internal_revenue_service number info release date index number --------------------------------- ------------------------ -------------------------------- ------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi genin-107713-05 date date dear --------------- this letter responds to your request dated date seeking to revoke your s_corporation_election as of date generally termination of an s_corporation_election by revocation is accomplished prospectively not retroactively pursuant to sec_1_1362-2 of the income_tax regulations an election made under sec_1362 of the internal_revenue_code is terminated if the corporation revokes the election for any taxable_year of the corporation for which the election is effective including the first taxable_year a revocation may be made only with the consent of shareholders who at the time the revocation is made hold more than one -half of the number of issued and outstanding shares of stock including non-voting stock of the corporation in general a revocation made during the taxable_year and before the 16th day of the third month of the taxable_year is effective on the first day of the taxable_year and a revocation made after the 15th day of the third month of the taxable_year is effective for the following taxable_year if a corporation makes an election to be an s_corporation that is to be effective beginning with the next taxable_year and revokes its election on or before the first day of the next taxable_year the corporation is deemed to have revoked its election on the first day of the next taxable_year if a corporation specifies a date for revocation and the date is expressed in terms of a stated day month and year that is on or after the date the revocation is filed the revocation is effective on and after the date so specified under sec_1_1362-6 to revoke an election the corporation files a statement that the corporation revokes the election made under sec_1362 the statement must be filed with the service_center where the election was properly filed the revocation statement must include the number of shares of stock including non-voting stock issued and outstanding at the time the revocation is made in addition each consent statement should indicate the number of issued and outstanding shares of stock including non-voting stock held by each shareholder at the time of the revocation genin-107713-05 if you wish to revoke your election as of date your revocation statement a copy of this letter and the copy of your january request along with a copy of this letter must be filed within days of the date of this letter we recommend that you send your revocation package to the ogden service_center via facsimile at please keep the facsimile transmission receipt for your records if you have any additional questions please contact our office at sincerely s dianna k miosi dianna miosi chief branch office of associate chief_counsel passthroughs special industries enclosure copy of request


t c memo united_states tax_court myron r struck and thelma c struck petitioners v commissioner of internal revenue respondent docket no filed date david s greenberg for petitioners joseph p wilson for respondent memorandum findings_of_fact and opinion swift judge respondent determined deficiencies in and penalties on petitioners’ federal income taxes as follows year deficiency sec_6662 penalty dollar_figure big_number dollar_figure big_number after concessions by the parties the primary issue for decision is whether petitioners qualify for the foreign_earned_income_exclusion of sec_911 hereinafter sometimes exclusion under the two conjunctive requirements thereof unless otherwise indicated all section references are to the internal_revenue_code in effect for and and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact this case was tried on date in san diego california some of the facts have been stipulated and are so found at the time the petition was filed myron and thelma struck resided in san diego california for approximately years from through early date myron was employed full time as a yacht captain for owners of private yachts thelma also was employed on the yachts as a chef and stewardess beginning in through may of myron and thelma were employed on a yacht that was owned by cush automotive a california company and that was operated primarily in foreign territorial waters each year cush automotive paid myron and thelma a salary their living_expenses while on the yacht and their vacation travel_expenses back to the united_states when underway every hours myron would note in a log the yacht’s longitude and latitude coordinates except for approximately weeks when on vacation in the united_states and even when docked in foreign ports myron and thelma lived on the yacht based on testimony and exhibits in evidence including a review of the log coordinates that was performed by personnel of the u s navy for purposes of this case the charts below set forth for myron and thelma’s taxable_year sec_2001 and sec_2002 our findings as to the number of days during the applicable 12-month periods on which myron and thelma were not physically present in foreign territorial waters and the number of days they were physically present in foreign territorial waters as indicated in the charts the two 12-month applicable periods we utilize to establish petitioners’ or more days of foreign physical presence requisite to qualify myron and thelma for the foreign_earned_income_exclusion for and overlap each other and do not correspond to calendar years 1we refer to each period of consecutive months used in the calculation of a taxpayer’s foreign_earned_income_exclusion as an applicable_period applicable_period of date to date for date sec_1 - - - - - - - - - - number of days foreign days nonforeign days total for applicable_period of date to date number of days foreign days dates nonforeign day sec_5 - - - - - - - - total on date myron and thelma left the yacht in costa rica and flew to the united_states for their annual 2-week vacation on date myron and thelma returned to the yacht in costa rica on date myron and thelma docked the yacht in the harbor in san diego california and retired from working on yachts from through myron and thelma owned unimproved real_property in julian california and occasionally they camped on this unimproved real_property during and myron and thelma were listed on the san diego california county tax rolls as absentee owners of this unimproved real_property from through myron and thelma also owned a townhouse in coronado california townhouse and they apparently claimed a california property_tax homeowners’ exemption relating to the townhouse during all of and the first half of myron and thelma rented out the townhouse to tenants and the townhouse was managed by real_estate professionals because it was rented out myron and thelma did not stay in their townhouse while vacationing in california in and the first half of 2cal const art sec_3 exempts dollar_figure of a home’s taxable value from california property_tax assessment when the home constitutes the owner’s principal_residence and is occupied by the owner during and the first half of in california myron and thelma also maintained bank accounts registered and garaged two vehicles at a relative’s property and maintained their driver’s licenses myron and thelma’s combined salaries from their employment on the yacht totaled dollar_figure for and dollar_figure for on petitioners’ joint federal_income_tax return petitioners reported their total dollar_figure in salaries and they claimed the foreign_earned_income_exclusion with regard to that total amount with the filing of their joint federal_income_tax return petitioners included a form 2555-ez foreign_earned_income_exclusion relating to each petitioner on these forms 2555-ez petitioners entered the address of a relative in california in the blanks for foreign address and indicated an applicable_period of january to date on petitioners’ joint federal_income_tax return petitioners reported their total dollar_figure in salaries and they claimed the foreign_earned_income_exclusion with regard to dollar_figure thereof based on the number of days in petitioners’ applicable_period that fell within petitioners’ taxable_year with the filing of their joint federal_income_tax return petitioners included a form 2555-ez relating to each petitioner on these forms 2555-ez petitioners entered the address of a relative in california in the blanks for foreign address and indicated an applicable_period of january to date during respondent’s audit petitioners filed with respondent amended forms 2555-ez for and indicating a costa rica foreign address for both years and new applicable periods of date to date and date to date respectively and petitioners cooperated with all of respondent’s documented requests for information and otherwise cooperated with respondent respondent’s revenue_agent concluded that petitioners did not have a foreign tax_home for and and the revenue_agent disallowed the total foreign_earned_income exclusions petitioners claimed for each year in their briefs for purposes of calculating their foreign_earned_income exclusions for and petitioners request revised applicable periods for and respectively of january to date and date to date alternatively for each year petitioners request that we apply whatever applicable periods would maximize petitioners’ foreign_earned_income exclusions 3the record does not explain why petitioners indicated on their filed forms 2555-ez foreign_earned_income_exclusion for and respectively applicable periods of only months and months in his briefs respondent states that the only applicable periods we should consider for petitioners for and are january to date and date to date opinion taxpayers generally have the burden_of_proof rule a however because petitioners submitted credible_evidence maintained records and cooperated with respondent the burden_of_proof regarding petitioners’ physical presence during and is on respondent sec_7491 a and b generally sec_911 provides to u s taxpayers a limited elective exclusion_from_gross_income for income earned overseas to qualify for this foreign_earned_income_exclusion for a particular year a taxpayer must have a foreign tax_home sec_911 and must either be a bona_fide_resident of a foreign_country for the taxpayer’s full taxable_year bona_fide residence requirement or be physically present in a foreign_country or countries for at least days during any consecutive months which overlap the taxpayer’s taxable_year physical presence requirement sec_911 and b a qualified_taxpayer may only exclude the lesser_of actual foreign_earned_income or the maximum amount set by statute sec_911 married taxpayers may each use their exclusions separately on separate returns or combine their exclusions on a joint_return sec_1_911-5 income_tax regs and without regard to community_property_laws sec_1_911-5 income_tax regs for and the maximum exclusions for a married couple filing a joint federal_income_tax return totaled dollar_figure and dollar_figure respectively sec_911 foreign tax_home requirement the foreign tax_home requirement of sec_911 is to be evaluated during the same applicable_period used by a taxpayer for the bona_fide residence or the physical presence requirement sec_1_911-2 and b income_tax regs sec_911 which defines tax_home as applied to the exclusion incorporates the travel business_expense provision of sec_162 as follows the term ‘tax home’ means with respect to any taxpayer such taxpayer’s home for purposes of sec_162 relating to traveling expenses while away from home thus under the foreign_earned_income_exclusion the location of a tax_home generally is determined in the same manner as the location of a tax_home under sec_162 in sec_1_911-2 income_tax regs it is explained that the location of a taxpayer’s regular or principal_place_of_business or if none of a taxpayer’s abode in a real and substantial sense will be regarded as the location of a taxpayer’s tax_home sec_1_911-2 income_tax regs provides as follows b the term tax_home has the same meaning which it has for purposes of sec_162 relating to travel_expenses away from home thus under sec_911 a taxpayer’s tax_home is considered to be located at his regular or principal if more than one regular place of business or if the taxpayer has no regular or principal_place_of_business because of the nature of the business then at his regular place of abode in a real and substantial sense if in a year a taxpayer has neither a regular or principal_place_of_business nor any abode in a real and substantial sense a taxpayer may be classified as an itinerant whose tax_home is located wherever the taxpayer is physically located from day to day 752_f2d_337 8th cir affg tcmemo_1984_63 47_tc_71 revrul_73_529 1973_2_cb_37 during and until date petitioners’ business consisted principally of traveling in international and foreign waters to foreign countries on the yacht of cush automotive because petitioners had neither a regular or principal_place_of_business nor a specific abode in a real and substantial sense during the applicable periods we conclude that petitioners were itinerants that petitioners had a foreign tax_home during the plus days they were physically present in a foreign_country during petitioners’ applicable periods for and for and that petitioners therefore had a foreign tax_home for purposes of the claimed foreign_earned_income_exclusion the last sentence of sec_911 provides that a taxpayer who has an abode in the united_states will not be treated as having a tax_home in a foreign_country neither sec_911 nor the regulations thereunder define abode court cases that have done so involve taxpayers who have alternated long blocks of time working abroad with long blocks of time at home in the united_states where their families lived because the taxpayers had domestic ties such as family in the united_states and only transitory ties in the foreign_country where the taxpayers worked the taxpayers were held to have a u s abode see 93_tc_297 doyle v commissioner tcmemo_1989_463 lemay v commissioner tcmemo_1987_256 affd 837_f2d_681 5th cir bujol v commissioner tcmemo_1987_230 affd without published opinion 842_f2d_328 5th cir but cf jones v 4respondent herein does not argue that as itinerants petitioners had no foreign tax_home for purposes of the sec_911 foreign_earned_income_exclusion see eg henderson v commissioner tcmemo_1995_559 holding that for purposes of sec_162 an itinerant taxpayer may be treated as having no tax_home and therefore may not be allowed away from home business travel expense deductions affd 143_f3d_497 9th cir sec_1_911-2 income_tax regs contains the following statement maintenance of a dwelling in the united_states does not necessarily mean that the taxpayer’s abode is in the united_states commissioner 927_f2d_849 5th cir revg tcmemo_1989_616 because petitioners’ townhouse was leased to others not available to petitioners and because petitioners had limited other ties to the united_states petitioners did not have an abode in the united_states during petitioners’ and applicable periods physical presence requirement under the second requirement of sec_911 because petitioners acknowledge that they do not qualify for the foreign_earned_income_exclusion under the bona_fide foreign residence requirement we address only the alternate physical presence requirement under sec_911 a taxpayer who spends at least days during an applicable_period in a foreign_country or countries will satisfy the physical presence requirement for the related tax_year for this purpose a taxpayer is to add together all foreign days falling within any one applicable_period sec_1_911-2 and income_tax regs an applicable_period consists of any consecutive months sec_1_911-2 income_tax regs in order for the exclusion to be applicable to reduce gross_income in a particular year the applicable_period must have some overlap with the taxpayer’s taxable_year in question sec_1_911-3 and income_tax regs for a particular taxable_year of a taxpayer there may be a number of different applicable periods see sec_1 a ii d income_tax regs and the examples thereunder a taxpayer may use whichever applicable_period maximizes the foreign_earned_income_exclusion see sec_911 sec_1_911-2 income_tax regs under sec_911 a foreign_country includes airspace lands and territorial waters under the sovereignty of a country territory or possession other than the united_states 313_f3d_1214 9th cir 126_tc_89 affd 473_f3d_790 7th cir sec_1_911-2 and h income_tax regs because international waters are not under the sovereignty of any one country time spent in international waters generally does not apply toward the foreign day requirement see 433_fsupp_936 e d la although sec_911 states that an aggregate of full days of physical presence in a foreign_country or countries is required the regulations thereunder define a full 6respondent’s audit technique guide for foreign athletes and entertainers october suggests that respondent’s revenue agents may use a more favorable applicable_period than the taxpayer initially indicated on a filed form_2555 foreign_earned_income audit internal_revenue_manual cch par big_number at big_number day to include partial days of travel in or on international airspace land or waters from one foreign location to another foreign location therefore a day involving travel in international waters between foreign locations in increments of less than hours is treated as a full_day in a foreign_country sec_1_911-2 and income_tax regs if the second alternate requirement of sec_911 is relied on days of foreign physical presence and if the applicable_period selected by a taxpayer to satisfy the days of foreign physical presence does not correspond to the taxpayer’s taxable_year the taxpayer may only exclude the lesser_of actual foreign_income earned during the taxable_year or a pro_rata portion of the maximum exclusion amount that corresponds to the number of days of the applicable_period that falls within the taxpayer’s taxable_year sec_1_911-3 and income_tax regs because we have found that petitioners were physically present in foreign countries for days for using an applicable_period of date to date7 and 7for petitioners have not specifically requested an applicable_period of date to date however petitioners have requested that the court determine the applicable_period that will maximize petitioners’ exclusion we agree with petitioners that generally we are not precluded from identifying and utilizing an applicable_period that allows a taxpayer the maximum foreign_earned_income_exclusion under the physical presence requirement for days for using an applicable_period of date to date petitioners pass the foreign physical presence requirement for both years we explain further two of the disputes the parties have in calculating petitioners’ foreign physical presence respondent treats each day that involved a partial day of travel for petitioners in international waters as a nonforeign day as explained however sec_1_911-2 and income_tax regs provides that a partial day of travel in international waters in traveling from one foreign_country to another foreign_country be treated as a full foreign day respondent argues that myron’s testimony does not establish petitioners’ presence in costa rica from december to date and respondent asserts that those days should not count as foreign days for petitioners we find myron’s testimony to be credible furthermore myron’s testimony was corroborated the yacht was docked in costa rica for the entire month of date and myron’s testimony regarding petitioners’ travel to the united_states in date was consistent with myron’s testimony that his vacation each year in the united_states lasted only weeks respondent argues that petitioners’ initial forms 2555-ez indicate that petitioners were located in the united_states for the entire month of date we disagree petitioners’ forms 2555-ez for were silent as to date and petitioners made mistakes designating applicable periods on the forms 2555-ez that they initially filed for both and also because of the shift to respondent of the burden_of_proof respondent bears the burden to prove that petitioners were not in a foreign_country for the first days of date respondent argues further that for there are insufficient facts in evidence to evaluate the requirements of the foreign_earned_income_exclusion under any applicable_period other than january to date we disagree petitioners’ log myron’s testimony and the navy review of the log establish petitioners’ presence in foreign countries for the applicable_period we utilize for -- namely date to date as well as for respondent also makes a procedural argument as to why we should analyze petitioners’ qualifications for the exclusion only under the applicable periods petitioners indicated on their initially filed forms 2555-ez respondent argues that our utilization of a different applicable_period for to measure petitioners’ foreign physical presence constitutes a new issue not raised by the pleadings although we have adjusted petitioners’ applicable_period for the issue remains what it has always been do petitioners qualify for the exclusion our slight adjustment in the applicable_period for does not constitute a new issue respondent argues that adjusting the applicable_period at this point in the litigation would be unfair where respondent prepared for trial based on an applicable_period of january to date however in respondent’s pretrial memorandum and posttrial briefs respondent acknowledges that we might consider other applicable periods that an applicable_period may be adjusted before examination during examination and during litigation and that we may make a finding as to the appropriate and most favorable applicable_period in respondent’s pretrial memorandum respondent states as follows during and petitioners were not physically present in a foreign_country for at least full days nor any other period of months in a row starting or ending in and emphasis added furthermore respondent has had ample opportunity to brief the court and to review the evidence on the facts of this case we do not believe that the applicable_period we use for petitioners for constitutes unfair surprise to respondent see estate of keeton v commissioner tcmemo_2006_263 the parties’ stipulation does not require a contrary result the parties’ stipulation only encompasses admissibility not correctness of the exhibits admitted into evidence petitioners have established that they qualify for the exclusion for both and petitioners had a foreign tax_home during the applicable periods and petitioners were physically present in foreign countries for at least days of the applicable periods overlapping and in light of our resolution of the foreign_earned_income issue in favor of petitioners the sec_6662 penalties determined by respondent are moot to reflect the foregoing decision will be entered under rule 8because the applicable periods utilized in our opinion do not correspond to petitioners’ taxable years a pro_rata adjustment to petitioners’ exclusions for foreign_earned_income for and will need to be made under sec_1_911-3 income_tax regs


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom p si plr-114334-99 date date number release date legend x a b d1 this letter responds to a letter dated date and subsequent correspondence written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code that x's s_corporation status will be effective as of the taxable_year beginning d1 facts according to the information submitted x was incorporated on d1 and it was decided that x would be an s_corporation a and b the shareholders of x hired an attorney to file x's form_2553 election by a small_business_corporation with an effective date of d1 the attorney however failed to timely file x's form_2553 x requests a ruling that it will be recognized as an s_corporation effective for the taxable_year beginning d1 under sec_1362 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides when an s election will be effective if an s election is made within the first two and one half months of a corporation's taxable_year then that plr-114334-99 corporation will be treated as an s_corporation beginning the year in which the election is made if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year conclusions based solely on the facts submitted and representations made we conclude that x has established reasonable_cause for not making a timely election and is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 containing an effective date of d1 for the election within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n department of the treasury internal_revenue_service washington d c employer_identification_number number release date date date u i l number legend a b c d m x y z a b c s t u dear ------------ we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 based on the information submitted we have concluded in the certificate of incorporation you state that initially your specific you state that you were incorporated in the state of m in date that you do not qualify for exemption under that section the basis for our conclusion is set forth below however the certificate of incorporation that you submitted is not signed and there is no evidence that it was filed with and approved by the appropriate state official as required in the application purposes are to educate the market sponsor research foster standards and articulate the measurable benefits of a technologies and techniques to serve as a forum for discussion of related issues sponsor industry research develop open standards and guidelines and promote best practices and to undertake such other activities as may from time to time be appropriate to further the purposes and achieve the goals set forth above in your bylaws you state that your membership is open to any entity or person who pays the initiation fees and annual dues you identify two classes of membership a members and b members the annual membership dues range from dollar_figures to dollar_figuret depending on the class of membership selected in your application you state that only a members have voting privileges the following rights privileges and benefits for a members are among those identified in your bylaws and recruitment material voting for directors voting on matters submitted to voting members nominating a director to the board_of directors appointing a voting representative to various committees sub- committees special interest groups and work groups running for board_of directors’ seats receiving without charge copies of your publications prior to public distribution with pre-publication access to any specifications under development have access to your resources and research having the use of your logo having a company website hotlink to your website and receiving free or discounted services meetings are open to b members none serve on your board or as officers you further stated that the a committee the only board committee that had been created consists of officers the committee proposes dispositions of issues that the board votes on including financial matters you stated that like a members b members may each appoint one voting representative to other committees we asked that you submit a copy of five a members’ company information that had been included in your materials we advised you that if you had used more than one type of material representative samples were to be provided for each you responded that the a members are treated as a group with lists of the companies in press kits and information kits you further stated that all are listed in your letter dated date you stated that while all member you submitted a copy of your logo you stated that you had no written on your website and all have links to their own websites you did not submit representative samples of materials that you had distributed policy regarding its use other than its being a privilege of a members who are encouraged to post it on their websites and in materials we asked you to provide representative samples of company products or materials submitted to you by members to be used to display your logo you responded that you knew of no member materials still displaying the logo you did not state whether members had used the logo in the past and if so whether you had received member material incorporating your logo we asked you to provide a list of free or discounted services provided to your a members for the period from date to date you responded that there were no free or discounted services provided to a members during the period that were not also provided to b members aside from the differing privileges accorded to different membership levels you did not submit a list of the services that had been provided in your application you state that you are dedicated to promoting on the behalf of developers and users of a technologies the development and use of responsible one-to-one marketing technology and practices on the world wide web you further state that you seek to accomplish these objectives by encouraging the growth and success of b that delivers the benefits of c while developing and promoting industry standard best practices and that protect the interests of consumers you identify the first step in your proposed c program as being the establishment of certain objectives that articulate your goal you state that you intend to provide a forum for industry discussion and information sponsor industry research foster standards for technology and best practices conduct educational conferences for members participate in trade shows engage in certification and branding programs and advertise membership on the web in the application you did not provide specific information regarding how you propose to conduct the activities and programs in your correspondence you stated that there is no certification or branding program at x you further stated that the proposed c program had not been implemented in your application you identified the allocation of your time resources as being marketing and sales research_and_development administrative activities and member services in our date letter we asked you to state approximately what percentage of your time and resources was devoted to the activities you responded that the figures which are historical and approximate only due to your two years of inactivity are and respectively we asked you to provide a copy of the agendas programs etc for your conferences you stated that you were attaching agenda for two in-person you stated that all members suggest research topics you explained that members meetings and you explained that the second meeting had been cancelled due to lack of participation no agendas accompanied your response you stated that informal teleconferences were periodically held for interested members where committee updates were provided and questions answered we asked you to provide representative samples from your website www a org of material that you considered to be educational you stated that you considered d the primer on a the glossary of industry terminology and the resources posted on your website links to a glossary to faqs about your organization and to other websites to be educational on the website you state you do not organize public events you post a calendar of events offered by other organizations on the website and those that you endorse are identified by your logo while nonmember suggestions for research topics would be welcome and considered as a practical matter your limited budget has not allowed for active solicitation of nonmembers another survey were made available to the public for a fee you stated that the fee was meant to defray the costs incurred in producing and distributing the survey and that the costs were consistent with similar types of reports available to the public from other sources your financial statements show your support as being from membership dues and assessments and sponsorship income you stated that additional income may be provided in other wa ys not yet determined in the future you further stated that if you offer certification services you may decide to charge a fee to cover your costs the results of a u item survey are posted on your website the results of in your application you state that y is to be paid to provide management services in the nature of members support services and general operational support in response to our request for a copy of the contract with y you responded that there was no formal contract you stated that for approximately two years the company has been providing minimal services to you only upon request from your officers you did not submit any documents related to the terms of the agreement between you and y your website contains a members only section in your members only newsletter there was a reference to your having negotiated with z to provide members with access to certain information through your website in response to our request for a copy of your contract with z you stated that you executed the cancellation provision of the contract in you did not submit a copy of the contract in the letter dated date you stated that you had been relatively quiescent for nearly two years during the b slowdown in a letter dated date you advised us that you continue to be inactive and that no decision had been made as to winding up your affairs you stated that you were in a form of suspended operations awaiting an internal decision whether to proceed with your mission or to dissolve you stated that no change in activities is anticipated you asked that a determination regarding your application_for exemption under sec_501 of the code be made based upon your past practices and operations income_tax of business_leagues chambers_of_commerce real-estate boards or boards_of_trade not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_501 of the code provides for the exemption from federal sec_1_501_a_-1 of the income_tax regulations provides generally for an exemption from taxes for organizations which are described in sec_501 or d of the code sec_1_501_a_-1 of the regulations provides generally that an organization claiming exemption under sec_501 of the code and described in any paragraph of sec_501 shall file the form of application prescribed by the commissioner and shall include information as required by such form and the instructions sec_1 a -2 of the regula tions provides that in addition to the information specifically called for by this section an organization may be required to provide any additional information deemed necessary for a proper determination of whether it is exempt under sec_501 of the code and when deemed advisable in the interest of an efficient administration of the internal revenue laws in the cases of particular types of organizations the form in which the proof of exemption shall be furnished may be prescribed sec_1_501_c_6_-1 of the regulations provides in part that a business league is an association of persons having some common business_interest the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit it is an organization of the same general class as a chamber of commerce or board_of trade thus its activities should be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons an organization whose purpose is to engage in a regular business of a kind ordinarily carried on for profit even though the business is conducted on a cooperative basis or produces only sufficient income to be self-sustaining is not a business league revproc_90_27 1990_1_cb_514 sets forth procedures with regard to applications for recognition of exemption from federal_income_tax under sec_501 of the code section dollar_figure of the revenue_procedure provides that where the organization cannot demonstrate to the satisfaction of the service that its proposed activities will be exempt a record of actual operations may be required before a ruling or determination_letter will be issued in 34_fsupp_71 n c the court held that an organization seeking exemption under sec_103 of the revenue act of which corresponds to sec_501 of the internal_revenue_code_of_1986 bears the burden of proving that it satisfies the requirements for recognition as a business league in retailers credit association of alameda county v commissioner of internal 33_bta_1166 the board_of_tax_appeals explained that a taxpayer claiming exemption must not only carry the burden_of_proof but must proceed perceptibly further and bring itself strictly within the provisions of the act creating the exemption the case involved an organization seeking exemption as a business league under the revenue act of sec_103 which corresponds to sec_501 of the internal_revenue_code_of_1986 organizations exempt under sec_501 of the code as business_leagues share certain characteristics set forth in sec_1_501_c_6_-1 of the regulations they are associations of persons who have a common business_interest their purpose is promote this common business_interest their activities are directed to the improvement of business conditions in one or more lines of business rather than towards performing particular services for individual persons they are not organized to engage in a regular business of a kind ordinarily carried on for profit even if the business is to be conducted on a cooperative basis or is to produce only sufficient income to be self-sustaining no part of their earnings inure to the benefit of any private individual an organization claiming exemption as a business league under sec_501 has the burden of proving that it qualifies for exemption under the code section durham merchant’s association supra in addition the organization must bring itself strictly within the provisions of sec_501 retailers credit association of alameda county supra form_1024 application_for recognition of exemption must be completed by an organization seeking recognition of exemption under sec_501 of the code sec_1_501_a_-1 of the regulations in section ii activities and operational information the applicant is required to p rovide a detailed narrative description of all the activities of the organization-past present and planned emphasis added in describing its activities an applicant is to provide information regarding when an activity was or will be initiated and where and by whom the activity will be conducted the service may when deemed necessary for a proper determination of whether it an organization is exempt under sec_501 and when deemed advisable in the interest of an efficient administration of the internal revenue laws require an applicant to submit additional information sec_1 a -2 you state that you have been inactive for nearly two years and you have provided no indication as to whether you intend to proceed with your activities you merely state that no change in your activities is anticipated the information that you furnished in your application and in response to our request for additional information does not describe your activities past present or future in sufficient detail to establish that you satisfy the requirements for recognition of exemption under sec_501 of the code section dollar_figure of revproc_90_27 supra also in analyzing your previous activities it is not clear whether your activities were intended to serve the general economic interests of a geographic location or of one or more lines of business by promoting the economic_interest of all businesses in a given trade community as would be the case with a chamber of commerce or board_of trade nor is it clear whether your activities were intended to promote the common business interests of an identifiable line_of_business or of members of closely related lines of business within an industry therefore for these reasons we are unable to recognize you as exempt as an organization described in sec_501 and you must file federal_income_tax returns you have the right to protest this ruling if you believe it is incorrect to protest you should submit a statement of your views to this office with a full explanation of your reasoning this statement signed by one of your officers must be submitted within days from the date of this letter you also have a right to a conference in this office after your statement is submitted you must request the conference if you want one when you file your protest statement if you are to be represented by someone who is not one of your officers that person will need to file a proper power_of_attorney and othe rwise qualify under our conference and practices requirements if we do not hear from you within days this ruling will become final and a copy will be forwarded to the ohio tax exempt and government entities te_ge office thereafter any questions about your federal_income_tax status should be directed to that office either by calling a toll free number or sending correspondence to internal_revenue_service te_ge customer service p o box cincinnati oh in the event this ruling becomes final it will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you decide to protest this ruling your protest statement should be sent to the address shown below if it is convenient you may fax your reply using the fax number shown in the heading of this letter if you fax your reply please contact the person identified in the heading of this letter by telephone to confirm that your fax was received ----------------------- irs organization name se t eo ra t constitution ave nw pe-3m1 washington dc if you do not intend to protest this ruling and if you agree with our proposed deletions as shown in the letter attached to notice you do not need to take any further action if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter enclosure notice lois g lerner director exempt_organizations rulings agreements sincerely


internal_revenue_service number release date index number ------------------- ------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------------------------------- -------------------------------------- telephone number ---------------------- refer reply to cc psi b04 plr-139282-16 date date --------- -------------------- legend grantor spouse date date date trust county court state statute state statute state dear --------------- -------------------------------------------- ------------------------------------------------ -------------------------- ------------------- ------------------- ---------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------- -------------------------------------------------- ------------- this letter responds to your authorized representative’s letter dated date and subsequent correspondence requesting rulings on the federal estate and gift_tax consequences of a judicial reformation of trust the facts and representations submitted are summarized as follows on date grantor created trust an irrevocable_trust to benefit spouse grantor’s spouse and descendants trust is administered under the laws of state section of trust is entitled special_power_of_appointment and provides that on the death of spouse the trustee is to distribute such amounts of principal and income as spouse is to direct to such persons or charities for such estates and interests and outright or upon such terms trusts conditions and limitations as spouse is to appoint by her last will made either before or after grantor’s death making specific reference to plr-139282-16 this power and which is to be admitted to probate in a formal or informal proceeding spouse may release such power_of_appointment in whole or in part by any method recognized by law the terms of section however did not specifically limit the exercise of the power_of_appointment to persons other than spouse the estate of spouse the creditors of spouse or the creditors of spouse’s estate it is represented that grantor intended for the power_of_appointment to be a limited_power_of_appointment section dollar_figure of spouse’s most recent will refers to section of trust the will states in relevant part i n section of trust i am granted the limited power to appoint the assets of such trust to persons or charities other than myself my creditors my estate or the creditors of my estate on date grantor filed a petition with county court to reform section of trust to provide that the trustee is to distribute such amounts of principal and income as spouse is to direct to such persons or charities other than spouse the creditors of spouse the estate of spouse and the creditors of the estate of spouse on date county court entered an order retroactively reforming and modifying section of trust to conform to grantor’s intent consistent with the petition you have requested the following rulings the power_of_appointment granted to spouse by section of trust as reformed by county court to correct the scrivener’s error does not constitute a general_power_of_appointment under sec_2041 of the internal_revenue_code over the assets of trust and trust assets will not be included in spouse's gross_estate the reformation of trust is not an exercise or release of a general_power_of_appointment under sec_2514 so as to constitute a gift by spouse for federal gift_tax purposes law and analysis sec_2001 provides that a tax is imposed on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2031 provides that the value of the gross_estate of the decedent shall be determined by including to the extent provided for in sec_2031 through the value at the time of his death of all property real or personal tangible or intangible wherever situated plr-139282-16 sec_2041 provides in relevant part that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 through inclusive sec_2041 defines the term general_power_of_appointment as a power that is exercisable in favor of the decedent the decedent's_estate the decedent's creditors or the creditors of the decedent’s estate sec_2041 provides in relevant part that the lapse of a power_of_appointment created after date during the life of the person possessing the power shall be considered the release of such power sec_2501 imposes a gift_tax for each calendar_year on the transfer of property by gift during the year by an individual sec_2511 provides that the gift_tax shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2514 provides that the exercise or release of a general_power_of_appointment created after date is deemed a transfer of property by the individual possessing the power sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power his estate his creditors or the creditors of his estate in 387_us_456 87_sct_1776 18_led_886 the supreme court considered whether a state trial court’s characterization of property rights conclusively binds a federal court or agency in a federal estate_tax controversy the court concluded that the decision of a state trial_court as to an underlying issue of state law should not be controlling when applied to a federal statute rather the highest court of the state is the best authority on the underlying substantive rule_of state law to be applied in the federal matter if there is no decision by that court then the federal authority must apply what it finds to be state law after giving proper regard to the state court’s determination and to relevant rulings of other courts of the state in this respect the federal_agency may be said in effect to be sitting as a state court plr-139282-16 state statute provides that a court may reform the terms of a governing instrument even if unambiguous to conform the terms to the transferor’s intention if it is proved by clear_and_convincing evidence that the transferor’s intent and the terms of the governing instrument were affected by a mistake of fact or law whether in expression or inducement state statute provides that to achieve the transferor’s tax objectives the court may modify the terms of a governing instrument in a manner that is not contrary to the transferor’s probable intention the court may provide that the modification has retroactive effect in this case it is represented that grantor did not intend for spouse to have a general_power_of_appointment based upon the facts submitted and the representations made we conclude that the county court’s date order to reform trust was to correct a scrivener’s error the order is consistent with applicable state law that would be applied by the highest court of state accordingly we conclude that the power_of_appointment granted to spouse by section of trust as reformed by county court to correct the scrivener’s error does not constitute a general_power_of_appointment under sec_2041 over the assets of trust and trust assets will not be included in spouse’s gross_estate further we conclude that the reformation of trust was not the exercise or release of a general_power_of_appointment under sec_2514 so as to constitute a gift by spouse for federal gift_tax purposes in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives except as expressly provided herein we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-139282-16 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely lorraine e gardner _________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc ita-plr-105585-02 date date legend do taxpayers property x r s t date year year accounting firm accountant dear this letter is in response to a request on behalf of taxpayers for a private_letter_ruling granting permission to revoke an election out of the installment_method pursuant to sec_453 of the internal_revenue_code plr-105585-02 facts husband taxpayer taxpayer is an individual using the cash_method_of_accounting taxpayer owned property x taxpayer secured a purchaser for property x in year on date taxpayer sold property x for a selling_price of dollar_figurer taxpayer received dollar_figures on the date of sale taxpayer was entitled to a payment of dollar_figuret in year and additional_amounts in subsequent years taxpayer retained accounting firm to prepare the year federal_income_tax return taxpayer provided accounting firm with a copy of the documents pertaining to the sale of property x accountant who worked with taxpayer in preparing the return erroneously concluded that the installment_sale provisions did not apply the return was prepared reporting all of the gain on the year return accounting firm represents that the applicability of the installment_method was not considered by any of the other accountants who reviewed or signed the year return taxpayers signed the return inadvertently making the election out of the installment_method on the timely filed year return subsequently another member of accounting firm reviewed taxpayers’ year return and realized that the installment_method should have been used for the sale within a reasonable_time of the discovery of the mistake accounting firm prepared the request for permission to revoke the election out of the installment_method for the sale taxpayers represent that there was no intention on their part to elect out of the installment_method taxpayers also represent that the request for a change is not due to hindsight on their part taxpayers’ request was within a reasonable_time and in accordance with the applicable administrative procedures for requesting a private_letter_ruling law and analysis sec_453 of the code provides that generally a taxpayer shall report income from an installment_sale under the installment_method sec_453 defines an installment_sale as a disposition of property for which at least one payment is to be received after the close of the taxable_year of the disposition sec_15a_453-1 i of the temporary income_tax regulations defines payment to include amounts actually or constructively received in the taxable_year under an installment_obligation pursuant to sec_453 of the code and sec_15a_453-1 d of the temporary income_tax regulations a taxpayer may elect out of the installment_method in accordance with the manner prescribed by regulations under sec_1 d of the income_tax regulations a taxpayer who reports an amount_realized equal to the selling_price including the full face_amount of any installment_obligation on a timely tax plr-105585-02 return filed for the taxable_year in which the installment_sale occurs is considered to have elected out of using the installment_method except as otherwise provided in regulations sec_453 requires a taxpayer who desires to elect out of the installment_method for a qualifying_sale to do so on or before the due_date including extensions for the taxpayer’s federal_income_tax return for the taxable_year of the sale pursuant to sec_15a_453-1 of the temporary regulations generally an election under sec_453 d is irrevocable and such an election is revocable only with the consent of the internal_revenue_service a revocation of an election out of the installment_method is retroactive and will not be permitted when one of its purposes is the avoidance of federal income taxes temp sec_15a_453-1 in the instant case taxpayer supplied accounting firm with documents containing information sufficient to indicate the possible application of installment_sale reporting for gain from the sale at issue accounting firm did not use the installment_method to report the gain because of accountant 1's failure to recognize that at least one payment would be received by taxpayer after the year of disposition accountant did not recognize the installment_method was available and did not advise taxpayer to report the gains using the installment_method at no time prior to the filing of the year return did accountant or any other employee of accounting firm discuss use of the installment_method with taxpayer the information submitted indicates that taxpayers’ desire to revoke the election is due to accountant 1's error and not hindsight by taxpayers taxpayers’ inadvertent election out was made in reliance upon the accountant’s advice and with the expectation that their liability was being minimized to the extent allowable by law as soon as accounting firm became aware of the oversight taxpayers were advised to file a request to revoke the election out accordingly based on a careful consideration of all the information submitted and representations made taxpayers may revoke the election out of the installment_method of reporting under sec_453 permission to revoke the election out of installment_method reporting for the sale is granted for the period that end sec_75 days after the date of this letter to revoke the election out of the installment_method for the sale at issue taxpayers must file an amended federal_income_tax return for the taxable_year of the sale and any previously filed return on which a portion of the gain from the sale is reportable under the installment_method a copy of this letter must be attached to the amended returns the rulings contained in this letter are based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party no opinion is expressed regarding the amount of gain realized on the sale of property x including whether the gain qualifies for the installment_method under sec_453 of the code no opinion is expressed as to the tax treatment of the transaction under any other provisions of the code and regulations plr-105585-02 that may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from the transaction which are not specifically covered by the above ruling this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the provisions of a power_of_attorney currently on file with this office we are sending a copy of this letter_ruling to the taxpayers’ authorized representative sincerely s j charles strickland j charles strickland senior technician reviewer branch office of associate chief_counsel income_tax and accounting


office_of_chief_counsel internal_revenue_service memorandum number release date cc ita b06 jzoldak postf-136957-12 third party communication none date of communication not applicable uilc 263a 263a date date to carol b mcclure associate area counsel-houston group natural_resources and construction large business international from kari fisher assistant to the branch chief branch income_tax accounting subject definition of inherently permanent structures under sec_1_263a-8 this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent issue when does an outdoor_advertising_display constitute an inherently_permanent_structure pursuant to sec_1_263a-8 of the income_tax regulations and therefore qualify as real_property for purposes of the domestic_production_activities_deduction under sec_199 of the internal_revenue_code generic fact pattern company constructs and maintains outdoor advertising displays billboards and rents advertising space on the billboards to customers company’s outdoor advertising displays consist of truckside billboards mobile billboards billboards mounted on wooden structures embedded in the ground traditional billboards and billboards mounted onto steel poles bolted or welded to a foundation modern billboards company is frequently required to obtain building permits or other licenses from governmental agencies before constructing traditional and modern billboards company’s traditional and modern billboards are designed to withstand severe weather and require the use of construction machinery and equipment to install or remove postf-136957-12 the traditional and modern billboards are installed on leased land and company’s land leases range from durations of days to years the 30-day leases provide for day period automatic renewals unless terminated by written notice from either party other leases do not explicitly provide for automatic renewal all lease agreements require company to remove the traditional and modern billboards at the expiration of each lease it is the practice of company as well as company’s industry to continue land leases until the billboards subject_to the leases are no longer profitable accordingly percent of company’s traditional and modern billboards have remained on the same parcels of land since their initial construction unlike the traditional and modern billboards however company relocates its mobile billboards on a frequent basis often weekly to locations that are best suited to meeting a particular client’s advertising objectives situation mobile billboard consists of advertising display faces attached to the side of an operable truck the display faces attached to the truck are approximately feet high by feet wide company moves mobile billboard to a different location to times monthly based on an advertising agreement with customer situation traditional billboard consists of an advertising display face nailed to a wooden support frame that is attached to one wooden pole feet in length the display face made of exterior grade plywood sheets i sec_5 feet high by feet wide the wooden pole is set feet into the ground and secured in place by a ring of concrete inches deep traditional billboard is installed using construction machinery and equipment company entered into a land lease for a 30-day term to install traditional billboard on landlord’s real_property the lease automatically renews every days unless either party cancels in writing the lease has automatically renewed for the last years company is required to remove traditional billboard at the termination of the 30-day lease or any subsequent renewal situation modern billboard consists of an advertising display face mounted to a steel frame that is attached to structural steel poles the steel poles are mounted to a 14-feet deep concrete and steel foundation the display face made of metal is feet high by feet wide company obtains a building permit before constructing modern billboard which is designed to remain anchored during severe weather conditions modern billboard is periodically subject_to an inspection process to ensure structural integrity modern billboard is installed using construction machinery and equipment company postf-136957-12 entered into a land lease for a 3-year term to install modern billboard on landlord’s real_property the lease contains an early release clause law and analysis under sec_199 the sec_199 deduction is determined by applying a percentage to the lesser_of the taxpayer's qualified_production_activities_income qpai or taxable_income determined without regard to the sec_199 deduction the applicable_percentage i sec_3 percent for taxable years beginning in and percent for taxable years beginning in through and percent for taxable years beginning after under sec_199 qpai is determined by taking domestic_production_gross_receipts dpgr for the taxable_year less cost_of_goods_sold cgs allocable to such dpgr less other expenses losses or deductions which are properly allocable to such dpgr sec_199 provides the term dpgr means the gross_receipts of the taxpayer which are derived from any lease rental license sale exchange or other_disposition of qualifying_production_property qpp which was manufactured produced grown or extracted by the taxpayer in whole or in significant part within the united_states sec_199 defines qpp as including tangible_personal_property sec_1_199-3 defines the term tangible_personal_property as any tangible_property other than land real_property described in sec_1_199-3 sec_1_199-3 defines real_property to mean buildings items that are structural_components of buildings inherently permanent structures as defined in sec_1_263a-8 other than machinery as defined in sec_1_263a-8 including items that are structural_components of inherently permanent structures inherently permanent land improvements oil_and_gas wells and infrastructure real_property defined in sec_1_263a-8 includes land unsevered natural products of land buildings and inherently permanent structures the term inherently_permanent_structure ips is defined in sec_1_263a-8 to include property that is affixed to real_property and that will ordinarily remain affixed for an indefinite period of time as the words inherently permanent suggest the essential character of an inherently_permanent_structure is that the property requires attachment to real_property to be able to perform its intended function for a duration of time not initially known thus this definition establishes two basic criteria for an ips first it is affixed to real_property second it will ordinarily remain affixed for an indefinite period of time the ips definition is illustrated by numerous examples including swimming pools roads bridges tunnels paved parking areas and other pavements special foundations sec_1_263a-8 also provides that any property not otherwise described in sec_1_263a-8 that constitutes other tangible_property under the principles of former sec_48 and sec_1_48-1 is treated for the purposes of sec_1_263a-8 as an inherently_permanent_structure postf-136957-12 wharves and docks fences inherently permanent advertising displays inherently permanent outdoor lighting facilities railroad tracks and signals telephone poles power generation and transmission facilities permanently installed telecommunications cables broadcasting towers oil_and_gas pipelines derricks and storage equipment grain storage bins and silos sec_1_263a-8 uses the term affixed to real_property for its ordinary and common sense meaning that is physically connected or attached affixation to real_property may be accomplished by weight alone sec_1_263a-8 embedding a structure in the ground can establish attachment to real_property in addition mounting a structure to a foundation can accomplish adequate connection to real_property similarly affixation may be achieved when the means of connection secure a structure to real_property to withstand severe weather conditions if installation of the structure involves the use of construction machinery and equipment attachment to real_property may be indicated for purposes of determining when a structure is physically attached to real_property it is irrelevant that the means of connection permit removal without damage to the structure a structure attached by weight alone is likely removable without damage similarly a structure bolted to a cement foundation that is embedded in the ground is likely removable without damage but nevertheless is connected to real_property however the manner of affixation should sufficiently secure the structure so that it will remain in place to be able to perform its intended function an ips will ordinarily remain affixed to real_property for an indefinite period of time the term ordinarily remain affixed for an indefinite period of time under sec_1_263a-8 means that the structure will typically remain affixed to real_property for the period during which the structure is expected to be maintained to remain in operating condition and serve a useful function that is the useful_life inherent in the structure a structure that has to be connected to real_property to be able to provide utility or to be able to perform its intended function is a structure that will ordinarily remain affixed to real_property for an indefinite period of time thus in general the structure is attached without any fixed plan to remove it at a particular date in the future and the exact date when a structure will be removed is neither known nor knowable when it is affixed the term ordinarily remain affixed for an indefinite period of time recognizes that even an inherently_permanent_structure may become disconnected from real_property the term ordinarily requires that usually or in most cases the structure will remain attached to real_property but recognizes that a structure may become detached from real_property for various reasons for example a structure may become dismounted from real_property by hurricane force winds or intentionally detached by construction machinery or equipment should the structure need to be repaired moved to another location or disposed of the possibility or occurrence of temporary or permanent removal from real_property does not transform the intrinsically permanent nature of a structure postf-136957-12 practices of an industry or taxpayer also may be instructive as to whether a particular structure or type of structure is likely to stay connected to real_property for the useful_life inherent in the structure for example a structure that must be attached to land to be functional may remain connected to real_property for an indefinite period of time even when the lease_term is definite and the removal of the structure is required at the expiration of the lease in that case industry or taxpayer practice will likely be to renew the land lease until the structure’s inherent useful_life is exhausted or the structure is no longer profitable also for consideration is how much time and expense are involved in affixing the structure to be able to function if a taxpayer makes the decision to expend significant resources to affix a structure to real_property to be able to perform its intended function it likely demonstrates the inherent permanency of the structure a structure though does not exist in perpetuity to the contrary it deteriorates or becomes obsolete over time accordingly remain affixed for an indefinite period of time cannot sensibly be interpreted to require that the structure remain attached to real_property forever because virtually no property would satisfy that definition including most if not all of the examples in sec_1_263a-8 conclusion while a determination is made based on the totality of the circumstances in each case an outdoor_advertising_display is an inherently_permanent_structure under sec_1 263a- c and is therefore real_property for purposes of the domestic_production_activities_deduction under sec_199 when it is attached to real_property and will ordinarily remain connected to real_property to be able to perform its intended function situation mobile billboard is not an inherently_permanent_structure under sec_1_263a-8 mobile billboard is not attached to real_property nor is it intended to remain stationary indefinitely to be able to perform its intended function advertising rather mobile billboard is a truck with advertising faces attached and is intended to be moved frequently see tam noting a mobile billboard mounted on wheels and held in place with ropes and stakes would not be an inherently_permanent_structure for purposes of sec_1_263a-8 situation traditional billboard is an inherently_permanent_structure under sec_1_263a-8 traditional billboard is an inherently permanent advertising display similar in nature to the example of a telephone pole an ips generally constructed with a wooden pole in mobile billboard is also not other tangible_property for purposes of former sec_48 and sec_1_48-1 postf-136957-12 sec_1_263a-8 traditional billboard is connected to real_property because a wooden pole feet in length is set in the ground and secured in place by concrete attachment to real_property is also indicated by the use of construction machinery and equipment to install traditional billboard traditional billboard was constructed to stay connected to real_property to be able to perform its intended function advertising thus traditional billboard will ordinarily remain in place for an indefinite period of time it is irrelevant for this determination that traditional billboard was constructed on landlord’s property under an initial 30-day lease or that the lease automatically renews every days until either party cancels these lease terms if anything suggest that the actual duration of the lease is not known when the parties entered into the lease here the 30-day lease has been renewed for years regardless the stated lease duration known before the construction of traditional billboard the automatic renewal provision in the lease or the actual duration known at the final expiration of the lease does not change the essential character of the inherently_permanent_structure the intrinsic permanency of a structure is not determined in hindsight the provision requiring removal at the end of the lease also does not alter the inherently permanent nature of the traditional billboard’s structure there is no requirement that a structure be installed with the intention of being permanently attached to real_property nor must the structure literally remain connected forever to be an inherently_permanent_structure situation modern billboard is an inherently_permanent_structure under sec_1_263a-8 modern billboard is an inherently permanent advertising display similar in nature to the example of a broadcasting tower in sec_1_263a-8 an ips typically bolted to either a foundation buried in the ground or to a building modern billboard is attached to real_property because steel poles are mounted to a 14-feet deep concrete and steel foundation in addition modern billboard required a building permit was installed with construction machinery and equipment was engineered to withstand severe weather conditions and is periodically inspected for structural integrity considering the expense and time involved with obtaining designs with appropriate specifications and building permits installation and the process of periodic inspections these facts indicate that the intrinsic nature of modern billboard is of a permanence required by sec_1_263a-8 modern billboard was constructed to stay connected to real_property to be able to perform its intended function advertising thus modern billboard will ordinarily remain in place for an indefinite period of time it is irrelevant for this determination that modern billboard was constructed on landlord’s property under a 3-year lease with a provision for early termination the stated lease duration or the possibility that the lease may be terminated early or the foundation and the advertising display are viewed here as components of one unit_of_property for purposes of sec_1_263a-10 regardless the foundation is real_property under sec_1_263a-8 because it will ordinarily remain affixed for an indefinite period of time postf-136957-12 renewed does not fix in time the actual duration of modern billboard’s attachment to real_property nor change the intrinsic character of the inherently_permanent_structure case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions