85_tc_527 because the issue is purely legal this case is ripe for summary_judgment timeworn discredited arguments that wages are not taxable_income suffice as an alternative to dismissal to justify summary_judgment for respondent 791_f2d_68 7th cir wages not income 82_tc_766 wages not income affd per curiam 793_f2d_139 6th cir cornell v commissioner tcmemo_1983_370 wages not income see also 737_f2d_1417 5th cir there is no need for us to spend any time on the arguments in petitioner’s memorandum of law petitioner should read the foregoing cases if she has not already done so we therefore grant respondent’s motion for summary_judgment sustaining all of respondent’s determinations and deny petitioner’s motion we now raise sua sponte whether we should impose a penalty under sec_6673 against petitioner on the ground that petitioner instituted or maintained the proceeding primarily for delay or that petitioner’s position in this proceeding is frivolous or groundless although petitioner’s position clearly has neither legal merit nor factual support we have no basis in this record for assessing petitioner’s motives in instituting and maintaining the proceeding there is no evidence in the court’s records that petitioner has previously been a litigant in this court nor is there any evidence in the record of this case that petitioner had received any prior warnings in this proceeding as would have occurred if respondent had filed a motion to dismiss the petition on the grounds that it failed to state a claim on the basis of which relief could be granted in the absence of a basis in this record for assessing petitioner’s motives see may v commissioner supra pincite8 we shall not impose a penalty under sec_6673 petitioner’s unwillingness to dispose_of this case by agreement creates the impression that petitioner may wish to file an appeal we conclude by informing petitioner as we have the court generally responds to such a motion by directing the taxpayer to file a proper amended petition as required by rule b setting forth with specificity each error made by respondent in the statutory notice and separate statements of fact on which the assignments of error are based this procedure gives the court an opportunity to tell the taxpayer that her arguments are tax_protester arguments that have no merit that for the taxpayer to persist in making them would waste everyone’s time and to warn the taxpayer that to remain on her original course will result in the imposition of sanctions under sec_6673 if the taxpayer fails to respond to the court’s order or to amend the petition we generally dismiss the case informed other taxpayers advancing arguments having no legal merit or factual support see eg 82_tc_403 talmage v commissioner tcmemo_1996_114 affd without published opinion 101_f3d_695 4th cir dicarlo v commissioner tcmemo_1992_280 that the courts of appeals have their own sanctioning powers to deal with frivolous appeals sec_7482 u s c sec fed r app p the court_of_appeals for the eleventh circuit to which an appeal in this case would lie has not hesitated in appropriate cases to use its power to order sanctions under these provisions see eg 816_f2d_603 11th cir 788_f2d_1509 11th cir 769_f2d_707 11th cir see also coleman v commissioner supra pincite 788_f2d_33 d c cir 770_f2d_17 2d cir to reflect the foregoing an appropriate order and decision will be entered for respondent


internal_revenue_service number release date index number ------------------------------------------------------------ --------------- --------------------- ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------------------------------- telephone number ---------------------- refer reply to cc tege eb qp2 plr-148103-13 date date company ------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------- taxpayer a taxpayer b esop x shares firm c firm d individual e amount x amount y amount z year year date ------------------------------ -------------------------- --------------------------------------------------------------------------------- -------------------- ------------------------- ------------------------------------------------ ------------------- ------------------ ------------------ ------------------ ---- ------- ------- --------------------------- plr date date date date date date date date date ---------------------------- ---------------------- ---------------------------- --------------------------- ----------------- -------------------- ------------------------ ----------------------- --------------------------- dear --------------------------------- this letter responds to your request submitted on your behalf by your authorized representative for a ruling that you have substantially complied with the requirements of sec_1042 of the internal_revenue_code code and the applicable regulations in connection with a sale of stock of the company to the employee_stock_ownership_plan esop maintained by the company the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayers a and b are husband and wife their filing_status for their u s individual_income_tax_return is married_filing_jointly the company was a domestic c_corporation at the time of the sale to the esop and never had any stock outstanding that was readily_tradable on an established_securities_market the company established an esop that is intended to be qualified under sec_401 of the code and to meet the requirements of sec_4975 on date taxpayer a sold x shares of company common_stock to the esop for amount x as a result of the sale taxpayer a realized a gain of amount y at the time of the sale taxpayer a had held the common_stock for more than years taxpayer a did not receive the stock in a distribution from a plan described in sec_401 of the code or in a transfer pursuant to an option or other right to acquire stock to which plr sec_83 sec_422 or sec_423 applied after the transaction the esop owned of the total value of the outstanding_stock of the company and taxpayer a owned taxpayer a represents that he intended to defer recognition of the gain on the sale to the esop under sec_1042 of the code taxpayers a and b relied on their accounting firm firm c to advise them on the requirements for making the sec_1042 election and to prepare their u s individual_income_tax_return for year the year of the sale to the esop taxpayer a informed firm c of his intention to make an election under sec_1042 but firm c failed to attach the sec_1042 election statement to taxpayer a and b’s return or to advise taxpayers a and b that the return was incomplete without the required statements taxpayers a and b filed the return on date after date but before the extended due_date for the return firm c realized its error thus pursuant to sec_301_9100-2 of the procedure and administration regulations on date taxpayers a and b filed an amended u s individual_income_tax_return for year the amended_return included the election under sec_1042 and a statement executed by the company pursuant to sec_1042 whereby the company agreed to be bound by the terms of sec_4978 and sec_4979a on various dates between date and date in year taxpayer a invested a portion of the proceeds from the sale to the esop in qualified_replacement_property as defined in sec_1042 of the code the total cost of the qualified_replacement_property was amount z one of the dates of purchase date occurred before the sec_1042 election was filed with the taxpayer’s amended_return on date the other purchases occurred after date firm c did not notify the taxpayers that they were required to attach a statement of purchase for the qualified_replacement_property bought at the time of the sec_1042 election to the election statement filed with their tax_return taxpayers a and b represent that they were dissatisfied with firm c’s service in particular with firm c’s failure to attach the sec_1042 election statement to their original return for year on date the taxpayers decided to retain firm d to prepare their income_tax return for year also on date taxpayer a informed firm d of the election he had filed under sec_1042 and of the qualified_replacement_property that he had purchased taxpayer a relied on firm d’s advice for completing the remaining requirements for the sec_1042 election on date based on the advice of firm d taxpayer a executed notarized statements of purchase for all of the qualified_replacement_property he had purchased also on date company’s chief financial officer emailed the notarized statements of purchase to individual e at firm d firm d prepared taxpayers a and b’s return for year but failed to attach the notarized statements of purchase or to advise taxpayers a and b that the return was incomplete without the statements of purchase as a result none of the statements of purchase were attached to the return that taxpayers a and b filed on or about date plr the extended due_date for the return taxpayers a and b were unaware of this failure until date when they and firm d were reviewing year-end tax planning strategies after discovering the error on date taxpayers a and b submitted this ruling_request along with an amended_return for year that included the notarized statements of purchase you have requested a ruling that based on the specific facts of this case taxpayers a and b will be treated as having substantially complied with the requirements for an election for the nonrecognition of gain under sec_1042 of the code and that the election will be treated as having satisfied the requirements of sec_1_1042-1t of the temporary income_tax regulations sec_1042 of the code provides that a taxpayer or executor may elect in certain cases not to recognize long-term_capital_gain on the sale of qualified_securities to an esop as defined in sec_4975 or eligible_worker-owned_cooperative if the taxpayer purchases qualified_replacement_property as defined in sec_1042 within the replacement_period of sec_1042 and the sale satisfies the requirements of sec_1042 a sale of qualified_securities meets the requirements of sec_1042 if the qualified_securities are sold to an esop or an eligible worker owned cooperative the plan or cooperative owns after application of sec_318 immediately after the sale at least percent of - a each class of outstanding_stock of the corporation other than stock described in sec_1504 which issued the securities or b the total value of all outstanding_stock of the corporation other than stock described in sec_1504 the taxpayer files with the secretary a verified written_statement of the employer whose employees are covered by the esop or an authorized officer of the cooperative consenting to the application of sec_4978 and sec_4979a with respect to such employer or cooperative and the taxpayer's holding_period with respect to the qualified_securities is at least years determined as of the time of the sale sec_1042 provides that the term qualified_securities means employer_securities as defined in sec_409 which are issued by a domestic c_corporation that has no stock outstanding that is readily_tradable on an established_securities_market and were not received by the taxpayer in a distribution from a plan described in sec_401 or in a transfer pursuant to an option or other right to acquire stock to which sec_83 sec_422 or sec_423 applied the taxpayer must purchase qualified_replacement_property within the replacement_period which is defined in sec_1042 as the period which begin sec_3 months before the date on which the sale of qualified_securities occurs and end sec_12 months after the date of such sale plr sec_1042 defines qualified_replacement_property as any security issued by a domestic operating_corporation which did not for the taxable_year preceding the taxable_year in which such security was purchased have passive_investment_income as defined in sec_1362 in excess of percent of the gross_receipts of such corporation for such preceding_taxable_year and is not the corporation which issued the qualified_securities which such security is replacing or a member of the same controlled_group_of_corporations within the meaning of sec_1563 as such corporation sec_1_1042-1t q a-3 of the temporary income_tax regulations states that the election shall be made in a statement of election attached to the taxpayer's income_tax return filed on or before the due_date including extensions of time for the taxable_year in which the sale occurs sec_1_1042-1t q a-3 states further that the statement of election shall provide that the taxpayer elects to treat the sale of securities as a sale of qualified_securities under sec_1042 and shall contain the following information a description of the qualified_securities sold including the type and number of shares the date of the sale of the qualified_securities the adjusted_basis of the qualified_securities the amount_realized upon the sale of the qualified_securities the identity of the esop or worker-owned cooperative to which the qualified_securities were sold if the sale was part of a single interrelated transaction under a prearranged agreement between taxpayers involving other sales of qualified_securities the names and taxpayer identification numbers of the other taxpayers under the agreement and the number of shares sold by the other taxpayers sec_1_1042-1t q a-3 further provides that if the taxpayer has purchased qualified_replacement_property at the time of the election the taxpayer must attach as part of the statement of election a statement of purchase describing the qualified_replacement_property the date of the purchase and the cost of the property and declaring such property to be qualified_replacement_property with respect to the sale of qualified_securities the statement of purchase must be notarized no later than days after the purchase if the taxpayer has not purchased qualified_replacement_property at the time of the filing of the statement of election a timely election under this q a shall not be considered to have been made unless the taxpayer attaches the notarized statement of plr purchase described above to the taxpayer's income_tax return filed for the taxable_year following the year for which the election under sec_1042 was made proposed sec_1_1042-1t q a-3 of the temporary income_tax regulations provides that the statement of purchase must be notarized not later than the time the taxpayer files the income_tax return for the taxable_year in which the sale of qualified_securities occurred in any case in which any qualified_replacement_property was purchased by such time and during the qualified replacement_period if qualified_replacement_property is purchased after such filing_date but during the qualified replacement_period the statement of purchase must be notarized not later than the time the taxpayer’s income_tax return is filed for the taxable_year following the year for which the election under sec_1042 was made the notice of proposed rulemaking issued on date provides that taxpayers may rely on the proposed_regulations for all open years sec_301_9100-1 sec_301_9100-2 and sec_301_9100-3 of the procedure and administration regulations provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 and sec_301_9100-2 also provide an automatic_extension of time to make certain statutory elections sec_301_9100-1 of the regulations defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 defines a statutory election as an election whose due_date is prescribed by statute sec_301_9100-2 provides that an automatic_extension of months from the due_date of a return excluding extensions is granted to make a statutory election whose due_date is the due_date of the return or the due_date of the return including extensions provided that the taxpayer timely filed its return for the year the election should have been made and the taxpayer takes corrective action as defined in paragraph c of this section within the 6_month period sec_301_9100-2 provides that corrective action means taking the steps required to file the election in accordance with the statute or the regulation published in the federal_register for those elections required to be filed with a return corrective action includes filing an original or an amended_return for the year the statutory election should have been made and attaching the appropriate form for or statement for making the election taxpayers who make an election under an automatic_extension and all taxpayers whose tax_liability would be affected by the election must file their return in a manner that is consistent with the election and comply with all other requirements for making the election for the year the election should have been made and for all affected years otherwise the irs may invalidate the election plr substantial compliance with regulatory requirements may suffice when such requirements are procedural and when the essential statutory purposes have been fulfilled young v commissioner 783_f3d_1201 5th cir quoting 81_tc_709 filing the statement of election is an essential requirement of sec_1042 see 122_tc_115 as the plain language of sec_1042 indicates the ‘essence’ of the statute is to demand evidence of a binding election to accept the tax consequences imposed by the section with respect to the filing of taxpayer a’s election statement because the deadline for making a sec_1042 election is set by sec_1042 of the code as the due_date including extensions of the taxpayer's return for the year of the sale sec_1042 is a statutory election accordingly sec_301_9100-2 of the procedure and administration regulations provides an automatic_extension of months from the due_date of the return for the year in which the sale to the esop was made in order to make a sec_1042 election provided that the taxpayers' return was timely filed for the year the election should have been made and the taxpayers take corrective action as defined in sec_301_9100-2 within the 6-month period in the present case taxpayers a and b's tax_return for the year of the sale to the esop was filed before the due_date set forth in sec_1042 and corrective action within the meaning of sec_301_9100-2 was taken by taxpayers a and b before months from such due_date taxpayers a and b thus timely filed the election statement with their year return with respect to the remaining requirements for making the sec_1042 election the taxpayers purchased qualified_replacement_property within the meaning of sec_1042 with a value of amount z before the end of the replacement_period under sec_1042 they represent that the sale to the esop met the requirements of sec_1042 taxpayers a and b relied on the advice of tax professionals firm c and firm d concerning the requirements necessary to complete the sec_1042 election in a timely and correct manner based on the advice of firm d taxpayer a executed notarized statements of purchase for the qualified_replacement_property and submitted the statements to firm d upon discovering firm d’s failure to attach the statements to the year return taxpayers a and b filed an amended_return for year with the statements of purchase attached and submitted this ruling_request therefore based on the specific facts of this case and representations made by taxpayers a and b and provided that the esop was qualified under sec_401 of the code and met the requirements of sec_4975 at the time of the sale we conclude that taxpayers a and b have substantially complied with the requirements for an election under sec_1042 and that the election will be treated as satisfying the requirements of sec_1042 and of sec_1_1042-1t of the temporary income_tax regulations plr 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 letter_ruling is directed only to the taxpayer who requested it sec_6110 provides that this ruling may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer’s representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely john t ricotta branch chief qualified_plans branch employee_benefits tax exempt government entities enclosure copy for purposes of sec_6110