office_of_chief_counsel internal_revenue_service memorandum number release date cc intl b07 jrussin posts-124550-14 uilc date date to nancy b romano area_counsel small_business self-employed from ricardo cadenas chief branch associate chief_counsel international subject litigation of usvi economic development program cases ty sec_2002 to this responds to your request concerning the impact of 715_f3d_455 3d cir aff’g in part and rev’g in part a f t r 2d d v i on cases involving taxpayers who appear to have participated in an arrangement described in notice_2004_45 2004_2_cb_33 meritless filing position based on sec_932 and sec_934 this memorandum should not be used or cited as precedent issue after the vento decision what factors should be applied to evaluate a claim of bona_fide residence in the u s virgin islands usvi in cases that factually are substantially_similar to those described in notice_2004_45 notice cases for taxable_year sec_2002 to conclusion the 11-factor facts-and-circumstances test set forth in 300_f2d_34 7th cir continues to provide the proper standard for evaluating a claim of bona_fide residence in the usvi for taxable_year sec_2002 to in a case described in notice_2004_45 the vento decision did not alter this standard the facts of the vento parents are distinguishable from the facts in most notice_2004_45 cases posts-124550-14 facts described by notice_2004_45 notice_2004_45 describes a scheme in which a taxpayer living and working in the united_states undertakes to i purport to become a usvi resident by establishing certain contacts with the usvi ii purport to terminate his or her existing employment relationship with his or her employer and iii purport to become a partner of a virgin islands limited_liability partnership that is treated as a partnership for u s tax purposes the taxpayer continues to provide substantially the same services to his or her former employer as before but the former employer makes payments to the usvi partnership which then passes the money to the taxpayer the usvi partnership either has already secured or then secures a reduction up to in usvi income_tax_liability under the usvi’s economic development program edp the taxpayer claims to be a bona_fide_resident of the usvi as required for the edp and claims an edp reduction in income_tax_liability on his or her usvi individual_income_tax_return the taxpayer claims that for purposes of computing his or her u s income_tax_liability the income is excluded under sec_932 notice_2004_45 states that the tax positions taken are highly questionable and in most cases meritless further stating that a claim of usvi residency for income_tax purposes may be considered without merit or fraudulent when the taxpayer continues to live and work in the united_states the notices of deficiency in these cases typically conclude that the taxpayer has entered into an abusive tax_avoidance scheme as described in notice_2004_45 this advice is provided based on the typical and shared elements in these cases law and analysis in vento the u s court_of_appeals for the third circuit applied the 11-factor standard set forth in 300_f2d_34 7th cir and held that the vento parents were bona_fide residents of the usvi as of date but that the three vento daughters were not the third circuit stated that t he district_court applied sochurek to this dispute and we will do so as well vento pincite the factors are intention of the taxpayer establishment of his home temporarily in the foreign_country for an indefinite period participation in the activities of his chosen community on social and cultural levels identification with the daily lives of the people and in general assimilation into the foreign environment physical presence in the foreign_country consistent with his employment nature extent and reasons for temporary absences from his temporary foreign home assumption of economic burdens and payment of taxes to the foreign_country marital status and residence of his family nature and duration of his employment whether his assignment abroad could be promptly status of resident contrasted to that of transient_or_sojourner treatment accorded his income_tax status by his employer accomplished within a definite or specified time good_faith in making his trip abroad whether for purpose of tax_evasion vento pincite quoting sochurek pincite posts-124550-14 when the third circuit’s factual findings with respect to the vento parents are compared with notice_2004_45 it is clear that vento is distinguishable from the typical notice_2004_45 case of particular significance the tax abuse in which the ventos had engaged was not with respect to rules exclusive to the usvi but rather involved a son of boss tax_shelter the typical notice_2004_45 case in contrast involves a direct abuse of a tax_benefit available solely through a usvi entity and expressly conditioned on bona_fide residence in the usvi furthermore the court’s specific factual findings with respect to the situation of the parents in vento are distinguishable from the typical notice_2004_45 case in many ways relevant to the sochurek standard the following discussion considers each of the relevant factors in turn the 11-factor test as noted in both sochurek and vento while not all sochurek factors will be present in every situation consideration and weight should be given to each factor that is applicable facts distinguishing the parents in vento from notice_2004_45 cases are expected to arise in consideration of factors and intention of the taxpayer the vento court found that the vento parents certainly decided to move to the virgin islands vento pincite in contrast the promotional materials described in notice_2004_45 falsely advised that participants could continue to live and work in the united_states and nevertheless be a bona_fide_resident of the usvi establishment of his home the third circuit found that the house in the usvi the ventos purchased and were renovating was not unlivable vento pincite n establishment of a home should take into consideration the type of property amount expended and type of accommodation by contrast to the ventos many notice_2004_45 taxpayers had only shared or short-term accommodations in the usvi physical presence mr vento was present in the usvi for the entire month of date a fact on which the court focused because his bona_fide residence was only at issue for that year vento pincite most notice_2004_45 cases involve more than one tax_year and in many cases bona_fide residence is at issue for an entire taxable_year even where a single month is critical the taxpayer may not be present for the entire month see vi derivatives llc v united_states no 06-cv-0012-jrs-rm d v i date and vifx llc v united_states no 06-cv-0013-jrs-rm d v i date granting government motions for partial summary_judgment sochurek f 2d pincite vento f 3d pincite pursuant to sec_908 of the american_jobs_creation_act_of_2004 p l the wording in code sec_932 was changed from at the close of the taxable_year to during the entire taxable_year effective for tax years ending after date posts-124550-14 assumption of economic burdens the court found that the vento parents had observed all the legal formalities of residency vento pincite in many notice_2004_45 cases the taxpayers maintain their driver’s licenses voting and other registrations in the united_states and not in the usvi marital status and residence of his family the third circuit found that mr and mrs vento lived with one another in the usvi vento pincite their daughters who lived elsewhere were adults and not dependents of their parents id by contrast many taxpayers in notice_2004_45 cases have spouses or minor children living outside the usvi nature and duration of his employment mr vento had sold the company he co- founded and began developing professional relationships in the virgin islands vento pincite by contrast typical notice_2004_45 participants return to the united_states as part of providing services to their former employers which do not benefit from the participants’ time in the usvi good_faith in its application of sochurek’s good_faith factor the third circuit found that two of the three usvi entities formed by the vento parents were bona_fide companies with non-tax business purposes and that richard vento’s establishment of business interests in the virgin islands supports his claim of bona_fide residency vento pincite in sochurek this factor turned on the absence of a scheme or arrangement relating to taxes sochurek pincite a typical notice_2004_45 case involves the use of a usvi partnership and sometimes additional entities in an attempt to convert u s -source income into income that is treated as effectively connected with the conduct_of_a_trade_or_business in the usvi claims of bona_fide residence when using such arrangements found highly questionable by notice_2004_45 are the clearest cases when individuals would fail to meet the good_faith factor in sum when challenging a bona_fide usvi residence position in a notice_2004_45 case the irs should carefully distinguish the facts from those involving the vento parents with respect to each applicable sochurek factor in particular the 11th good_faith factor where the direct usvi nexus presented by the abusive tax arrangement in which the taxpayers participated eg inappropriately claiming the edp benefit with respect to activities unconnected to the usvi is an important difference from vento limitations_period on assessment finally we note that it is not appropriate for the irs to concede automatically the statute-of-limitations issue often present in notice_2004_45 cases such a concession is appropriate only after a determination has been made under the sochurek standard that a taxpayer is a bona_fide usvi resident it is important to recognize that the holding in 140_tc_273 is limited to situations in which the posts-124550-14 taxpayer is a bona_fide_resident of the usvi for the tax_year in issue in such cases the period of limitations on assessment under sec_6501 begins to run upon the filing of the taxpayer’s filing of his return with the usvi bureau of internal revenue bir if a taxpayer is not a bona_fide_resident of the usvi then the filing of the taxpayer’s return with the usvi bir does not start the running of the period of limitations under sec_6501 pursuant to sec_932 and sec_6501 please call jacob russin at if you have any further questions the parties stipulated that mr appleton was a bona_fide_resident of the usvi for the relevant tax years if another exception to the running of the statute_of_limitations under sec_6501 applies then the irs should pursue that avenue


internal_revenue_service number release date index number -------------------- ------------------------------------- ------------------------------------ ---------------------------------------- ---------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-119481-16 date december legend x ------------------------------------------------------------- --------------------- trust a ----------------------------------- --------------------------------------------------------------- ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- ------------------------------------------------------------ ----------------------------------- trust b ----------------------------------------------------- ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- ------------------------------------------------------------ ----------------------------------- trust c ------------------------------------------------- ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------- trust d ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- ------------------------------------------------------------ state date -------------- -------------------- plr-119481-16 ------------------ ---------------------- ------- ------- ------- ------- date date year year year year dear ------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief from the inadvertent termination of its s_corporation_election pursuant to sec_1362 of the internal_revenue_code facts based on the information submitted and representations made therein we understand the relevant facts to be as follows x was incorporated under the laws of state on date and elected to be treated as an s_corporation effective date x represents that trust a_trust b and trust c were eligible to file elections pursuant to sec_1361 to be treated as qualified subchapter_s trusts qssts on date trust a_trust b and trust c acquired shares of x stock nevertheless no election was made to treat trust a_trust b or trust c as a qsst x represents that the income beneficiaries of trust a_trust b and trust c each reported the beneficiary’s distributable share of x’s items of income loss deductions and credits if any as if trust a_trust b and trust c each had a valid qsst election in effect on date trust d also acquired shares of x stock x represents that trust d was eligible to file an election pursuant to sec_1361 to be treated as an electing_small_business_trust esbt nevertheless trust d did not elect to be treated as an esbt effective date trust d reported its share of x’s items of income loss deductions and credits if any as if trust d had a valid esbt election in effect in year each of trust trust and trust distributed all of its income as defined in sec_643 in year each of trust trust and trust did not distribute all of its income as defined in sec_643 nevertheless x represents that each of those trusts did distribute all of its taxable_income for year plr-119481-16 in year all of the shares of x held by trust were distributed to trust and trust in year all of the current and accumulated income within the meaning of sec_643 of trust and trust was distributed to their respective beneficiaries x represents that x and its shareholders have reported their income consistently with x being an s_corporation x represents that the circumstances resulting in the termination of x’s s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive tax planning in addition x and all of its shareholders agree to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to the period specified by sec_1362 law sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that for the purposes of sec_1362 a_trust all of which is treated under title_26 subtitle a chapter subchapter_j part i subpart e of the united_states_code as owned by an individual who is a citizen or resident_of_the_united_states may be an s_corporation shareholder sec_1361 provides that for the purposes of sec_1362 an esbt may be an s_corporation shareholder sec_1361 provides that in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 a such trust will be treated as a_trust described in sec_1361 and b for purposes of sec_678 the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1361 provides that a qsst is a_trust the terms of which require that i during the life of the current income_beneficiary there shall be only income plr-119481-16 beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of such beneficiary's death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to such beneficiary in addition sec_1361 requires that the trust distribute or require to be distributed all of its income within the meaning of sec_643 currently to individual who is a citizen or resident_of_the_united_states sec_1361 defines an esbt sec_1361 provides that except as provided in sec_1362 an esbt means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in sec_170 or or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that the term electing_small_business_trust shall not include i any qualified_subchapter_s_trust as defined in sec_1361 if an election under sec_1361 applies to any corporation the stock of which is held by such trust ii any trust exempt from tax under subtitle a and iii any charitable_remainder_annuity_trust or charitable_remainder_unitrust as defined in sec_664 sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1_1361-1 of the income_tax regulations provides that the current income_beneficiary of a qsst must make the election under sec_1361 by signing and filing with the service_center with which the corporation files its income_tax returns the applicable form or a statement including the information listed in sec_1_1361-1 sec_1_1361-1 provides in part that if s_corporation stock is transferred to a_trust the qsst election must be made within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust sec_1_1361-1 provides that the income_beneficiary who makes the qsst election and is treated for purposes of sec_678 as the owner of that portion of the trust that consists of s_corporation stock is treated as the shareholder for purposes of sec_1361 sec_1366 sec_1367 and sec_1368 plr-119481-16 sec_1_1361-1 provides that the trustee of an esbt must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of sec_1_1361-1 sec_1_1361-1 provides that the trustee of an esbt must file the esbt election within the time requirements prescribed in sec_1_1361-1 for filing a qsst election generally within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation the termination is effective on and after the day of the termination sec_1362 provides in part that if -- an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation for which the election was made or the termination occurred is a small_business_corporation or to acquire the required shareholder consents and the corporation for which the election was made or the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of such corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the information submitted and the representations made we conclude that x's s_corporation_election was terminated as of date because x had an ineligible shareholder and would have been terminated as a result of the failure to distribute income within the meaning of sec_643 we further conclude that the termination of x’s s_corporation_election constituted an inadvertent termination within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter provided that apart from the missed esbt and qsst elections and the failure to distribute income as defined in sec_643 discussed herein x's s_corporation_election was otherwise valid and has not otherwise terminated under sec_1362 plr-119481-16 this ruling is contingent on x and all of its shareholders treating x as having been an s_corporation for the period beginning date and thereafter accordingly in determining their respective income_tax all the shareholders of x must include their pro- rata share of the separately_stated items of income including tax-exempt_income loss deduction or credit and nonseparately computed items of income and loss of x as provided in sec_1366 make adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 if x or its shareholders fail to treat themselves as described above this ruling is null and void this ruling is contingent on the beneficiaries of trust a_trust b and trust c each making a valid qsst election effective date with the appropriate service_center within days of the date of this letter this ruling is also contingent on the trustee of trust d making a valid esbt election effective date with the appropriate service_center within days of the date of this letter a copy of this letter should be attached to each of these trusts' qsst or esbt elections except as specifically ruled above we express or imply no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code specifically we express or imply no opinion regarding whether x is otherwise eligible to be an s_corporation whether trust a_trust b and trust c are eligible qssts under sec_1361 and whether trust d is an eligible esbt under sec_1361 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representatives sincerely david r haglund david r haglund chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------ ---------------------------- -------------------------------- ------------------------------------------------ ----------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-141874-07 date december -------------------------------- -------------------------- --------------------- ------------------------------------------------------------------------ ------------------------- ------------------------------- ----------------------------- -------------------------------- -------------------------------- ----------------------------------- ----------------------- --------------------------- ---------------------------- --------------------------------------- -------------------------------------- -------------------------------- legend decedent date date trust ---------------------------------------------------------------------------------------- partnership skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary dear ------------------ requesting a ruling on the application of the generation-skipping_transfer_tax to trust the facts and representations submitted are as follows on date decedent executed trust which was revocable and unfunded until his death decedent died on date under the terms of his will his residuary_estate passed to trust the transfer of decedent’s residuary_estate to trust was subject_to federal_estate_taxes is to transfer the trust assets to partnership so that the only assets in trust will be the article i paragraph c of trust provides that after decedent’s death the trustee this is in response to the date letter and other correspondence article i paragraph e provides that any portion of the trust estate passing to or under article i paragraph d if a beneficiary is under a legal disability or has not plr-141874-07 limited_partner interests the trustee is to distribute the limited_partner interests to the then surviving beneficiaries and the issue of a deceased beneficiary per stirpes however the share for skip beneficiary is to continue in trust attained age his or her share is to be retained in trust subject_to his or her right to distributions based on a standard relating to health maintenance support and education until he or she is not under a legal disability and has attained age at which time the remaining trust estate is to be distributed to him or her and the trust is to terminate or until his or her death prior to the removal of the disability and attainment of age at which time the remaining trust estate is to be distributed to the personal representative for the beneficiary’s estate for the benefit of a beneficiary that is not exempt from generation-skipping_transfer_tax is to be allocated to a separate trust the non-exempt trust for him or her with respect to the beneficiary’s non-exempt trust the beneficiary’s parent that is related directly to decedent is to have a general_power_of_appointment exercisable only in the parent’s will the power is to be effective on the parent’s death if the parent fails to exercise the power then on the parent’s death the trust estate of the beneficiary’s non-exempt trust is to be distributed to the beneficiary or if he or she is then deceased to his or her issue per stirpes if there are no such issue then to the surviving beneficiaries and the issue of any deceased beneficiaries a non-exempt trust shall not terminate until after the death of the respective parent skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary skip beneficiary and skip beneficiary each of whom is a grandniece grandnephew or third cousin of decedent none of the skip beneficiaries were years of age at decedent’s death a skip beneficiary’s parent is a niece nephew or second cousin of decedent beneficiaries are skip persons within the meaning of sec_2613 and accordingly the transfers to trust at decedent’s death were direct skips within the meaning of sec_2612 and therefore the transfers to trust are subject_to generation-skipping_transfer_tax skipping transfer gst sec_2611 provides that the term generation-skipping_transfer means a taxable_distribution a taxable_termination or a direct_skip estate or gift_tax of an interest in property to a skip_person the designated beneficiaries of trust are skip beneficiary skip beneficiary sec_2601 of the internal_revenue_code imposes a tax on every generation- sec_2612 provides that a direct_skip is a transfer subject_to federal you have asked us to rule on whether the non-exempt trusts for the skip sec_26_2612-1 of the generation-skipping_transfer_tax regulations sec_2613 provides that the term skip_person means a natural_person plr-141874-07 provides in part that a skip_person is a_trust if i all interests in the trust are held by skip persons or ii no person holds an interest in the trust and no distributions other than a distribution the probability of which occurring is so remote as to be negligible including distributions at the termination of the trust may be made after the transfer to a person other than a skip_person sec_2652 provides in part that a person has an interest_in_property_held_in_trust if at the time the determination is made such person a has a right other than a future right to receive income or corpus from the trust or b is a permissible current recipient of income or corpus from the trust and is not described in sec_2055 sec_26_2612-1 provides that for generation-skipping_transfer_tax purposes an interest in trust exists if a person has a present right to receive trust principal or income or is a permissible current recipient of trust principal or income assigned to a generation which i sec_2 or more generations below the generation assignment of the transferor or a_trust if all the interests in the trust are held by skip persons or if there is no person holding an interest in the trust and at no time after the transfer may a distribution including distributions on termination be made from the trust to a non-skip_person generation of the transferor ie decedent and he or she is the sole beneficiary of his or her non-exempt trust each skip beneficiary’s parent possesses a testamentary general_power_of_appointment with respect to the skip beneficiary’s non-exempt trust that is the parent may exercise the power at death to transfer the non-exempt trust property remaining at the parent’s death to any person or entity including the parent’s estate the power_of_appointment granted to a parent does not include a present right to receive trust principal or income and the parent is not a permissible current recipient of trust principal or income consequently a parent’s testamentary_power_of_appointment is not an interest in a respective non-exempt trust for generation- skipping transfer_tax purposes conclude that each non-exempt trust is a skip_person within the meaning of sec_2613 and decedent’s transfers to the non-exempt trusts are direct skips within the meaning of sec_2612 and therefore the transfers to trust are generation skipping transfers subject_to generation-skipping_transfer_tax accordingly based upon the facts submitted and representations made we in this case each skip beneficiary is two or more generations below the except as expressly provided herein no opinion is expressed or implied in accordance with the power_of_attorney on file with this office a copy of this this ruling is directed only to the taxpayer requesting it sec_6110 plr-141874-07 concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter provides that it may not be used or cited as precedent letter is being sent to your authorized representative enclosures copy for sec_6110 purposes lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs special industries sincerely yours


department of the treasury internal_revenue_service washington d c feb uilc number release date memorandum for director internal_revenue_service center kansas city mo attn entity control from subject chief branch office of the associate chief_counsel employee_benefits and exempt_organizations cc ebeo - railroad retirement act tax status attached for your information and appropriate action is a copy of a letter from the railroad retirement board concerning the status under the railroad retirement act and the railroad unemployment insurance act of we have reviewed the opinion of the railroad retirement board and based solely upon the information submitted concur in the conclusion that is an employer under the railroad retirement act and the railroad unemployment insurance act effective harry beker cc


internal_revenue_service number release date index number ---------------- ------------------------------------------------------------ ------------------------------------------ --------------------------------------- -------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number ---------------------- refer reply to cc psi b03 plr-127447-14 date date legend x ------------------------------------------------------------ ------------------ a b c country d1 d2 d3 ------------------------- --------------------------- ----------------------------- ------------ ---------------------- -------------------------- ----------------------- dear ------------------------------------------------------ this letter responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be classified as a partnership for federal tax purposes facts the information submitted discloses that x was formed on d1 under the laws of country x’s owners included three u s persons individuals a b and c by default classification x was an association for federal tax purposes x failed to file timely form plr-127447-14 entity classification election to be classified as a partnership for federal tax purposes effective d2 on d3 x terminated when it merged into another entity also formed under the laws of country of which a b and c became owners law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an plr-127447-14 election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-3 as a result x is granted an extension of time of days from the date of this letter to make an election to be treated as a partnership for federal tax purposes effective d2 x must make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form this ruling is contingent on x and its owners a b and c filing all required federal_income_tax and informational returns including amended returns consistent with the requested relief granted in this letter to the extent appropriate these returns or amended returns must include forms return of u s persons with respect to certain foreign_partnerships such that these forms reflect the consequences of the relief granted in this letter copies of this letter should be attached to any such returns or amended returns this ruling is also contingent on a b and c making proper determinations of the adjusted bases of their respective partnership interests in x or its successor required under sec_705 and the regulations thereunder including all decreases under sec_705 relating to the taxable years of x beginning on d2 and thereafter except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it according to sec_6110 of the code this ruling may not be used or cited as precedent plr-127447-14 under a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representatives the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by s holly porter chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------- --------------------------------- ------------------------- re -------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------------ telephone number ---------------------- refer reply to cc psi plr-137293-16 date march legend donor date trust x accountant dear -------------- ---------------------------------------------- ---------------------------- ---------------------------------- ------------ ----------------------- this letter responds to the letter dated date submitted by your authorized representative requesting an extension of time pursuant to sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to allocate generation-skipping_transfer gst_exemption to a transfer to a_trust facts the facts and representations submitted are as follows on date a date prior to date donor created an irrevocable_trust trust trust has gst potential on the same date donor transferred dollar_figurex to trust accountant prepared and timely filed donor’s form_709 united_states gift and generation-skipping_transfer_tax return reporting the transfer to trust however accountant improperly reported the gift on schedule a part gifts that are direct skips and are subject_to both gift_tax and generation-skipping_transfer_tax on schedule c computation of generation-skipping_transfer_tax accountant improperly reported an allocation of donor’s gst_exemption on the incorrect line in part gst_exemption reconciliation and failed to attach a notice of allocation these errors were discovered subsequently when donor retained new estate_planning counsel donor plr-137293-16 represents she has sufficient gst_exemption available to allocate to the date transfer to trust donor requests an extension of time to make an election under sec_2642 and sec_301_9100-1 and sec_301_9100-3 to allocate gst_exemption to the date transfer to trust effective as of the date of the transfer to trust law and analysis sec_2601 imposes a tax on every gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax imposed by sec_2601 is the taxable_amount multiplied by the applicable_rate sec_2641 defines the applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 the inclusion_ratio with respect to any property transferred in a gst is the excess if any of one over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of the gst_exemption under sec_2631 allocated to the trust and the denominator of which is the value of the property transferred to the trust sec_2631 as in effect on date provided that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such plr-137293-16 other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-1 through sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute sec_301_9100-3 provides in part that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied donor is granted an extension of time of days from the date of this letter to allocate her available gst_exemption to the transfer made to trust on date the allocation should be made on a supplemental form_709 and filed with the cincinnati service_center at the following address internal_revenue_service cincinnati service_center - stop cincinnati oh a copy of this letter should be attached to the return except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-137293-16 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination 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 associate chief_counsel passthroughs special industries lorraine e gardner by ______________________________ lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of the letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------------------- --------------------------------------------------- ---------------------------------- ------------------------------------------ department of the treasury washington dc third party communication date of communication month dd yyyy person to contact --------------------- id no ---------------- telephone number -------------------- refer reply to cc fip b04 plr-106624-19 date date taxpayer --------------------------------------------------------------------------- parent ---------------------------------------------------------- dear ---------------- this letter responds to taxpayer’s request for a letter_ruling that the payment of certain investment advisory fees from an annuity_contract will not be treated as an amount received by the owner of that annuity_contract for purposes of sec_72 of the internal_revenue_code facts taxpayer is a life_insurance_company within the meaning of sec_816 and is a subsidiary of parent taxpayer joins in the filing of a consolidated federal_income_tax return with parent on a calendar_year basis using an accrual_method of accounting taxpayer intends to offer ------- non-qualified deferred_annuity contracts referred to herein as the contract the contract will be issued to and owned by an individual or issued to and owned by a_trust or other entity as an agent for a natural_person within the meaning of sec_72 the owner the contract is an annuity_contract under the law of the jurisdiction where issued the contract qualifies for treatment as an annuity_contract for federal_income_tax purposes including by complying with the requirements of sec_72 ------ of the contracts is a variable_contract under sec_817 while ----- of the contracts are not variable_contracts under sec_817 the contract is not part of any qualified_retirement_plan within the meaning of sec_4974 plr-106624-19 the contract is comprised of an accumulation_phase and a payout phase during the accumulation_phase the cash_value of the contract is credited with earnings or interest based on options the owner selects from a menu provided by taxpayer the options consistent with applicable nonforfeiture law the contract is designed for owners who will receive ongoing investment advice from an investment adviser the adviser on how to allocate the contract’s cash_value within the meaning of sec_72 among the available options the adviser is expected to take into account factors such as the owner’s personal risk tolerance and investment timeline the interest rate and market environment the menu of options available under the contract and the various other_benefits and features available under the contract the adviser will be an appropriately licensed professional who is in the business of providing investment advice in consideration for its advice the owner will authorize investment advisory fees the fees to be paid periodically to the adviser from the contract’s cash_value the authorization the fees will be determined based on an arms-length transaction between the owner and the adviser the fees will not exceed an amount equal to an annual rate of ----- of the contract’s cash_value within the meaning of sec_72 determined at the time and in the manner provided in the authorization or other written_agreement with the adviser but in all events based on such cash_value during the period to which the fees relate the fees will compensate the adviser only for investment advice that the adviser provides to the owner with respect to the contract and not for any other services the fees will not result in any reduction in fees related to any other asset or for any other service taxpayer will pay the fees directly to the adviser during any period for which the authorization is in effect the contract will be solely liable for paying the fees and the fees will not be paid directly by the owner the owner will not have the right to direct payment of the fees for any other purpose or to any other person the adviser will not receive a commission for the sale of the contract from taxpayers requested ruling taxpayer requests a ruling that the fees taxpayer deducts from the contract’s cash_value and remit to the adviser will not be treated as an amount received by the owner of the contract for purposes of sec_72 law law and analysis sec_72 distinguishes between an amount_received_as_an_annuity under an annuity endowment or life_insurance_contract and an amount not received as an annuity under those contracts sec_1_72-1 of the income_tax regulations the plr-106624-19 regulations provides that amounts received as an annuity are amounts which are payable at regular intervals over a period of more than one full year from the date on which they are deemed to begin provided the total of the amounts so payable or the period for which they are to be paid can be determined as of that date see sec_1_72-1 and of the regulations any other_amounts to which the provisions of sec_72 apply are considered to be amounts_not_received_as_an_annuity sec_1_72-2 of the regulations provides that amounts are considered amounts received as an annuity only in the event that the following tests are met i they must be received on or after the annuity_starting_date as that term is defined in paragraph b of sec_1_72-4 of the regulations the first day of the first period for which an amount is received as an annuity under the contract ii they must be payable in periodic installments at regular intervals whether annually semiannually quarterly monthly weekly or otherwise over a period of more than one full year from the annuity_starting_date and iii except as indicated in subparagraph b of the regulations relating to variable_contracts the total of the amounts payable must be determinable at the annuity_starting_date either directly from the terms of the contract or indirectly by the use of either mortality tables or compound interest computations or both in conjunction with such terms and in accordance with sound actuarial theory sec_1_72-11 of the regulations describes amounts_not_received_as_an_annuity as any amount received under an annuity_contract if the amount i does not meet the requirements set forth in sec_1_72-2 of the regulations for amounts received as an annuity ii meets the requirements of sec_1_72-2 of the regulations for amounts received as an annuity but the annuity payments received differ in either amount duration or both from those originally provided under the contract or iii meets the requirements of sec_1_72-2 of the regulations for amounts received as an annuity but the annuity payments are received by a beneficiary after the death of an annuitant or annuitants in full discharge of the obligation under the contract and solely because of a guarantee sec_72 applies to any amount not received as an annuity under an annuity endowment or life_insurance_contract sec_72 provides that if any amount which is not received as an annuity is received on or after the annuity_starting_date it is included in gross_income sec_72 provides that if any amount which is not received as an annuity is received before the annuity_starting_date it is included in gross plr-106624-19 income to the extent allocable to income_on_the_contract and is not included in gross_income to the extent allocable to the investment_in_the_contract analysis in this case the fees are integral to the operation of the contract during any period for which the authorization is in effect the owner will receive ongoing investment advice from the adviser with respect to the contract so that the owner may properly utilize the contract the adviser is expected to help the owner select options related to the contract taxpayer has represented that the fees will not serve as consideration for anything other than investment advice provided by the adviser in relation to the contract furthermore taxpayer has represented that the fees will not exceed an annual rate of ----- of the contract’s cash_value based on the period in which the fees related based on taxpayer’s representations the fees will only be used to pay for investment advisory services relating to the contract because the contracts are designed to work with an adviser the contract is solely liable for the fees based on the facts above the fees do not constitute compensation to the advisor for services related to any assets of the owner other than the contract or any services other than investment advice services with respect to the contract therefore the fees are an expense of the contract not a distribution to the owner ruling based solely on the information submitted and the representations made the fees taxpayer deducts from the contract’s cash_value and remit to the adviser will not be treated as an amount received by the owner of the contract for purposes of sec_72 caveats the ruling contained in this letter is based upon information and representations taxpayer submitted accompanied by penalty of perjury statements executed by appropriate parties this office has not verified any of the material submitted in support of the ruling_request and it is subject_to verification on examination the ruling contained in this letter does not apply to any amount_paid by taxpayer that compensate the advisor for services related to assets other than the contract or for any services provided other than investment advice services with respect to the contract any such amount would be an amount received by the owner of the contract for purposes of sec_72 no opinion is expressed as to the tax treatment of the transaction under the provisions of any of the other sections of the code and regulations which may also be applicable plr-106624-19 thereto or to the tax treatment of any conditions existing at the time of or effects resulting from the transaction which are not specifically covered by the above rulings this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax return of taxpayers for the taxable_year in which the transaction covered by this ruling is consummated pursuant to a power_of_attorney on file in this office a copy of this ruling is being furnished to your authorized representatives sincerely john glover senior counsel branch associate chief_counsel financial institutions and products


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc psi plr-119877-01 date date number release date index number partnership a dear this letter responds to your letter dated date submitted on behalf of partnership requesting an extension of time for partnership to elect under sec_301 c of the procedure and administration regulations to be treated as an association_taxable_as_a_corporation partnership represents the following facts the partners of partnership intended that partnership be treated as a corporation effective a however due to inadvertence partnership did not file form_8832 entity classification election sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity may elect its classification for federal tax purposes as provided in this section an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides in general that unless it elects otherwise a domestic eligible_entity with two or more members is a partnership sec_301_7701-3 provides in general that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the applicable service_center sec_301_7701-3 provides that an election made under sec_301 c i will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of plr-119877-01 time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 based on the information submitted and representations made partnership has established that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied consequently partnership is granted an extension of days from the date of this letter for electing under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation effective a partnership must file form_8832 within the extension period with the appropriate service_center with a copy of this letter attached except for the specific ruling above we express or imply no opinion concerning the federal_income_tax consequences of the facts of this case under any other provision of the code sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election in accordance with the power_of_attorney on file with this office we are sending you the original of this letter and a copy to the taxpayer this ruling is directed only to the taxpayer on whose behalf it was requested according to sec_6110 this ruling may not be used or cited as precedent enclosures copy of this letter copy for sec_6110 purposes sincerely paul f kugler associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c mar i i t tep rast tax_exempt_and_government_entities_division uniform issue list legend taxpayer a taxpayer b company c plan d financial_institution e financial_institution f plan g financial_institution h account account j amount amount amount amount amount amount dear this letter is in response to a request for a as supplemented by correspondence dated date and date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code code regarding the distributions of amount and amount from pian d letter_ruling dated date the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution of amount from plan d taxpayer a asserts that her failure to accomplish a rollover of amount within the 60-day period prescribed by sec_402 was due to incorrect advice provided by financial_institution h taxpayer a further represents that amount has not been used for any purpose taxpayer b represents that he received a distribution of amount from plan d taxpayer b asserts that his failure to accomplish a rollover of amount within the 60-day period prescribed by sec_402 was due to incorrect advice provided by financial_institution h taxpayer b further represents that amount has not been used for any purpose in september taxpayer a operates company c taxpayer a and taxpayer b are employed by company c and participated in its qualified_retirement_plan plan d the custodian and administrator of plan d was financial_institution e taxpayer a decided to terminate plan d and adopt a new plan with company c adopted plan g financial_institution f on september with financial_institution f taxpayer a and taxpayer b received distributions from plan d net of federal taxes on october taxpayer a received a distribution of amount with amount withheld for federal_income_tax resulting in a net distribution of amount taxpayer b received a distribution of amount with amount withheld for federal_income_tax resulting in a net distribution of amount on october deposited into account and account j respectively separate_accounts for taxpayer a and taxpayer b within plan g financial_institution h a representative of financial_institution f was the plan_administrator for plan g the checks for amount sec_5 and were _ the taxpayers intended the transactions to be direct transfers between the two retirement plans however this action was not done and financial_institution e withheld federal taxes on the two distributions when asked by financial institution f to reverse the transaction financial_institution e said it had already sent the withheld taxes to the internal_revenue_service irs the taxpayers were then advised by a representative of financial_institution h they did not have to deposit the withheld taxes into the plan until they received the funds back from irs as a tax_refund a letter from financial_institution h acknowledging this incorrect advice was submitted with the ruling_request on july the taxes withheld amount and amount into the plan g the mistake was discovered in from the service when the taxpayers received a deficiency_notice refund the taxpayers deposited after receiving their 20_ based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_402 of the code with respect to the distributions of amount and amount sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 of the code states that such rollover must be accomplished within days following the day on which the distributee received the property an individual_retirement_account ira constitutes one form of eligible_retirement_plan sec_402 of the code provides that an eligible_rollover_distribution shall not include any distribution to the extent such distribution is required under sec_401 sec_402 of the code provides in relevant part that the secretary may waive the 60-day requirement under sec_402 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 and sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment e by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a and taxpayer b is consistent with their assertion that their failure to accomplish a timely rollover of amount and amount was due to their reliance on the incorrect advice by financial_institution h therefore pursuant to sec_402 the service hereby waives the day rollover requirement with respect to the distributions of amount and amount from plan d provided all other requirements of sec_402 of the code except the 60-day requirement are met with respect to such contributions amount contributed by taxpayer a to plan d and amount contributed by taxpayer b to plan d on july within the meaning of sec_402 of the code __ will be considered a rollover_contribution this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter 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 a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please contact if you wish to inquire about at sincerely yours cotte a wier deleted copy of this letter notice of intention to disclose notice manager employee_plans technical group enclosures cc


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc corp b05 - plr-107789-02 date date legend partners partnership sub 1a sub 2a seller purchaser plr-107789-02 target target target 2a target 2b company official outside tax professional outside tax professional date a date c date d date x date y dear this is in response to a letter dated date submitted on behalf of partnership requesting a second extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election partnership the united_states_shareholder of purchaser the foreign purchasing_corporation previously requested an extension of time to file a sec_338 election under sec_338 of the internal_revenue_code and sec_1_338-1 and g of the income_tax regulations with respect to purchaser’s acquisition of the stock of target plr-107789-02 2a and target 2b sometimes hereinafter referred to as the election on date a all citations in this letter to regulations under sec_338 are to the regulations as in effect on date a plr-123951-01 plr-200152029 was issued granting partnership an extension until days from date the date of the letter to file the election outside tax professional who was responsible for filing the election misread the due_date as a result the extended filing deadline passed without partnership having made the election partnership is a domestic limited_liability_company partnership owns all of sub 1a which owns all of sub 2a which owns all of purchaser sub 1a and sub 2a are foreign entities on date x partnership made an election under sec_301_7701-3 by filing form_8832 entity classification election to disregard sub 1a and sub 2a as separate entities for united_states tax purposes effective on date y which is before the below described acquisition the acquisition other than the disregarded_entity elections made for sub 1a and sub 2a and the intended disregarded_entity election for target 2b no other disregarded_entity elections have been made or will be made for any acquired target or their subsidiaries effective as of the date of the acquisition purchaser is a foreign_corporation prior to the acquisition purchaser was a controlled_foreign_corporation within the meaning of sec_957 a cfc and was not required under sec_1_6012-2 to file a u s income_tax return prior to the acquisition target and target were both wholly owned subsidiaries of seller seller target and target are foreign_corporations target has two subsidiaries target 2a and target 2b target also owns various other foreign subsidiaries not subject_to this ruling_request prior to the acquisition seller target and target did not file u s income_tax returns and they were not subject_to u s income_taxation further neither target target target 2a nor target 2b was a cfc a passive_foreign_investment_company for which an election under sec_1295 was in effect a foreign_investment_company or a foreign_corporation the stock ownership of which is described in sec_552 or required under sec_1_6012-2 to file a u s income_tax return on date a pursuant to a stock purchase agreement dated date a purchaser acquired all of seller’s stock of target and target for cash and the assumption of target 1's and target 2's liabilities in fully taxable transactions it is represented that purchaser's acquisition of the stock of target and target each qualified as a qualified_stock_purchase as defined in sec_338 the period of limitations on assessment under sec_6501 has not expired for purchaser’s target 1's target 2's target 2a’s or target 2b’s taxable_year s in which the acquisition occurred the taxable years in which the elections should have been filed or any taxable_year s that would have been affected by the elections had they been timely filed plr-107789-02 sec_338 elections for target and target were timely filed the elections for target 2a and target 2b wholly owned subsidiaries of target were due on date c however for various reasons the elections for target 2a and target 2b were not timely filed on date d which is after the due_date for the elections company official and outside tax professional discovered that the elections for target 2a and target 2b had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the elections sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase sec_1_338-1 provides that united_states_shareholders as defined in sec_951 of a foreign purchasing_corporation that is a controlled_foreign_corporation as defined in sec_957 taking into account sec_953 may file a statement of sec_338 election on behalf of the purchasing_corporation if the purchasing_corporation is not required under sec_1_6012-2 other than sec_1_6012-2 to file a united_states income_tax return for its taxable_year that includes the acquisition_date form_8023 must be filed as described in the form and its instructions and also must be attached to form_5471 filed with respect to the purchasing_corporation by each united_states_shareholder for the purchasing corporation’s taxable_year that includes the acquisition_date under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 generally defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the elections is fixed by regulation ie sec_1 d therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for partnership to file the elections provided partnership plr-107789-02 shows that it acted reasonably and in good_faith the requirements of sec_301_9100-1 through are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by partnership company official outside tax professional and outside tax professional explain the circumstances that resulted in the failure_to_file the elections for target 2a and target 2b the information establishes that the request for relief was filed before the failure to make the elections was discovered by the internal_revenue_service and that the interests of the government will not be prejudiced if relief is granted see sec_301 b i based on the facts and information submitted including the representations made we conclude that partnership has shown that it acted reasonably and in good_faith in failing to make the elections the requirements of sec_301_9100-1 through have been satisfied and that granting relief will not prejudice the interests of the government accordingly and provided that the sec_338 election made for target is valid an extension of time is granted under sec_301_9100-1 until days from the date on this letter for partnership to file the elections with respect to the acquisition of the stock of target 2a and target 2b as described above the above extension of time is conditioned on the filing within days of the date on this letter of all returns and amended returns if any necessary to report the transaction in accordance with the elections and the taxpayers' partnership’s partners purchaser target target 2a and target 2b’s tax_liability if any being not lower in the aggregate for all years to which the elections apply than it would have been if the elections had been timely made with respect to target 2a and target 2b taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 partnership should file the elections in accordance with sec_1_338-1 and g ie a new election on form_8023 must be executed on or after the date on this letter which grants an extension and filed in accordance with the instructions to the form a copy of this letter should be attached to the election form partnership purchaser target target 2a and target 2b as applicable must report the transaction as a sec_338 transaction on their returns if they have not already filed accordingly and they must attach to such returns or amend the applicable returns if they have already filed accordingly by attaching a copy of the election form and a copy of this letter plr-107789-02 we express no opinion regarding whether the acquisition of the stock of target or the deemed acquisition of the stock of target 2a and target 2b qualify as qualified_stock purchases under sec_338 or any other tax consequences arising from the elections in addition we express no opinion as to the tax treatment or consequences of filing the elections late under the provisions of any other section of the code and regulations or the tax treatment of any conditions existing at the time of or effects resulting from filing the elections late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayer and its employees however the director should verify all essential facts moreover notwithstanding that an extension is granted under sec_301_9100-1 to file the elections any penalties and interest that would otherwise be applicable shall still apply this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely yours ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc


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 psi plr-135652-07 date july x ----------------------------------------- trust --------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- ------------------------------------------------- ----------------------- -------------------------------------------------------------------------------------------------- ----------------------------------------------------- ----------------------- -------------------- ---------------------- -------------------------- ---------------- trust date date date date dear ------------- this responds to a letter dated date and subsequent correspondence written on behalf of x by x's authorized representative requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on date and made an election to be treated as an s_corporation effective date on date shares of x stock were transferred to trust and trust each of trust and trust is represented as being eligible to be an electing_small_business_trust esbt as of date however the trustees of trust and trust failed to make esbt elections for the trusts therefore x’s s_corporation_election terminated on date when trust and trust became shareholders this was not discovered until date plr-135652-07 x represents that the failure_to_file the esbt elections for trust and trust and the consequent termination of x’s election to be an s_corporation was inadvertent unintended and not the result of tax_avoidance or retroactive tax planning x further represents that since date x and each person who is or was a shareholder of x have filed their income_tax returns consistent with the treatment of x as an s_corporation and consistent with the treatment of trust and trust as esbts sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that for purposes of subchapter_s a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides than an esbt is a permitted shareholder of a small_business_corporation sec_1362 provides that an election under sec_1362 terminates whenever at any time on or after the 1st day of the 1st taxable_year for which a corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1361 provides that the term electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in paragraphs or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1351 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances plr-135652-07 resulting in the ineffectiveness or termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation shall be treated as an s_corporation during the period specified by the secretary sec_1_1361-1 of the income_tax regulations provides that the trustee of the trust must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of m ii based solely on the representations made and the information submitted we conclude that x's s election terminated on date when shares of the stock of x were transferred to trust and trust we further conclude however that the termination was an inadvertent termination within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation as of date and thereafter provided that the trustees of trust and trust file esbt elections for the trusts and provided that x’s s election is not otherwise terminated under sec_1362 the trustees of trust and trust must file esbtelections pursuant to the procedures set forth in sec_1_1361-1 with the appropriate service_center within days of the date of this letter a copy of this letter should be attached to the esbt elections except as specifically ruled upon above no opinion is expressed as to the federal tax consequences of the facts of the facts described above under any other provision of the code in particular no opinion is expressed or implied concerning whether x was or is a small_business_corporation or whether trust and or trust are eligible esbts under sec_1361 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-135652-07 pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x’s authorized representative sincerely j thomas hines chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------- ------------------------------- ----------------------------------- ------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-104095-08 date date legend x country d1 -------------------------------- ------------------------ -------------------------- ---------------------- dear -------------- this is in response to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a disregarded_entity for federal tax purposes facts the information submitted states that x was formed under the laws of country as an entity eligible to make a classification election x’s default status was as an association_taxable_as_a_corporation for federal tax purposes x intended to be classified as a disregarded_entity for federal tax purposes effective d1 however a form_8832 entity classification election for x to elect to be treated as a disregarded_entity effective d1 was not timely filed plr-104095-08 law and analysis sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if the foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing a form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-104095-08 conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of sixty days from the date of this letter to elect to be classified as a disregarded_entity for federal tax purposes effective d1 the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_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 will be sent to x’s authorized representative sincerely william p o’shea associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes