internal_revenue_service number release date index no cc te_ge eb hw plr-110311-01 taxpayer date plan dear this is in reply to your letter dated date and subsequent correspondence requesting rulings on behalf of taxpayer concerning the federal_income_tax treatment under sec_104 and sec_105 of the internal_revenue_code the code of long-term disability benefits paid through the plan you represent that taxpayer provides long-term disability coverage to its eligible u s employees through the plan benefits are provided through a group_insurance policy with a third-party insurance carrier the plan currently provides employees who become disabled while employed with wage continuation payments at the rate of of salary after an initial 180-day elimination period under the current terms of the plan taxpayer covers the entire premium for this basic coverage and the cost of coverage is not included in the gross_income of the employees taxpayer intends to amend the plan to provide that each employee whether current or hired in the future may elect to pay the full cost of his or her long-term disability coverage on an after-tax basis the amended plan while the taxpayer will continue to meet in-full the group policy insurance premiums charged by the third-party carrier for each employee an appropriate portion of the group premium will be allocated to each employee who elects to meet the cost of coverage on an after-tax basis and will be included in his or her gross_income reported each year under the amended plan the election to pay for the cost of coverage on an after-tax basis may be made on a year by year basis and must be made in writing prior to the beginning of the plan_year during which the employee will be paying for his or her disability coverage on an after-tax basis the election is irrevocable for the plan_year once the plan_year begins employees hired during the course of a plan_year will be permitted to elect after-tax coverage for the remainder of the plan_year within a certain period generally days following their employment_commencement date employees will be permitted to make a new election for each plan_year prior to the beginning of that plan_year sec_104 of the code provides that except in the case of amounts attributable to and not in excess of deductions allowed under sec_213 for any prior taxable_year gross_income does not include amounts received through accident_or_health_insurance or through an arrangement having the effect of accident_or_health_insurance for personal injuries or sickness other than amounts received by an employee to the extent such amounts are attributable to contributions by the employer which were not includible in the gross_income of the employee or are paid_by the employer sec_1_104-1 of the income_tax regulations states that if an individual purchases a policy of accident_or_health_insurance out of his own funds amounts received thereunder for personal injuries or sickness are excludable from his gross_income under sec_104 conversely if an employer is either the sole contributor to such a fund or is the sole purchaser of a policy of accident_or_health_insurance for his employees the exclusion provided under sec_104 does not apply to any amounts received by his employees through such fund or insurance the regulation refers to sec_1_105-1 of the regulations for rules relating to the determination of the amount attributable to employer contributions sec_1_105-1 of the regulations provides that all amounts received by employees through an accident_or_health_plan which is financed solely by their employer are subject_to the provisions of sec_105 amounts received by an employee through accident_or_health_insurance for personal injuries or sickness must be included in gross_income under sec_105 of the code to the extent such amounts are attributable to contributions by the employer which were not includible in the gross_income of the employee or are paid_by the employer unless paid as reimbursements of medical_expenses under sec_105 or for the loss or loss of use of a member or function of the body and without regard to absence from work under sec_105 sec_1_105-1 of the regulations provides that in the case of amounts received by an employee through an accident_or_health_plan which is financed partially by his employer and partially by contributions of the employee sec_105 of the code applies to the extent that such payments are attributable to contributions of the employer that were not includible in the employee’s gross_income the portion of such amounts which is attributable to such contributions of the employer shall be determined in accordance with sec_1_105-1 in the case of insured plans with respect to each employee the amended plan is financed either solely by the taxpayer or solely by the employee at no time is the coverage under the amended plan financed by both taxpayer and employee contributions accordingly the amended plan is not a contributory plan within the meaning of sec_1_105-1 of the regulations based on the information submitted and representations made we conclude as follows long-term disability benefits paid to an employee who has elected under the amended plan to pay his or her own premiums on an after-tax basis for the plan_year in which he or she becomes disabled are attributable solely to after-tax employee contributions and excludable from such employee’s gross_income under sec_104 of the code long-term basic disability benefits paid to an employee who has elected under the amended plan to exclude the premiums_paid by the taxpayer for the plan_year in which he or she becomes disabled are attributable solely to taxpayer contributions and includible in such employee’s gross_income under sec_105 of the code this ruling is directed only to the taxpayer who requested it sec_6110 k of the code provides that it may not be used or cited as precedent sincerely yours harry beker chief health and welfare branch division counsel associate chief_counsel tax exempt and government entities enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court virginia m marten petitioner v commissioner of internal revenue respondent david e and donna p lane petitioners v commissioner of internal revenue respondent docket nos filed date woodford g rowland for petitioner in docket no john be cassinat for petitioners in docket no christian a speck for respondent memorandum opinion vasquez judge this case is before the court on petitioners david e and donna p lane's petitioners motion for - - costs and fees pursuant to sec_7430 and rule petitioners do not request a hearing on this matter and we see no reason for a hearing see rule a accordingly we rule on petitioners' motion on the basis of the parties' submissions and the existing record see rule a we incorporate by reference portions of marten v commissioner tcmemo_1999_340 marten i our opinion on the merits in the instant case that are relevant to the disposition of the motion before us after concessions ’ the issue for decision is whether petitioners are a prevailing_party in the underlying tax case subsumed within this issue is the question of whether respondent's position in the underlying tax case was substantially justified background in david e lane mr lane and virginia m marten ms marten married after legally separating in mr lane purchased a dollar_figure life_insurance_policy on his own life and unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure in respondent's objection to petitioners' motion for costs and fees respondent concedes that petitioners substantially prevailed with respect to the amount in controversy and to the most significant issue presented in the court_proceeding petitioners have not unreasonably protracted the litigation and petitioners exhausted their administrative remedies available within the internal_revenue_service named ms marten the owner and beneficiary of the policy in marten i the issue was whether mr lane's payments of the life_insurance premiums were alimony includable by ms marten in gross_income and deductible by mr lane we held that under sec_71 before amendment by the deficit_reduction_act_of_1984 defra publaw_98_369 98_stat_795 pre-defra sec_71 the premium payments were alimony and includable in ms marten's gross_income and deductible by mr lane discussion sec_7430 provides for the award of administrative and litigation costs to a taxpayer in an administrative or court_proceeding brought against the united_states involving the determination of any_tax interest or penalty pursuant to the internal_revenue_code an award of administrative or litigation costs may be made where the taxpayer is the prevailing_party exhausted available administrative remedies did not unreasonably protract the administrative or judicial proceeding and claimed reasonable administrative and litigation costs sec_7430 b and c these requirements are conjunctive and failure to satisfy any one will preclude an award of costs to petitioners see 88_tc_492 this requirement applies only to litigation costs see sec_7430 prevailing_party to be a prevailing_party the taxpayer must substantially prevail with respect to either the amount in controversy or the most significant issue or set of issues presented and at the time the petition in the case is filed the taxpayer must meet the net_worth requirements of u s c sec d b sec_7430 a a taxpayer however will not be treated as the prevailing_party if the commissioner establishes that his position was substantially justified see sec_7430 b respondent contends that petitioners are not a prevailing_party because his position was substantially justified ’ petitioners argue that respondent's position was not substantially justified because respondent erroneously relied on sec_71 after the amendments made by defra post--defra sec_71 to assess liability against petitioners and respondent took inconsistent positions against ms marten and petitioners where respondent knew that only one petitioner could be liable for the deficiency respondent alternatively argues that petitioners have not proven that they meet the net_worth requirement of sec_7430 c a and all litigation costs and fees claimed were reasonable because we find that respondent's position was substantially justified we need not reach respondent's alternative arguments - at trial and in their posttrial briefs in marten i all parties including petitioners relied on post-defra sec_71 we held in marten i that pre-defra sec_71 applied on date ms marten filed a motion for reconsideration of our opinion in marten i in which she argued that marten i pursuant to q a-26 of sec_1_71-1t temporary income_tax regs fed reg date hereinafter q a-26 should have been decided under post-defra sec_71 respondent filed a response to the motion for reconsideration in which respondent agreed with ms marten in an order dated date we granted the motion for reconsideration and considered whether q a-26 dictated that post-defra sec_71 should apply there was no definitive case law directly on point and the legislative_history behind defra was not illuminating we interpreted q a-26 in light of the effective date language in defra and decided that under q a-26 and defra itself pre-defra sec_71 applied to the instant case given the difficulty of the issue and lack of case law on point respondent was substantially justified in taking the position as petitioners did in marten i that post-defra sec_71 applied petitioners also complain that respondent took inconsistent positions in regards to petitioners and ms marten and thus could not have been substantially justified we have held that the commissioner is entitled to take inconsistent positions against -- - former spouses in the alimony context see 66_tc_101 ryan v commissioner tcmemo_1999_109 see also 108_tc_430 sherbo v commissioner tcmemo_1999_367 in the present case respondent was in a classic whipsaw situation because petitioners deducted the premium payments as alimony and ms marten failed to include the premium payments in income in such a case the commissioner is substantially justified in taking inconsistent positions to protect the revenue we therefore conclude that petitioners are not a prevailing_party within the meaning of sec_7430 accordingly we hold that petitioners are not entitled to an award of administrative or litigation costs to reflect the foregoing an appropriate order will be issued denying the motion for costs and decisions will be entered


tax_exempt_and_government_entities_division number release date date date department of the treasury internal_revenue_service washington d c contact person identification_number contact number employer_identification_number form required to be filed tax years uil dear this is our final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code sec_501 as an organization described in code sec_501 we made this determination for the following reason s first you failed to provide sufficient information in your application to enable us to determine that you are eligible for recognition of exempt status second you failed the organizational_test because you did not provide a copy of your articles of incorporation you also fail the operational_test because you will be engaging in activities that are commercial and do not have an exempt_purpose third you will impermissibly operate for the benefit of your founder and his for-profit entity finally your net_earnings will likely inure to the benefit of your founder because you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file instructions and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance with their if you decide to contest this determination under the declaratory_judgment provisions of code sec_7428 you must initiate a suit in the united_states tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia before the day after the date that we mailed this letter to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment filing a declaratory_judgment suit under code sec_7428 does not stay the requirement to file returns and pay taxes we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions you should follow the instructions in notice further action if you agree with our deletions you do not need to take any if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your sincerely lois g lerner director exempt_organizations enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date contact person uniform issue list legend j s o o o o a o e identification_number contact number fax number employer_identification_number u e n m a m w b n w o w environmental issues business issue medical projects environmental projects military projects w o w w o u o p dear we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code code based on the information provided we have concluded that you do not qualify for exemption under sec_501 the basis for our conclusion is set forth below facts you taxpayer are a non-profit corporation formed in state1 on date1 you submitted a form_1023 seeking recognition of exemption under sec_501 on date2 you submitted a certificate of incorporation issued by state1 and dated date‘ but did not provide a copy of your articles of incorporation you also submitted certification from state2 showing that you are registered as a foreign nonprofit corporation in state2 you did not adopt bylaws and although you stated that you adopted a conflict of interest policy you did not provide a copy you indicated in your application that you would be engaged in a variety of activities you stated that you would engage in economic development operate as a cooperative hospital_service_organization under sec_501 operate as a charitable risk_pool under sec_501 operate a school provide hospital or medical_care provide low-income_housing or housing for the elderly or handicapped provide scholarships fellowship educational loans or other educational grants to individuals and that you will simultaneously be a publicly supported charity and a private_operating_foundation you partially completed various schedules for the form_1023 including schedule b schools colleges and universities schedule c hospitals and medical_research organizations schedule d a supporting organizations schedule e organizations not filing form_1023 within months of formation schedule f homes for the elderly or handicapped or low- income housing schedule g successors to other organizations and schedule h organizations providing scholarships fellowships educational loans or other educational grants to individuals and private_foundations requesting advance approval of individual grant procedures you also submitted a copy of your business plan objectives these include demanding changes to laws regarding environmental issues and a business issue you also state that your purposes include stopping venture capitalists medical projects building affordable residential homes providing disaster relief and preventing divorce you also provide that you will create a prison and develop new environmental projects and military projects in this document you list several of your in your business plan you make repeated reference to for-profit and its you have a close relationship with for-profit that organization shares its director and founder founder with you activities and products you also filled out schedule d of the form_1023 and stated that your supported_organization is for-profit on schedule d you provided that you will distribute at least of your income to for-profit you also included with your application a single charter document for both you and for-profit you state that you started with for-profit but decided to start a wonderful npo exempt_corporation because you failed to secure your funding on your application and supporting documentation you list founder as your founder ceo and chairman you listed no other officers directors trustees or employees you stated that founder’s annual actual or estimated compensation is dollar_figure law sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable educational and other purposes provided that no part of the net_earnings inure to the benefit of any private_shareholder_or_individual exempt sec_1_501_c_3_-1 of the income_tax regulations regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not sec_1_501_c_3_-1 of the regulations provides that an organization is organized exclusively for one or more exempt purposes only if its articles of organization contain specific language enumerated in this section sec_1_501_c_3_-1 of the regulations states that an organization is organized exclusively for one or more exempt purposes only if its articles of organization a limit the purposes of such organization to one or more exempt purposes and b do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 of the regulations states that an organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it to carry on otherwise than as an insubstantial part of its activities activities which are not in furtherance of one or more exempt purposes even though such organization is by the terms of such articles created for a purpose that is no broader than the purposes specified in sec_501 thus an organization that is empowered by its articles to engage in a manufacturing business or to engage in the operation of a social_club does not meet the organizational_test regardless of the fact that its articles may state that such organization is created for charitable purposes within the meaning of’ sec_501 sec_1_501_c_3_-1 of the regulations states that in no case shall an organization be considered to be organized exclusively for one or more exempt purposes if by the terms of its articles the purposes for which such organization is created are broader than the purposes specified in sec_501 sec_1_501_c_3_-1 of the regulations provides that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_a_-1 of the regulations defines the words private_shareholder_or_individual in sec_501 to refer to persons having a personal and private interest in the activities of the organization sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus to meet the requirements of this subsection it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests revproc_75_50 1975_2_cb_587 sets forth guidelines and recordkeeping requirements regarding racially nondiscriminatory policies for private_schools that are applying for recognition of exemption under sec_501 revproc_2011_9 2011_2_irb_283 section dollar_figure provides that exempt status may be recognized in advance of the organization's operations if its proposed operations are described in sufficient detail to permit a conclusion that it will clearly meet the particular requirements for exemption pursuant to the section of the code under which exemption is claimed sec_4 states that the organization must fully describe all of the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures in 326_us_279 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes the court found that a trade_association had an underlying commercial motive that distinguished its educational program from that carried out by a university and therefore the association did not qualify for exemption in 765_f2d_1387 9th cir affg 48_tcm_471 the court found that it was unnecessary to consider the reasonableness of payments made by the applicant to a business owned by its officers the court noted that the critical inquiry is not whether particular contractual payments to a related for-profit organization are reasonable or excessive but instead whether the entire enterprise is carried on in such a manner that the for-profit benefits substantially from the operation of the church the organization has the burden of providing sufficient documentation or other substantive information regarding its activities and operations which would establish entitlement to tax exempt status including establishing that its net_earnings will not inure to the benefit of private individuals and that it will not serve private interests see eg 505_f2d_1068 6th cir 412_f2d_1197 ct ci church of technology v united_states ci ct share network foundation v commissioner 78_tcm_6 70_fedclaims_782 was an action for declaratory_judgment that the petitioner brought to challenge the denial of his application_for exempt status the court in finding that the actual purposes displayed in the administrative record supported the service’s denial stated it is well-accepted that in initial qualification cases such as this gaps in the administrative record are resolved against the applicant the court noted that if the petitioner had evidence that contradicted these findings it should have submitted it as part of the administrative process the court also highlighted the principle that exemptions from income_tax are matters of legislative grace in 74_tc_531 aff'd 670_f2d_104 9th cir the tax_court explained that an organization that is closely- controlled by related individuals must clearly demonstrate that private interests will not be served and that net_earnings will not inure to the benefit of insiders given the control_over the petitioner organization by related individuals the court could not conclude from the information in the administrative record that part of the net_earnings did not inure to the benefit of the controlling family or stated another way that petitioner was not operated for the family’s private benefit in reaching this conclusion the court noted that the situation calls for open and candid disclosure of all facts bearing upon petitioner's organization operations and finances so that the court should it uphold the claimed exemption can be assured that it is not sanctioning an abuse of the f such disclosure is not made the logical inference is that the facts revenue laws if disclosed would show that petitioner fails to meet the requirements of sec_501 in 82_tc_215 an organization was formed to provide education and charity but failed to provide sufficient details regarding its proposed operations the court held that it failed to prove that it would operate exclusively for exempt purposes under sec_501 of the code in 86_tc_916 the court held that a church with only two members was not eligible for recognition of tax exemption because its net_earnings inured to the benefit of one of these members the court noted that where an individual or small_group has exclusive control_over the management of the organization’s funds and is the principal recipient of the distributions of the organization prohibited inurement is strongly suggested in american science foundation v commissioner 52_tcm_1049 the court determined that an organization was not eligible for recognition of tax exemption because it failed to provide sufficient information to permit the conclusion that its activities will be exclusively in furtherance of exempt purposes rationale to qualify for exemption under sec_501 a taxpayer'must demonstrate that it is both organized and operated exclusively for exempt purposes and that no part of its earnings inure to private individuals sec_501 sec_1_501_c_3_-1 you have not demonstrated that you are organized and operated for exclusively exempt purposes additionally your assets and income may inure to the benefit of your founder and for-profit therefore we can not recognize you as exempt from taxation see sec_501 sec_1_501_c_3_-1 ii to be organized exclusively for exempt purposes an organization's articles of organization must limit its purposes to one or more exempt purposes and must not expressly empower the organization to engage other than as an insubstantial part of its activities in activities which do not further one or more exempt purposes sec_1 c -1 b i iii and iv as noted above although you submitted documentation that you are incorporated you did not provide a copy of your articles if incorporation as such you have not demonstrated that your articles of incorporation contain the requisite language and therefore fail the organizational_test c -1 b additionally you are not operated for exclusively exempt purposes an applicant is required to submit sufficient information during the application process for the service to conclude that the organization is in compliance with the organizational and operational requirements of sec_501 before a ruling is issued revproc_2011_9 supra the organization has the burden of establishing through the administrative record that it operates as a sec_501 organization american science foundation 52_tcm_1049 denial of exemption may be based solely upon failure to provide information describing in adequate detail how the operational_test will be met see id 82_tc_215 exempt status can be recognized in advance of operations if proposed operations can be described in enough detail to permit a conclusion that the organization will clearly meet the requirements of sec_501 revproc_2011_9 supra american science foundation 52_tcm_1049 the organization has the burden of providing sufficient substantive information regarding its activities and operations to establish entitlement to tax-exempt status see eg founding church of scientology f 2d pincite church of spiritual technology ci ct pincite bubbling well church of universal love t c pincite share network foundation t c m pincite any gaps contained in the administrative record are resolved in favor of the service new dynamics fed cl pincite it is well-accepted that in initial qualification cases such as this gaps in the administrative record are resolved against the applicant information that is vague or nonspecific is not sufficient to meet the requirements under sec_501 share network foundation 78_tcm_6 your application does not present adequate information to allow us to determine that you meet the operational_test your application lists a myriad of activities that you intend to engage in but did not describe how you will engage in those activities and how those activities further exempt purposes for example you state that you will economic development but did not explain how your activities would provide for economic development you stated that you would operate as a cooperative hospital_service_organization under sec_501 provide hospital or medical_care and completed schedule c but did not provide any details on how you are providing hospital or medical_care similarly you stated that you will operate a school and completed schedule b but did not describe your schools additionally while you stated that your schools would comply with revproc_75_50 supra you also indicated on schedule b that you have an objective to maintain segregated education although some of the activities you list may be exempt_activities you did not provide sufficient information about how you propose to conduct your activities to permit us to determine whether they will advance these purposes as required by revproc_2011_9 sec_4 therefore you are not operated exclusively for exempt purposes an organization will also not be organized and operated exclusively for exempt purposes if it is operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests sec_1_501_c_3_-1 your earnings appear to inure to founder and you appear to operate for the benefit of for-profit rather than for a public interest therefore you are not operated exclusively for exempt purposes you stated that founder is your founder ceo and chairman you did not indicate that you have any other officers directors or trustees you also have not adopted bylaws for the selection of these individuals you do not have any employees you stated that you have adopted a conflict of interest policy but did not provide a copy of this document you also indicated that founder’s annual compensation will be dollar_figure per year because founder is the only person associated with your organization and especially considering your lack of safeguards such as a conflict of interest policy we believe that your net_earnings will ultimately inure to the benefit of individual because your net_earnings will most likely inure to the benefit of founder you do meet the requirements of sec_1_501_c_3_-1 of the regulations in addition similar to what the court noted in church of eternal life and liberty the fact that you are a single individual with exclusive control_over the management and distribution of your organization’s funds strongly suggests prohibited inurement t c pincite additionally there are several indicators in your application that you are operating for the benefit of for-profit explicitly states that you started your organization because for-profit failed to secure funding in addition on schedule d for supporting organizations you stated that your supported for example you provided a copy of your and for-profit’s charter which organization is for-profit you also indicated on schedule d that at least of your income will go to for-profit courts have repeatedly held that an organization that operates to provide commercial benefits to a related for-profit has a substantial non-exempt purpose for example in church by mail v commissioner the court found that it was unnecessary to consider the reasonableness of payments made by the applicant to a business owned by its officers the court noted that the critical inquiry is not whether particular contractual payments to a related for-profit organization are reasonable or excessive but instead whether the entire enterprise is carried on in such a manner that the for-profit benefits substantially from the operation of the church f 2d pincite similarly it appears from a thorough examination of your application that you founded your organization in order to fund for-profit in addition the few activities you were able to describe are so intertwined with those of for-profit that it is difficult to discern the distinction between you and for-profit consequently because you operate for the benefit of founder and for-profit you do not qualify for recognition of exemption conclusion your application_for exemption is denied first you failed to provide sufficient information in your application to enable us to determine that you are eligible for recognition of exempt status second you failed the organizational_test because you did not provide a copy of your articles of incorporation you also fail the operational_test because you will be engaging in activities that are commercial and do not have an exempt_purpose third you will impermissibly operate for the benefit of founder and for-profit finally your net_earnings will likely inure to the benefit of founder therefore you do not qualify for recognition of exemption under sec_501 of the code you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to protest as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if if you do not intend to protest this determination you do not need to take any further action we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service te_ge constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois g lerner director exempt_organizations


t c summary opinion united_states tax_court kabongo l kalubi petitioner v commissioner of internal revenue respondent docket no 23795-07s filed date kabongo l kalubi pro_se monica j miller for respondent ruwe judge this case was brought pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure case petitioner filed the petition requesting redetermination of deficiencies in income_tax for and years at issue this case is before the court on respondent’s motion to dismiss for lack of jurisdiction motion to dismiss background at the time the petition was filed petitioner resided in georgia on date petitioner filed with the court an incomplete petition that did not have a notice_of_deficiency attached petitioner subsequently filed an amended petition requesting redetermination of deficiencies for the years at issue petitioner did not attach any statutory notices of deficiency to his amended petition however he did attach a letter from respondent dated date which showed an updated total balance of petitioner’s outstanding unpaid tax_liabilities for the years at issue on date respondent filed the motion to dismiss respondent alleged that he had issued no notice_of_deficiency and had made no other determination that would confer jurisdiction upon the court for the years at issue petitioner filed an objection to respondent’s motion to dismiss and attached a copy of a notice_of_deficiency for his tax_year that was dated date thereafter this court ordered respondent to respond to petitioner’s objection and to include an explanation of what records formed the basis for respondent’s motion and an explanation of how petitioner’s tax_liabilities for the years at issued were determined in respondent’s response he asserted that petitioner’s unpaid tax_liabilities for the years at issue had already been assessed for tax_year respondent’s records show that he issued a notice_of_deficiency to petitioner and petitioner filed a petition in this court at docket no 17725-02s a decision in that case entered on date redetermined a dollar_figure deficiency in income_tax for tax_year for tax_year respondent’s records show that during respondent issued to petitioner a notice_of_deficiency and that petitioner had agreed with the proposed adjustments for tax_year respondent’s records show that petitioner’s timely filed tax_return reported an unpaid tax_liability of dollar_figure on date petitioner filed an amended_return for tax_year indicating a corrected tax_liability of dollar_figure after reviewing petitioner’s amended_return respondent determined an additional dollar_figure in tax owed plus dollar_figure of interest for on the basis of petitioner’s entries on his amended_return petitioner agreed to the additional dollar_figure for for tax years and petitioner’s timely filed tax returns reported unpaid tax_liabilities of dollar_figure and dollar_figure respectively discussion the tax_court is a court of limited jurisdiction and we may exercise our jurisdiction only to the extent authorized by congress sec_7442 85_tc_527 the court’s jurisdiction to redetermine a deficiency depends upon the issuance of a valid notice_of_deficiency to a taxpayer and a timely filed petition rule a c 93_tc_22 90_tc_142 a timely petition is required to be filed within days after the mailing of the notice_of_deficiency sec_6213 petitioner as the party invoking this court’s jurisdiction bears the burden of proving that we have jurisdiction over the matter see 114_tc_268 affd 22_fedappx_837 9th cir 65_tc_346 35_tc_177 in order to meet his burden petitioner must affirmatively establish all facts giving rise to our jurisdiction see david dung le m d inc v commissioner supra pincite the only evidence petitioner proffered that might suggest that this court has jurisdiction is the notice_of_deficiency for the tax_year which respondent mailed to him on date petitioner previously filed a petition regarding tax_year and a decision was entered that is now final in any event the petition filed in the instant case was filed long after the filing deadline for contesting the notice_of_deficiency for respondent acknowledges that in a notice_of_deficiency was issued for tax_year respondent’s records indicate that petitioner had agreed to the adjustments therein in any event the petition in the instant case was filed long after the deadline for filing a petition to contest the notice_of_deficiency for as to tax years and respondent’s records show that petitioner’s unpaid tax_liabilities for these years were based upon petitioner’s self-reported liabilities and that no notices of deficiency have been issued petitioner has not made any assertions or proffered any evidence that would indicate that this court has jurisdiction over his claims we will therefore grant respondent’s motion to dismiss for lack of jurisdiction to reflect the foregoing an appropriate order of dismissal for lack of jurisdiction will be entered


internal_revenue_service department of the treasury index number 468a 468a washington dc number release date person to contact telephone number refer reply to cc dom p si plr-105870-99 date date re request for a revised schedule of ruling amounts taxpayer parent plant location commission district state act fund dear this letter responds to the request of taxpayer dated date for a revised schedule of ruling amounts in accordance with sec_1_468a-3 of the income_tax regulations taxpayer was previously granted a revised schedule of ruling amounts on date information for the schedule of ruling amounts was submitted on behalf of the taxpayer pursuant to sec_1_468a-3 taxpayer represents the facts and information relating to its request for a revised schedule of ruling amounts as follows taxpayer is percent owned by parent and files a consolidated federal_income_tax return with parent taxpayer has a direct ownership_interest of percent in plant which is situated at location taxpayer is under the audit jurisdiction of the district_director of district plant's operating license expires in taxpayer is subject_to the jurisdiction of commission which covers percent of the taxpayer's total electric sales the plr-105870-99 estimated base cost for decommissioning the plant is based on an independent study and is premised on the prompt removal immediate dismantling method commission in docket no effective authorized nuclear decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes for the plant in the amount of and estimated an after-tax rate of return on assets of percent the commission also determined the total estimated cost of decommissioning to be this base cost escalated using an estimated inflation rate of percent results in an estimated future decommissioning cost of these rates were estimated after taking into consideration the tax and investment changes made to sec_468a of the internal_revenue_code made by of the energy policy act of recently state enacted act into law which mandates that the sale of electric generation to retail customers in state becomes deregulated the act authorizes taxpayer to continue to recover its nuclear plant decommissioning costs through a societal benefits charge sbc which will be a separate nonbypassable charge included in its bills to all retail customers taxpayer anticipates that its decommissioning costs attributable to plant will be recoverable through the sbc in the same amounts and over the same period of time as determined by commission there are currently proceedings pending before commission that may result in an increase or decrease in the amount of decommissioning costs for the plant to be included in taxpayer's cost of service for ratemaking purposes the funding_period and level_funding limitation period for the plant extends from the estimated period for which the fund will be in effect is the estimated_useful_life of the plant is pursuant to sec_1_468a-8 of the regulations the qualifying percentage is based upon the percentage of the vintage depreciation costs that remained to be recovered as of date the amount of the original depreciation costs is and the amount remaining to be recovered as of date is thus the taxpayer originally calculated its qualifying percentage to be percent sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the taxable_year or the ruling_amount applicable to that year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and plr-105870-99 receives from the secretary a schedule of ruling amounts the ruling_amount for any taxable_year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the taxable_year if the payment is made on account of the taxable_year within 2½ months after the close of the taxable_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any taxable_year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such taxable_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the taxable years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the plr-105870-99 nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a taxable_year sec_1_468a-3 of the regulations permits the internal_revenue_service to provide a schedule of ruling amounts that is identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer’s proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any taxable_year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier taxable_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the funding_period for a nuclear decommissioning fund is the period that begins on the first day of the first taxable_year for which a deductible payment is made or deemed to be made to such nuclear decommissioning fund and ends the later of i the last day of the taxable_year that includes the estimated date on which decommissioning costs of the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's cost of service for ratemaking purposes or ii the last day of the taxable_year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning the plant multiplied by the taxpayer's qualifying interest in the plant plr-105870-99 sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant sec_1_468a-3 of the regulations provides that the estimated period for which a nuclear decommissioning fund is to be in effect begins on the later of the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund or deemed made or the first day of the taxable_year that includes the date that the nuclear power plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer’s rate base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that the estimated_useful_life of a nuclear power plant begins on the first day of the taxable_year that includes the date that the plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant to which the nuclear decommissioning fund relates has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount plr-105870-99 sec_1_468a-3 of the regulations enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if a any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates increases the proposed period over which decommissioning costs of the nuclear power plant will be included in cost of service for ratemaking purposes adjusts the estimated date on which the nuclear power plant will no longer be included in the taxpayer’s rate base for ratemaking purposes or reduces the amount of decommissioning costs to be included in cost of service for any taxable_year and b the taxpayer’s most recent request for a schedule of ruling amounts did not provide notice to the service of such action by the public_utility commission sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in the sec_468a of the code and the regulations thereunder based solely on these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commission has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations taxpayer has determined that pursuant to sec_1_468a-3 of the regulations as modified by sec_1_468a-8 the qualifying percentage is percent plr-105870-99 taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commission and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund the maximum amount of cash payments made or deemed made to the fund during any taxable_year is restricted to the lesser amount of the decommissioning costs applicable to the fund or the ruling_amount applicable to the fund as set forth under sec_1_468a-2 of the regulations based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts taxable years year total approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time this ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received plr-105870-99 the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated above payments made to the fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to the fund or the ruling amounts applicable to the fund in the taxable_year this letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that this ruling may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to your authorized legal_representative pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each taxable_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours peter c friedman assistant to the branch chief branch office of the assistant chief_counsel passthroughs and special industries


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date genin-121390-09 uil ------------------------- --------------------- ------------------------- dear -------------- thank you for your letter of date to commissioner shulman regarding the tax consequences to victims of the investment fraud mr bernard l madoff perpetrated on date we issued guidance revrul_2009_9 and revproc_2009_20 on the tax treatment of losses from so-called ponzi schemes similar to that mr madoff operated i am enclosing copies for your information revrul_2009_9 explains the income_tax law that applies to an investor who loses money in a fraudulent investment arrangement it provides that an investor who was the victim of a fraudulent investment arrangement is entitled to a theft_loss deduction that is not limited by the rules that apply to capital losses investment theft losses are not subject_to limitations that apply to personal casualty and theft losses the theft_loss is deductible in the year the fraud is discovered except to the extent the investor has a reasonable_prospect_of_recovery the amount of the theft_loss includes not only the investor's unrecovered investment but also amounts reported as income from the investment in prior years and reinvested in the fraudulent investment arrangement a theft_loss deduction that creates a net_operating_loss for the investor can be carried back and forward according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years genin-121390-09 to claim a theft_loss deduction in any taxable_year an investor must prove that the loss was due to theft and that no reasonable prospect exists of recovering the investment investors often cannot make highly factual determinations with certainty in the year the loss is discovered for this reason we published revproc_2009_20 to provide a simplified_method for investors to compute and report their losses from fraudulent investment schemes this revenue_procedure generally allows an investor who was a victim of mr madoff’s fraud to claim a theft_loss in the amount the investor may deduct is up to percent of the loss less the amount of reimbursement he or she expects to receive as an advance for customer claims from the securities investor protection corporation sipc or from private insurance or other contractual arrangements that guarantee the investor against loss i hope this information is helpful please call me at --------------------- if i can further assist you sincerely john p moriarty chief branch office of associate chief_counsel income_tax and accounting enclosures


t c memo united_states tax_court james e griffin and katrina f griffin transferees petitioners v commissioner of internal revenue respondent docket no filed date thomas j brown and hubert r brown for petitioners michael a pesavento for respondent memorandum findings_of_fact and opinion ruwe judge respondent asserts that petitioners as transferees of assets of rodger l fisher are liable for unpaid federal income taxes of mr fisher for the taxable years and in the amount of dollar_figure plus interest as provided by law respondent determined and petitioners concede for the purposes of this proceeding that mr fisher's unpaid and deficiencies and additions to tax are addition_to_tax year deficiency sec_6663 dollar_figure dollar_figure big_number big_number the issue for decision is whether petitioners are liable as the transferees of assets of mr fisher under sec_6901 and if so the amount of such liability findings_of_fact some of the facts have been stipulated and are so found petitioners resided in tallahassee florida at the time they filed their petition petitioners were married to each other throughout the period relevant to this case mrs griffin and mr fisher are sister and brother 1the notice of transferee_liability issued to petitioners on date determined a liability of dollar_figure in an amended answer respondent increased the amount of transferee_liability asserted against petitioners to dollar_figure 2unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure mr fisher's tax_liability mr fisher was employed by the department of general services for the state of florida from through date mr fisher's duties in this capacity included overseeing the contracts between the state of florida and telephone carriers such as at t and southern bell whereby these carriers would pay commissions to the state measured by the use of their services at pay telephones located on state property sometime prior to date mr fisher identified certain pay telephones that were not then covered under any state_agency contract with the carriers in order to receive the commissions generated by these telephones mr fisher created three fictitious entities and gave them names that sounded like legitimate state agencies such as florida transportation- maintenance florida maintenance and repair and florida rehabilitative service when the agency contracts with the carriers were negotiated in date mr fisher caused separate contracts to be entered into between the fictitious entities and the carriers with respect to these telephones during the 8-month period beginning in date and continuing through date mr fisher diverted approximately dollar_figure in commissions that should have been paid to the state of florida the diverted commissions were paid to the three fictitious entities and deposited into five different bank accounts mr fisher began contemplating his scheme well before the first diversion mr fisher began taking action on his plan as early as date when he leased p o box in leon county florida this post office box was listed as the mailing address for several of his fictitious entities and was the address to which many of the diverted commissions were mailed on date mr fisher was found guilty by a jury in leon county florida of grand theft and official misconduct in connection with the diversion of the telephone commissions mr fisher was sentenced to imprisonment for a term of years and ordered to pay restitution in the amount of dollar_figure mr fisher was also indicted on federal charges based on his diversion of telephone commissions in consideration of being allowed to plead guilty to one count of this federal indictment mr fisher agreed to forfeit to the united_states all rights title and interest in a 92-acre parcel of land and a 25-acre parcel of land in order to accomplish this mr fisher secured the signatures of petitioners on a quitclaim_deed dated date which describes these two parcels mr fisher was then 3the florida department of law enforcement was able to recover only dollar_figure out of the approximately dollar_figure diverted by mr fisher sentenced to prison for a term of months to run concurrently with the sentence imposed by the state of florida mr fisher did not report the diverted proceeds on his federal_income_tax returns for and using a bank deposit analysis respondent determined that mr fisher failed to report income from his illegal activities of dollar_figure and dollar_figure for and respectively as previously indicated petitioners do not contest respondent's determination of deficiencies and additions to tax against mr fisher transfers of real_property and mortgage payments mr fisher started planning the diversion of the telephone commissions prior to date on date mr fisher transferred to petitioners by warranty deed his interest in three contiguous parcels of land located pincite apalachee parkway tallahassee florida these parcels consisted of a acre parcel parcel a 92-acre parcel parcel and a 25-acre parcel parcel on the date of these transfers there was only one improvement built on these parcels which consisted of a house constructed in on parcel mr fisher applied for the construction permit for this house and upon its completion he moved into the house and continued to reside therein until his imprisonment in the fair_market_value of the three parcels transferred on date including the house built in was dollar_figure as of that date mr fisher and his former wife alice a fisher originally obtained title to parcel sometime in on date mr and mrs fisher borrowed dollar_figure from north florida national bank this loan was secured_by a mortgage on parcel under the terms of this loan mr and mrs fisher promised to pay dollar_figure per month for years mr and mrs fisher were divorced in the circuit_court for leon county florida issued a final judgment of dissolution of marriage on date as part of this judgment mrs fisher was awarded the house and property located pincite donnesbury way tallahassee florida in which mr and mrs fisher were residing prior to the divorce mr fisher was awarded parcel located pincite apalachee parkway on date mr fisher executed a real_estate mortgage on parcel to secure his indebtedness of dollar_figure to c s family credit inc on date mr fisher executed a mortgage on parcel to secure his indebtedness of dollar_figure to c s family credit inc on date mr fisher 4the 2-acre improved parcel with the house had a fair_market_value of dollar_figure and the remaining two parcels had a fair_market_value of dollar_figure together 5mr and mrs fisher had approximately dollar_figure in equity in this property at the time of their divorce executed a mortgage on parcel to secure an initial advance of dollar_figure from government employees credit_union of florida mr fisher obtained title to parcel on date the record is not clear regarding when mr fisher obtained title to parcel on date mr fisher executed a mortgage on parcel sec_1 and to real_estate financing inc refi to secure a loan in the original amount of dollar_figure the refi mortgage was the only encumbrance against the three parcels as of date the amount of unpaid principal on the refi loan as of date the date the three parcels were transferred to petitioners was dollar_figure subsequent to the transfer to petitioners on date mr fisher continued to reside in the house on parcel and continued to make payments on the refi loan during the 6-month period following the transfer mr fisher paid off the outstanding balance on the refi loan in its entirety the following amounts were paid to refi by mr fisher date amount dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure total dollar_figure petitioners did not pay any consideration for the real_property that mr fisher transferred to them on date or for any of the subsequent loan payments made by mr fisher to refi transfers of cash between date and date mr fisher sent six checks to petitioners which totaled dollar_figure these checks were drawn from the bank accounts into which mr fisher had put diverted telephone commissions of the dollar_figure in checks from mr fisher two checks in the amounts of dollar_figure and dollar_figure were not honored because of insufficient funds in mr fisher's accounts therefore the total amount deposited by petitioners into their joint account was dollar_figure shortly after these checks were deposited into petitioners' account mr fisher directed mrs griffin to return some of the proceeds to him and to his designees the total amount dollar_figure returned by petitioners between date and date was date payee money order no amount rodger fisher t1908127 dollar_figure elizabeth bollema t1908442 dollar_figure 6during this time petitioners were living in the state of arizona lucious little t1908443 dollar_figure sandra clary t1908444 dollar_figure rodger fisher t1908860 dollar_figure total dollar_figure respondent contends that petitioners retained dollar_figure dollar_figure less dollar_figure from the checks received from mr fisher subsequent transfers by petitioners petitioners made the following payments by check or cashier's checks during date payee check no amount roosevelt randolph dollar_figure thomas brown big_number rodger fisher big_number ameritrust co big_number national association thomas brown big_number roosevelt randolph big_number total dollar_figure opinion sec_6901 provides a procedure whereby taxes owed by a transferor may be collected from a transferee commissioner v 7petitioners contend that payments to mr fisher and to others on his behalf should be considered in determining their liability as transferees in their brief petitioners contend that the total amount retransferred to mr fisher and his designees was dollar_figure and refer to the exhibit reflecting the six checks totaling dollar_figure stern 357_us_39 100_tc_180 sec_6901 does not create or define a transferee's liability commissioner v stern supra pincite hagaman v commissioner supra for purposes of this case the existence and extent of a transferee's liability at law or in equity is determined by state law commissioner v stern supra pincite hagaman v commissioner supra pincite thus state law determines the elements of liability and sec_6901 provides the remedy or procedure to be employed by the commissioner as the means of enforcing that liability 305_f2d_664 2d cir affg 35_tc_1148 respondent bears the burden of proving petitioners' liability as transferees sec_6902 rule d respondent calculated the extent of petitioners' transferee_liability by adding the individual values of the property mr fisher conveyed to petitioners as follows value as determined property by respondent real_property located at dollar_figure apalachee parkway less outstanding mortgage mortgage payments made by big_number mr fisher subsequent to including interest checks big_number total dollar_figure 8there are some situations where the existence and extent of transferee_liability is a matter of federal_law see eg sec_6324 and b a transfers of real_property and mortgage payments florida law is applicable to the transfers of the three parcels of land located in tallahassee florida under florida's uniform fraudulent transfer act fufta a transfer is fraudulent as to present and future creditors if the debtor made the transfer with actual intent to hinder delay or defraud any creditor of the debtor fla stat ann sec a west fla stat ann sec west provides in determining actual intent under paragraph a consideration may be given among other factors to whether a the transfer or obligation was to an insider b the debtor retained possession or control of the property transferred after the transfer c the transfer or obligation was disclosed or concealed d before the transfer was made or obligation was incurred the debtor had been sued or threatened with suit e the transfer was of substantially_all the debtor's assets f the debtor absconded g the debtor removed or concealed assets h the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred i the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred j the transfer occurred shortly before or shortly after a substantial debt was incurred k the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor several of these listed factors are present here mr fisher transferred his interests in the disputed parcels of land by warranty deeds on date to his sister and brother-in-law who are insiders for the purposes of fufta see fla stat ann sec west mr fisher retained possession and control of the house that was built in on one of the parcels he continued to live there until his imprisonment in and continued to make payments on the loan which encumbered the propertydollar_figure petitioners paid no consideration in exchange for mr fisher's transfer of the three parcels finally the transfer of the parcels occurred after mr fisher took the first step in his diversion scheme and shortly 9the close relationship of the transferee to the transferor tends to establish a prima facie case of a fraudulent conveyance which must be then met by the taxpayer money v powell so 2d fla dist ct app 10retention of possession of the property after the transfer creates a prima facie presumption of fraud jones v wear so fla before he received the first illegal diversion of telephone commissions and incurred the related tax liabilitiesdollar_figure the above factors support respondent's argument that mr fisher intended to defraud his creditors once respondent establishes the prima facie case of transferee_liability it is incumbent upon petitioners to come forth and present evidence in rebuttal 27_tc_999 affd in part and revd in part 261_f2d_362 6th cir petitioners contend that the three parcels were originally purchased by mr fisher with petitioners' money and that they were always the equitable owners of the three parcels in essence petitioners are arguing for a resulting trustdollar_figure the burden of proving a resulting trust rests with petitioners powell v race so 2d fla the burden of establishing the existence of a resulting trust is a heavy one in foster v thornton so fla the court held that a resulting trust in real_estate 11regardless of when federal taxes are actually assessed taxes are considered as due and owing and constitute a liability no later than the date the tax_return for the particular period is required to be filed 100_tc_180 12a resulting trust arises as a matter of law where property is acquired in the name of one person or entity with consideration provided by others under florida law once a party proves that he paid the purchase_price for a piece of property a presumption arises that it was the parties' intention that the individual holding legal_title was to hold the property in trust for the payor maliski v maliski so 2d fla dist ct app may be proved by parol testimony but such proof must be full and clear evidence to establish a resulting trust must be so clear strong and unequivocal as to remove from the mind of the chancellor every reasonable doubt as to the existence of the trust id quoting geter v simmons so fla when a resulting trust is sought to be established by parol evidence the burden rests upon the person asserting the existence of the trust to remove every reasonable doubt as to its existence by clear strong and unequivocal evidence id quoting brown v brown so fla we find that petitioners have not met their burden of producing such evidence it is undisputed that legal_title to the real_property was held by mr fisher at all times prior to the transfer to petitioners on june dollar_figure however petitioners claim to have advanced dollar_figure in cash for a downpayment on parcel purchased in made mortgage payments on a dollar_figure loan that mr and mrs fisher made in their own names and also to have contributed an undisclosed amount of capital via credit card purchases of supplies and other materials used in the construction of the house built on parcel during these contentions are not supported by any documentation in the record petitioners failed to produce any canceled checks money orders 13mrs fisher's name was on the title of parcel for a short_period of time credit card receipts bank statements or any other documentation which would corroborate their argument petitioners instead rely on their own testimony and that of mr fisher and his former wife alice however this testimony is contradicted by other evidence for example the amount of monthly mortgage payments that petitioners claim to have made to mr fisher do not correspond to the original loan from north florida national bank in petitioners claim to have made monthly payments of dollar_figure for approximately years whereas the north florida national bank loan required monthly payments of dollar_figure for years additionally mr fisher executed several loans secured_by mortgages on the property in each instance mr fisher purported to be the true owner mr fisher also applied for the construction permit which authorized the construction of the house on parcel during finally during mr and mrs fisher's divorce proceedings parcel was treated as marital property and awarded to mr fisher mr fisher's actions were consistent with true ownership petitioners failed to present documentation corroborating their payment for the property petitioners have not presented clear strong and unequivocal evidence of a resulting trust indeed the preponderance_of_the_evidence supports a finding that mr fisher was the owner of the property prior to date the fair_market_value of the property transferred on the date of transfer must be determined to find the extent of transferee_liability 93_tc_475 affd without published opinion 933_f2d_1014 9th cir 22_tc_415 respondent presented the report and testimony of harry j smith who valued the real_property transferred to petitioners at dollar_figure as of date mr smith's valuation of the subject property consists of two components the house built during and parcel upon which the house was built which were valued together at dollar_figure and parcel sec_2 and which were valued together at dollar_figure we find mr smith's valuation persuasivedollar_figure at the time the real_property was transferred to petitioners it was encumbered by a mortgage the balance of the loan secured_by this mortgage was dollar_figure on the date of transfer for purposes of determining petitioners' transferee_liability the fair_market_value of the real_property must be reduced by the outstanding mortgage against the property stokes v commissioner supra therefore we find that the value of the real_estate interest transferred to petitioners on date was dollar_figure dollar_figure less dollar_figure 14petitioners argue that mr smith valued a house built in rather than the house that existed at the time of the transfer we do not find this argument persuasive in valuing the real_property mr smith relied on the property appraiser records for leon county florida which reflect information regarding the house built in 15petitioners did not present any evidence regarding the fair_market_value of the real_property in question during the 6-month period following date mr fisher completely paid off the refi loan secured_by the mortgage the total amount mr fisher paid during this period was dollar_figuredollar_figure as each payment was made by mr fisher on the loan the mortgage lien was correspondingly reduced and petitioners realized a proportionate increase in their equity in the property under fufta a transfer is broadly defined as including every mode direct or indirect absolute or conditional voluntary or involuntary of disposing of or parting with an asset or an interest in an asset and includes payment of money release lease and creation of a lien or other encumbrance fla stat ann sec west each payment made by mr fisher on the loan satisfies the broad definition of a transfer under florida law petitioners did not pay any consideration for the release of this encumbrance based upon our reasoning regarding the transfer of the real_property itself we find that these transfers were made with the same fraudulent intent see supra pp therefore we find that petitioners received transfers with a total value of dollar_figure by way of mr fisher's payment of the refi loan 16the difference between the balance of the unpaid principal of the loan as of date in the amount of dollar_figure and the total amount_paid by mr fisher over the 6-month period following the transfer on date of dollar_figure was due to interest and other charges accruing on the loan b transfers of cash in addition to the fraudulent transfer of real_property and the payments mr fisher made on the loan respondent contends that the dollar_figure retained by petitioners in the circular movement of money for mr fisher also was a fraudulent transfer petitioners failed to provide any substantive argument as to why this transfer was not fraudulent however in their answering brief petitioners for the first time contend that respondent's focus on florida law regarding their liability for these transfers may be misplaced petitioners suggest that arizona law might apply because they resided in the state of arizona when the transfers of cash took place arizona like florida adopted the uniform fraudulent transfer act which was effective during the years in issue see ariz rev stat ann secs to west petitioners have not demonstrated any difference between arizona's version of the uniform fraudulent transfer act and florida's version of the same act further our review of these two statutes reveals no significant differences in their language as applicable to the facts of this case therefore our determination of petitioners' transferee_liability regarding the receipt of cash would be the same under either state's law as with the transfers of the real_property and the payment of the loan there are several factors present in the transfer of cash which demonstrate fraud for purposes of fufta during the period from date through date mr fisher transferred dollar_figure to petitioners for which they paid no consideration fla stat ann sec h west petitioners are insiders for purposes of fufta fla stat ann sec a west in addition mr fisher created several fictitious entities in order to carry out and later conceal the telephone commissions that he diverted from the state of florida mr fisher transferred some of the telephone commissions to petitioners by checks drawn on the accounts opened in the names of these fictitious entities petitioners transferred some of these funds back to mr fisher through the use of money orders payable to mr fisher and to others that he designated these actions are indicative of mr fisher's intent to conceal these assets fla stat ann sec g west finally the transfers of cash occurred shortly before mr fisher incurred a substantial tax_liability fla stat ann sec j west together these factors demonstrate mr fisher's intent to hinder delay or defraud his creditors fla stat ann sec a west c subsequent transfers by petitioners petitioners contend that even if they are held liable as transferees the amount of their liability should be reduced by their payment of credit card bills and attorney's_fees and by the value of the two smaller unimproved parcels which they transferred to the united_states in accordance with mr fisher's plea agreement a transferee may avoid liability for a tax_deficiency under a fraudulent transfer statute by reconveying the property to the transferor under certain conditions 52_tc_727 see also 760_f2d_1129 11th cir affg in part and revg in part tcmemo_1983_397 a transferee may avoid liability as a fraudulent transferee by reconveying or retransferring the property to the transferor prior to the commissioner's taking action to collect from the transferee eyler v commissioner supra pincite a transferee who pays the debts of his transferor however will not be relieved of liability to the extent of the payment unless the debts paid held priority over the tax claimed by the commissionerdollar_figure id petitioners bear the burden of refuting transferee_liability once the commissioner has made a prima facie showing of such liability 35_tc_1148 affd 305_f2d_664 2d cir 17we note that whether a reconveyance to the transferor relieves the transferee of liability is a matter of state law mclellan v commissioner tcmemo_1975_15 the parties have pointed us to no florida or arizona cases which would provide for a contrary result on these facts transfers directly to mr fisher except for the dollar_figure previously allowed by respondent the only retransfer of property that petitioners made directly to mr fisher was the dollar_figure check dated date respondent acted to collect from petitioners when the notice of transferee_liability was issued on date because the dollar_figure payment occurred before date we find that the amount of transferee_liability asserted by respondent should be reduced to the extent of dollar_figure transfers to mr fisher's creditors petitioners contend that the remaining transfers of cash to ameritrust co national association mr randolph and mr brown and the transfer of the two parcels to the united_states 18respondent contends that petitioners and mr fisher conspired to defraud mr fisher's creditors in 18_tc_1159 affd 217_f2d_952 9th cir we noted that in certain cases it is possible that retransfers might be the result of collusion between the parties and made in such manner that it also would be in fraud of creditors despite the fact that mr fisher and petitioners were closely related there is no evidence of collusion on the part of petitioners with regard to the retransfer of dollar_figure on date 19petitioners do not identify the respective relationships of these payees to mr fisher or the purposes of these payments however respondent identified the payees mr randolph and mr brown as mr fisher's attorneys respondent also identified the payee ameritrust co national association as a creditor of mr fisher however there is nothing in the record that would continued were made in mr fisher's behalf however petitioners do not offer any proof or make any argument to show that the debts and fees paid on mr fisher's behalf or that the transfer of the two parcels of land in accordance with mr fisher's plea agreement had priority over his indebtedness to respondent transferee_liability having been established it is incumbent upon petitioners to make such a showing 18_tc_1159 affd 217_f2d_952 9th cir accordingly petitioners' claim that they are relieved of liability by reason of the expenditures made by them on mr fisher's behalf is rejected to the extent petitioners have raised other issues or arguments we have fully examined them and find them to be without merit summarizing our conclusions then we hold that petitioners are liable as transferees for mr fisher's income_tax deficiencies and additions to tax for and to the extent of dollar_figure dollar_figure as determined by respondent less the dollar_figure retransferred to mr fisher plus interest on such amount as provided below continued indicate whether this creditor or any other creditor had priority over respondent d liability for interest where the amount transferred to a transferee is less than the amount of taxes owed by the transferor state law determines the extent to which a transferee is liable for interest accrued prior to the commissioner's demand for payment 37_tc_945 florida gives respondent the right to statutory interest on petitioners' transferee_liability lebeau v commissioner tcmemo_1992_ under florida law prejudgment_interest is allowed in cases involving a liquidated claim town of longboat key v carl e widell son so 2d fla dist ct app mr fisher's unpaid tax_deficiency and addition_to_tax for was dollar_figure which was due and owing no later than date because the value of the assets transferred to petitioners was less than this liability all of respondent's claim against petitioners became liquidated no later than date petitioners' transferee_liability includes accrued interest at the rate prescribed under fla stat ann sec dollar_figure west from date decision will be entered under rule