department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o ve r n m e n t e n t i t i e s d i v i s i o n ----------------- contact person telephone number ----------------------------- identification_number --------------- number release date se t eo ra t date date uniform issue list employer_identification_number legend taxpayer plan dear ------------------ this is in response to a letter dated submitted on your behalf by your authorized representative requesting rulings regarding the provision of certain health benefits in the manner described below by an organization described in sec_501 of the internal_revenue_code the code you taxpayer are a collectively bargained joint labor-management employee_benefit_trust the trust you qualified for tax-exempt status pursuant to sec_501 you are established and maintained pursuant to numerous collective bargaining agreements with approximately employers contributing you cover approximately active employees and retired persons including spouses and dependents the unions and employer associations have agreed that your trustees can create a health reimbursement plan the plan which will be maintained as a separate plan under the trust contributions will be made to the plan on behalf of active employees however the plan is designed to provide benefits for retired employees the following individuals will be eligible to receive benefits under the plan employees who are or older and who have terminated all employment with a contributing employer employees receiving retiree health benefits under the trust employees who qualify for disability retirement benefits under the terms of the defined benefit pension_plan sponsored by the bargaining parties and employees who are entitled to disability benefits under the social_security act self-employed persons are not eligible to participate in the plan if an employee dies the employee’s eligible dependents may continue to receive benefits from the account employee_benefits are forfeitable to the trust upon death of the employee and all the employee’s eligible dependents the plan only provides for benefits for eligible expenses_incurred for medical_care as defined under sec_213 benefits are not provided for expenses that are reimbursable by another employer-provided accident_and_health_plan or any other group or individual accident_or_health_insurance or expenses used as a deduction on the employee’s federal tax_return the amount of employer contributions to the plan will equal dollar_figurex for each hour worked by the employee as determined under the applicable contribution rate in the collective bargaining agreement no employee will be able to receive cash in lieu of contributions to the plan nor will the employees be allowed to make a salary reduction election to the plan employer contributions made on behalf of an active employee will be allocated to an individual_account under the plan in the name of the employee the balance in an employee’s account unless subject_to forfeiture will be carried forward each year until the employee satisfies the requirements for eligibility sec_501 of the internal_revenue_code provides that a voluntary employee benefit association veba that provides for the payment of life sick accident or other_benefits to the members of such association or their dependents or designated beneficiaries shall be exempt from taxation sec_1_501_c_9_-3 of the income_tax regulations provides that the life sick accident or other_benefits provided by a veba must be payable to its members their dependents or their designated beneficiaries sec_1_501_c_9_-3 of the regulations describes the term sick_and_accident_benefits to mean amounts furnished to or on behalf of a member or a member's dependents in the event to illness or personal injury to a member or dependent such benefits may be provided through reimbursement to a member or a member’s dependents for amounts expended because of illness or personal injury or though the payment of premiums to a medical_benefit or insurance program sec_105 of the code provides that in general amounts received by an employee through employer_provided accident_or_health_insurance for personal injuries or sickness shall be included in the gross_income of the employee to the extent such amounts are attributable to contributions by the employer which were not includible in the gross_income of the employee or are paid_by the employer sec_105 of the code provides that except in the case of amounts attributable to and not in excess of deductions allowed under code sec_213 for any prior taxable_year gross_income does not included amounts referred to sec sec_105 if such amounts are paid directly or indirectly to the taxpayer to reimburse the taxpayer for medical_care of the taxpayer his spouse or dependents sec_105 of the code provides that amounts received under an accident_or_health_plan for employees shall be treated as amounts received through accident_or_health_insurance for purposes of sec_105 sec_1_105-2 provides that only amounts that are paid specifically to reimburse the taxpayer for expenses_incurred by the taxpayer for the prescribed medical_care are excludable from gross_income therefore sec_105 does not apply to amounts that the taxpayer would be entitled to receive irrespective of whether or not the taxpayer incurs expenses for medical_care sec_105 of the code provides that unless the plan satisfies the nondiscrimination requirements of sec_105 amounts paid under a self-insured medical expense reimbursement plan to a highly_compensated_individual will not be excludable from that individual’s gross_income under sec_105 to the extent they constitute excess_reimbursements sec_106 of the code provides that the gross_income of an employee does not include employer_provided coverage under an accident_or_health_plan sec_1_106-1 provides that the gross_income of an employee does not include contributions which the employee’s employer makes to an accident_or_health_plan for compensation through insurance or otherwise to the employee for personal injuries of sickness incurred by the employee or the employee’s spouse or dependents rev_rul 1966_2_cb_230 provides that the fact that only retired employees will be eligible to receive benefits will not adversely affect exemption under sec_501 of the code revrul_2002_41 2002_28_irb_75 provides that employer_provided coverage and medical_care reimbursements made under a reimbursement arrangement that allows unused amounts of an annual maximum reimbursement to be carried forward are excludable from gross_income under sec_105 and sec_106 of the code notice_2002_45 i r b provides that in general a health reimbursement plan hra is one that is paid for solely by the employer and not provided pursuant to a salary reduction election or otherwise under a cafeteria_plan reimburses the employee for medical_care expenses as defined by code sec_213 incurred by the employee and the employee’s spouse and dependents and provides reimbursements up to a maximum dollar amount for a coverage period and any unused portion of the maximum dollar amount is carried forward to increase the maximum reimbursable amount in subsequent periods notice_2002_45 also provides that to the extent that an hra is an employer_provided accident_or_health_plan coverage and reimbursements of medical_care expenses of an employee and the employee’s spouse and dependents are excludable from the employee’s gross_income under sec_105 and sec_106 of the code finally notice_2002_45 provides that medical_care expense reimbursements under an hra are excludible under sec_105 to the extent reimbursements are provided to current and former employees including retired employee their spouses and dependents and the spouses and dependents of deceased employees to the extent that an hra is a self-insured medical expense reimbursement plan the nondiscrimination_rules under sec_105 apply the plan satisfies the first criteria for an hra because it is funded solely by employer contributions there is no salary reduction election and employees will not be allowed to receive cash in lieu of any benefits the plan satisfies the second criteria since it only provides benefits for medical_care expenses as defined by sec_213 of the code the plan satisfies the third criteria because any unused portion the end of a coverage period will be carried forward to increase the maximum reimbursable amount in subsequent periods if a balance remains in the employee’s account at his or her death the employee’s spouse and dependents may use the remaining amount for qualified_medical_expenses any unused balance at the death of the employer the employer’s spouse and all dependents will be forfeited top the employer nothing in notice_2002_45 precludes providing benefits exclusively for former employees a_trust that was previously recognized as tax-exempt under sec_501 does not lose its tax-exempt status when it provides additional benefits of the type contemplated by sec_501 all of the benefits provided pursuant to plan b can be described as other_benefits under the regulations since they related to safeguarding the health of an employee and his or her spouse and dependents and become payable as the result of unanticipated events as such they are within the definition of other_benefits described by sec_1_501_c_9_-3 that may be provided under a plan that is exempt under sec_501 accordingly based upon the information you submitted we rule that establishing and funding plan b through a code c trust neither causes the plan to fail to satisfy the requirements for a health_reimbursement_arrangement hra as described in notice_2002_45 nor causes the trust to lose tax-exempt status under sec_501 employer contributions paid to the trust with respect to the plan on behalf of active employees and benefits received by eligible employees and the eligible employees’ spouses and dependents are excludable from gross_income under sec_106 and sec_105 respectively the plan meets the requirements for an hra as described in notice_2002_45 these rulings are based on the understanding that there will be no material changes in the facts and representations upon which they are based except as we have ruled herein we express no opinion as to the tax consequences of the transactions described above under any other provision of the code this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter this ruling is directed only to the organization that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely yours mary jo salins manager exempt_organizations technical group


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 1-plr-106229-99 date date legend x a b d1 d2 d3 state this responds to the letter dated date and prior correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts you have represented that the facts are as follows x is a corporation organized under the laws of state which made a valid s_corporation_election effective d1 on d2 x stock was issued to a a nonresident_alien although a is married to b a citizen_of_the_united_states a and b did not initially elect to subject a to tax as a united_states_resident but have subsequently filed an election under sec_6013 and the accompanying income cc dom p si 1-plr-106229-99 tax regulations along with a d3 individual tax_return filed jointly with b to have a taxed as a resident_of_the_united_states effective beginning in the d3 tax_year x and its shareholders intended for x to be an s_corporation before and after the issuance of the x stock to a law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect sec_1361 provides that in order to be a small_business_corporation a taxpayer cannot have a nonresident_alien as a shareholder sec_1362 provides that an election to be treated as a subchapter_s_corporation terminates whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation under sec_1362 the termination is effective on and after the date the s_corporation ceases to meet the requirements of a small_business_corporation sec_1362 in relevant part provides that if an election under sec_1362 by any corporation was terminated under sec_1362 the secretary determines that the termination was inadvertent no later than a reasonable period of time after discovery of the event resulting in the termination steps were taken so that the corporation is once more a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the terminating event the corporation shall be treated as continuing to be an s_corporation during the period specified by the secretary the committee reports accompanying the subchapter_s_revision_act_of_1982 explain sec_1362 as follows if the internal_revenue_service determines that a corporation’s subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that cc dom p si 1-plr-106229-99 taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts s rep no 97th cong 2d sess 1982_2_cb_718 h_r rep no 97th cong 2d sess 1982_2_cb_730 sec_6013 provides that generally a nonresident_alien_individual with respect to whom this subsection is in effect for the taxable_year is treated as a resident_of_the_united_states for purposes of chapter for all of the taxable_year sec_6013 provides that an individual with respect to whom this subsection is in effect is any individual who at the close of the taxable_year for which an election is made is a nonresident_alien_individual married to a citizen or resident_of_the_united_states if both spouses make the election to have the benefits of this subsection apply to them sec_6013 provides that an election made under this subsection applies to the taxable_year for which it was made and to all subsequent taxable years until terminated except that an election shall not apply to any taxable_year if neither spouse is a citizen or resident_of_the_united_states at any time during the year pursuant to sec_6013 an election is terminated as the earliest of a revocation by either taxpayer the death of either taxpayer the legal_separation of the couple or the termination by the secretary_of_the_treasury if an election made under sec_6013 for any two individuals is terminated for any taxable_year the two individuals are ineligible under sec_6013 to make an election under this subsection for any subsequent tax_year sec_1_6013-6 of the income_tax regulations provides that generally an election under this section is made by attaching a statement to a joint income_tax return or a joint amended income_tax return for the first taxable_year for which the election is to be in effect conclusion based solely on the facts submitted and the representations made we conclude that x’s election to be treated as an s_corporation terminated on d2 when x’s stock was issued to a we also conclude that the termination constituted an inadvertent termination within the meaning of sec_1362 pursuant to sec_1362 x will be treated as continuing to cc dom p si 1-plr-106229-99 be an s_corporation from d2 provided that the election to have a taxed as a resident_of_the_united_states is effective beginning in the d3 tax_year and that x’s s election is not otherwise terminated under sec_1362 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed concerning whether the original election made by x to be treated as an s_corporation was a valid election under sec_1362 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely signed daniel j coburn daniel j coburn assistant to the branch chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court joseph l evans petitioner v commissioner of internal revenue respondent docket no 20464-13s l filed date joseph l evans pro_se matthew s reddington for respondent summary opinion gerber judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed unless otherwise indicated all section references are to the internal_revenue_code in effect for the relevant times and all rule references are to the tax_court rules_of_practice and procedure pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case the controversy before the court arises from respondent’s determination to proceed with collection by the filing of a notice_of_federal_tax_lien under sec_6320 with respect to petitioner’s and tax_liabilities and frivolous_return penalties for and the issues for our consideration are whether respondent’s settlement officer abused her discretion by making the determination that respondent should proceed with collection and whether the returns and or amended returns that petitioner submitted were frivolous so as to warrant the assessment of penalties under sec_6702 background at the time the petition was filed petitioner resided in pennsylvania petitioner submitted a form 1040ez income_tax return for single and joint filers with no dependents reporting zero wages and zero in all income boxes except for unemployment_compensation where he reported dollar_figure he reported income_tax_withholding of dollar_figure and sought a refund of the dollar_figure attached to the form 1040ez were three forms w-2 wage and tax statement each of which reflected amounts of wages and tax withheld the_amount_of_wages on each form_w-2 had been crossed out and the following statement attached this corrected w-2 is submitted to rebut a document known to have been submitted previously by the party identified as employer which has erroneously alleged a payment to the party listed as employee as defined by the sec_3121 and sec_3401 i am not an employee nor have i received wages as defined by the aforementioned relevant code sections i declare that i have examined this statement and to the best of my knowledge it is true correct and complete followed by a signature and date each form_w-2 had been further modified by the addition of the word corrected petitioner also attached forms substitute for form_w-2 wage and tax statement or form 1099-r distribution from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc with respect to each form_w-2 indicating zero wages and the same amounts of tax withheld as was shown on each form_w-2 when petitioner initially submitted his return respondent sent him a notification that adjustments had been made with respect to his income_tax_withholding and also issued a refund check for dollar_figure thereafter in connection with petitioner’s return he received an examination_report denying a refund and instead advising that he would have a dollar_figure income_tax deficiency for the tax_year petitioner in response submitted a form 1040a u s individual_income_tax_return which in all respects made the same contentions as the form 1040ez for and claimed the same dollar_figure refund of all tax withheld petitioner also disagreed with the examination_report for subsequently petitioner filed a form 1040x amended u s individual_income_tax_return which ostensibly disputed the amount of tax that respondent determined and sought a dollar_figure refund for respondent assessed dollar_figure penalties under sec_6702 with respect to petitioner’s submitted or filed documents for petitioner followed the same approach as for submitting a form 1040ez showing zero wages and zero in all income boxes except unemployment_compensation where he reported dollar_figure he reported income_tax_withholding of dollar_figure and requested a refund of that amount contending that he did not have wages similarly petitioner submitted a second form 1040ez with an attached form_4852 in response to respondent’s examination_report for which included the same claim_for_refund of the dollar_figure in withholding respondent likewise assessed dollar_figure penalties with respect to the returns for petitioner again followed the same approach as for and submitting a form 1040a showing zero wages and dollar_figure in withholding but seeking a dollar_figure refund which was slightly less than the amount of tax withheld on the form 1040a petitioner reported dollar_figure of unemployment_compensation which he included in his adjusted_gross_income resulting in a dollar_figure tax_liability for subsequently petitioner submitted a form 1040x which reflected an amended refund of dollar_figure again respondent assessed dollar_figure penalties in connection with petitioner’s documents for and petitioner filed returns that respondent also considered to be frivolous and the documents filed were not treated as timely filed returns respondent issued a statutory_notice_of_deficiency for petitioner’ sec_2010 and sec_2011 tax years determining income_tax deficiencies and late filing additions to tax petitioner did not petition this court with respect to the and deficiency_notice and respondent assessed the determined income_tax deficiencies and additions to tax after the dollar_figure penalties had been assessed petitioner was in touch with a representative of the internal_revenue_service irs appeals_office who advised that a form could be filed with respect the penalties and that the amount of each penalty could be reduced from dollar_figure to dollar_figure petitioner chose not to submit the form and or pay reduced penalties on date respondent mailed to petitioner a notice_of_determination concerning collection action s under sec_6320 and or concerning income_tax for and and sec_6702 frivolous tax penalties for and in that notice respondent determined that the filing of a notice_of_federal_tax_lien was proper and appropriate the notice_of_determination was preceded by the following events in response to notification of the filing of a notice_of_federal_tax_lien petitioner filed a form request for a collection_due_process or equivalent_hearing in the form petitioner advised that irs did not follow procedures i have entered into an installment_agreement due to fear of financial hardship i have submitted contradicting information regarding tax years on oct respondent’s settlement officer so acknowledged petitioner’s request and a hearing via telephone was held on date during the telephone hearing petitioner contended that the frivolous_return penalties for and should not be applied because he had submitted amended returns for those years the so responded that the amended returns were also considered frivolous in his timely petition to this court filed date petitioner contested respondent’s determination with respect to the frivolous_return penalties by alleging that he had filed amended returns for the three years involved he also contested the late filing additions for and alleging that he had timely filed those returns petitioner also contended that respondent did not comply with procedures during the administrative collection process discussion petitioner seeks review of the determination by the irs sustaining collection activity with respect to unpaid income_tax and sec_6702 frivolous_return penalties in this type of action we review an irs administrative determination de novo if the underlying tax_liability is properly at issue 114_tc_176 otherwise the court reviews the irs determination for abuse_of_discretion id pincite abuse_of_discretion exists when a determination is arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir if a taxpayer requests a hearing in response to a notice_of_federal_tax_lien he may raise any relevant issue relating to the unpaid tax or the collection action sec_6330 sec_6330 permits a taxpayer to challenge the existence or amount of his underlying liability in a collection_due_process proceeding only if he did not receive a notice_of_deficiency or otherwise have an opportunity to contest that liability petitioner raises the underlying liabilities with respect to the sec_6702 frivolous_return penalties the commissioner may assess a frivolous_return penalty without a preassessment opportunity to contest such determinations see sec_6703 accordingly petitioner did not previously have the opportunity to question the underlying sec_6702 penalties and may do so in this proceeding generally sec_6702 provides for a dollar_figure civil penalty for filing a frivolous tax_return petitioner argues that his filing of amended or supplementary returns for and remedied any shortcomings of the original returns and therefore the penalties should not be applicable respondent argues that all of petitioner’s returns were frivolous and that his approach comports with an often- used tactic to avoid paying income_tax ie filing a zero return this court has jurisdiction and petitioner may contest frivolous_return penalties in a sec_6330 collection action before this court see 130_tc_44 a civil penalty for filing a frivolous_return may be assessed against a taxpayer if three requirements are met the taxpayer files a document that purports to be an income_tax return sec_6702 the purported return lacks the information needed to gauge the substantial correctness of the self-assessment or contains information indicating the self- assessment is substantially incorrect id and the taxpayer’s conduct is based on a position the secretary has identified as frivolous or demonstrates a desire to delay or impede the administration of federal tax laws sec_6702 during the commissioner issued notice_2007_30 2007_1_cb_883 setting forth positions which are considered frivolous germane amongst the positions is the following e a taxpayer has an option under the law to file a document or set of documents in lieu of a return or elect to file a tax_return reporting zero taxable_income and zero tax_liability even if the taxpayer received taxable_income during the taxable_period for which the return is filed or similar arguments described as frivolous in revrul_2004_34 2004_1_cb_619 id c b pincite the holding set forth in revrul_2004_34 2004_1_cb_619 is as follows a taxpayer cannot use a zero return to avoid or evade the taxpayer’s federal_income_tax liability taxpayers attempting to avoid or evade their federal tax_liability by taking frivolous positions will be liable for the actual tax due plus statutory interest in addition the service will determine civil penalties against taxpayers where appropriate and those taxpayers may also face criminal prosecution the service also will determine appropriate penalties against persons who prepare frivolous returns or promote frivolous positions and those persons may also face criminal prosecution promoters and others who assist taxpayers in engaging in these schemes also may be enjoined from doing so under sec_7408 we note that the commissioner’s position as stated above was made public as early as courts generally look to the face of the documents to determine whether a taxpayer is liable for a frivolous_return penalty as a matter of law see 136_tc_455 290_fsupp2d_1220 d nev the tactic used by petitioner in submitting returns for and fully comports with the circumstances described in the above-quoted ruling and other similar cases the question posed in cases in which this issue was considered is whether the return filed evidences an honest and reasonable attempt to satisfy the tax laws and or contains sufficient data to calculate the tax_liability petitioner filed return documents seeking refunds of tax and showing zero on every line except for the lines for unemployment_compensation withholding credits payments and refunds although petitioner attached forms w-2 he modified them and attempted to qualify them by claiming that those who issued the forms w-2 reporting that he earned wages were not employers and that he was not an employee citing two sections of the internal_revenue_code in support of his qualifications during the trial petitioner was asked about the explanatory paragraphs he had attached to each form_w-2 alleging that he was correcting the form_w-2 because he was not an employee as defined by sec_3121 and sec_3401 in particular he was asked why he believed that the income he received was not wages he responded it’s all in the internal_revenue_code section based upon their definitions when asked where he obtained that information petitioner did not know and could not remember he was also asked whether someone had advised him to file his return in the manner that he did and he responded no under those circumstances we cannot find that the returns petitioner filed are an honest and reasonable attempt to satisfy the tax laws the commissioner’s position has been extant since at least and caselaw with substantially_similar facts held against taxpayers for many years before petitioner filed his and return documents see eg 136_tc_455 bonaccorso v commissioner tcmemo_2005_278 under these circumstances petitioner’s argument falls flat and has been long recognized as stale groundless and frivolous bonaccorso v commissioner tcmemo_2005_278 slip op pincite it is clear from the record before the court that petitioner used this ploy simply as a means to obtain a refund of tax withheld and that the documents submitted to respondent are frivolous within the meaning of sec_6702 petitioner also raises the question of whether the commissioner is empowered to assess sec_6702 civil penalties on more than one return for a taxable_period respondent in essence contends that sec_6702 does not limit the dollar_figure penalty to a single document per taxable_period we agree with respondent in grunsted v commissioner t c pincite this court found that the commissioner properly assessed five sec_6702 frivolous_return penalties for three taxable years petitioner also raises the underlying tax_liabilities for and in that he contends that the late filing addition_to_tax under sec_6651 should not apply because his returns were timely filed with respect to that argument petitioner was provided an opportunity to question the and liabilities and additions because of his receipt of a notice_of_deficiency petitioner however did not contest respondent’s determination by petitioning this court to place his contentions in controversy sec_6330 permits a taxpayer to challenge the existence or amount of his underlying liability in a collection proceeding only if he did not receive a notice_of_deficiency or otherwise have an opportunity to contest that liability petitioner did receive a notice_of_deficiency and is thereby precluded under sec_6330 from challenging the underlying tax_liabilities in a subsequent hearing or in this court’s proceeding see 132_tc_301 see also sec_301_6320-1 q a-e2 e q a-e2 proced admin regs finally we consider petitioner’s contentions that respondent did not comply with procedures during the administrative collection process petitioner did not present any evidence showing a lack of compliance where the underlying liability is not at issue the court reviews the notice_of_determination to decide whether there was an abuse_of_discretion 414_f3d_144 1st cir callahan v commissioner t c pincite goza v commissioner t c pincite the determination of the settlement officer must take into consideration the verification that the requirements of applicable law and administrative procedure have been met issues raised by the taxpayer and whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person that any collection be no more intrusive than necessary sec_6330 see also 117_tc_183 we note that the record reflects that the settlement officer properly based her determination on the factors required by sec_6330 we accordingly hold that the determination to proceed with collection was not an abuse of the settlement officer’s discretion and accordingly the collection action is sustained to reflect the foregoing an appropriate decision will be entered


internal_revenue_service department of the soe l washington dc contact person teler- in re date’ ep ra t4 feb sin legend village a state b plan x group c employees statute t dear this letter is letter_ruling dated additional correspondence dated and supplemented by and in response to a request for a private _ submitted on your behalf by your authorized representative regarding the federal_income_tax treatment of certain contributions to plan x under sec_414 of the internal_revenue_code the code the following facts and representations have been submitted that village a is a municipality duly organized under statute t provides that a municipality the laws of state b shall establish and administer plan x funded in part by employee contributions and that village a may pick up the employee contributions made by group c employees to plan x on government pick up plan as established under the laws of state b whereby employee contributions to a governmental_plan are picked up by village a within the meaning of sec_414 village a voted to proceed with a of the code page village a has prepared and is prepared to adopt a resolution providing for procedures to fund plan k within the meaning of sec_414 resolution village a shall pick up contributions made by group c employees to plan xk in accordance with the laws of state b receive cash in lieu of contributions that plan x meets the qualification requirements of sec_401 group c employees will not be given the option to village a asserts of the code of the code under the based on the aforementioned facts and representations you have requested the following ruling that are picked up by village a contributions made to plan x pursuant to the laws of as allowed under state b both the laws of state b and sec_414 internal_revenue_code shall not be included as gross_income of the group c employees pursuant to sec_3401 a a of the code until such time as they are distributed of the sec_414 of the code provides that contributions otherwise designated as employee contributions shall be treated as employer contributions if such contributions are made to a plan described in sec_401 established by a state government or a political_subdivision thereof and are picked up by the employing unit the federal_income_tax treatment to be accorded of the code is specified in in that revenue contributions that are picked up by the employer within the meaning of sec_414 revrul_77_462 c b ruling the employer school district agreed to assume and pay the amounts employees were required by state law to contribute to a state pension_plan concluded that the school district's picked-up contributions to the plan are excluded from the employees’ gross_income until such time as they are distributed to the employees the revenue_ruling held further that under the provisions of sec_3401 contributions to the plan are excluded from wages for purposes of the collection of income_tax at source on wages therefore no withholding is required from the employees’ salaries with respect to such picked-up contributions a a of the code the school district's revrul_77_462 the issue of whether contributions have been picked up by an employer within the meaning of sec_414 h the code is addressed in revrul_81_35 1981_1_cb_255 revenue rulings established that the following two criteria and revrul_81_36 c b these of page the employer must specify that the must be met contributions although designated as employee contributions are being paid_by the employer in lieu of contributions by the employee and be given the option of choosing to receive the contributed amounts directly instead of having them paid_by the employer to the pension_plan the employee must not revrul_87_10 1987_1_cb_136 provides that in order to satisfy revenue rulings and the required specification of designated employee contributions must be completed before the period to which such contributions relate thus employees may not exclude from current gross_income designated employee contributions to a qualified_plan that relate to compensation earned for services prior to the date of the last governmental action necessary to effect the pick up the resolution adopted by village a satisfies the criteria set forth in revrul_81_35 and revrul_81_36 because it specifies that the contributions to plan x are to be made by village a in lieu of contributions by group c employees and that group c employees may not elect to receive such contributions directly instead of having such contributions paid_by village a to plan x accordingly we conclude that the contributions picked up by village a and paid_by village a to plan x satisfy the requirements of sec_414 of the code and shall not be included in the gross_income of group c employees in the year in which such amounts are contributed and the picked up contributions are not wages within the meaning of sec_3401 in the gross_income of group c employees or their beneficiaries only in the taxable_year in which they are distributed to the extent that the amounts represent contributions made by village a a a of the code these amounts will be includible for purposes of the application of sec_414 h of it the code contributions through a reduction in salary an offset against future salary increases or a combination of both is immaterial whether village a picks up these rulings apply only if the effective date for the commencement of any proposed pick up is not any earlier than the later of the date the resolution is signed or the date it is put in effect these rulings are based on the assumption that plan x meets the requirements for qualification under section page a of the code at the time of the proposed contributions and distributions no opinion is expressed as to whether the amounts in question are subject_to tax under the federal_insurance_contributions_act the amounts in question are paid pursuant to reduction agreement within the meaning of sec_3121 b no opinion is expressed as of the code a salary to whether this letter_ruling is directed only to the taxpayer that requested it that it may not be used or cited by others as precedent sec_6110 of the code provides a copy of this letter is being sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours john g riddle jr manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of letter_ruling notice


t c summary opinion united_states tax_court clifford ray wood sr and danielle denise levering-wood petitioners v commissioner of internal revenue respondent docket no 15860-04s filed date clifford ray wood sr pro_se james h harris for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency in petitioners’ federal_income_tax of dollar_figure for the taxable_year the issue for decision is whether petitioners are entitled to claim a dependency_exemption deduction for jw1 for taxable_year background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioners resided in newark delaware on the date the petition was filed in this case on date clifford wood sr petitioner and stephanie wood ms wood petitioner’s former wife were married during the marriage petitioner and ms wood had one child jw born in petitioner and ms wood were divorced in petitioner and ms wood’s divorce was granted by a final divorce decree entered by the family court of the state of delaware in and for new castle county on date petitioner and ms wood entered into a separation agreement that was incorporated into the final divorce decree the separation 1the court uses only the minor child’s initials 2after his divorce from ms wood petitioner married petitioner danielle denise levering-wood in july of agreement was signed by petitioner ms wood and their respective counsel the separation agreement states in pertinent part as follows this agreement dated this day of nov a d is made between stephanie wood hereinafter referred to as wife ms wood and clifford wood sr hereinafter referred to as husband petitioner recitals whereas the parties stephanie wood and clifford wood sr were married in due form on date and whereas one child was born to the marriage of the parties namely jw born in whereas diverse disputes and unhappy differences arose between husband and wife the said parties legally_separated on date and are planning to live separate and apart from one another during the remainder of their respective lives and whereas the parties have reached an agreement regarding the division of their marital property and debt custody visitation child_support and all other matters ancillary to their separation now therefor sic in consideration of these facts and circumstances and of the mutual promises made in this agreement husband and wife each agree child custody visitation parties shall have joint custody with wife being the primary residential parent husband shall have visitation that is equivalent to the standard visitation guidelines the days that husband shall exercise his visitation will be by mutual agreement as long as husband notifies wife within twenty-four hours of receiving his monthly work schedule at or before the beginning of each month should husband’s work schedule change from that given to wife at the beginning of each month husband shall notify wife as soon as possible or at least within twenty-four hours of the date that visitation is being changed on date the family court of the state of delaware in and for new castle county issued an order modifying custody of jw as the present case pertains to the taxable_year such order is not relevant however the court notes that in the order dated date the family court of the state of delaware ordered that ms wood retain primary residential custody of jw petitioners filed a form_1040 u s individual_income_tax_return for the taxable_year petitioners did not attach a form_8332 release of claim to the exemption for child of divorced or separated parents or any statement waiver or declaration conforming to the substance of form_8332 to their federal_income_tax return ms wood did not sign a form_8332 or any statement or waiver stating that she was releasing her claim to the exemption for jw in their federal_income_tax return petitioners claimed a dependency_exemption deduction for jw respondent disallowed the claimed dependency_exemption deduction for jw accordingly respondent issued to petitioners a notice_of_deficiency determining a deficiency of dollar_figure in petitioners’ federal_income_tax discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct 290_us_111 in pertinent part rule a provides the general_rule that the burden_of_proof shall be upon the petitioner in certain circumstances however if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the proper tax_liability sec_7491 places the burden_of_proof on the commissioner sec_7491 rule a credible_evidence is ‘the quality of evidence which after critical analysis a court would find sufficient to base a decision on the issue if no contrary evidence were submitted’ 122_tc_143 quoting 116_tc_438 sec_7491 applies only if the taxpayer complies with substantiation requirements maintains all required records and cooperates with reasonable requests by the commissioner for witnesses information documents meetings and interviews sec_7491 although neither party alleges the applicability of sec_7491 we conclude that the burden of 3we interpret the quoted language as requiring the taxpayer’s evidence pertaining to any factual issue to be evidence the court would find sufficient upon which to base a decision on the issue in favor of the taxpayer see bernardo v commissioner tcmemo_2004_199 proof has not shifted to respondent with respect to the issue in the present case moreover deductions are a matter of legislative grace and are allowed only as specifically provided by statute 503_us_79 292_us_435 sec_151 authorizes deductions for the exemptions provided by that section in particular sec_151 provides an exemption for each of a taxpayer’s dependents as defined in sec_152 who is a child of the taxpayer and who has not reached the age of by the close of the taxable_year sec_151 sec_152 defines the term dependent to include a taxpayer’s child provided that more than half of the child’s support was received from the taxpayer or is treated under sec_152 as received from the taxpayer in the case of a child of divorced parents sec_152 provides as a general_rule that the child shall be treated as receiving over half of his or her support from the custodial_parent sec_1_152-4 income_tax regs provides that custody will be determined by the terms of the most recent decree of divorce if there is one in effect in the event of so-called split or joint custody ‘custody’ will be deemed to be with the parent who as between both parents has the physical custody of the child for the greater portion of the calendar_year id thus in the present case because the separation agreement established that ms wood was the primary residential custodian of jw throughout and because petitioner has testified that jw resided with ms wood for the greater portion of the calendar_year ms wood was the custodial_parent in and petitioner was the noncustodial_parent sec_152 provides an exception to the general_rule of sec_152 pursuant to that exception the child shall be treated as receiving more than half of his or her support from the noncustodial_parent if a the custodial_parent signs a written declaration in such manner and form as the secretary may by regulations prescribe that such custodial_parent will not claim such child as a dependent for any taxable_year beginning in such calendar_year and b the noncustodial_parent attaches such written declaration to the noncustodial parent’s return for the taxable_year beginning during such calendar_year see sec_1_152-4t a q a-3 temporary income_tax regs fed reg date the declaration required by sec_152 must be made either on form_8332 or on a statement conforming to the substance of that form id accord 114_tc_184 affd sub nom 293_f3d_1208 10th cir the form provided by the irs form_8332 calls for the following information the name of the child or children for whom an exemption claim is released the applicable tax_year or years for which the claims are released the custodial parent’s signature and the date of signature the custodial parent’s social_security_number the noncustodial parent’s name and the noncustodial parent’s social_security_number the exemption may be released for a single year for a number of specified years for example alternate years or for all future years as specified in the declaration sec_1_152-4t a q a-4 temporary income_tax regs fed reg date in the present case ms wood as the custodial_parent did not sign a form_8332 or any written declaration or statement agreeing not to claim the exemption for jw and no such form declaration or statement was attached to petitioners’ return for the year in issue however petitioner argues that he provided approximately percent of jw’s support for taxable_year and therefore he should be entitled to claim the exemption with respect to jw petitioner may have provided percent of jw’s support for taxable_year however such a fact does not suffice to change the express requirements of sec_152 see miller v commissioner supra pincite where this court stated the control_over a child’s dependency_exemption conferred on the custodial_parent by sec_152 was intended by congress to simplify the process of determining who is entitled to claim dependency_exemptions for children of a marriage see h rept part pincite to make sec_152 work as intended that control must be preserved by insisting on adherence to the requirements of sec_152 the law is clear that petitioners are entitled to the child dependency_exemption for jw in only if they have complied with the provisions of sec_152 petitioners have failed in this regard it follows therefore that the exception set forth in sec_152 does not apply and that the general_rule of sec_152 does apply accordingly petitioners are not entitled to deduct the dependency_exemption deduction for jw for taxable_year sec_152 miller v commissioner supra reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


internal_revenue_service number release date index number --------------------- ------------------------------- --------------------------------------------------- ---------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number ---------------------- refer reply to cc corp b04 plr-125886-16 date date legend distributing --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- -------------------------------- merger partner --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------------ controlled owner a owner b --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------------- plr-125886-16 sub sub sub sub newco newco red dre red sub red sub --------------------------------------------------------------------------------------- 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--------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- -------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ----------------------------------------------------------------- plr-125886-16 red sub red sub red sub red sub red sub green dre green dre green dre 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--------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- merger sub --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ----------------------------- plr-125886-16 controlled red dre state a state b state c business a business b --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------------------------------ -------------- ---------- ----------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------ --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ----------------------------------------------------------------- a b c dear ----------- ---- ---- ---- this letter responds to your letter dated date requesting rulings on certain federal_income_tax consequences of certain proposed transactions the information provided in that letter and in subsequent correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process this letter is issued pursuant to section dollar_figure of revproc_2016_1 i r b regarding one or more significant issues under sec_332 sec_355 sec_357 sec_358 and sec_361 of the internal_revenue_code code the rulings contained in this letter only address one or more discrete legal issues involved in the transaction this office expresses no opinion as to the overall tax consequences of the transactions described in this letter or as to any issue not specifically addressed by the rulings below facts plr-125886-16 distributing is the common parent of an affiliated_group_of_corporations that file a u s consolidated federal_income_tax return more than a percent of distributing’s stock is publicly traded and widely held and less than b percent of its stock in the aggregate is owned by owner a a state a limited_liability_company electing to be classified as a corporation and owner b a state a corporation each a first-tier subsidiary of distributing distributing and its subsidiaries are engaged in business a and in business b distributing owns percent of each of sub owner a owner b and indirectly through disregarded_entity red dre percent of several domestic and foreign entities the red subs the red subs include red sub red sub red sub red sub red sub red sub and red sub sub in turn owns indirectly through disregarded entities percent of sub which in turn owns percent of sub which in turn owns percent of sub each of owner a owner b sub sub sub sub red sub red sub red sub red sub and red sub is a member of distributing’s u s federal consolidated_group distributing owns directly and indirectly through disregarded entities percent of the interest in each of a group of disregarded entities the green dres the green dres include green dre green dre and green dre pursuant to the proposed transactions the business b assets and operations will be separated from the business a assets and operations resulting in two publicly held worldwide groups the separation shortly after the separation controlled will acquire all of the stock of merger partner an unrelated state c_corporation in exchange for controlled stock in a transaction where controlled’s pre-combination shareholders will retain more than c percent of the stock voting power and value of controlled the combination proposed transaction for what have been represented to be valid business purposes the following steps have been proposed the proposed transaction i distributing will form a new corporation controlled controlled will form a merger subsidiary merger sub ii distributing will form directly and indirectly certain disregarded entities to separate its business b from its business a including the controlled green dres and the controlled red dre iii distributing will form newco a state a limited_liability_company electing to be classified as a corporation and newco a state b corporation plr-125886-16 iv the green dres will transfer certain intangibles related to business b to the controlled green dres several transactions will be effected to align distributing’s ownership of the green dres and the controlled green dres into separate chains distributing and controlled will enter into a cross license agreement with respect to patents to be used in their respective businesses v red sub will make a cash distribution to red dre which will then distribute the cash to distributing vi red dre will contribute the red subs to controlled red dre and will distribute the membership interests in controlled red dre to distributing or sell such interests to distributing in exchange for a receivable and then extinguish the receivable by distributing it to distributing vii red sub will transfer its non-business b assets to newco for fair_market_value consideration and distribute cash including cash sales proceeds if any to controlled red dre which in turn will distribute such cash to distributing viii sub will make an entity classification election to be treated as disregarded from distributing with sub hereinafter referred to as dre ix sub will make an entity classification election to be treated as disregarded from distributing with sub hereinafter referred to as dre together with the entity classification election by sub in step viii the liquidations x sub will sell its non-business b assets to distributing in exchange for cash xi sub will sell its non-business b assets to newco in exchange for cash the controlled contribution xii dre will distribute the membership interests in dre to distributing and distributing will contribute such membership interests in dre and receivables due from sub to controlled in exchange for controlled stock and controlled’s assumption_of_liabilities including certain pension liabilities related to business b certain of which will be deductible by or capitalized into the asset basis of controlled controlled may in turn contribute the receivables due from sub to sub indirectly through dre in cancellation of the receivables xiii distributing will contribute certain historic directly held business b assets to sub in exchange for sub stock and then contribute such sub stock the merger sub stock and the membership interests in i controlled red dre and ii the controlled green dres to controlled in exchange for i controlled stock ii controlled plr-125886-16 debt the controlled debt and iii controlled’s assumption_of_liabilities including certain pension liabilities related to business b certain of which will be deductible by or capitalized into the asset basis of controlled such contribution together with the contribution of dre interests and sub receivables in step xii the controlled contribution and such deductible or capitalized liabilities together with the deductible or capitalized liabilities described in step xii the deductible liabilities controlled in turn will contribute certain business b assets received in this step to sub indirectly through dre xiv controlled will issue third party debt in exchange for borrowing cash proceeds the controlled debt proceeds xv controlled will distribute the controlled debt proceeds to distributing distributing will deposit any controlled debt proceeds into distributing’s existing general accounts xvi distributing within months of the receipt of the controlled debt proceeds will use an amount of cash from its general accounts equal to or greater than the amount of the controlled debt proceeds to repay certain existing distributing debt existing at the time of the receipt of the controlled debt proceeds or subsequently incurred during the 18-month period in the ordinary course of business and or make shareholder distributions or redemptions the cash proceeds purge and the manner and timing of such repayments distributions redemptions as well as distributions or exchanges of controlled debt as described herein the manner of making purging distributions xvii one or more investment banks the investment banks acting as principals for their own account will purchase a portion of the distributing external debt such acquisition the investment bank tender and such debt the exchange debt the investment banks may finance the investment bank tender in whole or in part through secured borrowings including repo transactions utilizing the exchange debt as collateral xviii distributing will enter into an exchange_agreement the exchange_agreement with the investment banks no sooner than five days after the investment bank tender pursuant to which the investment banks will exchange the exchange debt for some or all of the controlled debt the controlled exchange securities and such exchange the investment bank debt exchange the investment bank debt exchange will occur at least days after the investment bank tender any remaining controlled debt will be distributed to distributing’s creditors other than the investment banks and or distributing’s shareholders within months of receipt by distributing ie pursuant to the manner of making purging distributions the investment banks may hedge various risks related to holding the distributing debt with third parties plr-125886-16 xix distributing will recapitalize the shares of distributing stock held by owner a and owner b into common shares or common-equivalent preferred shares of distributing stock that receive additional distributing stock instead of controlled stock in connection with the external distribution defined below xx controlled will recapitalize the existing shares of controlled common_stock held by distributing by subdividing such shares into a number of shares equal to the number of outstanding shares of distributing stock excluding the shares of distributing stock held by owner a and owner b that were recapitalized in step xix the external distribution xxi distributing will distribute the controlled stock to its public shareholders ie excluding owner a and owner b in a partial pro-rata spin-off the external distribution distributing will deliver controlled shares to an exchange agent on behalf of the controlled shareholders representing the aggregate of the fractional shares to which they are entitled and the exchange agent will sell the shares in an open-market transaction and remit the cash proceeds to the shareholders otherwise entitled to receive the fractional shares certain continuing relationships between distributing and controlled may give rise to payments made between controlled and distributing the cumulative amount measured on a rolling basis of the net payments if any from controlled to distributing will be used pursuant to the manner of making purging distributions within months of the receipt by distributing of each such payment xxii distributing will distribute additional distributing common_stock or additional common-equivalent preferred_stock to owner a and owner b the combination xxiii controlled will acquire all of the stock of merger partner in a reverse subsidiary merger transaction in which merger sub merges with and into merger partner with merger partner surviving the combination the combination will result in the controlled shareholders retaining a direct interest in controlled of greater than c percent of the voting power and value of all of the controlled stock xxiv following the combination controlled may carry out open-market share repurchases or accelerated share repurchases the share repurchases the share repurchases if consummated will be motivated by a corporate business_purpose will be made with respect to widely held shares and will not be motivated by a desire to increase or decrease the ownership percentage of any particular shareholder or group of shareholders representations plr-125886-16 a the controlled contribution and the external distribution will qualify as a reorganization within the meaning of sec_355 and sec_368 b pursuant to the plan_of_reorganization within months of receipt of the controlled debt proceeds from controlled distributing will use an amount of cash equal to or greater than the amount of the controlled debt proceeds pursuant to the manner of making purging distributions c none of the distributing exchange debt will have been issued in anticipation of the external distribution d the investment banks acquiring the distributing exchange debt in connection with the investment bank tender will i no sooner than the 5th day following the acquisition of the distributing exchange debt enter into the exchange_agreement with distributing to exchange it for controlled exchange securities and ii no sooner than the 14th day following the investment bank tender begin to consummate the investment bank debt exchange e within months of receipt of the controlled debt including the controlled exchange securities distributing will distribute such debt to distributing’s creditors including the investment banks and or shareholders f the purpose for any exchange or distribution of the controlled debt including the controlled exchange securities occurring after the external distribution would be to implement such exchange or distribution efficiently including the investment bank debt exchange and such delay would be expected to be caused by external market conditions g the deductible liabilities did not result in the creation of or increase in the basis of any asset prior to the controlled contribution h the deductible liabilities are accrued liabilities for financial_accounting purposes by distributing but will not meet the timing requirement for a deduction by distributing before the controlled contribution under distributing’s method of tax_accounting the deductible liabilities will meet the timing requirements for a deduction by controlled after the controlled contribution under controlled’s method of tax_accounting i the deductible liabilities assumed by controlled were incurred in the ordinary course of business and are related to the business b j any share repurchases will not be related to the proposed transactions and are expected to occur at approximately the same times and to be in the same or a lesser amount as the share repurchases that merger partner would have undertaken if the combination did not occur plr-125886-16 k except for the transfer of dre to controlled in the controlled contribution the liquidations will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of sub or sub if persons holding directly or indirectly more than percent in value of the stock of sub or sub also hold directly or indirectly more than percent in value of the stock in recipient l the payment of cash in lieu of fractional shares of controlled stock is solely for the purpose of avoiding the expense and inconvenience of issuing fractional shares and does not represent separately bargained for consideration no distributing shareholder will receive cash in an amount equal to or greater than the value of one full share of controlled common_stock rulings based solely on the information submitted and the representations set forth above we rule as follows the involvement of the investment banks in the investment bank tender and the investment bank debt exchange will not preclude the application of sec_361 to the investment bank debt exchange provided the distributing exchange debt or distributing debt other than the distributing exchange debt in satisfaction of which controlled debt is distributed constitutes securities for purposes of sec_355 and sec_361 and the controlled debt to be transferred in cancellation of the distributing exchange debt or such other distributing debt has comparable terms eg comparable remaining period to maturity but not necessarily comparable interest rate the controlled debt will constitute securities for purposes of sec_355 and sec_361 under the principles of revrul_2004_78 distributing’s completion of the investment bank debt exchange and if necessary any distribution of the controlled debt to distributing’s creditors other than the investment banks and or distributing’s shareholders following the date of the external distribution will not preclude i the controlled contribution ii the external distribution or iii the investment bank debt exchange from qualifying under sec_355 and sec_361 the cash proceeds purge and any distribution or exchange by distributing of controlled debt including the investment bank exchange in each case pursuant to the manner of making purging distributions will be treated as being distributed pursuant to the plan_of_reorganization for purposes of sec_361 and c the deductible liabilities will be excluded in determining the amount of liabilities of distributing assumed by controlled for purposes of sec_357 sec_358 and plr-125886-16 b to the extent payment of the deductible liabilities would give rise to a deduction or be capitalized into basis in assets by controlled to the extent that controlled shareholders are widely held publicly traded mutual funds that are also merger partner shareholders immediately prior to the combination for purposes of sec_355 the increase in direct or indirect based on the attribution principles under sec_318 ownership percentage of controlled stock by reason of being a merger partner shareholder immediately prior to the combination is offset by the decrease in such ownership percentage by reason of being a controlled shareholder immediately prior to the combination determined without regard to changes in ownership of such funds by their public shareholders for purposes of sec_355 in calculating the offset by reason of being a controlled shareholder immediately prior to the combination of any increase of a shareholder’s controlled stock ownership percentage distributing absent actual knowledge may rely upon the publicly filed documents reporting ownership as of the closest point in time preceding the combination that disclose the relevant shareholders’ ownership percentage of stock in the relevant corporation the receipt of cash by a distributing shareholder in lieu of a fractional share of controlled stock will be treated for u s federal_income_tax purposes as if the fractional share had been transferred to the distributing shareholder as part of the external distribution and had then been disposed of by the distributing shareholder for the amount of cash in a sec_1001 sale_or_exchange for purposes of sec_355 the sale of fractional shares in the market will not be treated as acquisitions that are part of the plan that includes the external distribution to the extent the share repurchases are treated as part of a plan or series of related transactions with the external distribution for purposes of sec_355 the share repurchases will be treated as being made from all public shareholders defined as shareholders who are not a controlling shareholder or a ten-percent shareholder within the meaning of sec_1_355-7 and of controlled common_stock on a pro_rata basis for purposes of testing the effect of the share repurchases on the external distribution under sec_355 the initial designations of the post-combination members of the controlled board_of directors will not affect the determination of the total voting power or value of the stock of controlled acquired within the meaning of sec_355 the controlled contribution will not preclude the liquidations from qualifying as complete liquidations within the meaning of sec_332 payments from distributing or any of its affiliates to controlled or any of its affiliates or vice versa under any continuing relationships regarding liabilities indemnities or other obligations that i have arisen or will arise for a taxable_period plr-125886-16 ending on or before the external distribution and ii will not become fixed and ascertainable until after the external distribution will be treated as occurring immediately before the external distribution except for purposes of sec_355 see 344_us_6 revrul_83_73 1983_1_cb_84 the amount of any other_property within the meaning of sec_361 received by distributing from controlled after the external distribution and attributable to a taxable_period ending on or before the external distribution will be treated for purposes of sec_361 and c as distributed i by controlled to distributing pursuant to the plan_of_reorganization in an amount equal to the cumulative excess the excess of the gross amount of such other_property received by distributing over the gross amount of property transferred by distributing to controlled after the external distribution attributable to a taxable_period ending on or before the external distribution as measured on a rolling basis months after each receipt of such other_property by distributing and ii by distributing pursuant to the plan_of_reorganization provided that distributing uses a cumulative amount measured on a rolling basis equal to the excess pursuant to the manner of making purging distributions within months from the date of each such receipt caveats except as expressly provided herein no opinion is expressed or implied concerning the tax treatment of the proposed transaction under any provision of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the proposed transaction that is not specifically covered by the above rulings temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in the letter_ruling see section dollar_figure of revproc_2016_1 2016_1_irb_1 however when the criteria in section dollar_figure of revproc_2016_1 2016_1_irb_1 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances procedural statements this letter is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent 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-125886-16 pursuant to the power_of_attorney on file in this matter a copy of this letter is being sent to your authorized representatives sincerely _____________________________________ gerald b fleming senior technician reviewer branch office of associate chief_counsel corporate cc


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date date legend b name c state x number y dollars amount dear 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 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 won't be taxable 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 provided in code sec_117 description of your request your letter indicates you will operate a scholarship program called b your program is intended to facilitate the growth of promising leaders in the state of c by developing the skills needed to flourish within their local communities you will award x scholarships for y dollars each academic year each scholarship is renewable up to four years this is a need-based scholarship with criteria focusing on an individual’s involvement in his or her community rather than academic or athletic performance your program will be advertised through local media and on your website letter catalog number 58263t to be eligible applicants must e e e e attain a high school diploma or ged in c complete an application to at least one c collegiate program university college or trade program commit to attending a c university college or trade school complete standardized testing required for program admission sat or act provide proof of community involvements volunteerism individuals must complete and submit an application attach a one-page personal essay and two letters of recommendation all supporting documents from the checklist must be included with the application as a package incomplete applications will be disqualified the scholarship advisory committee will select scholarship recipients and consists of your board members officers and directors if the individuals in those positions resign or are replaced by you the new individuals in those positions would assume the respective position on the scholarship advisory committee the scholarship advisory committee will select the recipients based on the following e e e application financial need ‘something special’ financial need is determined after considering the applicant’s total annual household_income students and parent guardians the number of students in the household attending college the estimated tuition room board books’ expenses any estimated grant scholarship aid received to date the estimated family contribution student and parent guardian and the amount of annual college expense unfunded such as intending to use student loans to receive a scholarship each year recipients must meet and maintain the following eligibility requirements e e be enrolled and complete a minimum of twelve units per semester at a university college or trade school in c maintain at least a cumulative grade point average each semester abide by the school’s rules policies and code of conduct regarding student safety behavior and discipline each student will be responsible to send their final grades transcripts to you for renewal approval failure to abide by the above terms and conditions may result in revocation or nonrenewal of the scholarship which is at the sole discretion of your scholarship advisory committee scholarship funds are submitted directly to the student’s college of attendance funding is never written to an individual but is only written to the student’s college of choice letter catalog number 58263t the school will only use the funds if the student is in good standing which is defined as maintaining a cumulative gpa of during each semester funds are to be used strictly for tuition books and subsequent fees at c accredited universities colleges or trade programs you represent that you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes and take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees’ assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversion from occurring you represent that you will maintain the following all records relating to individual grants including information obtained to evaluate grantees identify a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you undertook the supervision and investigation of grants described above 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 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 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 must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations letter catalog number 58263t p o box cincinnati oh e e e 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 we've sent a copy of this letter to your representative as indicated in your power_of_attorney 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


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-130657-08 date january legend x ----------------------------------------- ------------------------------------------ y ----------------------------------------------- country ---------------------- date ----------------- dear ----- -------- this responds to a letter dated date and subsequent correspondence 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 the information submitted states that x was formed under the laws of country and is wholly-owned by y x represents that as a foreign eligible_entity x intended to elect to be treated as a disregarded_entity effective date however x inadvertently failed to timely file a form_8832 entity classification election sec_301_7701-3 of the income_tax regulations provides that an eligible_entity with at least two members may elect to be classified as either an association and thus a corporation under sec_301_7701-2 or as a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner plr-130657-08 sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that except as provided in sec_301 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 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 for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member 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 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than 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 sec_301_9100-1 through provide the standards the 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 based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time 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 plr-130657-08 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely curt g wilson associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc