internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc psi plr-117996-00 date date number release date index number legend partnership llc state company b c x d1 country n dear this letter responds to a letter dated date and additional correspondence written on behalf of company and x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an election under sec_301_7701-3 to be treated as a disregarded_entity effective d1 facts according to the information submitted on d1 partnership a state limited_partnership acquired through llc its disregarded state limited_liability_company b percent of the common_stock and c percent of the preferred_stock of company a private limited_company formed under the laws of country an election was made under sec_301_7701-3 to treat company as a partnership for federal tax purposes plr-117996-00 company owns n subsidiaries including x all of which are private limited companies formed under the laws of country x is an entity that is eligible to elect under sec_301_7701-3 to be disregarded as an entity separate from its owner however the form_8832 entity classification election was not timely filed so as to treat x as a disregarded_entity effective d1 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is classified as an association if all its members have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified as other than its default classification in sec_301_7701-3 by filing form_8832 with the appropriate service_center sec_301_7701-3 provides that the effective date of an entity classification election can not be more than days prior to the date the election is filed and can not be more than months after the date on which the election is filed under sec_301_7701-3 an election will not be accepted unless all of the information required by the form and instructions including the taxpayer identifying number of the entity is provided on form_8832 see sec_301_6109-1 for rules on applying for and displaying employer identification numbers sec_301_7701-3 provides generally that if an eligible_entity makes an election to change its classification the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election sec_301_7701-3 provides that a foreign eligible entity’s classification is relevant when its classification affects the liability of any person for federal tax or information purposes sec_301_7701-3 provides that if an eligible_entity classified as an association elects to be disregarded as an entity separate from its owner the following is deemed to occur the association distributes all of its assets and liabilities to its single owner in liquidation of the association sec_301_7701-3 provides that when elections for a series of tiered entities are effective on the same date the eligible entities may specify the order of the elections on form_8832 if no order is specified for the elections any transactions that are deemed to occur as a result of the classification change will be treated as occurring plr-117996-00 first for the highest tier entity’s classification change then for the next highest tier entity’s classification change and so forth down the chain of entities until all the transactions have occurred the provisions of sec_301_7701-3 apply to elections filed on or after date taxpayers may apply the provisions of sec_301_7701-3 retroactively to elections filed before date if all taxpayers affected by the deemed transactions file consistently with the provisions of sec_301_7701-3 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusions based solely on the facts submitted and the representations made we conclude that good cause has been shown and the other requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied consequently x is granted an extension of time for making the sec_301_7701-3 election effective d1 until days following the date of this letter the election should be made by following the procedure set forth in form_8832 a copy of this letter should be attached to the election a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed about the tax consequences of making an election for x to be treated as an entity that is disregarded plr-117996-00 as separate from its owner further no opinion is expressed regarding the election made to treat company as a partnership for federal tax purposes this ruling is directed only to the taxpayer on whose behalf it was requested sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office this letter is being sent to you as the taxpayer’s authorized representative a copy of this letter will also be sent to the taxpayer sincerely yours paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service p o box cincinnati oh release number release date date legend x place dear department of the treasury employer_identification_number contact person - id number contact telephone number uil you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students - also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations in code sec_117 our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures will not be taxable description of your request you are operating a scholarship program to achieve your purpose of enhancing access to higher education your program's purpose is to provide scholarships to deserving graduating high school students of the public high school in x you are required to annually distribute the greater of the net_income of the trust or the amount that must be distributed to satisfy code sec_4942 so the number of scholarships and the amounts will vary depending on the amount of funds available to be distributed scholarships are awarded on an objective and non-discriminatory basis and no schoiaiship may be awarded to any disqualified_person as defined in code sec_4946 letter catalog number 58263t in addition all eligible_candidates will be seniors at x high school who have demonstrated good citizenship and moral principles you will not consider any students who have citizenship issues school code issues or honor code violations financial aid will not be a pre- requisite for being a recipient of an award the scholarships are renewable as long as the students are in good standing and continuing their college university or post-graduate studies there is no application process the principal of x high school recommends deserving outstanding students to members of the awarding committee which consists of the superintendent of the city of x the principal of x high school and a member nominated by your trustee who is currently the school counselor from x high school each year the trustee advises the awarding committee of the amount of funds available to be awarded as scholarships the committee ranks all students on grade-point-average gpa good citizenship and moral character the committee also considers those who are most likely to succeed in college the awarding committee must provide the meeting minutes to you in which they outline the guidelines criteria used to select scholarship recipients these would only have to be provided once the awarding committee must also annually provide you the signed minutes of the committee meeting and a list of all names addresses and last four digits of each recipient's social_security_number and the amount of each award they must also sign and return to you a copy of your conflict of interest policy once you approve the list you will send a congratulatory letter to the recipients and ask them to provide the name of the school they are attending each recipient may select any fully accredited college or university or technical or vocational school beyond the high school level the scholarships are also announced at the senior award night the trustee pays the scholarship proceeds directly to the school the recipient attends for the benefit of the recipient and provides a letter to each school specifying that their acceptance to the funds constitutes their agreement to i refund an unused portion of the scholarship if the scholarship recipient fails to meet any term or condition of the scholarship ii notify the trustee if the scholarship recipient fails to meet any term or condition of the scholarship if the school will not agree to such terms the trustee will obtain the needed reports and grade transcripts from the scholarship recipient you will arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded and investigate diversions of funds from their intended purpose as well as take all reasonable and appropriate steps to recover diverted funds ensure other grants funds held by the grantee are used for their intended purposes and withhold further payments to grantee until you obtain grantees assurances that future diversions will not occur and the grantees will take extraordinary precautions to prevent future diversions from occurring letter catalog number 58263t you will maintain all records relating to individual grants including information obtained to evaluate grantees identify whether grantee is a disqualified_person establish the amount and purpose of each grant and establish that you under took the supervision and investigation of grants basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination e e e e e e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you may report any significant changes to your program by completing form_8940 and sending it to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary letter catalog number 58263t please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely director exempt_organizations letter catalog number 58263t


department of the treasury washington dc person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b09 plr-137133-03 date february internal_revenue_service number release date index number ------------------------------------- --------------------------------------------- ------------------------------- - legend grantor_trust trust ---------------------- -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- ----------------------- -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- ----------------------- ---------------------- -------------------------- --------------------------- ------------------- ------------------------- ------------------------- ----------------------- date spouse child date child child child grandchild -------------------------- grandchild ---------------------- grandchild ---------------------- grandchild ---------------- state trust a ------------------ -------------------------------------------------------------------------------------------- ----------------------- ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ----------------- ------------------------------------------------------ ----------------------- -------------------------------------------------------------------------------------------- trust b_trust c trust d date court date trust e plr-137133-03 -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- --------------------------------------- -------------------------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------------------------- ------- ------ -------- -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- --------------------------------------- -------------------------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------------------------- ------- trust f trust g y z trust h trust j trust k grantor created trust and trust on date trust was created for the this letter responds to your letter dated date requesting rulings under dear sir sec_61 sec_661 sec_1001 sec_1015 sec_1223 sec_2036 sec_2037 sec_2038 sec_2501 and sec_2601 of the internal_revenue_code benefit of spouse and the issue of grantor and spouse trust was created for the benefit of child and the issue of child spouse died on date grantor and spouse had four children child child child and child child has four children grandchild grandchild grandchild and grandchild trust article two a of the trust agreement provides that the trustees may in their discretion accumulate the income of trust and add it to principal or at any time or from time to time distribute any part or all of the income and principal of trust to or among grantor’s lineal_descendants and their spouses and spouse be outright or in further trust for any one or more of the classes among which the trustees may distribute however any distribution to a new trust shall be made so that no part of the income or principal of such new trust will at any time be distributed to any person to whom a distribution could not have been made under trust article two b provides that the distributions authorized under article two a may article two c provides that if not otherwise terminated sooner trust shall article two d provides that if not otherwise terminated sooner trust shall plr-137133-03 terminate twenty years and eleven months after the death of the last survivor of spouse and all of grantor’s lineal_descendants living at the time of creation of trust upon termination the trustees shall distribute all property remaining in trust including all principal and undistributed_income per stirpes to grantor’s lineal_descendants to whom the trustees were authorized to make distributions from such trust immediately before such termination terminate upon the death of the last survivor of spouse and grantor’s lineal_descendants whenever born upon such termination the trustees may distribute the remaining trust property to any one or more of any surviving_spouse of grantor’s lineal_descendants the trustees shall also distribute the rest of the property if any to and among the persons who would have been entitled to grantor’s personal_property and in such proportions as they would have been entitled to immediately following the death of the last survivor of spouse and grantor’s lineal_descendants if grantor died intestate domiciled in state no distribution under this paragraph may be made after the time for termination of trust under article two c article four a provides in relevant part that the trustees have the power and discretion to act as they deem proper in any recapitalization merger reorganization consolidation partition or other transaction affecting any of the property held by them split trust into four trusts trust a_trust b_trust c and trust d one each for the benefit of each of the grantor’s children that child’s issue that child’s spouse and the spouse of any of the child’s issue the service issued a favorable private_letter_ruling regarding the federal income gift estate and generation-skipping_transfer_tax consequences of this transaction on date trust a is the trust created for the benefit of child and his family line the dispositive terms of trust a are identical to the terms of trust except that the discretionary distributions of income and principal in trust a are limited to the members of child 1’s family line trust article two a of the trust agreement provides that the trustees may in their discretion accumulate the income of trust and add it to principal or at any time or from time to time distribute any part or all of the income and principal of trust to or among child child 1’s spouse child 1’s lineal_descendants and the spouses of any of child 1’s lineal_descendants be outright or in further trust for any one or more of the classes among which the trustees may distribute however any distribution to a new trust shall be made so that in order to better serve beneficiaries with differing needs the trustees of trust article two b provides that the distributions authorized under article two a may article two c provides that if not otherwise terminated sooner trust shall article two d provides that if not otherwise terminated sooner trust shall plr-137133-03 no part of the income or principal of such new trust will at any time be distributed to any person to whom a distribution could not have been made under trust terminate twenty years and eleven months after the death of the last survivor of all of grantor’s lineal_descendants living at the time of creation of trust upon termination the trustees shall distribute all property remaining in trust including all principal and undistributed_income per stirpes to grantor’s lineal_descendants to whom the trustees were authorized to make distributions from such trust immediately before such termination terminate upon the death of the last survivor of grantor’s lineal_descendants whenever born upon such termination the trustees may distribute the remaining trust property to any one or more of any surviving_spouse of grantor’s lineal_descendants the trustees shall also distribute the rest of the property if any to and among the persons who would have been entitled to grantor’s personal_property and in such proportions as they would have been entitled to immediately following the death of the last survivor of grantor’s lineal_descendants if grantor died intestate domiciled in state no distribution under this paragraph may be made after the time for termination of trust under article two c article four a provides in relevant part that the trustees have the power and discretion to act as they deem proper in any recapitalization merger reorganization consolidation partition or other transaction affecting any of the property held by them proposed transaction provisions of the trust agreements are identical the beneficiaries have differing personal and financial situations and as a result they have differing financial needs concerning distributions of principal and income the trustees recommended splitting the trusts pursuant to the authority granted them in the trust agreement the beneficiaries however disagreed as to the appropriate methodology for splitting the trusts and ultimately challenged the trustee’s decision in court court entered an order on date providing that effective upon receipt of a favorable ruling by the internal_revenue_service trust a and trust would each be divided into three trusts the resulting trusts with the same beneficiaries would then be merged together trust f and trust g collectively referred to as the trust a resulting trusts trust e will be for the benefit of child child 1’s spouse child 1’s lineal_descendants other than grandchild and grandchild and the spouses of child 1’s lineal_descendants other than grandchild and grandchild collectively referred to as child 1’s limited the current beneficiaries of trust a and trust are identical and the operative according to the date court order trust a shall be divided into trust e trust a will be divided so that y of the assets of trust a determined at the time plr-137133-03 family line trust f will be for the benefit of grandchild grandchild 1’s spouse the lineal_descendants of grandchild and the spouses of the lineal_descendants of grandchild collectively referred to as grandchild 1’s family line trust g will be for the benefit of grandchild grandchild 2’s spouse the lineal_descendants of grandchild and the spouses of the lineal_descendants of grandchild collectively referred to as grandchild 2’s family line of division will be allocated to trust e z will be allocated to trust f and z will be allocated to trust g the funding of the trust a resulting trusts will generally be on a fractional basis however each asset need not be distributed strictly pro_rata provided that the assets selected for each trust a resulting trust from each asset class must be fairly representative of the appreciation depreciation and tax basis of the assets available for distribution from such class any loans which have been made by trust a to any beneficiary shall be among the assets distributed to the trust a resulting trust of which the borrower is a beneficiary following the proposed division the dispositive terms of each of the trust a resulting trusts will be identical to the dispositive terms of trust a except that the discretionary distributions of income and principal of each trust a resulting trust would be limited to the members of child 1’s limited family line grandchild 1’s family line or grandchild 2’s family line upon the death of the last survivor of grandchild grandchild 2’s family line will be first-tier contingent_remainder beneficiaries of the trust for the benefit of grandchild 1’s family line unless that trust is terminated sooner upon the death of the last survivor of grandchild grandchild 1’s family line will be first-tier contingent_remainder beneficiaries of the trust for the benefit of grandchild 2’s family line unless that trust is terminated sooner upon the death of the last survivor of grandchild and grandchild the trust for the benefit of child 1’s limited family line will be first-tier contingent_remainder beneficiaries of the trusts for the benefit of grandchild and grandchild 2’s family lines unless those trusts are terminated sooner upon the death of the last survivor of child other than grandchild and grandchild the trusts for the benefit of grandchild 1’s family line and grandchild 2’s family line will be first-tier contingent_remainder beneficiaries of the trust for the benefit of child 1’s limited family line unless that trust is terminated sooner all of the resulting trusts will terminate no later than twenty years and eleven months after the death of the last survivor of spouse and all of grantor’s lineal_descendants living on date collectively referred to as the trust resulting trusts trust h will be for the benefit of child 1’s limited family line trust j will be for the benefit of grandchild 1’s family line trust k will be for the benefit of grandchild 2’s family line of division will be allocated to trust h z will be allocated to trust j and z will be trust will be divided so that y of the assets of trust determined at the time furthermore trust shall be divided into trust h trust j and trust k plr-137133-03 allocated to trust k the funding of the trust resulting trusts will generally be on a fractional basis however each asset need not be distributed strictly pro_rata provided that the assets selected for each trust resulting trust from each asset class must be fairly representative of the appreciation depreciation and tax basis of the assets available for distribution from such class any loans which have been made by trust to any beneficiary shall be among the assets distributed to the trust resulting trust of which the borrower is a beneficiary following the proposed division the dispositive terms of each of the trust resulting trusts will be identical to the dispositive terms of trust except that the discretionary distributions of income and principal of each trust resulting trust would be limited to the members of child 1’s limited family line grandchild 1’s family line or grandchild 2’s family line upon the death of the last survivor of grandchild grandchild 2’s family line will be first-tier contingent_remainder beneficiaries of the trust for the benefit of grandchild 1’s family line unless that trust is terminated sooner upon the death of the last survivor of grandchild grandchild 1’s family line will be first-tier contingent_remainder beneficiaries of the trust for the benefit of grandchild 2’s family line unless that trust is terminated sooner upon the death of the last survivor of grandchild and grandchild the trust for the benefit of child 1’s limited family line will be first-tier contingent_remainder beneficiaries of the trusts for the benefit of grandchild and grandchild 2’s family lines unless those trusts are terminated sooner upon the death of the last survivor of child other than grandchild and grandchild the trusts for the benefit of grandchild 1’s family line and grandchild 2’s family line will be first-tier contingent_remainder beneficiaries of the trust for the benefit of child 1’s limited family line unless that trust is terminated sooner all of the resulting trusts will terminate no later than twenty years and eleven months after the death of the last survivor of spouse and all of grantor’s lineal_descendants living on date together trust f and trust j will be merged together and trust g and trust k will be merged together rulings requested division and merger of these trusts the proposed division of trust a and trust and the proposed allocation of each existing asset among the resulting trusts will not cause trust a_trust or the resulting trusts to lose their status as grandfathered trusts that are exempt from the generation-skipping_transfer_tax and will not cause a distribution from or termination of any interests in trust a_trust or any of the resulting trusts to be subject_to the generation-skipping_transfer_tax the merger of the resulting trusts into trusts with identical terms will not cause the resulting trusts to lose their status as grandfathered trusts that are exempt from the generation-skipping_transfer_tax and will not cause a distribution from or termination of any interests in any after the divisions of trust a and trust trust e and trust h will be merged the trustees have requested the following rulings relating to the proposed sec_2601 imposes a tax on every generation-skipping_transfer plr-137133-03 of the resulting trusts to be subject_to the generation-skipping_transfer_tax the resulting trusts will be treated as separate taxpayers under sec_643 the proposed division and merger will not result in the realization by trust a_trust or the resulting trusts or a beneficiary of trust a_trust or the resulting trusts of any income gain_or_loss under sec_661 the proposed division and merger will not result in the realization of any income gain_or_loss under sec_61 or sec_1001 by trust a_trust the resulting trusts or a beneficiary of trust a_trust or the resulting trusts the proposed division and merger will result in resulting trusts with assets that have the same basis as they had at the time of the allocation under sec_1015 the holding periods for all the assets allocated to each resulting trust will include trust a or trust 2’s holding_period respectively under sec_1223 the proposed division and merger will not cause any portion of the assets of trust a_trust or any of the resulting trusts to be includible in the gross_estate of any beneficiary of trust a_trust or the resulting trusts under sec_2036 through and the proposed division and merger will not constitute a transfer by any beneficiary of trust a_trust or the resulting trusts that will be subject_to the gift_tax under sec_2501 ruling sec_1 and taxable_distribution taxable_termination and a direct_skip under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added regulations provides that except as provided in sec_26_2601-1 or c any trust in existence on date is considered an irrevocable_trust except as provided in sec_26_2601-1 or c which relate to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 in the present case trust a and trust are considered to have been irrevocable on date because neither sec_2038 nor sec_2042 applies judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status the rules contained in sec_26_2601-1 are applicable only for purposes of sec_26_2601-1 provides rules for determining when a modification sec_2611 defines the term generation-skipping_transfer to include a sec_26_2601-1 of the generation-skipping_transfer_tax sec_26_2601-1 example provides that in grantor sec_26_2601-1 provides that a modification of the governing plr-137133-03 determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided in the original trust furthermore a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered a shift in a beneficial_interest in a_trust established an irrevocable_trust trust for the benefit of grantor’s child a a’s spouse and a’s issue at the time trust was established a had two children b and c a corporate fiduciary was designated as trustee under the terms of trust the trustee has the discretion to distribute all or part of the trust income to one or more of the group consisting of a a’s spouse or a’s issue the trustee is also authorized to distribute all or part of the trust principal to one or more trusts for the benefit of a a’s spouse or a’s issue under terms specified by the trustee in the trustee’s discretion any trust established under trust however must terminate twenty-one years after the death of the last child of a to die who was alive at the time trust was executed trust will terminate on the death of a at which time the remaining principal will be distributed to a’s issue per stirpes in the trustee distributes part of trust’s principal to a new trust for the benefit of b and c and their issue the new trust will terminate years after the death of the survivor of b and c at which time the trust principal will be distributed to the issue of b and c per stirpes the terms of the governing instrument of trust authorize the trustee to make the distribution to a new trust without the consent or approval of any beneficiary or court in addition the terms of the governing instrument of the new trust do not extend the time for vesting of any beneficial_interest in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of trust extending beyond any life in being at the date of creation of trust plus a period of twenty-one years plus if necessary a reasonable period of gestation therefore neither trust nor the new trust will be subject_to the provisions of chapter sec_26_2601-1 example provides that in grantor the division of trust a and trust proposed by the trustees is within the in this case trust a and trust are generation-skipping_transfer trusts because plr-137133-03 established an irrevocable_trust for grantor’s child and the child’s issue in grantor’s spouse also established a separate irrevocable_trust for the benefit of the same child and issue the terms of the spouse’s trust and grantor’s trust are identical in the appropriate local court approved the merger of the two trusts into one trust to save administrative costs and enhance the management of the investments the merger of the two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the merger in addition the merger does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the trust that resulted from the merger will not be subject_to the provisions of chapter they provide for distributions to more than one generation of beneficiaries below the grantor’s generation date is prior to date and trust a and trust were irrevocable on date trust a and trust therefore are exempt from the generation-skipping_transfer_tax pursuant to sec_26_2601-1 authority granted to them in the original trust agreements the beneficiaries challenged the trustees’ methodology for computing the fractional shares of child 1’s limited family line grandchild 1’s family line and grandchild 2’s family line court ultimately issued an order authorizing the division and merger of the trusts because the terms of the resulting trusts will be the same as the terms of the original trusts the proposed division and merger of the trusts does not shift a beneficial_interest to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification in addition the proposed transactions do not extend the time for vesting of any beneficial_interest in either trust beyond the period provided in the original trust based on the facts submitted and the representations made we conclude that the proposed division of trust a and trust and the subsequent mergers of the various resulting trusts will not affect trust a or trust 2’s status as exempt from the generation-skipping_transfer_tax as a result the proposed divisions and mergers will not cause distributions from or terminations of any interests in trust a_trust or any of the resulting trusts to be subject_to the generation- skipping transfer_tax ruling prescribed by the secretary two or more trusts shall be treated as one trust if such trusts have substantially the same grantor or grantors and substantially the same primary beneficiary or beneficiaries and a principal purpose of the trusts is the avoidance of the tax_imposed_by_chapter_1 sec_643 provides that for purposes of subchapter_j under regulations sec_661 provides that in any taxable_year a deduction is allowed in while the trust a resulting trusts have the same grantor they have different sec_1_661_a_-2 of the income_tax regulations provides that if property is plr-137133-03 beneficiaries therefore we conclude that each of the trust a resulting trusts will be treated as separate trusts for federal_income_tax purposes under sec_643 similarly the trust resulting trusts have the same grantor but different beneficiaries therefore we conclude that each of the trust resulting trusts will be treated as separate trusts for federal_income_tax purposes under sec_643 ruling computing the taxable_income of a_trust other than a_trust to which subpart b applies for the sum of the amount of income for such taxable_year required to be distributed currently and any other_amounts_properly_paid_or_credited_or_required_to_be_distributed for such taxable_year paid credited or required to be distributed in_kind no gain_or_loss is realized by the trust or estate or the other beneficiaries by reason of the distribution unless the distribution is in satisfaction of a right to receive a distribution in a specific dollar amount or in specific property other than that distributed beneficiary to whom an amount specified in sec_661 is paid credited or required to be distributed by an estate_or_trust described in sec_661 the sum of the following amounts the amount of income_for_the_taxable_year_required_to_be_distributed_currently to such beneficiary whether distributed or not and all other_amounts properly paid credited or required to be distributed to such beneficiary for the taxable_year that the division of trust a into the trust a resulting trusts is not a distribution under sec_661 or sec_1_661_a_-2 similarly the division of trust into the trust resulting trusts is not a distribution under sec_661 or sec_1_661_a_-2 ruling sec_5 and in property property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in such section for determining loss over the amount_realized sec_61 provides that gross_income includes gains derived from dealings based solely on the facts submitted and the representations made we conclude sec_662 provides that there shall be included in the gross_income of a sec_1001 provides that the gain from the sale_or_other_disposition of sec_1_1015-2 provides that in the case of property acquired after sec_1015 provides that if property is acquired after date by plr-137133-03 sec_1_1001-1 provides that except as otherwise provided in subtitle a the gain_or_loss realized from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or as loss sustained a transfer in trust other than by a transfer in trust by a gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized by the grantor on such transfer date by transfer in trust other than by a transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer was made if the taxpayer acquired the property by a transfer in trust this basis applies whether the property be in the hands of the trustee or the beneficiary and whether acquired prior to termination of the trust and distribution of the property or thereafter held property however acquired there shall be included the period for which such property was held by any other person if under chapter of subtitle a the property has for the purpose of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in his hands as it would have in the hands of such other person see also sec_1_1223-1 where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result thereof thus neither gain nor loss is realized on a partition see revrul_56_437 1956_2_cb_507 c b a non-pro rata distribution of trust property was made in_kind by the trustee although the trust instrument and local law did not convey authority to the trustee to make a non-pro rata distribution_of_property in_kind the distribution was effected as a result of a mutual agreement between the trustee and the beneficiaries because neither the trust instrument nor local law conveyed authority to the trustee to make a non-pro rata distribution revrul_69_486 held that the transaction was equivalent to a pro_rata distribution followed by an exchange between the beneficiaries and was subject_to the provisions of sec_1001 and sec_1002 the present case is distinguishable from revrul_69_486 because it has been represented that the assets of the trusts will be allocated accordingly to their respective sec_1223 provides that in determining the period for which a taxpayer has in revrul_69_486 1969_2_cb_159 distinguished by revrul_83_61 a partition of jointly owned property is not a sale_or_other_disposition of property the supreme court in cottage savings u s pincite concluded that 499_us_554 concerns the plr-137133-03 interests evenly among the three resulting trusts the assets of the original trusts will be divided fractionally and distributed to the resulting trusts in accordance with the respective fractional interest of each of the resulting trusts each asset may not be distributed strictly pro_rata but the assets selected for each trust will be fairly representative of the appreciation depreciation and tax bases of the assets available for distribution accordingly the proposed transaction will not be treated as a pro_rata distribution followed by an exchange of assets among the beneficiaries of the original trusts issue of when a sale_or_exchange has taken place that results in realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender’s interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution sec_1_1001-1 of the regulations reasonably interprets sec_1001 and stated than an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material so long as their respective possessors enjoy legal entitlements that are different in_kind or extent cottage savings u s pincite in cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans the interests of the beneficiaries of the three resultant trusts will not differ materially from their interests in the original trusts the proposed transaction will not change the interests of the beneficiaries instead the beneficiaries will be entitled to the same benefits after the proposed transaction as before the proposed transaction is similar to the kinds of transactions discussed in revrul_56_437 since the original trusts are to be divided but all other provisions of the trusts will remain substantially identical thus the proposed transaction will not result in a material difference in the kind or extent of the legal entitlements enjoyed by the beneficiaries the division of trust a and trust with the division of the assets of the trusts among the three separate trusts and the subsequent merger of each of the three resultant trusts into its corresponding trust will not constitute a sale or other taxable disposition of the assets of the trusts under sec_1001 because sec_1001 does not apply to the division of based upon the facts submitted and the representations made we conclude that it is consistent with the supreme court’s opinion in cottage savings to find that sec_2037 provides that the value of the gross_estate shall include the sec_2036 provides that the value of the gross_estate shall include the plr-137133-03 the trust assets under sec_1015 the basis of the trust assets will be the same after the partition as the basis of those assets before the partition furthermore pursuant to sec_1223 the holding periods of the assets in the hands of the new trusts will include the holding periods of the assets in the original trusts ruling value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in the case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise if possession or enjoyment of the property can through ownership of such interest be obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property and the value of such reversionary_interest immediately before the death of the decedent exceeds five percent of the value of such property sec_2038 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money or money’s worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power either by the decedent alone or in conjunction with any person to alter amend revoke or terminate or where the decedent relinquished any such power during the year period ending on the date of the decedent’s death in order for to apply the decedent must have made a transfer of property or any interest therein except in the case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth under which the decedent retained an interest in or power over the income or corpus of the transferred property in the present case the proposed division and merger of trusts does not constitute a transfer within the meaning of the beneficiaries of the resulting trusts will have the same interest after the division and merger as they had as beneficiaries before we therefore conclude that the proposed division and merger will not cause the interest of sec_2512 provides that where property is transferred for less than an sec_2512 provides that if the gift is made in property the value thereof at sec_2501 imposes a tax for each calendar_year on the transfer of property plr-137133-03 any beneficiary of the original trust or the resulting trusts to be includible in the beneficiary’s gross_estate under ruling by gift during the calendar_year by any individual resident or nonresident sec_2511 provides that the tax imposed by sec_2501 applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible the date of the gift is considered the amount_of_the_gift adequate_and_full_consideration in money or money’s worth then the amount by which the value of the property exceeded the value of the consideration is deemed to be a gift and is included in computing the amount of gifts made during the calendar_year in this case the beneficiaries of the resulting trusts will have the same interests after the proposed division and merger that they had as beneficiaries under the original trust so there is no direct transfer of assets because the beneficial interests rights and expectancies of the beneficiaries are substantially_similar both before and after the proposed transaction no transfer of property will be deemed to occur as a result of the division accordingly we conclude that the division of the original trusts and the allocation of assets among the resulting trusts as proposed is not a transfer direct or indirect of property that will be subject_to the gift_tax imposed by sec_2501 concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 except as expressly provided herein no opinion is expressed or implied the rulings contained in this letter are based upon information and plr-137133-03 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer s requesting it sec_6110 sincerely james f hogan acting branch chief office of associate chief_counsel passthroughs special industries copy of letter for sec_6110 purposes enclosure cc


office_of_chief_counsel department of the treasury internal_revenue_service washington d c date uil i am responding to a letter dated date to commissioner douglas h number info release date conex-104741-09 -------------------------------------------- -------------------------------------------- -------------------------------- attn------------------------ dear ------------ shulman about the treatment of the costs associated with breast pumps and related equipment the letter recommends that the service allow the costs of breast pumps and related equipment to be reimbursable under a tax favored health care flexible_spending_account fsa revenue code defines medical_care to include the diagnosis cure mitigation treatment or prevention of disease medical_care includes medicine and drugs but does not include goods or services that are merely beneficial to general health and do not mitigate or treat a disease under current law therefore the cost of purchasing or renting a breast pump and related equipment although it may have the benefits mentioned in your letter would not come within the definition of a medical_care expense for fsa purposes breastfeeding equipment as medical_care in contravention of current law a change to the internal_revenue_code must be made by congress in general funds from an fsa are to be used for medical_care the internal it is not within the power of the internal_revenue_service to classify conex-104741-09 i hope this information is helpful if you have additional questions please contact me or -----------------at ----- ------------- christopher f kane branch chief branch income_tax accounting sincerely


internal_revenue_service number release date cc dom it a tl-n-4420-99 uilc date internal_revenue_service national_office service_center advice memorandum for assistant district_counsel from acting assistant chief_counsel income_tax accounting cc dom it a subject eitc and incarcerated dependent this is in reply to your request for significant service_center advice dated date regarding whether a child’s detention in a juvenile facility constitutes a temporary absence from the household due to special circumstances under sec_1 c of the income_tax regulations which concerns the definition of head_of_household the conclusion affects whether the child meets the definition of a qualifying_child for purposes of the earned_income_credit eic sec_1_2-2 may be applied to determine what is a temporary absence from the principal_place_of_abode for purposes of sec_32 issue whether a child’s detention in a juvenile facility pending trial may be a temporary absence from the household due to special circumstances within the meaning of sec_1_2-2 of the regulations conclusion detention in a juvenile facility pending trial is a temporary absence from the household due to special circumstances if there is no intent on the part of the taxpayer and child to change the child’s principal_place_of_abode notwithstanding the child’s temporary detention in the facility the child’s parent may qualify as head_of_household if the other requirements of sec_2 and the regulations thereunder are satisfied in addition the child may meet the residency test of sec_32 facts the taxpayer’s child is being held in a juvenile facility pending trial prior to being detained the juvenile lived with the taxpayer depending on the outcome of the trial the child may be held after the trial in a juvenile facility for an extended period of time law sec_32 of the internal_revenue_code allows an eic in the case of an eligible_individual sec_32 of the code defines an eligible_individual to include any individual who has a qualifying_child for the taxable_year sec_32 sets forth the three requirements for a qualifying_child sec_32 provides that the qualifying_child must have the same principal_place_of_abode as the eligible_individual for more than one-half of the taxable_year if the qualifying_child is the eligible_foster_child of eligible_individual the qualifying_child must have the same principal_place_of_abode as the eligible_individual for the entire taxable_year sec_32 this is known as the residency test the concept of qualifying_child was added to sec_32 by the omnibus budget reconciliation act of p l 104_stat_1388 in adding qualifying_child to sec_32 congress added a relationship_test a residency test and an age_test sec_32 your issue involves the residency test in explaining the residency test the legislative_history provides an individual satisfies the residency test if the individual has the same principal_place_of_abode as the taxpayer for more than half the taxable_year the entire year for foster children the determination of whether the residence requirement is met is made under rules similar to those applicable with respect to whether an individual meets similar requirements with respect to head-of-household filing_status thus for example rules apply with respect to temporary absences due to education or illness that would disregard certain of such absences for purposes of determining whether the child had the same principal_place_of_abode for over half the year h_r conf_rep no 101st cong 2d sess moreover in interpreting an analogous residency requirement under prior_law sec_1_32-2 of the income_tax regulations specifically provides that the term we assume for purposes of this memorandum that the child is not being tried as an adult principal_place_of_abode is defined with reference to sec_1_2-2 of the regulations accordingly the standards in sec_1_2-2 are controlling sec_2 of the code defines head_of_household as one who maintains as his home a household which constitutes for more than one-half of such taxable_year the principal_place_of_abode as a member of such household of specified persons an individual shall be considered as maintaining a household only if over half of the cost of maintaining the household during the taxable_year is furnished by such individual the legislative_history for the head-of-household provision includes the following statement under both the house and senate bills a taxpayer is considered as maintaining a household only if during the year he furnishes more than half the maintenance_costs of such household moreover the individual who makes it possible for the taxpayer to gain the benefits of the head-of-household status must actually live in the taxpayer’s household during the entire taxable_year unless he is temporarily absent for example attending school or for reasons of health emphasis added s rep 1951_2_cb_458 sec_1_2-2 of the regulations provides that the taxpayer and such other person will be considered as occupying the household notwithstanding temporary absences from the household due to special circumstances a nonpermanent failure to occupy the common abode by reason of illness education business vacation military service or a custody agreement under which a child or stepchild is absent for less than months in the taxable_year of the taxpayer shall be considered temporary absence due to special circumstances such absence will not prevent the taxpayer from being considered as maintaining a household if i it is reasonable to assume that the taxpayer or such other person will return to the household and ii the taxpayer continues to maintain such household or a substantially equivalent household in anticipation of such return in 28_tc_826 acq 1958_2_cb_6 the issue was whether the taxpayer could claim head_of_household filing_status based on his sister the sister was continuously confined to a nursing home for several years including the entire year under consideration the sister had been a member of the taxpayer’s household prior to the confinement and the taxpayer paid all of the sister’s expenses in the nursing home due to illness and age it was unlikely that the sister would return to the taxpayer’s household the court held that the sister’s stay in the nursing home was temporary due to special circumstances even though she was unlikely to return to the sec_1_32-2 was promulgated in as sec_1_43-2 and redesignated as sec_1_32-2 in due to subsequent statutory changes in sec_32 these regulations are not entirely in conformity with current law taxpayer’s household the court reasoned that if she did recover neither she nor taxpayer intended to terminate the relationship to the pre-existing home revrul_66_28 1966_1_cb_31 applies hein to the dependency_exemption because as the revenue_ruling notes the regulations under sec_152 contain a provision identical to sec_1_2-2 of the regulations concerning temporary absence from the household due to special circumstances the revenue_ruling holds that the period of time during which a dependent is confined to a nursing home because of illness will be considered a temporary absence due to special circumstances under sec_152 even though such absence is for an extended period of time however there must be an absence of intent on the part of the taxpayer and dependent to change the dependent’s principal_place_of_abode the possibility or probability that death might intervene before the dependent returns to the household is not sufficient to make such absence permanent discussion the legislative_history for the head-of-household provisions lists two situations involving temporary absence from the household due to special circumstances namely absence for reasons of health and education it is clear from the legislative_history that these situations are intended as examples of temporary absence the regulations list four additional situations involving temporary absence due to special circumstances there is no indication from the language of the regulations that the regulations provide an exclusive list of situations involving temporary absence from the household also except in the case of child custody agreements the regulations do not limit or restrict a temporary absence to a specific period of time eg one year or less detention in a juvenile facility pending trial can be a temporary absence notwithstanding the possibility that the child may be detained after the trial for an extended period of time in a juvenile facility as indicated by the hein case and revrul_66_28 the length of the person’s absence from the household does not by itself determine whether the absence is temporary what is determinative is whether there is any intent to change the principal_place_of_abode see sec_1_152-1 of the regulations the language in sec_1_152-1 concerning temporary absence from the household due to special circumstances is identical to that of sec_1_2-2 however the focus in sec_1_152-1 is on individuals who may qualify as members of a taxpayer’s household under sec_152 if you have any questions about the memorandum please contact john moran pincite0 heather c maloy by s michael l gompertz assistant to the branch chief branch


significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division feb ep ka ‘al in re company this letter constitutes notice that a waiver of the minimum_funding_standard for the above-named plan for the plan_year ending july the following conditions has been granted subject_to the company makes contributions to the plan totaling the amount of the quarterly contributions originally due on november february february for the plan_year ending july and by the company makes the required quarterly contributions to the plan due on may timely manner and meets the minimum_funding_standard for the plan for the plan_year ending july for the plan_year ending july and august by april ina the company makes the required quarterly contributions to the plan due on november for the plan_year ending july minimum_funding_standard for the plan for the plan_year ending july by april in a timely manner and meets the and august february may you agreed to these conditions in letter sent via facsimile dated february any one of these conditions is not satisfied the waiver is retroactively null and void if this conditional waiver has been granted in accordance with sec_412 of the internal_revenue_code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the amount for which this conditional waiver has been granted is the contribution that would otherwise be required to reduce the balance in the funding_standard_account to zero as of date the company’s primary business is the production of large and complicated assembly machines and equipment used by other manufacturers the current financial hardship was brought on by a reduction in customer orders the primary customer base for the company is other manufacturers when the economy slowed in the early part of the decade the manufacturers invested less in capital equipment as the economy improved many manufacturers moved production outside of the united_states thus reducing demand in the company's primary market the company’s revenues fell from oe october oo october the year ending october in the year ending october the revenues increased to in fiscal_year ending october in the year ending october however in the year ending the company had a profit of the company had losses of the company had a loss of for the years ending - and for and to an because the actions taken by the company have improved its financial position the waiver for the plan_year ending july conditions set forth above in order to effect a recovery_of its business the company has taken a number of steps to firm up its financial situation among these steps is an agreement in november with the company’s labor force that has eliminated costs that will allow the company to be competitive in the smaller machine markets the company has also developed a new product for which the company expects to receive a flow of new orders the initial machine is expected to be in production at the customer's plant in early fall of although payment for this machine is not expected to be received until early order for a second machine is expected upon the successful installation of the first machine your attention is called to sec_412 of the code and sec_304 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived_funding_deficiency remains unamortized please note that any amendment to a profit sharing plan or any other retirement plans covering employees covered by this plan maintained by the company to increase the liabilities of those plans would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan by the company covering employees has been granted subject_to the uo covered by this plan would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan_year ending july should be entered on schedule b actuarial information for this reason we suggest that you furnish a copy of this letter to the enrolled_actuary who is responsible for the completion of the schedule b the date of this letter we have sent a copy of this letter to the manager ep classification in to the manager ep compliance unit in and to your authorized representative pursuant to a power_of_attorney on file in this office if you require further assistance in this matter please contact sincerely yours qh ml donna m prestia manager employee_plans actuarial group


internal_revenue_service number release date index number ------------------------------------------- --------------------------------------------------------- ---------------------------------------------- ----------------------------------- -------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number -------------------- refer reply to cc psi b1 plr-126857-07 date date -------------------------------------------- legend x ------------------------------------------ country ---------------------- date ----------------------- date dear ------------------ requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an entity classification election under sec_301_7701-3 this letter responds to a letter dated date submitted on behalf of x ----------------------- the information submitted states that x was formed on date under the laws of sec_301_7701-3 provides that a business_entity that is not classified as a country x represents that x is a foreign_entity eligible to elect to be treated as a disregarded_entity x intended to be treated as a disregarded_entity effective date due to inadvertence x failed to file a timely form_8832 entity classification election electing to treat x as a disregarded_entity effective date corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides that except as provided in sec_301 sec_301_9100-1 provides that the commissioner may grant a reasonable plr-126857-07 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability or b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed extension of time to make a regulatory election or a statutory election but no more than 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 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin commissioner will use to determine whether to grant an extension of time to make the election making certain elections determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief 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 granting relief will not prejudice the interests of the government conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose federal tax consequences of the facts described above under any other provision of the sec_301_9100-2 provides the rules governing automatic extensions of time for except as specifically set forth above no opinion is expressed concerning the based solely on the information submitted and the representations made we sec_301_9100-3 provides the standards the commissioner will use to sec_301_9100-1 through provide the standards the plr-126857-07 code provides that it may not be used or cited as precedent being sent to x's authorized representatives this ruling is directed only to the taxpayer requesting it sec_6110 pursuant to a power_of_attorney on file with this office a copy of this letter is sincerely william p o'shea associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ---------------------------------------- -------------------------------------- -------------------------------- ------------------ ---------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-108690-05 date date ------------ --------------------------- -------------------------------------- legend x ------------------------------------------ country date dear --- --------- this responds to a letter dated date submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity under sec_301_7701-3 x represents that x is a foreign_entity eligible to elect to be treated as a disregarded_entity however the service has no record of a timely filed form_8832 entity classification election electing to treat x as a disregarded_entity effective date entity for federal_income_tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if the foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 the information submitted states that x was formed under the laws of country sec_301_7701-3 provides guidance on the classification of a foreign sec_301_9100-1 through provide the standards the sec_301_9100-1 provides that the commissioner may grant a reasonable sec_301_7701-3 provides that an entity classification election must be filed plr-108690-05 on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed extension of time to make a regulatory election or a statutory election but no more than 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 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief 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 granting relief will not prejudice the interests of the government conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose federal tax consequences of the facts described above under any other provision of the code provides that it may not be used or cited as precedent except as specifically set forth above no opinion is expressed concerning the based solely on the information submitted and the representations made we this ruling is directed only to the taxpayer requesting it sec_6110 plr-108690-05 being sent to x’s authorized representatives sincerely pursuant to a power_of_attorney on file with this office a copy of this letter is heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------- ---------------- ---------------------------- -------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no --------- telephone number -------------------- refer reply to cc ita b04 plr-134297-13 date date legend taxpayer llc year year year dollar_figurea dollar_figureb individual firm dear ----------------- -------------------------------------------------------- ------------------------------------------ ------ ------ ------ -------------- ------------ ---------------------- ------------------------ this letter responds to your letter requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make a regulatory election specifically you have requested an extension of time to make an election under sec_108 of the internal_revenue_code and sec_1_108-5 of the income_tax regulations to exclude income resulting from the discharge of qualified_real_property_business_indebtedness and to reduce the basis of depreciable real_property effective for taxpayer’s year tax_return facts taxpayer reports income on a calendar_year uses the cash_receipts_and_disbursements_method of accounting and is one of three owners of llc llc is a limited_liability_company that is treated as a partnership for federal_income_tax purposes and is in the business of constructing and operating a commercial shopping center in year llc defaulted on a bank loan and was issued a form_1099 for cancellation of debt income plr-134297-13 cod in the amount of dollar_figurea the amount attributable to taxpayer based on his ownership_interest in llc is dollar_figureb taxpayer represents that the partners of llc were eligible to exclude cod income pursuant to sec_108 which relates to qualified_real_property_business_indebtedness this exclusion required taxpayer to make an election pursuant to sec_108 and sec_1_108-5 on a timely filed year form_1040 taxpayer’s year form_1040 was prepared by individual a qualified_tax professional with many years of experience however due to an oversight individual did not discuss the election with taxpayer nor did individual make the election on taxpayer’s behalf to reduce the basis of depreciable real_property and to exclude income resulting from the discharge of qualified_real_property_business_indebtedness taxpayer’s year form_1040 was timely filed in year taxpayer retained the services of firm to provide general tax planning advice in year firm discovered that the partners of llc had been eligible to make the election relating to cod income in year after discovering individual’s oversight in not including the form_982 making the sec_108 election on taxpayer’s year form_1040 taxpayer filed this request for an extension of time to make the election taxpayer individual and firm have submitted affidavits consistent with the above facts taxpayer represents that granting relief under sec_301_9100-3 will not result in a lower tax_liability in the aggregate for all years to which the election applies than taxpayer and all interested parties would have had if the election had been timely made taking into account the time_value_of_money taxpayer’s adjusted_basis in the depreciable_property is greater than the amount of cod income taxpayer will not exclude an amount under sec_108 that exceeds the excess of the principal_amount of indebtedness over the fair_market_value of the real_property taxpayer will reduce basis in its depreciable real_property on the year tax_return and taxpayer will reduce only the basis of depreciable real_property that would have been eligible for such basis_reduction if the election had been timely made on the original return law and analysis sec_108 provides that gross_income does not include any amount that but for sec_108 would be 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 in general that the amount excluded under sec_108 with respect to any qualified_real_property_business_indebtedness shall not exceed the excess of the outstanding principal_amount of such indebtedness immediately before the discharge over the fair_market_value of the real_property described in sec_108 as of such time plr-134297-13 sec_108 requires a taxpayer to make an election to exclude cod income under sec_108 sec_108 provides that in the case of a partnership sec_108 and sec_108 are applied at the partner level sec_1_108-5 provides that the election under sec_108 is 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 made on a completed form_982 reduction of tax_attributes due to discharge_of_indebtedness and sec_1082 basis_adjustment sec_301_9100-1 through sec_301_9100-3 provide the standards that the service will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-3 provides that requests for extension of time for regulatory elections other than automatic extensions 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 the grant of relief will not prejudice the interests of the government under sec_301_9100-3 a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election however a taxpayer is not considered to have reasonably relied on a qualified_tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or was not aware of all relevant facts in addition sec_301_9100-3 provides that a taxpayer is deemed not to have acted reasonably and in good_faith if the taxpayer- i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all respects of the required election and related consequences but chose not to make the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that the commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate plr-134297-13 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 similarly if the tax consequences of more than one taxpayer are affected by the election the government’s interests are prejudiced if extending the time for making the election may result in the affected taxpayers in the aggregate having a lower tax_liability than if the election had been timely made sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable_year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section under the facts submitted by taxpayer we conclude that taxpayer has acted reasonably and in good_faith under sec_301_9100-3 in addition we conclude that granting relief will not prejudice the interests of the government under sec_301_9100-3 conclusion based solely on the information submitted and the facts as represented in the ruling_request we grant taxpayer an extension of days from the date of this letter to file an amended_return to make the election under sec_108 and sec_1_108-5 the election is to be made on form_982 except as expressly provided in the preceding paragraph we do not express or imply an opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically this letter does not rule on whether the amount of income at issue is properly treated as cancellation_of_indebtedness_income under sec_61 in addition this letter also does not rule on whether the income in fact qualifies for exclusion from income under sec_108 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling plr-134297-13 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 michael j montemurro chief branch office of associate chief_counsel income_tax accounting cc


department of the treasury internal_revenue_service washington d c office_of_chief_counsel date number release date gl-119001-02 uilc cc pa cbs br1 memorandum for sbse associate area_counsel richmond from mitchel s hyman senior technician reviewer branch collection bankruptcy summonses subject taxpayer x this memorandum responds to your date request for advice this document may not be used or cited as precedent sec_6110 legend taxpayer x number a amount a date a date b date c date d date e issue dollar_figure when a taxpayer files for bankruptcy after property has been seized but before the scheduled sale should the internal_revenue_service service release the property when the automatic_stay precludes conducting the sale within the time period set forth in sec_6335 and sec_6335 conclusion although there is no authority in either the internal_revenue_code or bankruptcy code for tolling this period this period is inapplicable because the sale is precluded as a matter of law as soon as possible after the bankruptcy petition is filed the service gl-119001-02 must make a determination whether to release the subject property or protect its interest in such property in the bankruptcy proceeding such as by seeking relief from the automatic_stay to continue the sale if the service obtains relief from the automatic_stay it may issue a new notice of sale and conduct the sale when there is no longer a bankruptcy preclusion facts the facts which you have provided are as follows on date a the service seized number a parcels of unimproved_real_estate belonging to the taxpayer for nonpayment of income taxes totaling approximately dollar_figureamount a notice of sale was given to the taxpayer on date b and public notice was given by publication on date c the sale was scheduled for date d pincite a m on date e the taxpayer filed a petition for relief under chapter of the bankruptcy code the service could not then proceed with the sale because the filing of a bankruptcy petition operates as a stay of any act to collect assess or recover a claim against the debtor that arose before the commencement of the bankruptcy case u s c sec_362 instead the sale was adjourned pursuant to sec_6335 and the regulations thereunder you determined that there would be insufficient time to obtain an order from the bankruptcy court granting relief from the automatic_stay in order to permit the sale to continue within the sec_6335 adjournment period you requested our office’s advice in order to determine whether the seizure should be released we informally agreed with your office’s determination to release the seizure in your case as the subject property could simply be reseized and resold once the automatic_stay had been lifted with minimum additional harm or cost to the service law and analysis the provisions governing administrative sale of seized property are found in sec_6335 in particular sec_6335 provides that t he time of sale shall not be less than days nor more than days from the time of giving public notice under subsection b sec_6335 provides that the secretary by regulations shall prescribe the manner and conditions of sale of property including u nder what circumstances the secretary may adjourn the sale from time to time but such adjournments shall not be for a period to exceed in all month the applicable regulation merely reiterates this statutory language and provides that the date of the adjourned sale shall not be later than one month after the date fixed in the original notice of sale sec_301_6335-1 sec_6335 further provides that if at the sale the property is not sold to the highest bidder or deemed sold to the united_states it shall be released to the owner gl-119001-02 there is no provision in either the internal_revenue_code treasury regulations or bankruptcy code for tolling of the time periods in sec_6335 and sec_6335 we initially considered whether sec_108 of the bankruptcy code might provide authority for tolling the period for administrative sale or adjournment while the automatic_stay is in effect but concluded that it was inapplicable sec_108 of the bankruptcy code operates to toll certain nonbankruptcy limitations periods while a bankruptcy case is pending specifically sec_108 provides e xcept as provided in section of this title if applicable nonbankrutpcy law fixes a period for commencing or continuing a civil_action in a court other than a bankruptcy court on a claim against the debtor and such period has not expired before the date of the filing of the petition then such period does not expire until the later of - the end of such period including any suspension of such period occurring on or after the commencement of the case or days after notice of the termination or expiration of the stay under sec_362 with respect to such claim b c sec_108 the plain language of sec_108 applies to time frames for commencing or continuing civil actions in court generally courts agree that this section does not apply to non-litigation matters see 888_f2d_574 8th cir holding that c cannot toll the expiration of a contractual subordination agreement in re vassilowitch 72_br_803 bankr d mass holding that c cannot toll the period for exercising a purchase option the supreme court has recently determined that limitations periods can be tolled by courts applying their equitable powers in cases where a claimant has actively pursued his or her judicial remedies or where a party’s misconduct causes the claimant to miss a deadline 122_sct_1036 even if those factors were applicable to the present case however the court’s analysis in young would still not support equitable_tolling as the period for administrative sale is not a limitations_period although we have been unable to find any authority for tolling the subject provisions we conclude that even without such tolling the service was not required to release the property seized in your case it is our position that where the sale may not be conducted as a matter of law due to the taxpayer’s bankruptcy the sale may be cancelled rather than adjourned as there is no adjournment of sale the limitations in sec_6335 do not apply furthermore as the sale never takes place sec_6335 does not require the seized property to be released the timing of adjournments of sales has been addressed by the ninth circuit in 44_f3d_795 9th cir in anderson a property owner brought an action to enjoin a sale of real_property seized a sale had been properly gl-119001-02 scheduled for an earlier date at that time several bidders attended but none of them had the required percent cash or equivalent down payment accordingly the revenue_officer decided to postpone the sale for approximately one month on the date of the rescheduled sale no bidders came the revenue_officer again postponed the sale the ninth circuit held that because the sale did not take place within days of the public notice or a month thereafter the government was bound to release the property back to the owner pursuant to sec_6335 the government argued that there was a distinction between adjournment and postponement for purposes of sec_6335 in anderson the government argued that the sale was not adjourned but was postponed which can be done without limitation the court rejected this distinction the ninth circuit in anderson was specifically criticizing decisions made by the service to delay sales congress did not adopt a policy of giving the irs discretion to sell the property when in its discretion sale would be desirable it adopted a different policy- fish or cut bait congress told the secretary to provide for terms and conditions of sale by regulation and told the secretary that those regulations could not allow adjournments of a sale of more than one month these express limitations are inconsistent with the irs’s preferred interpretation that it may delay sales indefinitely anderson f 3d pincite anderson does not address the situation in which the service is precluded from conducting the sale as a matter of law thus anderson is distinguishable from the facts of the present case anderson does not provide explicit or controlling authority for the position that the service must return seized property if a noticed sale of such property is barred by the automatic_stay the ninth circuit concluded in anderson that sec_6335 makes it mandatory for the service to return property to the owner if the property is not sold to a bidder or purchased by the united_states at the sale if the automatic_stay bars the service from conducting the sale after the sale has been noticed then sec_6335 does not apply since that section can only be applicable if there has been a sale therefore the anderson decision is not controlling in situations where a sale is never held the anderson court indicated that for purposes of sec_6335 a sale takes place on the date advertised in the notice of sale when an agent of the service actually appears to conduct the sale the service argued that a sale does not take place until the employee actually starts the sale however if no sale is convened because of the automatic_stay there would be no sale under either definition gl-119001-02 in cases where an owner of seized property files a bankruptcy petition after the service has noticed the sale of such property the service should make a determination as soon as possible whether to release the seizure if the service decides to retain the property it should take immediate action in the bankruptcy proceeding to protect its interest in the subject property property seized prior to bankruptcy but not sold is part of the bankruptcy_estate subject_to turnover b c sec_541 462_us_198 as a policy matter it makes sense that creditors cannot on their own sell property of the estate that might be necessary for effective reorganization see id pincite therefore the bankruptcy code provides secured creditors holding seized but unsold property alternative ways to protect their interests for example secured creditors can request adequate protection of their interests b c sec_363 the bankruptcy court can place restrictions on the trustee’s ability to sell or use the property whiting pools u s pincite creditors can also request the bankruptcy court to lift the automatic_stay and allow sale of the seized property to continue see b c sec_362 it is the service’s practice to take advantage of these alternative remedies as soon as possible after the automatic_stay takes effect see irm to summarize we conclude that where a taxpayer files for bankruptcy protection after property has been seized and sale of that property noticed but before the date of the sale the service is not required to release the property back to the petitioner the provisions of sec_6335 and sec_6335 are not tolled by the bankruptcy but are inapplicable to the situation where the service is precluded by the automatic_stay from continuing the sale it is our view that sec_6335 was meant to delineate rules concerning the specific time and place of sale not to make a sale mandatory once public notice has been issued we believe congressional intent was that the sale be conducted soon after the public notice in order to attract the most potential bidders and generate maximum sale proceeds cancellation of a sale due to a bankruptcy filing issuance of a new notice of sale after the automatic_stay is lifted and conducting the new sale within the statutory time period is consistent with that intent see irm this chief_counsel advisory was coordinated with branch collection bankruptcy and summonses if you have further questions please call case development hazards and other considerations gl-119001-02