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 tege eb hw plr-128418-11 date december legend taxpayer ---------------------------------------- ----------------------- ------------ --------------------------------------------------------------------- ------------------------------------------------------------------------------------------ state statute plan ---------------------------------------------------------------------------------------------------------- dear ------------- this is in reply to your letter dated date for a ruling concerning whether certain disability benefits paid under sec_806 of the statute are excludable from the gross_income of recipients under sec_104 of the internal_revenue_code the code the statute requires employers in state to provide the pension benefits of the statewide defined_benefit_plan established by the statute however the statute permits employers to withdraw from the statewide pension_plan if they establish and maintain a locally administered and financed alternative pension_plan that is subject_to sec_601 of the statute plr-128418-11 sec_601 of the statute provides that the members of such plan hired before on or after date shall be covered by the provisions of sections and in lieu of any other defined disability and preretirement death_benefits sec_803 and of the statute provide that a member who is not eligible for the normal retirement pension described in sec_403 or a local defined benefit retirement pension selected pursuant to sec_704 or provided pursuant to article of the statute and who becomes totally or occupationally disabled shall be retired from active_service for disability and shall be eligible to receive disability benefits under sec_803 or sec_806 of the statute the annual disability benefits provided are based on a certain percentage of a member’s annual base salary paid to the member immediately preceding retirement and an additional_amount if the member had a spouse and dependent_children at the time of the disability sec_803 and b and a and b of the statute sec_806 of the statute provides that if a member who is otherwise eligible to apply for the disability retirement benefits under section is required to terminate the member’s regular employment due to a total or occupational injury that is the result of an injury received while performing official duties or an occupational disease arising out of and in the course of the member’s employment the member is eligible for a disability benefit in an amount provided for in section sec_806 of the statute states that the board shall promulgate rules that specify standards for determining whether a member’s disability is the result of an injury received while performing official duties or an occupational disease arising out of an in the course of employment sec_804 of the statute states that the benefits payable under section or to any member who at the time of the award of such benefits is a member of a money purchase plan pursuant to this article shall be reduced by an amount that is the actuarial equivalent of the benefits such member receives from any such money purchase plan whether the benefits received from the money purchase plan are paid on a periodic basis or in a lump sum sec_61 of the code provides that except as otherwise provided by law gross_income means all income from whatever source derived including compensation_for services sec_104 of the code provides that gross_income does not include amounts received under workmen’s compensation acts as compensation_for personal injuries or sickness sec_1_104-1 of the income_tax regulations states that sec_104 of the code excludes from gross_income amounts received by an employee under a plr-128418-11 workmen’s compensation act or under a statute in the nature of a workmen’s compensation act that provides compensation to the employee for personal_injury_or_sickness incurred in the course of employment sec_1_104-1 of the regulations also states that this exclusion does not apply to the amount received either to the extent that it is determined by reference to the employee’s age or length of service or the employee’s prior contributions even though the employee’s retirement is occasioned by an occupational injury or sickness or to the extent that it is in excess of the amount provided in the applicable workmen’s compensation act or acts the fact that the amount received as a disability retirement pension is computed with regard to the employee’s salary prior to retirement does not disqualify the payment from being in the nature of workmen’s compensation see revrul_85_104 c b revrul_68_10 1968_1_cb_50 based on the information submitted representations made and authorities cited we conclude as follows sec_806 of the statute limits benefits to a class of employees with service-incurred injuries or disease and the benefits are not determined with reference to the employee’s age length of service or prior contributions accordingly sec_806 of the statute is a statute in the nature of a workmen’s compensation act benefits paid under sec_806 of the statute as offset by the benefits funded under the plan pursuant to sec_804 of the statute are excludable from the member’s gross_income under sec_104 of the code no opinion is expressed as to the federal tax consequences of the transaction under any other section of the code or statute other than those specifically stated above 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 harry beker chief health welfare branch office of associate chief_counsel division counsel tax exempt government entities


internal_revenue_service number release date index number ------------------------ ---------------------------------------------------------- ----------------------------- --------------------------------- -------------------------------------------- - department of the treasury washington dc person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc corp b03 - plr-147127-03 date october --------------------------------- ---- ---- distributing ----------------------------- ---------------------------------------------------------- -------------------------------------------------- controlled ---------------------------------------------------------- -------------------------------------------------- a c d f g h date c date d date e ------------------- ------------------- ------------------ ---- ---- -- -- ---------------------------------------------- we respond to a letter dated date submitted on your behalf by n dear --------------- your authorized representative requesting that we supplement our letter_ruling dated date plr-103061-99 issued as plr the prior letter_ruling the legend abbreviations facts proposed transaction representations and caveats appearing in the prior letter_ruling are hereby incorporated by reference additional information was submitted in a letter dated date the information submitted for consideration is summarized below the prior letter_ruling contains rulings under sec_355 of the internal_revenue_code and related provisions of the code and regulations regarding the distribution to distributing’s shareholders of the class b common_stock of controlled the distribution following a recapitalization of controlled to create a dual-class voting_stock structure the first recapitalization the first recapitalization was designed to insure that the control requirements of sec_355 and d of the code would be satisfied despite a secondary offering of controlled stock that was to occur before the distribution the first recapitalization gave controlled two classes of stock controlled class a common_stock the holders of which were entitled to elect up to c percent of controlled’s board_of directors the class a stock and controlled class b common_stock the holders of which were entitled to elect the remaining d percent or more of controlled’s board_of directors the class b stock the two classes of stock are identical except for voting rights in the first recapitalization all of the publicly-held shares of controlled stock were redesignated as class a stock and all of the shares of controlled stock held by distributing were exchanged for an equal number of shares of class b stock recapitalization under the ticker symbol that had previously been associated with the original controlled common_stock the class b stock did not begin trading publicly until immediately following the distribution distributing converted a number of shares of its class b stock into shares of class a stock and sold those shares in a secondary offering of controlled stock on date c the secondary offering the secondary offering reduced the amount of controlled stock class a and class b taken together held by distributing from a percent to f percent of the total number of outstanding shares of controlled distributing remained in control of controlled within the meaning of sec_368 by virtue of its ownership of all of the class b stock which entitled distributing to vote for at least d percent of controlled’s directors the class a stock began trading on n immediately following the first plr-147127-03 the distribution occurred on date d the prior letter_ruling holds among other things that the distribution would meet the requirements of sec_355 and c accordingly no gain_or_loss would be recognized by distributing’s shareholders on their receipt of controlled stock and no gain_or_loss would be recognized by distributing on the distribution of controlled stock the class b stock began trading on n on date e under a new ticker symbol it has been over g years since the first recapitalization and over h years since the distribution controlled has experienced difficulties and complaints from shareholders as a result of having two classes of publicly traded voting common_stock outstanding controlled seeks to eliminate its dual-class voting_stock structure in order to alleviate the disparity that has developed in the trading prices of the class a stock and the class b stock since the distribution as well as to address other problems relating to the dual-class structure the low-vote class a stock has consistently traded at a premium to the high-vote class b stock as a result controlled proposes that its shareholders be presented with an opportunity to vote to amend controlled’s certificate of incorporation to reclassify the class a stock and class b stock as a single class of common_stock or convert all the shares of class b stock into shares of class a stock the second recapitalization controlled would condition the second recapitalization upon the approval of the holders of a majority of the outstanding shares of class a stock voting as a separate class and the holders of a majority of the outstanding shares of class b stock voting as a separate class recapitalize the class a stock and the class b stock into one class of common_stock without affecting the tax-free treatment of the distribution or the effectiveness of the prior letter_ruling in support of this request controlled states that i substantial independent acts eg the shareholder votes are required to eliminate the dual-class structure ii at the time of the first recapitalization and the distribution controlled did not expect the circumstance that now gives rise to the need to revise its capital structure that is at the time of the first recapitalization controlled did not expect the high-vote class b stock to trade at a discount to the low-vote class a stock and iii considerable time has elapsed since the dual-class structure was implemented g years and the distribution took place h years and supplemental ruling requests we rule as follows based upon the information and representations submitted with the original distributing seeks a supplemental letter_ruling that controlled be allowed to plr-147127-03 the second recapitalization will not affect the qualification of the distribution under sec_355 of the code or the effectiveness of the prior letter_ruling the rulings contained in this letter are based upon information and except as expressly provided herein no opinion is expressed or implied this supplemental ruling is directed only to the taxpayer s requesting it a copy of this letter together with the prior letter_ruling must be attached to 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 concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter sec_6110 of the code provides that it may not be used or cited as precedent any income_tax return to which it is relevant this letter is being sent to your authorized representative cc filiz a serbes filiz a serbes chief branch office of associate chief_counsel corporate in accordance with the power_of_attorney on file with this office a copy of sincerely


t c memo united_states tax_court barbara ann delon and welbon delon petitioners v commissioner of internal revenue respondent docket no 6525-10l filed date barbara ann delon and welbon delon pro sese david m mccallum for respondent memorandum findings_of_fact and opinion vasquez judge pursuant to sec_6330 petitioners seek review of respondent’s determination to proceed with collection of their unpaid federal_income_tax liability the issue for decision is whether respondent abused his discretion by sustaining the proposed collection activity findings_of_fact 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 at the time they filed the petition petitioners resided in north carolina during petitioner barbara ann delon worked at the north carolina central university foundation foundation petitioners timely filed their joint federal_income_tax return for they did not report the income that ms delon received from the foundation on date the internal revenue unless otherwise indicated all section references are to the internal_revenue_code petitioners objected to several of the stipulated facts and attached exhibits however petitioners’ objections relate to the accuracy of the underlying tax_liability which is not at issue see infra p and not to the admissibility of the evidence the irs received a form 1099-misc miscellaneous income from the continued service irs issued to petitioners a notice_of_deficiency in which it determined a deficiency in their income_tax and an accuracy-related_penalty under sec_6662 petitioners received the notice_of_deficiency on date petitioners did not file a petition contesting the deficiency determination on date the irs assessed petitioners’ tax_liability petitioners failed to pay the assessed tax_liability and on date the irs issued to petitioners a final notice_of_intent_to_levy and notice of your right to a hearing on date the irs received petitioners’ timely filed form request for a collection_due_process or equivalent_hearing cdp hearing request in the cdp hearing request petitioners stated that they disagreed with the levy because ms delon’s employer improperly classified her as an independent_contractor and therefore the deficiency determination was incorrect on date settlement officer darla weatherby of irs office of appeals appeals sent petitioners a letter scheduling a telephone cdp hearing for date pincite p m the letter advised petitioners that appeals could not consider whether petitioners owed the amount due if petitioners had received a continued foundation that reported ms delon earned dollar_figure of income petitioners disagree with the amount of income and also argue that the foundation improperly characterized ms delon as an independent_contractor instead of as an employee notice_of_deficiency regarding that amount the letter further stated that in order for officer weatherby to consider collection alternatives petitioners had to submit a form 433-a collection information statement for wage earners and self- employed individuals and file all required tax returns petitioners did not submit any information to officer weatherby and the scheduled hearing did not take place on date the irs issued to petitioners a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination sustaining the proposed levy opinion sec_6330 provides that the secretary shall furnish taxpayers with written notice of their right to a hearing before any property is levied upon sec_6330 further provides that the taxpayer may request administrative review of the matter in the form of a hearing within a prescribed 30-day period sec_6330 and b petitioners’ and tax returns had not been filed officer weatherby instructed petitioners to call her at the scheduled hearing time but she did not receive any call at some point petitioners attempted to call officer weatherby but they do not explain why they were unable to reach her pursuant to sec_6330 a taxpayer may raise at the sec_6330 hearing any relevant issue with regard to the commissioner's collection activities including spousal defenses challenges to the appropriateness of the commissioner’s intended collection action s and alternative means of collection 114_tc_604 114_tc_176 if a taxpayer received a notice_of_deficiency for the year in issue or otherwise had the opportunity to dispute the underlying tax_liability the taxpayer is precluded from challenging the existence or amount of the underlying tax_liability sec_6330 sego v commissioner t c pincite goza v commissioner t c pincite petitioners challenge the existence and amount of their underlying tax_liability for the irs issued petitioners a notice_of_deficiency for petitioners received the notice_of_deficiency on date therefore petitioners are precluded from challenging the existence or amount of the underlying tax_liability see sec_6330 sego v commissioner t c pincite goza v commissioner t c pincite where as here the existence and amount of the taxpayer’s underlying tax_liability are not at issue we review the commissioner’s determination for abuse_of_discretion sego v commissioner t c pincite goza v commissioner t c pincite petitioners did not request that officer weatherby consider collection alternatives failed to provide her with the financial information that she requested or file all required tax returns and disputed only the underlying tax_liability in their cdp hearing request accordingly respondent did not abuse his discretion in determining that collection activity should proceed to reflect the foregoing decision will be entered for respondent


department of the treasury employer_identification_number contact person - 1d number contact telephone number uil internal_revenue_service p o box cincinnati oh number release date date date legend y name of scholarship w name of trust m state x dollar_figure y dollar_figure z dollar_figure u dollar_figure w dollar_figure p dollar_figure v number of residents dear we have considered your request for advance approval of your grant-making program under sec_4945 of the internal_revenue_code dated date our records indicate that you were recognized as exempt from federal_income_tax under sec_501 of the code and that you are classified as a private_foundation as defined in sec_509 your letter indicates that you will operate a grant-making program called y that will be awarding scholarships to students who are residents of an eligible county in an eligible state listed on new schedule a to your trust document and graduating from public high schools located in eligible counties which are rural counties having fewer than v residents as determined by the u s census bureau and who will require financial assistance to attend college state as m exhibit a to your trust document indicates the eligible each scholarship awarded under this trust shall be in an amount sufficient to pay the unmet financial need of the recipient up to z the unmet financial need of the recipient shall be determined by totaling tuition and fees plus x dollars for books and supplies plus y dollars for room and board and x dollars for personal expenses then deducting the amount of grants excluding work study grants waivers and scholarships obtained by or awarded to the recipient and by the amount of the recipient's expected family contribution as determined by the free application_for federal student aid the dollar amount of each scholarship to be awarded shall be determined by your trustee and executive director and shall be subject_to subsequent revision pursuant to the terms of this trust subject_to the approval of the trustee of w eligibility requirements are as follows each applicant must be recommended by a qualified educator’ affiliated with the high school attended by the applicant who must provide a letter of recommendation which states that he educator believes that the applicant meets the minimum award criteria specified in the trust agreement a qualified educator’ is either a teacher who taught the applicant in high school or the high school counselor or the high school principal all scholarships shall be awarded only to recipients who are selected by your grant committee until the grantor’s death or incompetency each recipient must be a resident of an eligible county located in an eligible state after the grantor’s death or incompetency each recipient must be a resident of an eligible county located in any state in the united_states the trustee shall publish on your website a listing of all eligible counties in each state when each new u s census bureau population survey is published the list of eligible counties will be updated by the trustee and subject_to the approval of the trustee of w each recipient must be a citizen_of_the_united_states the recipients must have attended during their junior and senior years and must graduate from a public high school located in an eligible county they must have a cumulative grade point average of or higher they must score composite score or higher on the act or the equivalent score on any scholastic attainment in a high school which places the recipient in the top quartile of all the students taking such test and which test has been approved by your trustee and the trustee of w each recipient must authenticate to the satisfaction of your trustee a financial need of at least p dollars in order to attend college each recipient must apply for federal and state entitlement grants excluding work study grants waivers and scholarships for which they are eligible as well as any grants waivers or scholarships recommended by the trustee each recipient must be a motivated and high-achieving student who aspires to obtain a college education to better himself or herself and not to satisfy the desires of others each first time recipient must be accepted for enrollment and must enroll at a four year or higher not-for-profit accredited college or university public or private located in any state in the united_states for the fall semester immediately following recipient's high school graduation each recipient must maintain an academic course load which will allow him or her to graduate from an eligible college or university in four years time each recipient must maintain a dollar_figure cumulative grade point average or equivalent and provide the executive director with a copy of his or her official transcript at the end of each academic semester if a dollar_figure cumulative grade point average is not maintained the scholarship is forfeited scholarship recipients must declare an academic major prior to the commencement of their junior year of study they must live in dormitory housing provided by the college or university during their freshman year unless waived by the executive director each recipient must cooperate and participate in work shops and other activities sponsored by the trust unless excused from doing so by the executive director prior to the start of each academic year each recipient must provide you with a balanced budget for the upcoming year certified by the recipient listing all the anticipated income savings grants scholarships and awards as well as all anticipated expenses and all outstanding debts and assets at the end of each academic year each recipient must provide you an annual report describing the accomplishments and progress made by the recipient towards those goals represented to the grant committee as a part of his or her application each recipient must not have been convicted of a felony each recipient must act in a manner which consistent with the representations made by the recipient to the grant committee in applying for the scholarship each recipient must sign a written_agreement and waiver permitting the trust to publicize in the recipient’s local newspaper local media and on your website the recipient's name personal photo or likeness personal achievements and biography to help publicize the scholarship each applicant must include a properly executed all-inclusive liability waiver with the applicant’s application submittal package signed by the applicant and the custodial_parent s and notarized the state department of elementary and secondary education through an e-mail announced the establishment of the scholarship and mailings were made to the counselors in each and every public high school in each and every eligible county after the grantor's death or incompetency during the third week of august of each year the trustee shall mail a one page informative letter about the scholarship along with a brochure to the high school principals and high school counselors of all public schools in the united_states located in eligible counties the trustee will also maintain your website to inform the general_public about your scholarship each scholarship shall be awarded for one academic year consisting of two semesters fall and winter and may be renewed yearly by the recipient at the discretion of the grant committee for up to three additional years or until the recipient graduates if sooner the recipient continues to qualify for the scholarship each scholarship shall be renewable by the recipient for up to three additional years if the recipient fulfills the conditions for renewal of the scholarship prior to renewal of the scholarship each recipient must convince the grant committee that he or she is making notable progress towards those goals represented when the scholarship was first awarded the amount of the renewed scholarship shall be determined in the same manner of as the first scholarship the maximum dollar amount of a renewed scholarship shall be limited to and shall not exceed the dollar amount of the first scholarship awarded to the recipient recipients who successfully renew their scholarships shall be eligible for an international study grant each recipient must personally contribute toward the cost of his or her education by working a minimum of two hundred forty hours prior to the start of each subsequent academic year they may work as an intern in their area of academic interest or study or may volunteer to work for a recognized exempt charitable_organization with the hours worked being credited toward the work requirement subject_to the prior approval of the executive director confirmation of the employment or volunteer activity shall be provided to the executive director and the executive director shall verify and evaluate such information and shall provide such information to the grant committee prior to the grant committee considering a recipient’s request to renew his or her scholarship each scholarship may be reinstated if illness interrupts a recipient’s ability to continue his or her college education and the interruption is for less than one year the recipient may apply after recovery for reinstatement of the scholarship commencing the next school year reinstatement may also be allowed if a college or university closes for any part of a normal academic year and the recipient is unable to obtain satisfactory course instruction or grades any such reinstatement is evaluated upon its own merits and at the discretion of the trustee and executive director subject_to approval of the trustee of the trust in such event until the grantor's death or incompetency the grantor shall have discretion to determine the process to be used to select applicants interview applicants select finalists award scholarships and other matters when administering the trust but always on an objective and non-discriminatory basis regardless of said applicant’s race creed color sexual orientation religion disability or sex the grantor’s right of discretion shall not pass on to a successor trustee until the grantor’s death or incompetency the grantor shall review all the applications to verify that they meet the eligibility requirements after the applications have been reviewed all the applications which meet the requirements are assigned to seven readers the readers review the applications and rank those into one of three categories being designated and after they are ranked they are reviewed and the ones where there is an agreement that they are 3’s are deleted from consideration for the applications where there is an agreement that they are 1’s’ they are considered finalists group additional finalist are selected the finalists are then personally interviewed by an interview panel and based on their evaluation the scholarships are awarded those that are ranked are re-evaluated and out of that finalists shall be evaluated based upon his or her character academic ability achievement in and out of school work experience shall be given consideration in lieu of school or community activities personal goals that are meaningful and substantive and his or her future promise as shown to the grant committee the readers must execute a reader's agreement to evaluate applications pursuant to the readers terms and conditions and reader guidelines readers can not review applications from any school they are associated with or the applications associated with any applicants parents or educators known to the reader the applications are ranked on the following criteria academic ability leadership ability significant employment or volunteer work future promise and family circumstance the interview panelists must execute a panelist agreement to serve as a panelist to interview and rank finalists pursuant to the panelist terms and conditions and panelist guidelines finalists are ranked on the following criteria character achievement personal goals plan to achieve goals and future promise the seven readers and the six members of the interview panel are diverse individuals with backgrounds in education or administration in the education field or other community or government fields all scholarship awards shall be made by the grant committee no scholarships may be awarded without the prior signature approval of a majority of the members of the grant committee relatives of the grantor trustee executive director or to a person serving on the grant committee within the third degree of consanguinity are not eligible for the scholarships while the grantor is acting as trustee the grant committee shall consist of the grantor trustee and at least two other members selected by the grantor after the grantor's the death or incompetency the trustee and executive director shall appoint a five member screening committee whose members shall be subject_to prior approval of the trustee of the trust the executive director shall not be a member of the screening committee the trustee and executive director will review with all members of the screening committee the trust articles and schedule a prior to the start of the award process each year the executive director shall provide the screening committee with a copy of all approved applications submitted by eligible applicants excluding financial information the screening committee shall select and interview the most qualified applicants the number of applicants interviewed shall be four times the estimated number of scholarships to be awarded the estimated number of scholarships will be determined by the trustee and executive director based on prior years experience and the estimated amount of funding available for the new scholarships funding of existing scholarships shall take precedence over the funding of new scholarships the screening committee shall interview and evaluate each applicant's character academic ability achievement work experience shall be given consideration in lieu of school or community activities personal goals and future promise after all interviews have been completed the screening committee shall rank all applicants the top ranked applicants shall be selected as finalists and the number of finalists selected shall be two times the estimated number of scholarships to be awarded each finalist shall be notified by letter the executive director shall provide the grant committee with a complete informational package on each finalist excluding financial information each finalist shall be evaluate based on his or her character academic ability achievement work experience shall be given consideration in lieu of school or community activities personal goals that are meaningful and substantive and his or her future promise as shown to the grant committee after all finalists are interviewed they shall be ranked then with the assistance of the trustee and executive director the dollar amount of each scholarship shall be determined the actual dollar amount of each scholarship awarded shall be subject_to later revision pursuant to the terms of this trust and be awarded starting with finalist ranked number then so on to the extent that budgeted funds permit or until one-half of the number of finalists interviewed have been awarded a scholarship whichever shall first occur the grant committee shall not award more than one scholarship for every two finalists interviewed by the grant committee each recipient of a scholarship shall be promptly notified by certified mail return receipt requested or private courier a number of finalists not awarded a scholarship equal to one-third the number of finalists who are awarded a scholarship shall be selected as alternates with the next best finalist not awarded a scholarship being selected as the first alternate and so on scholarship is awarded but not accepted by the recipient pursuant to the following procedures and the scholarship is subsequently withdrawn the first scholarship withdrawn shall be offered to the first alternate and so on until all scholarships have been awarded or there are no more alternates ifa each recipient must acknowledge that he or she accepts the scholarship offered to him or her within fourteen calendar days following receipt of notification or within fourteen calendar days after such notification is sent by certified mail return receipt requested to the address of applicant which ever shall first occur the form must be signed by the recipient and the parents or legal guardians and all signatures must be notarized the return envelope must be postmarked by the usps no later than fourteen calendar days following delivery of the scholarship notification any scholarship not accepted by recipient in this manner shall be deemed rejected by the offeree and shall be immediately withdrawn by the executive director subject only to the approval of the trustee and offered instead to the alternates as describe previously each finalist that was identified as an alternate shall receive x dollar award to be used by the recipient to further his or her education each finalist interviewed by the grant committee and not awarded a scholarship or selected as an alternate shall receive u dollars to be used by the recipient to further his or her education a confirmation of progress made towards completion of degree within years time must be provided to the executive director at the end of each academic year if the four year graduation schedule can not be maintained the recipient shall forfeit his or her scholarship unless a hardship variance is obtained by the recipient from the trustee and executive director and approved by the trustee of w the award of scholarships for successive years of study shall be contingent upon the recipient continuing to be eligible in the sole opinion of the grant committee if the scholarship is no longer awarded to a recipient for a subsequent year because recipient no longer qualifies the trust shall not award the forfeited scholarship to a substitute recipient the funds appropriated for a forfeited scholarship shall be retained by the trustee for use in fulfilling the purpose of the trust a member serving on the screening committee shall not serve on the grant committee and a member serving on the grant committee shall not serve on the screening committee the membership of the grant committee shall be determined by the trustee and the executive director of the foundation subject_to the approval of the trustee of the w each member of the grant committee must meet the eligibility criteria for members of the grant committee the executive director of the trust shall not be a member of the grant committee the trustee and executive director will review with all members of the grant committee the the trust articles and schedule a prior to the start of the award process each year executive director shall ensure that the criteria and procedures contained and adopted by the grantor and incorporated in the trust on schedule a are followed in determining who will receive the scholarship each member of the grant committee must have attained the age of twenty-one years and have graduated from a college or university with an undergraduate degree equivalent to a bachelor of arts or bachelor of science degree they must have graduated from a public high school preferably located in an eligible county one member of the grant committee must be a high school principal or counselor who is or has been employed by an eligible high school one member of the grant committee must be an upper level administrator who is or has been employed by an eligible college or university the remaining three members of the grant committee must be from fields of endeavor which do not involve educating students or the operation of an educational_institution each member of the grant committee must have distinguished himself or herself in either his or her professional or civic life be a person of good moral character and be interested in the advancement of knowledge and education of students who qualify for a scholarship no member of the grant committee may have any economic incentive direct or indirect to award a scholarship to a recipient each member of the grant committee must have experience in evaluating the potential and ability of individuals to distinguish themselves a grant committee member may not participate in interviewing or determining whether or not to award a scholarship to a recipient who has attended an educational_institution which employed that grant committee member within the prior four year period members of the grant committee must vote in favor of awarding the scholarship in such event three non-effected members of the grant committee shall affirm to the trustee and executive director said member's willingness to serve for the term appointed independence from improper or undue influence by others and willingness to evaluate each applicant based upon the totality of the applicant’s character academic ability achievement in and out of school and personal goals on an objective and non-discriminatory basis regardless of said applicant's race creed color sexual orientation religion disability or sex each member of the grant committee shall be appointed for a term of three years and may be reappointed to successive terms of three years each with the approval of the trustee executive director and the trustee of the trust the trustee and executive director shall fill vacancies in any position on the grant committee that becomes vacant because of a member's death disability resignation or because said member no longer meets the criteria for membership on the grant committee however such appointee shall be subject_to the approval of the trustee of the w a member of the grant committee may be removed by the trustee and executive director at any time with or without cause with the approval of the trustee of the w the trustee and executive director may request removal of a member of the grant committee who either is not devoting sufficient time to his or her duties as a member of the grant committee or he or she no longer meets the criteria for membership on the grant committee the trustee and executive director may appoint a replacement who meets the grant committee requirements and subject_to the approval of the trustee of the w the replacement member shall serve for the remaining unexpired term of the removed member members of the grant committee shall not be compensated however the executive director shall reimburse all members of the grant committee for actual and reasonable expenses_incurred traveling to and from the meetings of the grant committee to and from interviews of prospective recipients and while pursuing their duties as members of the grant committee upon receipt of a statement for such expenses the grant committee shall not award scholarships or obligate the trust to award scholarships in excess of the amount of funds budgeted for such purposes each year by the trustee and executive director and in the event the trust lacks funds to fully fund the scholarships awarded by the grant committee funds shall be applied first to discharge the trust obligations to fourth year scholarships recipients next to third year recipients then second year recipients and only after the foregoing scholarships have been funded shall the executive director disburse funds to award to first year recipients to the maximum extent possible the executive director shall distribute the scholarship proceeds directly to the college or university attended by the scholarship recipient to be disbursed by the college or university in accordance with the guidelines provided by the trust to the maximum extent possible distributions payments shall be made at the beginning of each semester for which the scholarship recipient has enrolled funds for room and board if the recipient is not living in a college dormitory shall be limited to w dollars each semester and shall be paid directly to the recipient at the beginning of each semester each recipient must account for the expenditure of such funds at the end of each semester to the satisfaction of the executive director such funds shall be adjusted for any change in the median household_income for the state of missouri as hereafter published by the u s census bureau rounded up or down to the nearest hundred dollars before funds are distributed for the first academic year each recipient must provide the executive director a written four year degree plan which has been approved and certified to by the college counselor and registrar certifying as to its feasibility and that if plan is followed it will lead to the award of a degree within a four year period of time the recipient must certify that he or she approves of and agrees to follow the degree plan any changes in the plan must be promptly reported to the executive director and if the change will prevent the recipient from graduating with in the four years time the scholarship will be terminated with prior approval of the executive director the recipient may attend summer school to make up any deficiency and if by doing so the recipient can maintain a four year graduation schedule the scholarship may be continued upon presentation of a new degree plan approved and certified to by the college counselor and registrar certifying as to its feasibility and that if revised plan is followed it will lead to the award of a degree within a four year period of time all cost incurred to attend summer school shall be borne by the recipient the executive director subject_to trustee approval shall have the authority to approve or disapprove changes in the amount of a scholarship to be awarded due to a change in the recipient’s circumstances each recipient shall be responsible for promptly notifying the executive director of any change or potential change which could result in a change in the basis upon which the original scholarship award was premised failure to provide notification may result in termination of the scholarship such changes which are required to be reported shall include but shall not be limited to changes in direct academic costs changes in four year degree plan additional grants or scholarships awarded indebtedness and any other material_change which would affect the recipient's continued eligibility for a y the recipient must not incur indebtedness without the prior approval of the executive director all debt incurred by the recipient without the prior approval of the executive director shall be deducted from the award amount of the scholarship and if the resulting scholarship amount is less than p dollars the scholarship shall be immediately terminated indebtedness incurred by the recipient and not reported on the recipient's financial report submitted to the executive director shall result in the immediate termination of the scholarship the trustee shall permanently retain at the office of the trust all records that relate to the administration o the trust and a backup of such records at a secure off site location sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i its grant procedure includes an objective and nondiscriminatory selection process ii such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours lois lerner director exempt_organizations enclosures notice redacted copy of this letter


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b05-plr-100853-02 date date in re legend parent company exchange rule a industry services instruments state x country y tax_year plr-100853-02 date date a b c d e f dear this is in reply to a letter dated date in which rulings are requested with regard to certain federal_income_tax consequences of proposed activities involving the above taxpayers the rulings in this letter are based on the facts and representations submitted under penalties of perjury in support of the request verification of that information may be required as part of the audit process the material information is summarized below parent a state x corporation is a holding_company with subsidiaries primarily engaged in the industry the stock of parent is publicly traded on the exchange parent is the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return the group company is a state x corporation that is a member of the group company engages in the industry by providing services company’s authorized capital stock consists of a shares of common_stock having a par_value of dollar_figureb per share and c shares of preferred_stock as of date company had outstanding d shares of its authorized common_stock which includes e shares of its country y subsidiary that are exchangeable into shares of company common_stock and f shares of its authorized preferred_stock both parent and company regularly compute their federal_income_tax liability using an accrual_method of accounting and parent files the group’s consolidated federal_income_tax return on a tax_year basis the management of parent determined that it will further the business of parent and company to facilitate the use of option strategies based upon the price of parent common_stock by company’s customers company received a letter relating to rule a plr-100853-02 dated date from exchange the letter granting company permission to trade in parent stock and to enter into certain designated option strategies involving parent stock on an unsolicited basis company proposes to sell a put option on parent stock to a client and acquire a put option on parent stock from a third party with the terms of such option contracts allowing either for physical or cash settlement the proposed option company and parent make the following representations i ii iii iv v vi company’s activities with respect to the proposed option will be limited by exchange procedures company is a dealer_in_securities including the proposed option for purposes of sec_475 of the internal_revenue_code_of_1986 as amended the code company will not take the position that the proposed option or parent stock is held for investment or as a hedge with respect to either a security to which sec_475 does not apply or a position right to income or a liability which is not a security in the hands of company company’s tax basis in the proposed option and parent stock will not be adjusted by reference to the basis of any property or by reference to income gain deduction or loss from other_property neither company parent nor any other member of the group has structured or engaged in any transaction while a member of the group or in anticipation of becoming a member of the group during the current taxable_year or in any taxable_year within the preceding taxable years that is open for assessment under sec_6501 with a principal purpose of avoiding gain or creating loss on parent stock or a position in parent stock subject_to sec_475 the conduct of company with respect to the proposed option will be similar to company’s conduct with respect to options on the stock of corporations other than parent except as required to satisfy rule a the letter and other applicable securities laws regulations pronouncements and judicial rulings each as amended from time to time sec_1_1502-13 provides that if a member m of a consolidated_group recognizes a loss directly or indirectly with respect to the stock of its common parent p the loss will be permanently disallowed and will not reduce m’s earnings_and_profits sec_1_1502-13 provides that sec_1_1502-13 does not apply to plr-100853-02 any loss from p stock held by m if m regularly trades in p stock of the same class with customers in the ordinary course of its business as a dealer the gain_or_loss on the share is taken into account pursuant to sec_475 and certain other requirements are met sec_1_1502-13 provides that the principles of sec_1_1502-13 with appropriate adjustments apply to positions in p stock to the extent that p’s gain_or_loss from an equivalent position would not be recognized under sec_1032 based solely on the information submitted and the representations set forth above we hold as follows in the case of the proposed option company meets the requirements of sec_1_1502-13 for the exception to the general_rule of sec_1 f i sec_1_1502-13 and iv does not disallow company’s recognized losses with respect to the proposed option including i the written put option and ii the acquired put option in both the case of cash or physical settlement of the proposed option and does not prevent such losses from reducing company’s earnings_and_profits no opinion is expressed about the tax treatment of the above mentioned transactions under any other provision of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the above transactions that are not specifically covered in the above rulings a copy of this letter must be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the proposed transactions covered by this ruling letter are consummated this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours charles whedbee senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service national_office technical_advice_memorandum index uil no cc dom p su b4 number release date case mis no tam-121901-98 date date legend spouse children marital trust trust decedent family_trust state company a company b state statute issue does the disposition of the shares in company a and company b to the children as a result of the spouse’s disclaimer constitute a specific_bequest or a residuary bequest issue under the terms of the decedent’s will and trust does the marital bequest bear any portion of the estate_tax conclusion issue the disposition of the shares to the children is a residuary bequest conclusion issue under the terms of the decedent’s will and trust and state law the marital bequest does not bear the burden of any portion of the estate_tax facts the decedent died testate on date a resident of state his will had been executed in in addition the decedent had executed an inter_vivos revocable_trust trust that became irrevocable on decedent’s death he was survived by the spouse and two children children article i paragraph a of the will states that in the trust instrument the decedent directed the trustee to pay all estate_taxes article i paragraph b of the will states as follows despite the provisions of paragraph a my personal representative shall pay the amount of estate_taxes certified by the trustee as exceeding the principal out of which the trustee is directed to provide for payment any such amount payable by my personal representative shall be paid out of the share of my residuary_estate that does not qualify for the federal estate_tax_marital_deduction without seeking reimbursement or recovery from any person emphasis supplied under article ii of the will decedent bequeathed all tangible_personal_property to spouse if she survives him under article iv the residue of the probate_estate is to pass to and become part of the principal of trust article first of the trust directs the trustee to distribute to decedent during his lifetime such amounts of income and principal as decedent may request at any time article second of the trust provides for the payment of estate_tax as follows upon my death the trustee shall pay from the principal of the trust estate the expenses of my last illness and funeral claims allowable against my estate inheritance taxes and generation-skipping taxes on direct skips assessed by reason of my death assets or funds otherwise excludable in computing federal_estate_taxes shall not be used to make the foregoing payments emphasis supplied under article third a of the trust if decedent is survived by spouse a marital trust intended to qualify for a marital_deduction under sec_2056 of the internal_revenue_code is established as follows if my spouse spouse survives me the trustee shall set_aside out of the trust estate that pecuniary amount equal to the value of qualified_property as defined in this paragraph reduced by the largest amount if any which if allocated to the family_trust would result in no increase in federal estate_tax payable at my death as used in this paragraph qualified_property is all property disposed of by this trust or my will and which is not otherwise effectively disposed of by the payment of debts expenses of administration and other charges payable from principal by my personal representative or trustee including the death taxes referred to in article i of my will emphasis supplied under the terms of the marital trust the spouse is to receive all trust income for her life and principal is to be distributed for her health support in reasonable comfort and maintenance on spouse's death the remaining principal is to be distributed to those of the decedent's descendants as spouse appoints by will article fourth in the flush language provides that the trustee as of my death shall set_aside the balance of the trust as a separate trust named the family_trust under article fourth paragraph a and b the income from the family_trust is to be paid to spouse for life and principal is to be distributed for spouse's health support in reasonable comfort and maintenance on spouse's death the corpus is to pass to those of decedent's descendants as spouse may appoint by will article fourth paragraph c of the trust provides that on the death of the last to die of decedent and spouse the remaining principal of all trusts then held under articles third and fourth is to be distributed per stirpes to the decedent's then living descendants to the extent the funds are i not effectively appointed by the spouse and ii not entirely exempt from generation-skipping_transfer_tax at decedent’s death the trust held assets having a value of more than dollar_figure the probate_estate had a value of dollar_figure all of which passed to the trust based on the above-described testamentary dispositions the trust corpus but for dollar_figure reflecting the amount that would pass tax-free as a result of the estate’s available unified_credit passed to the marital trust the balance of the trust corpus was to pass to the family_trust at the time of decedent’s death certain shares of stock in company a and company b having a value of approximately dollar_figure were held in the trust and were distributable to the marital trust and or the family_trust however the spouse executed a qualified_disclaimer within the meaning of sec_2518 pursuant to which she disclaimed her income and principal rights and her power_of_appointment with respect to all shares held by the trusts in company a and company b by reason of the disclaimer spouse was considered under applicable state law to have predeceased the decedent with respect to the shares accordingly the shares passed outright to the children under the flush language and paragraph c of article fourth of the trust law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2056 provides that for purposes of the tax imposed by sec_2001 the value of the taxable_estate except as limited by sec_2056 is to be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property which passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides that in determining for purposes of sec_2056 the value of any interest in property passing to the surviving_spouse for which a deduction is allowed under sec_2056 there is to be taken into account the effect which the tax imposed by sec_2001 or any estate succession legacy or inheritance_tax has on the net value of the interest passing to the surviving_spouse in 317_us_95 the supreme court held that applicable state law as to the devolution of property at death should govern the ultimate impact of the federal tax on the respective beneficiaries the applicable rules of the state apply if the will or other governing instrument has no tax payment directions however directions in the governing instrument may provide that the burden of tax_payments is to be apportioned otherwise in estate of lewis v commissioner tcmemo_1995_168 the decedent’s will provided that the residue of her estate was to pass to a revocable_trust which became irrevocable at her death the will further provided that estate_taxes were to be paid out of the residue of my estate without apportionment and with no right of reimbursement from any recipient of any such property the trustee of the trust was to establish a marital trust funded with the minimum amount necessary to reduce the estate_tax to zero taking into account all available credits the balance passed to a family_trust the trustee had the discretion to pay to the executor amounts for estate_taxes however any such amount was to be paid from the family_trust the issue before the court was whether the estate_tax should be paid from the residue of the probate_estate as provided in the will or the family_trust as provided in the revocable_trust the court held that although the trust provisions referred to the maximum marital_deduction and gave the trustee the discretion to pay estate_taxes this did not override the clear direction in the will the court concluded that the tax payment clause in the will governed and the estate_taxes were to be paid from the residue of the probate_estate see estate of fagan v commissioner tcmemo_1999_46 estate of miller v commissioner tcmemo_1998_416 but see 151_f3d_1201 9th cir state statute provides that if a part of the property concerning which the estate_tax is levied or assessed is held under the terms of any trust created intervivos then unless the governing instrument directs otherwise if any portion of the trust is directed to pass or to be held in further trust by reference to a specific property or type of property fund sum or in any other nonresiduary form the net amount of the tax attributable to that portion must be charged to and paid from the corpus of the residuary share of the trust without requiring contribution from the nonresiduary interest or the persons receiving or benefiting from that interest the net amount of the tax directly attributable to the residuary share of the trust must be charged as follows the net amount of the tax attributable to each residuary temporary interest must be charged to that portion of the residuary principal that supports the temporary interest without apportionment and the net amount of the tax attributable to the balance of the residuary share must be equitably apportioned among the residuary beneficiaries by charge to the corpus of their interest in the proportions that the value of the residuary interest of each included in the measure of the tax bears to the total of all residuary interests included under state law a direction against application of the state apportionment statute may be explicit or implicit but the direction must be clear and unequivocal however an implicit direction is not sufficient to avoid the state statute unless the court finds that the testator considered and made a deliberate and informed decision about the burden of taxation issue under state law a specific_bequest is a gift of specific property that can be distinguished from all other_property in the estate of the same kind in contrast a residuary bequest is satisfied out of the general assets of the estate and it is payable after other legacies have been satisfied and debts and expenses have been paid in re estate of gilbert v the society of new york hospital et al so 2d estate of jones v jones so 2d in this case under the dispositive arrangement if decedent is survived by spouse a pecuniary amount determined by formula passes to the marital trust as a preresiduary disposition in addition under the flush language of article fourth on decedent’s death whether or not survived by spouse all other_property not passing to the marital trust under article third is disposed of under the flush language of article fourth as residuary property ie the balance of the property the spouse disclaimed her entire_interest in the company a and company b stock arising under both the marital trust and family_trust as a result of the disclaimer under applicable state law spouse was treated as predeceasing decedent with respect to the disclaimed property thus as a result of the disclaimer the shares passed to the family_trust and then outright to the children under the flush language of article fourth and paragraph c of article fourth although the disclaimer referenced specific assets to be disclaimed the characterization of these assets passing as a result of the disclaimer as either a specific or residuary bequest is dependent on the dispositive terms of the trust in this case as a result of the disclaimer the shares passed under the flush language of article fourth of the trust as a residuary bequest issue in this case the will specifically refers to the directions in the trust for payment of estate_tax the will contains directions for the executor to act in conjunction with the trustee in paying the tax under certain circumstances however since virtually all of decedent’s assets were held by the trust the tax payment clause in decedent’s will directing payment of taxes from the probate residue only if the tax_liability exceeds the trust assets did not become operative thus this case is distinguishable from cases such as estate of fagan and estate of lewis where the probate_estate contained substantial assets and the will contained unequivocal directions regarding the payment of estate_taxes the terms of the trust direct the trustee to pay estate_taxes out of the principal of the trust estate we do not believe this provision constitutes a direction regarding which assets or groups of assets are intended to bear the burden of payment of estate_taxes however article second of the trust does specifically direct that property excludible in computing the federal estate_tax is not to be burdened with payment of estate_taxes as discussed above we have concluded that as a result of the dispositive scheme in the trust and spouse’s disclaimer a pre-residuary bequest of a pecuniary amount passed to the marital trust and a residuary bequest funded almost in total with the disclaimed property passed outright with the exception of dollar_figure to the children under the state apportionment statute discussed above all estate_taxes are to be paid out of the trust residue there is nothing in the trust instrument that would override this result accordingly in this case all estate_taxes are to be paid out of the residuary bequest passing under article fourth that is the shares of stock in corporation a and corporation b plus dollar_figure the marital bequest under article third is not burdened with the payment of any estate_tax caveat s a copy of this technical_advice_memorandum is to be given to the taxpayer sec_6110 of the code provides that it may not be used or cited as precedent we note that the application of sec_2207b would not change this result sec_2207b prior to amendment by the taxpayer_relief_act_of_1997 which eliminated the requirement that the provision can be waived only by specific reference to sec_2207b provided if any part of the gross_estate on which tax has been paid consists of the value of property included in the gross_estate by reason of sec_2036 the decedent's_estate shall be entitled to recover from the person receiving the property the amount that bears the same ratio to the total_tax under this chapter that has been paid as a the value of the property bears to b the taxable_estate sec_2207b shall not apply if the decedent otherwise directs in a provision of his will or revocable_trust specifically referring to sec_2207b


internal_revenue_service department of the treasury index number ruling release date washington dc person to contact telephone number refer reply to cc dom p si - plr-119363-98 date date grantor_trust trustee a b state dear this is in response to your letter dated date submitted on behalf of grantor requesting a ruling that proposed trust will satisfy the requirements of a charitable_remainder_unitrust under sec_664 of the internal_revenue_code grantor proposes to establish trust under the laws of state trust is intended to qualify as a charitable_remainder_unitrust under sec_664 of the code the governing instrument of trust provides that the unitrust_amount is payable in equal shares to a and b for a term of five years if either a or b does not survive the term the entire unitrust_amount is payable to the survivor for the remainder of the term if neither a nor b survives the term then the entire unitrust_amount is payable to the then-living grandchildren of grantor for the remainder of the term at the end of the term the trustee shall distribute the entire principal and income of trust in equal shares to two charitable organizations specified in the governing instrument of trust if one of the specified charitable organizations no longer exists or is no longer an organization described in sec_170 sec_2055 and sec_2522 of the code then the entire principal and income shall be distributed to the remaining organization if neither organization exists or qualifies as a tax-exempt_organization under the above sections of the code then the trustee shall distribute the principal and income to one or more qualified tax-exempt organizations as the trustee shall select in the trustee’s sole discretion the unitrust_amount will be an amount equal to percent of the net fair_market_value of the trust assets determined as of the first day of the taxable_year of trust the trustee shall prorate the unitrust_amount on a daily basis for a short taxable_year and for the taxable_year in which the unitrust term expires the unitrust_amount will be paid in equal quarterly installments from income and to the extent that income is insufficient from principal such quarterly installments will be paid at the end of each quarter and the unitrust_amount must be paid to the trust recipients no later than the close of the taxable_year for which the payment is due any income of the trust for a taxable_year in excess of the unitrust_amount shall be added to principal trustee shall act as initial trustee a and b shall have authority to remove the trustee and appoint a successor by their mutual written consent if either a or b fails to survive the unitrust term the survivor shall have such authority if neither a nor b survives the unitrust term the then-living grandchildren of grantor shall have such authority pursuant to sec_4 of revproc_99_3 1999_1_irb_111 the internal_revenue_service has generally discontinued issuing rulings concerning whether a charitable_remainder_trust that provides for unitrust payments for one or two measuring lives satisfies the requirements described in sec_664 of the code in the present case trust provides unitrust payments for a term of years therefore your request is not subject_to sec_4 of revproc_99_3 in lieu of seeking the service’s advance approval of a charitable_remainder_unitrust taxpayers are directed to follow the sample provisions for charitable_remainder unitrusts outlined in revproc_90_30 1990_1_cb_534 by following the models contained in revproc_90_30 taxpayers can be assured that the service will recognize the trust as meeting all the requirements of a qualified charitable_remainder_unitrust under sec_664 of the code provided that the trust operates in a manner consistent with the terms of the trust instrument and provided it is a valid trust under applicable local law in addition for transfers to a qualifying charitable_remainder_unitrust the remainder_interest will be deductible under sec_170 and sec_2522 if the charitable_beneficiary otherwise meets all of the requirements of those sections in the present case grantor has noted that trust contains provisions which differ from the model language in rev_proc in several ways therefore we will issue a ruling on whether those provisions disqualify trust under sec_664 of the code first the provisions in the proposed trust differ from the model language in that the unitrust_amount is to be paid to the recipients for a term of years rather than for the lives of the recipients second the provisions in the proposed trust provide contingent beneficiary designations if one or both of the recipients should fail to survive the unitrust term third the provisions in the proposed trust differ from the model language in that they provide that the unitrust_amount must be paid to the recipients no later than the close of the taxable_year for which the payment was due fourth the provisions in the proposed trust designate multiple and alternate charitable remaindermen and provides for the appointment of a successor trustee sec_664 of the code sets forth the requirements to be a charitable_remainder_unitrust sec_664 provides that a fixed percentage which is not less than percent of the net fair_market_value of the assets valued annually is to be paid not less often than annually to one or more persons at least one of whom is not an organization described in sec_170 and in the case of individuals only to an individual who is living at the time of the creation of the trust for a term of years not in excess of years or for the life or lives of such individual or individuals no amount other than the above-described payments may be paid to or for_the_use_of any person other than an organization described in sec_170 following the termination of the payments described above the remainder_interest in the trust is to be transferred to or for_the_use_of an organization described in sec_170 sec_1_664-3 of the income_tax regulations provides that for taxable years ending after date the governing instrument must provide that the trust shall pay not less often than annually a fixed percentage of the net fair_market_value of the trust assets determined annually to a person or persons described in sec_1_664-3 for each taxable_year of the period specified in sec_1_664-3 sec_1_664-3 of the regulations provides that permissible unitrust beneficiaries may include members of a named class except in the case of a class which includes any individual all such individuals must be alive and ascertainable at the time of the creation of the trust unless the period for which the unitrust_amount is to be paid to such class consists solely of a term of years sec_1_664-3 of the regulations provides that in the case of an amount payable for a term of years the length of the term of years shall be ascertainable with certainty at the time of the creation of the trust except that the term may be terminated by the death of the recipient or by the grantor’s exercise by will of a retained power_to_revoke or terminate the interest of any recipient other than an organization described in sec_170 in any event the period may not extend beyond either the life or lives of a named individual or individuals or a term of years not to exceed years sec_1_664-3 of the regulations provides that the governing instrument of a_trust shall provide that if an organization to or for_the_use_of which the trust corpus is to be transferred or for_the_use_of which the trust corpus is to be retained is not an organization described in sec_170 at the time any amount is to be irrevocably transferred to or for_the_use_of such organization such amount shall be transferred to or for_the_use_of one or more alternative organizations which are described in sec_170 at such time such alternative organization or organizations may be selected in any manner provided by the terms of the governing instrument sec_2 of revproc_90_30 provides that if a taxpayer makes a transfer to a_trust that substantially follows one of the sample forms of trust contained therein the taxpayer may be assured that the service will recognize the trust as meeting all the requirements of a charitable_remainder_unitrust provided that the trust operates in a manner consistent with the terms of the instrument creating the trust and provided the trust is valid under local law sec_3 of revproc_90_30 provides that if provisions of a_trust are substantially_similar to those of the sample trusts provided in the revenue_procedure or in revproc_89_20 1989_1_cb_841 the service will recognize the trust as satisfying all of the applicable_requirements of sec_664 of the code even though the wording is varied to comport with local law and practice as necessary to create trusts define legal relationships pass property by bequest provide for the appointment of alternative and successor trustees or designate alternative charitable remaindermen sec_5 paragraph of revproc_90_30 provides that upon the death of the first of the unitrust_amount beneficiaries to die the survivor shall be entitled to receive the entire unitrust_amount based solely on the information submitted we conclude that upon the execution of trust the governing instrument will meet the requirements of a charitable_remainder_unitrust under sec_664 of the code provided that trust is a valid trust under applicable local law no opinion is expressed as to the federal tax consequences of the formation or operation of trust under the provisions of any other section of the code a copy of this letter should be attached to the first federal tax_return that reflects this transaction a copy is enclosed for that purpose this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to grantor sincerely yours j thomas hines senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa --------------- postn-140970-15 uilc date date to thomas a friday senior attorney small_business self-employed from adrienne e griffin senior technician reviewer procedure administration subject abatement of frivolous_return penalty this chief_counsel_advice responds to your request for assistance of date this advice may not be used or cited as precedent legend t s y1 y2 y3 y4 y5 y6 y7 ------------------- ------------ ------ ------ ------ ------ ------ ------ ------ postn-140970-15 ------ ------ -------- -------- --------------- y8 y9 d1 d2 d3 issue you forwarded to our office the following question which had been submitted by the taxpayer_advocate_service tas does the irs have the discretion to abate the sec_6702 frivolous filer penalty due to the mental incompetency of the t conclusion no t his representative or guardian may however wish to determine if t qualifies for a reduction of the frivolous_return penalty pursuant to sec_6702 and revproc_2012_43 2012_49_irb_643 discussed in more detail below facts t receives social_security disability and also a disability pension he was a non-filer for the taxable years y1 y2 y3 y4 y5 y7 y8 and y9 the irs created substitutes for return sfrs and after deficiency notices were issued the income taxes were assessed it also appears the service levied on the taxpayer’s social_security and pension benefits to begin collecting the liabilities on d1 y6 t submitted a form_843 claim_for_refund and request for abatement asking for a refund of tax and assessed interest for taxable years y3 and y4 as best we can discern from the copy of the taxpayer’s form_843 he asked for a refund of the sums levied from his social_security disability benefits t’s form_843 contained the following statements i am a private government_entity cannot be taxed the money was illegally deducted from my disability payment the irs is in violation of the 5th and 14th amendment of due process t also wrote the following across the top of the form request for net interest rate of zero under revproc_2000_26 according to the service’s transcript which you forwarded to our office along with correspondence from tas the service assessed the dollar_figure frivolous_return penalty under sec_6702 based on t’s form_843 prior to this assessment the service mailed to t a letter 3176c dated d2 y7 allowing him to file a corrected form_843 within days t did not reply to the letter 3176c postn-140970-15 --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ---------on d3 y9 the united_states district_court for the district of s issued an order which found that t was not competent to stand trial and ordered that he be released on bond subject_to restrictions not relevant here law and analysis a taxpayer may be assessed the civil penalty under sec_6702 if he files a document that purports to be an income_tax return the purported return lacks the information needed to judge the substantial correctness of the self-assessment or contains information indicating the self-assessment is incorrect and the position on the document is frivolous or demonstrates a desire to delay or impede the administration of federal tax law 130_tc_44 the form_843 a document a taxpayer may use to seek a refund of tax can be a purported return under sec_6702 id additional citations omitted pursuant to sec_6702 the service issued notice_2007_30 2007_14_irb_883 then issued updated notice_2008_14 2008_4_irb_310 and finally updated notice_2010_33 2010_17_irb_609 which identify positions the service determined are frivolous notice_2008_14 was effective for submissions and issues raised after date the statements t placed on form 843-that he is a private governmental entity not subject_to taxation and that the service’s actions violate the 5th and 14th amendments to the u s constitution-are similar or substantially_similar to the frivolous positions listed in notice_2008_14 and sec_6404 authorizes the service to abate the unpaid portion of an internal revenue tax or liability which is excessive or illegally assessed our office has located no reported case regulation or written policy of the service authorizing or requiring the abatement of the sec_6702 frivolous_return penalty when it is shown that the taxpayer is mentally incompetent moreover because there is no indication that t filed the form_843 in response to erroneous written advice from an employee of the service the abatement authority under sec_6404 is inapplicable next we summarize the body of law developed under the code’s civil_fraud penalty currently sec_6663 in order to provide examples of situations in which an individual’s mental capacity impacts whether he can be held liable for a penalty to sustain the civil_fraud penalty the service must establish an underpayment_of_tax and that some part of the underpayment was due to fraud knutsen-rowell inc et al v commissioner tcmemo_2011_65 a taxpayer’s entire course of conduct can sec_6404 also authorizes an abatement of an assessment made after the applicable expiration of the period of limitations on assessments no information was submitted to our office indicating the assessment of the frivolous_return penalty against taxpayer was made outside the limitation period postn-140970-15 establish the requisite fraudulent intent 137_tc_147 courts have refused to sustain the civil_fraud penalty in cases when the taxpayer’s mental condition established that his or her intent was not fraudulent see eg simonelli v commissioner tcmemo_1985_12 taxpayer who was periodically admitted to mental hospitals not shown to deliberately attempt to avoid taxes when he destroyed tax records 38_tc_251 no fraudulent failure to report capital_gain by taxpayer who suffered from severe psychosis or mental disease by contrast when the requirements for imposition of the civil_fraud penalty were established and the record showed that the taxpayer conducted business activities or managed his affairs the courts have upheld the service’s assessment despite claims that mental incapacity negated fraudulent intent parker v commissioner tcmemo_1985_263 taxpayer’s mental illness only affected some areas of his life and he continued to work as tax_return_preparer during years at issue when he misappropriated employer’s funds mccue v commissioner tcmemo_1983_273 notwithstanding testimony of psychiatrist indicating taxpayer was mentally ill in belief that tax law did not apply to him evidence also showed taxpayer contacted congressmen and attorneys to resolve his tax situation unlike the civil_fraud penalty the elements of the frivolous_return penalty under sec_6702 do not include the taxpayer’s intent in filing a frivolous tax_return consequently the above-cited cases do not support abatement of the frivolous_return penalty in this case we located at least one reported case in which a taxpayer contested her liability for additions to tax under sec_6651 for filing returns late because she was age during the years the returns were due and did not have the legal capacity to file the returns 67_f3d_29 2d cir bassett however is of limited utility in addressing whether the service is authorized to abate the sec_6702 penalty the court_of_appeals in bassett sustained the tax court’s opinion that because under new york law the parents of a child are the child’s legal guardians sec_6012 placed the responsibility to file the tax returns on the guardian bassett f 3d pincite according to the appeals court the proper focus was therefore on whether the child’s guardians showed reasonable_cause for the late-filed returns id pincite the frivolous_return penalty under sec_6702 unlike the additions to tax under sec_6651 or the accuracy-related and civil_fraud penalties includes no reasonable_cause defense the third requirement for assessing the frivolous_return penalty noted above includes an exception to this general_rule specifically under sec_6702 the service must show that a taxpayer’s conduct is based on a position the service has identified as frivolous or reflects a desire to delay or impede the administration of federal tax laws the second part of this test therefore takes into account the taxpayer’s intent in filing the particular document at issue however intent is not relevant in this case because t’s conduct was based on a position the service has identified as frivolous even assuming that the service is authorized to abate a penalty assessed under sec_6702 if the taxpayer is incompetent the information we presently have would not necessarily support abatement in particular the timing of the district court’s finding of incompetency to stand trial would weigh against postn-140970-15 t or his representative if any may wish to determine if he qualifies for a reduction of the frivolous_return penalty under sec_6702 which reads the secretary may reduce the amount of any penalty imposed under this section if the secretary determines that such reduction would promote compliance with and administration of the federal tax laws the service implemented this subsection through publication of revproc_2012_43 2012_49_irb_643 which describes the limited circumstances under which a taxpayer assessed a penalty under sec_6702 or b is eligible for a one-time reduction of any unpaid penalty liability the revenue_procedure applies to any person who has not fully paid the dollar_figure penalty and who seeks a reduction of such penalty pursuant to sec_6702 a taxpayer can request this reduction of the frivolous_return penalty under sec_6702 by making a written for request for reduction on form sec_6702 frivolous tax submissions penalty reduction or a successor form remitting a payment of dollar_figure in either of the two ways stated in revproc_2012_43 sec_2 making the request before the united_states files suit against the person for collection of the penalty and being in full compliance with all federal tax filing and payment requirements t or his representative should review revproc_2012_43 as it contains more specific information about these requirements and also includes disqualifying events the time limitation for qualification and other information case development hazards and other considerations none identified this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions abatement the district_court issued its order during date which wa sec_4 years after the taxpayer submitted the form_843 to the service given this series of events it is not certain the taxpayer was incompetent during date when he completed and mailed the form_843 to the irs if the taxpayer qualifies the outstanding sec_6702 penalty liability can be reduced to dollar_figure see revproc_2012_43 sec_4 and the taxpayer will have to be in full compliance with all federal tax filing and payment requirements as one of the prerequisites to securing a reduction of the frivolous_return penalty revproc_2012_43 sec_4


id office uilc cca-318164-09 ---------------- number release date from -------------------- sent wed pm to --------------------------------------------------------- cc --------------------- subject re legal argument - ------ -although not directly on point the is a good analogy as the acquisition of the stock of entities is the acquisition of assets - financial_assets rather than tangible intangible assets if a t p had purchased assets of one entity and the stock of another we were certainly use to look at the valuation of both the stock and the individual assets --------