internal_revenue_service number release date index number -------------------------- --------------------------------------- ---------------------------- --------------------------- ------------------------------- in re ---------------------------- --------------------------- ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------------- id no ---------- ----------- telephone number --------------------- refer reply to cc psi b05 plr-109961-05 date date legend taxpayer ------------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------- ---------------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- -------------------------------------------- ------------------------------------------------------------------------------------------------- ----------------- utility county project x date a dear ------------ this letter responds to your letter dated date and subsequent correspondence submitted on behalf of taxpayer requesting a letter_ruling concerning whether the transfer of an intertie from county to utility is a nonshareholder contribution_to_capital excludable from income under ' a of the internal_revenue_code facts taxpayer represents that the facts are as follows utility is a regulated electric utility that provides electrical transmission and distributions services county constructed owns and operates project project is a qualifying_facility under the public_utilities regulatory policies act of plr-109961-05 county utility and x entered into an interconnection service agreement on date a the interconnection service agreement provides for the interconnection of project with the utility’s grid the interconnection service agreement will remain effective for as long as project continues commercial operations utility built and owns the intertie county reimbursed utility for the cost of the intertie the cost of the intertie will be capitalized by project as an intangible asset and recovered using the straight-line method over a useful_life of years utility will not include the intertie in its rate base county is not selling electricity from project to utility the electricity produced by project is being wheeled by x over utility’s grid ownership to all electricity that is wheeled from project transfers to third party customers prior to its transmission on utility s grid under the proposed transaction county is not purchasing electricity from utility for project in the future county may purchase electricity over the intertie from utility for project county and utility project that during the first ten taxable years of utility beginning with the year in which the intertie is placed_in_service the inflow of power over the intertie to project in all years would not exceed five percent of the projected total power flows over the intertie further taxpayer represents the following the intertie transferred by county to utility has become a permanent part of utility s capital the transfer of the intertie is not compensation_for services provided by utility to county the transfer was a bargained-for-exchange the transfer resulted in a benefit to utility in an amount commensurate with its value and the intertie will be used by utility in its business to produce income law and analysis sec_61 and ' of the income_tax regulations provide that gross_income means all income from whatever source derived unless excluded by law sec_118 provides that in the case of a corporation gross_income does not include any contribution_to_the_capital_of_the_taxpayer sec_118 as amended by ' a of the tax_reform_act_of_1986 the act and ' a of the small_business job protection act of provides that for purposes of subsection a except as provided in subsection c the term acontribution to the capital of taxpayer does not include any contribution_in_aid_of_construction ciac or any other contribution as a customer or potential customer sec_1_118-1 provides in part that ' also applies to contributions to capital made by persons other than shareholders for example the exclusion applies to the value of land or other_property contributed to a corporation by a governmental_unit or by a civic group for the purpose of enabling the corporation to expand its operating facilities however the exclusion does not apply to any money or property transferred plr-109961-05 to the corporation in consideration for goods or services rendered or to subsidies paid to induce the taxpayer to limit production the legislative_history to ' indicates that the exclusion_from_gross_income for nonshareholder contributions to capital of a corporation was intended to apply to those contributions that are neither gifts because the contributor expects to derive indirect benefits nor payments for future services because the anticipated future_benefits are too intangible the legislative_history also indicates that the provision was intended to codify the existing law that had developed through administrative and court decisions on the subject h_r rep no 83rd cong 2d sess s rep no 83d cong 2d sess notice_88_129 1988_2_cb_541 as modified and amended by notice_90_60 1990_2_cb_345 and notice_2001_82 2001_2_cb_619 provides specific guidance with respect to the treatment of transfers of property to regulated public_utilities by qualifying small power producers and qualifying cogenerators collectively qualifying facilities as defined in sec_3 of the federal power act as amended by section of the public_utilities regulatory policies act of purpa the amendment of ' b by the act was intended to require utilities to include in income the value of any ciac made to encourage the provision of services by a utility to a customer see h_r rep no 99th cong 2d sess conference_report in a ciac transaction the purpose of the contribution of property to the utility is to facilitate the sale of power by the utility to a customer in contrast the purpose of the contribution by a qualifying_facility to a utility is to permit the sale of power by the qualifying_facility to the utility accordingly the fact that the amendments to ' b render ciac transactions taxable to the utility does not require a similar conclusion with respect to transfers from qualifying facilities to utilities notice_88_129 provides in part that with respect to transfers made by a qualifying_facility to a utility exclusively in connection with the sale of electricity by the qualifying_facility to the utility a utility will not realize income upon transfer of an intertie by a qualifying_facility an intertie may include new connecting and transmission facilities or modifications upgrades or relocations of a utility s existing transmission network the possibility that an intertie may be used to transmit power to a utility that will in turn transmit the power across its transmission network for sale by the qualifying_facility to another utility wheeling will not cause the contribution to be treated as a ciac further the notice provides in part that a transfer from a qualifying_facility to a utility will not be treated as a qualifying_facility transfer qf transfer under this notice to the extent the intertie is included in the utility s rate base moreover a transfer of an intertie to a utility will not be treated as a qf transfer under this notice if the term of the power purchase contract is less than ten years plr-109961-05 notice_88_129 also provides in part that a utility that constructs an intertie in exchange for a cash payment from a qualifying_facility pursuant to a purpa contract will be deemed to construct the property under contract and will recognize income from the construction in the same manner as any other taxpayer constructing similar_property under contract subsequent to the construction of the property the qualifying_facility will be deemed to transfer the property to the utility in a qf transfer that will be treated in exactly the same manner as an in-kind qf transfer in addition the notice provides in part that the contribution of a dual-use intertie to a utility will be treated as a qf transfer and therefore nontaxable if in light of all information available to the utility at the time of transfer it is reasonably projected that during the first ten taxable years of the utility beginning with the year in which the transferred property is placed_in_service no more than five percent of the projected total power flows over the intertie will flow to the qualifying_facility notice_2001_82 amplifies and modifies notice_88_129 notice_2001_82 extends the safe_harbor provisions of notice_88_129 to include transfers of interties from non- qualifying facilities and transfers of interties used exclusively or in part to transmit power over the utility s transmission grid for sale to consumers or intermediaries wheeling the notice requires that ownership of the electricity wheeled passes to the purchaser prior to its transmission on the utility s transmission grid this ownership requirement is deemed satisfied if title passes at the busbar on the generator s end of the intertie further notice_2001_82 provides that a long-term interconnection agreement in lieu of a long-term power purchase contract may be used to satisfy the safe_harbor provisions of notice_88_129 in wheeling transactions finally notice_2001_82 requires that the generator must capitalize the cost of the property transferred as an intangible asset and recovered using the straight-line method over a useful_life of years in the instant case the transfer of the intertie is subject_to the guidance set forth in notice_88_129 notice_90_60 and notice_2001_82 for the following reasons project is a qualifying_facility under the public_utilities regulatory policies act of as contemplated under notice_88_129 county utility and x have entered into a long-term interconnection service agreement the intertie will be used in connection with sales of electricity wheeled over utility s transmission grid to third parties the cost of the intertie will not be included in utility’s rate base no more than five percent of the projected total power flows over the intertie will flow to the qualifying_facility during the first ten taxable years beginning with the year in which the intertie is placed_in_service ownership of the electricity wheeled will not be with county prior to its transmission on the grid and the cost of the intertie will be plr-109961-05 capitalized by project as an intangible asset and recovered using the straight-line method over a useful_life of years thus we conclude that the transfer of the intertie by county to utility meets the safe_harbor requirements of notice_88_129 as amended and modified by notice_90_60 and notice_2001_82 next we must decide whether the contribution qualifies as a contribution_to_capital under ' a the legislative_history of ' provides in part as follows this ' in effect places in the code the court decisions on the subject it deals with cases where a contribution is made to a corporation by a governmental_unit chamber of commerce or other association of individuals having no proprietary interest in the corporation in many such cases because the contributor expects to derive indirect benefits the contribution cannot be called a gift yet the anticipated future_benefits may also be so intangible as to not warrant treating the contribution as a payment for future services s rep no 83d cong 2d sess in 319_us_98 the court held that payments by prospective customers to an electric utility company to cover the cost of extending the utility s facilities to their homes were part of the price of service rather than contributions to capital the case concerned customers payments to a utility company for the estimated cost of constructing service facilities primary power lines that the utility company otherwise was not obligated to provide the customers intended no contribution to the company s capital later in 339_us_583 the court held that money and property contributions by community groups to induce a shoe company to locate or expand its factory operations in the contributing communities were nonshareholder contributions to capital the court reasoned that when the motivation of the contributors is to benefit the community at large and the contributors do not anticipate any direct benefit from their contributions the contributions are nonshareholder contributions to capital id pincite finally in 412_us_401 the court in determining whether a taxpayer was entitled to depreciate the cost of certain facilities that had been funded by the federal government held that the governmental subsidies were not contributions to the taxpayer s capital the court recognized that the holding in detroit edison co had been qualified by its decision in brown shoe co the court in chicago burlington quincy railroad co found that the distinguishing characteristic between those two cases was the differing purpose motivating the respective transfers in brown shoe co the only expectation of the plr-109961-05 contributors was that such contributions might prove advantageous to the community at large thus in brown shoe co since the transfers were made with the purpose not of receiving direct services or recompense but only of obtaining advantage for the general community the result was a contribution_to_capital the court in chicago burlington quincy railroad co also stated that there were other characteristics of a nonshareholder contribution_to_capital implicit in detroit edison co and brown shoe co from these two cases the court distilled some of the characteristics of a nonshareholder contribution_to_capital under both the and codes first the payment must become a permanent part of the transferee s working_capital structure second it may not be compensation such as a direct payment for a specific quantifiable service provided for the transferor by the transferee third it must be bargained for fourth the asset transferred foreseeably must benefit the transferee in an amount commensurate with its value fifth the asset ordinarily if not always will be employed in or contribute to the production of additional income and its value assured in that respect chicago burlington quincy railroad co u s pincite based on the facts represented we conclude that the transfer of the intertie by county to utility possesses the characteristics of a nonshareholder contribution_to_capital as described in chicago burlington quincy railroad co therefore the transfer of the intertie by county to utility will be a contribution_to_capital under ' a conclusion accordingly based solely on the foregoing analysis and the representations made by taxpayer we rule that the transfer of the intertie by county to utility will not constitute a contribution_in_aid_of_construction under ' b and will be excludable from the gross_income of utility as a nonshareholder contribution_to_capital under ' a except as specifically set forth above no opinion is expressed or implied concerning the federal_income_tax consequences of the above described facts under any other provision of the code or regulations specifically no opinion is expressed or implied as to whether taxpayer s representation that less than five percent of the total projected power flows over the intertie from utility to project is a reasonable projection for purposes of the five percent test in notice_88_129 plr-109961-05 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely susan j reaman branch chief branch office of associate chief_counsel passthroughs and special industries enclosures copy of letter copy for ' purposes cc


internal_revenue_service number release date index number ---------------------------- --------------------------------------- --------------------------------------------------- ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no -------------- telephone number ---------------------- refer reply to cc psi b01 plr-106681-15 date date x y country date dear --------------- ----------------------------------------------------------------- ------------------------ ----------------------------------------------------------------- ------------------------ ------------------------- --------------------------- this ruling is in response to your request dated date submitted on behalf of y requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity for federal_income_tax purposes facts according to the information submitted x is a domestic limited_liability_company treated as a partnership for federal_income_tax purposes on date x's wholly owned foreign_subsidiary y was formed under the laws of country y represents that it intended to elect to be treated as a disregarded_entity effective date however y failed to timely file a valid form_8832 entity classification election to elect to be treated as a disregarded_entity for federal tax purposes plr-106681-15 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single member having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result y is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 plr-106681-15 this ruling is contingent on the owner of y filing within days of this letter all required returns for all open years consistent with the requested relief these returns may include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations and ii forms information_return of u s persons with respect to foreign disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except as specifically set forth above no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to y’s authorized representatives sincerely associate chief_counsel passthroughs special industries by joy c spies joy c spies senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


tcmemo_2012_261 united_states tax_court anthony tesoriero petitioner v commissioner of internal revenue respondent docket no filed date r determined a tax_deficiency an accuracy-related_penalty pursuant to sec_6662 and an addition_to_tax pursuant to sec_6651 for p’s tax_year the deficiency stems from r’s disallowance of certain deductions taken by a wholly owned s_corporation thus increasing p’s flowthrough income and from r’s determination that p received other income the parties stipulated p’s tax_deficiency and the accuracy-related_penalty leaving only the sec_6651 addition_to_tax in dispute held p is liable for the sec_6651 addition_to_tax steven aaron horowitz for petitioner marco franco brian j bilheimer and lydia a branche for respondent memorandum findings_of_fact and opinion wherry judge this case is before the court on a petition for redetermination of an income_tax deficiency a sec_6662 accuracy-related_penalty and an addition_to_tax under sec_6651 for failure to timely file a federal_income_tax return that respondent determined for the taxable_year after concessions the sole remaining issue before the court is whether petitioner is liable for a sec_6651 addition_to_tax for failure to timely file his federal_income_tax return findings_of_fact some of the facts have been stipulated the stipulation of facts with accompanying exhibits and the stipulation of settled issues are incorporated herein 1unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended and in effect for the taxable_year at issue the rule references are to the tax_court rules_of_practice and procedure 2in the notice_of_deficiency dated date respondent determined a dollar_figure deficiency a dollar_figure addition_to_tax under sec_6651 and a dollar_figure accuracy-related_penalty under sec_6662 respondent based his determination on a dollar_figure increase in flowthrough income from petitioner’s s_corporation and a dollar_figure increase in other income on date the parties submitted to the court a stipulation of settled issues per this stipulation the parties agreed that the increase in flowthrough income should be dollar_figure that the increase in other income should be dollar_figure and that the sec_6662 penalty applies only to the increase in flowthrough income by this reference at the time the petition was filed petitioner resided in new york jack m portney and his certified public accounting firm portney co firm prepared petitioner’s return the firm generally employed around accountants and support staffers mr portney is a certified_public_accountant has practiced as such since and has handled petitioner’s tax matters for about years mr portney’s firm prepares roughly big_number tax returns per year of those returns to are filed on extension using forms application_for automatic_extension of time to file u s individual_income_tax_return mr portney’s practice was to file a form_4868 for petitioner every year petitioner filed his return after obtaining an automatic_extension in mr portney’s firm prepared a single form_4868 for both petitioner and eleanor tesoriero with respect to their returns the form_4868 showed an estimated_tax liability of dollar_figure which mr portney arrived at solely by looking at the amount of petitioner’s estimated_tax payments mr portney never asked petitioner what he believed his income_tax_liability would be because mr portney had not yet received petitioner’s form_w-2 wage and tax statement mr 3petitioner’s marriage to ms tesoriero was dissolved by judicial decree on date mr portney was unaware that ms tesoriero would be filing her federal tax_return separately and had chosen a different tax preparer portney did not adjust the estimated_tax liability for wage income and did not adjust the total payments for withholding credits nor did he adjust any entries to reflect ms tesoriero’s income despite the fact that he knew she was employed by petitioner’s corporation after reviewing the form_4868 mr portney placed it on top of an envelope with other extension requests for other clients to be sent to the same internal_revenue_service irs service_center the accounting firm’s usual custom and practice is that the secretary seals the envelope and affixes postage mr portney does not personally mail any of the extension requests but he ensures that the secretary takes the mail downstairs to the mailbox he does not actually see the mail placed in the mailbox mr portney’s firm does not mail extension requests via certified or registered mail it mails forms by regular mail with postage paid using a postage meter and does not keep records of mailing or postage meter logs on august petitioner mailed his federal_income_tax return and respondent received that return on date respondent’s records do not reflect the receipt of a form_4868 for either petitioner or his former spouse thus respondent determined that petitioner’s return was not timely filed on date respondent mailed to petitioner a notice_of_deficiency for the taxable_year determining among other items an addition_to_tax for failure to timely file the return petitioner on date timely filed a petition for redetermination with this court a trial was held on date in new york new york opinion respondent bears the burden of production with respect to the sec_6651 addition_to_tax see sec_7491 116_tc_438 to meet this burden respondent must produce sufficient evidence establishing that it is appropriate to impose the addition_to_tax see higbee v commissioner t c pincite the burden of establishing that the deficiency was due to reasonable_cause rather than willful neglect remains with petitioner see id pincite 81_tc_806 aff’d without published opinion 767_f2d_931 9th cir as a general_rule any person made liable for any_tax shall make a return or statement according to the forms and regulations prescribed by the secretary sec_6011 returns for calendar_year individual taxpayers are due on april of the year following the tax_year sec_6072 if a taxpayer fails to file a return on time sec_6651 imposes an addition_to_tax of of the tax required to be shown on the return for each month or fraction thereof for which there is a failure_to_file not to exceed in the aggregate this penalty rate will be reduced by for any month or fraction thereof that the sec_6651 addition_to_tax is also applied see sec_6651 the penalty will not apply if the taxpayer shows that the failure is due to reasonable_cause and not due to willful neglect sec_6651 the parties do not dispute that respondent received the return on date respondent produced records showing that the irs did not receive an extension request thus respondent has met his burden of production petitioner bears the burden of proving either timely filing or reasonable_cause and lack of willful neglect see higbee v commissioner t c pincite while individuals generally must file their returns by april a taxpayer with respect to a taxable_year could at that time obtain an automatic four- month extension of time for filing until august sec_1_6081-4 income_tax regs the taxpayer was required to file an application on form_4868 by the original deadline for filing the return and show an estimate of the full amount of tax for the year sec_1_6081-4 and income_tax regs a filing is not complete until the document is delivered and received 241_us_73 thus a form_4868 cannot be properly filed until it is delivered and received at the appropriate internal_revenue_service location spanner v commissioner tcmemo_1988_435 irs records reflect that it never received petitioner’s form_4868 sec_7502 creates a presumption of delivery if the taxpayer sends the filing or other document via certified or registered mail such mailing methods along with proof that the taxpayer properly addressed the mailing provide prima facie evidence of delivery sec_7502 sec_301_7502-1 proced admin regs mr portney’s firm does not mail forms via certified or registered mail nor does it use an authorized private delivery service see sec_7502 so petitioner must look elsewhere to establish proof of delivery this court has allowed taxpayers to prove delivery through other extrinsic evidence such as testimony that they mailed the document 92_tc_793 aff’d 909_f2d_1155 8th cir in certain circumstances therefore taxpayers may prove delivery thus filing through testimony but as we have cautioned taxpayers in the past when a return is not sent by registered or certified mail it is the taxpayer not the government that bears the risk of nondelivery 90_tc_947 in addition because this case is appealable absent stipulation to the contrary to the court_of_appeals for the second circuit we follow any decision of that court that is squarely on point 54_tc_742 aff’d 445_f2d_985 10th cir the court_of_appeals for the second circuit has held that sec_7502 provides the sole exception to the requirement of physical delivery 599_f2d_44 2d cir extrinsic evidence other than proof of mailing via registered or certified mail cannot help petitioner prove receipt by respondent id see also 13_f3d_49 2d cir mr portney testified at length as to his office’s procedures for mailing forms to the irs although we do not doubt the veracity of mr portney’s testimony that his office followed established custom and practice such testimony is irrelevant in a case appealable in the second circuit mr portney did not mail the form_4868 via certified or registered mail nor did he use an authorized private delivery service therefore sec_7502 does not create a presumption of delivery because we cannot establish that respondent ever received the form 4respondent contends for the first time in his posttrial reply brief that sec_301_7502-1 proced admin regs promulgated in and effective september controls see fed reg date because we are constrained by precedent of the second circuit that reaches the same conclusion we need not address this argument we cannot find that petitioner timely filed a valid extension request because the purported form_4868 was not valid petitioner did not timely file his tax_return we next address petitioner’s argument that his failure to timely file was due to reasonable_cause and not willful neglect reasonable_cause may exist where a taxpayer is unable to file the return within the prescribed time despite exercising ordinary business care and prudence sec_301_6651-1 proced admin regs willful neglect is a conscious intentional failure or reckless indifference 469_us_241 reasonable_cause_generally exists as a result of factors beyond a taxpayer’s power to control for example unavoidable postal delays timely filing of a return with the wrong irs office death or serious illness of the taxpayer or a member of his immediate_family taxpayer’s unavoidable absence from the united_states destruction by casualty of taxpayer’s records or place of business and reliance on the erroneous advice of an irs officer_or_employee 114_f3d_366 2d cir aff’g tcmemo_1995_547 see also 137_tc_8 5thus we need not reach respondent’s alternative argument that the form_4868 is void due to a failure to make a good-faith attempt to estimate petitioner’s tax_liability petitioner contends that he relied upon advice from his accountant that the return was not due until date and that this reliance gives him reasonable_cause when an accountant or attorney advises a taxpayer on a matter of tax law such as whether a liability exists it is reasonable for the taxpayer to rely on that advice boyle u s pincite taxpayers may also rely on an adviser’s statement that no return at all is due see mcmahan v commissioner f 3d pincite reliance on a mistaken legal opinion of a competent tax adviser--a lawyer or accountant--that it was unnecessary to file a return constitutes reasonable_cause but t he failure to make a timely filing of a tax_return is not excused by the taxpayer’s reliance on an agent and such reliance is not ‘reasonable cause’ for a late filing under sec_6651 boyle u s pincite see also grossman v commissioner tcmemo_1986_439 often the outcome in cases such as this turns on whether the taxpayer relied on advice that no return was due or whether the taxpayer relied on the adviser to timely file the return grossman v commissioner tcmemo_1986_439 this case presents the latter issue as there is no doubt that petitioner was required to file a return and mr portney did not advise petitioner otherwise petitioner relied on mr portney to timely file the request for an extension we have observed that a n agent’s failure_to_file an extension request is tantamount to an agent’s failure_to_file a return mcmahan v commissioner tcmemo_1995_547 thus petitioner can no more rely on mr portney to file the extension than to file the return furthermore the court_of_appeals for the second circuit has held that reliance upon an adviser to file an extension request does not constitute reasonable_cause mcmahan v commissioner f 3d pincite thus petitioner’s reliance upon mr portney does not constitute reasonable_cause petitioner is liable for the sec_6651 addition_to_tax for failure to timely file a return the court has considered all of petitioner’s contentions argument requests and statements to the extent not discussed herein we conclude that they are merit less moot or irrelevant to reflect the foregoing and concessions by the parties decision will be entered under rule 6even if reliance on an adviser could constitute reasonable_cause given these facts petitioner did not produce evidence of such reliance petitioner never requested that mr portney file an extension request nor did petitioner present evidence that he followed up with mr portney to ensure that the extension request was filed mr portney did not call petitioner to inform him that an extension request had been filed


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp 2-plr-104970-99 date date legend parent subsidiary unrelated company date date date date date date date x y z plr-104970-99 dear this is in reply to your letter dated date in which you requested a ruling on behalf of parent and subsidiary that under sec_1504 of the internal_revenue_code the code the service waive the general_rule of sec_1504 of the code additional information was received in a letter dated date the information submitted indicates that parent was the common parent of an affiliated_group consisting of parent and subsidiary from its inception on date through date subsidiary was a wholly-owned subsidiary of parent the group began filing consolidated tax returns for the tax_year ended date subsidiary had shares of common_stock issued and outstanding from its incorporation through date on date unrelated company merged with and into subsidiary in consideration of the merger parent exchanged y shares of its common_stock in subsidiary and z as a result of the merger parent no longer was in control of subsidiary within the meaning of a and thus affiliation was terminated parent filed a consolidated_return which encompassed the earnings_of subsidiary for the pre-merger period subsidiary filed a separate_return for the short_year beginning after the merger on date the current majority shareholders of parent purchased x percent of the stock of parent for cash this resulted in an ownership_change with respect to parent as defined by sec_382 of the code on date parent acquired the shares of subsidiary common_stock previously exchanged in consideration of the merger the stock was acquired to gain complete control of subsidiary the acquisition of this stock resulted in an ownership_change pursuant to sec_382 as of date subsequently parent timely filed this request that it be allowed to file consolidated_returns with subsidiary beginning on date the date following the reaffiliation and for subsequent years sec_1504 of the code provides that if a corporation is included or required to be included in a consolidated_return filed by an affiliated_group for a taxable_year which includes any period after date and such corporation ceases to be a member of such group in a taxable_year beginning after date with respect to periods after such cessation such corporation and any successor of such corporation may not be included in any consolidated_return filed by the affiliated_group or by another affiliated_group with the same common parent or a successor of such common parent before the 61st month beginning after its first taxable_year in which it ceased to be a member of such affiliated_group sec_1504 of the code provides that the secretary may waive the application of sec_1504 to any corporation for any period subject_to such conditions as the secretary may prescribe plr-104970-99 sec_1504 of the code was enacted by section a of the tax_reform_act_of_1984 the conference_report stated that the rule prohibiting consolidation after deconsolidation was an anti-abuse rule h_r conf_rep no 98th cong 2d sess revproc_91_71 1991_2_cb_900 grants an automatic waiver of the general_rule of sec_1504 of the code for taxpayers who meet its requirements if a taxpayer qualifies for the automatic waiver under revproc_91_71 the procedure described therein is the exclusive procedure available for obtaining a waiver of the rule contained in sec_1504 the automatic waiver in revproc_91_71 generally applies to any corporation that ceased to be a member of a group and rejoins the same group ie group remained in existence within the meaning of sec_1_1502-75 of the income_tax regulations the automatic waiver of revproc_91_71 does not apply in this case because the group went out of existence within the meaning of sec_1_1502-75 of the regulations when subsidiary merged with unrelated company thus the parties in the instant case must secure a ruling granting the sec_1504 waiver before a consolidated_return may be filed parent represents that its disaffiliation on date and reaffiliation on date has not and will not provide a benefit of a reduction in income increase in loss or any other deduction credit or allowance that would not otherwise be secured or have been secured had the disaffiliation and reconsolidation not occurred including but not limited to the use of a net_operating_loss or credit that would have otherwise expired the representations submitted by the taxpayer form a material basis for the issuance of the ruling letter based upon the information submitted and on the representations set forth above it is held as follows pursuant to sec_1504 the application of sec_1504 of the code is hereby waived provided that parent and subsidiary constitute an affiliated_group_of_corporations within the meaning of sec_1504 parent and subsidiary may join in the filing of a consolidated federal_income_tax return beginning on date and for subsequent taxable years except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant plr-104970-99 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely assistant chief_counsel corporate by edward s cohen chief branch


department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------- telephone number -------------------- refer reply to cc psi b02 plr-125978-11 date date internal_revenue_service number release date index number -------------------------------- --------------------------- ------------------- --------------------------------- legend legend x y d1 d2 d3 state n ---------------------------- ---------------------- -------------------- ---------------------- ------------------- ---------------------- ------------------ ------------------- --- trust1 -------------------------------------------------- --------------------------------------------------------------------- trust2 -------------------------------------------------- -------------------------------------------------------------------- trust3 -------------------------------------------------- ----------------------------------------------------------------------- trust4 -------------------------------------------------- --------------------------------------------------------------------- trust5 -------------------------------------------------- ------------------------------------------------------------------------ plr-125978-11 trust6 --------------------------------------------------------------------------------------------------------- --------------------------------------------------- ----------------------------------------------------------------------------------------- dear --------------- this responds to a letter dated date submitted on behalf of x by x's authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated under the laws of state on d1 x was the sole shareholder of y stock at all times since d2 the shareholders of x include n individuals trust1 trust2 trust3 trust4 trust5 and trust6 x represents that trust1 trust2 trust3 trust4 and trust have met the qualified_subchapter_s_trust qsst requirements described in sec_1361 at all times since d2 collectively the qssts x represents that trust6 has met the electing_small_business_trust esbt requirements described in sec_1361 at all times since d2 x filed form_2553 election by a small_business_corporation with an effective date of d2 x also elected to have y treated as a qualified_subchapter_s_subsidiary qsub described in sec_1362 with an effective date of d2 finally x filed form_8716 election to have a tax_year other than a required tax_year for the tax_year beginning d2 on d3 x discovered trust6 failed to make an esbt election and consent to x's election to be an s_corporation x and the trustee of trust6 filed the paperwork required by revproc_2003_43 2003_1_cb_998 the service_center approved the late esbt election associated with the ineffective s election relief request under revproc_2003_43 the trustees not the beneficiaries of trust1 trust2 trust3 trust4 and trust5 consented to the form_2553 election by a small_business_corporation for the trusts consequently the qssts did not properly consent to x's election to be an s_corporation thus making the election ineffective on d2 under sec_1362 additionally the trustees not the beneficiaries of the qssts consented to the relief request under revproc_2003_43 on d3 therefore the inadvertent s election relief granted under revproc_2003_43 was also ineffective x represents that the circumstances resulting in the ineffectiveness of x's s_corporation_election were inadvertent and not motivated by tax_avoidance x further represents that x and its shareholders have filed all returns consistent with x's status as an s_corporation since d2 x and its shareholders have agreed to make such adjustments plr-125978-11 consistent with the treatment of x as an s_corporation as may be required by the secretary sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which it was made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the event resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination the corporation shall be treated as an s_corporation during the period specified by the secretary based solely on the information submitted and the representations made we conclude that x's s_corporation_election on d2 and late s_corporation_election on d3 were ineffective for the taxable_year beginning d2 we further conclude that the circumstances resulting in such ineffectiveness were inadvertent within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as an s_corporation from d2 provided x's s_corporation_election was otherwise effective and was not otherwise terminated under sec_1362 we further conclude that trust6 will be treated as an esbt from d2 y will be treated as a qsub effective on d2 and the election made by x on form_8716 to have a tax_year other than a required_year will be treated as effective on d2 this ruling is contingent upon the beneficiaries of trust1 trust2 trust3 trust4 and trust5 filing qsst elections for the qssts with an effective date of d2 with the appropriate service_center within days of the date of this ruling a copy of this letter should be attached to each qsst election 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 regarding x's eligibility to be an s_corporation or its ability to have a tax_year other than a required tax_year further no opinion is expressed as to whether trust1 trust2 trust3 trust4 or trust5 qualify as qssts whether trust6 qualifies as an esbt or whether y qualifies as a qsub 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 plr-125978-11 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representative sincerely charlotte chyr senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b05 - plr-120598-00 date date corporation date x date a date b date c date d date e date f this letter responds to your date request for rulings concerning the federal_income_tax consequences of a proposed transaction the information submitted for consideration is summarized below corporation was formed as a c_corporation in date x and operated as such through its taxable_year ending date a effective for its taxable_year beginning date b an election was made for corporation to be an s_corporation as defined in sec_1361 of the internal_revenue_code at that time there was net unrealized built in gain as defined in sec_1374 in corporation’s assets on date c all of corporation’s stock was purchased by shareholders who did not qualify as s_corporation shareholders as a result corporation’s s_corporation tax_year ended at the close of the day on date d corporation elected to be a reit under sec_856 for the taxable_year beginning on date e the day after date d and ending on date f corporation also elected pursuant to sec_1_337_d_-5t of the temporary income_tax regulations for the rules of sec_1374 to apply plr-120598-00 to the net unrealized built-in-gain based solely on the information submitted and provided that corporation enters into a closing_agreement with the service agreeing among other things that corporation will be subject_to the provisions of sec_1374 as a reit to the same extent it was subject_to sec_1374 as an s_corporation we rule as follows the 10-year recognition_period described in sec_1374 for corporation will continue to be treated as commencing on date b the effective date of corporation’s election to be an s_corporation the net unrealized built-in-gain of corporation under sec_1374 will continue to be calculated based on the fair_market_value and adjusted_basis of corporation’s assets as of date a no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code and its regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings this ruling is addressed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent it is important that a copy of this letter be attached to the federal_income_tax returns of the taxpayers involved for the taxable years in which the transaction covered by this letter is consummated pursuant to a power_of_attorney on file in this office a copy of this letter has been sent to the taxpayer by chief branch sincerely yours associate chief_counsel corporate


t c memo united_states tax_court estate of antonino campilongo deceased rafelina maglio executrix petitioner v commissioner of internal revenue respondent docket no filed date stephen c ryan and andrew h wilson for petitioner cynthia k hustad and elaine l sierra for respondent memorandum opinion jacobs judge this matter is before the court on respondent's motion to dismiss for lack of jurisdiction respondent contends that the petition was not filed within the day period prescribed by sec_6213 respondent determined a deficiency in petitioner's federal estate_tax of dollar_figure and an addition_to_tax under sec_6651 of dollar_figure antonino campilongo died on date while a resident of california rafelina maglio antonino's sister is the executrix of her brother's estate she was a resident of california on the date the petition was filed the statutory_notice_of_deficiency was mailed to rafelina maglio as executrix of the estate of antonino campilongo on date the 90-day period provided by sec_6213 for filing a petition with this court expired on wednesday date which was not a legal_holiday in the district of columbia the postage on the envelope containing the petition was made by private postage meter and is dated date the petition was received by the court's mailroom on date and was filed on that date petitioner acknowledges that the envelope in which the court received the petition bears a legible postmark date which is outside the 90-day period prescribed by sec_6213 but petitioner claims the petition was originally mailed on date by certified mail return receipt requested all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure an employee of petitioner's counsel's law firm affixed a postage meter label to the envelope in which the petition was placed and the postage meter label affixed to the envelope containing the petition apparently became unattached in transit causing the post office to return the envelope to petitioner's counsel's law firm on date stamped returned for postage petitioner wishes to introduce extrinsic evidence to support its claims respondent contends that extrinsic evidence may not properly be considered when it would contradict a legible postmark on the envelope containing the petition in general to be timely a petition for redetermination of a deficiency must be filed with this court within days after the notice_of_deficiency is mailed sec_6213 the court lacks jurisdiction if the petition is untimely filed 92_tc_729 affd without published opinion 935_f2d_1282 3d cir if a petition is received after the 90-day period it will be deemed filed on the date of the united_states postmark stamped on the envelope if the requirements of sec_7502 are satisfied sec_7502 does not apply unless a petition is timely deposited in the united_states mail with sufficient postage prepaid sec_7502 sec_301_7502-1 proced admin regs when a private postage meter is used the postmark date must be within the prescribed period for filing and the document must be received by the addressee within the normal delivery period for an envelope postmarked by the united_states post office at the same point of origin sec_301 c iii b proced admin regs if a document is sent by certified mail and the sender's receipt is postmarked by a postal employee the date on the receipt is treated as the postmark date of the document sec_301_7502-1 proced admin regs as previously stated the requirements of sec_7502 and the regulations must be satisfied in order to treat a petition as timely filed when it reaches this court by mail after the period prescribed by sec_6213 one of these requirements is that a private postage meter postmark must bear a legible date that is on or before the last date prescribed for filing the document sec_301_7502-1 proced admin regs in this case the date postmark on petitioner's envelope is beyond the required 90-day period for filing the envelope containing the petition must be timely mailed with sufficient postage prepaid sec_7502 sec_301 c ii proced admin regs although petitioner claims that this requirement was met a u s postal service stamp on the envelope indicates that it was returned for postage we shall not speculate about whether proper postage was affixed to the envelope when originally mailed or whether any such postage became unattached before or after the envelope was deposited in the mail a second mailing of the petition bears a private postmeter date of date in 70_tc_712 the taxpayer claimed that the date on a private postage meter was set incorrectly resulting in an untimely postmark that wa sec_1 day later than the actual date that the petition was mailed the taxpayer therein attempted to introduce extrinsic evidence to support his claim in declining to receive the taxpayer's proffer of extrinsic evidence we stated the general scheme of sec_7502 and implementing regulations is designed to avoid testimony as to date of mailing in favor of tangible evidence in the form of an official government notation as such when a legible postal service postmark appears on an envelope no evidence that the petition was mailed on some other day will be allowed 572_f2d_212 9th cir affg a memorandum opinion of this court 65_tc_548 sec_301_7502-1 proced admin regs where non-postal service postmarks are used the statute does permit extrinsic evidence other than the tangible evidence of the postmark in such cases the regulations require the timely private postage meter postmark date to be independently corroborated by facts beyond the taxpayer's control but the statute and regulations clearly contemplate presentation of such extrinsic evidence only when the private postage meter postmark reflects a date on or before the 90th day after mailing the notice_of_deficiency we believe our position maintains the obvious parity sought by congress between private postage meter and postal service postmarks--that both be made on or before the 90th day we noted that where a legible postal service postmark reflected a date after the 90th day no evidence could be presented to contradict it we see no reason why a taxpayer who has independent control_over his postmark should fare any better especially when the regulations require both postmarks to be made on or before the 90th day wiese v commissioner supra pincite see also 88_tc_1063 petition postmarked on 91st day was untimely whether postmark made by private meter or u s postal service postmark date conclusive and extrinsic evidence not admissible to contradict it in the instant case the date postmark on petitioner's envelope is conclusive petitioner's claimed prior attempt to mail the petition was unsuccessful and did not result in the filing of the petition evidence of such attempted mailing is inadmissible under wiese and kahle petitioner relies on 65_tc_548 in which we considered extrinsic evidence of the date of mailing when the post office failed to postmark the envelope containing taxpayer's petition in that case the envelope had sufficient postage it reached the court within the normal period following a timely mailing the court drew an analogy to cases where the postmark on the envelope is illegible see sec c iii a in this case petitioner's prior claimed mailing did not reach the court and was returned for postage unlike sylvan the subsequent mailing bore a legible private postmeter date beyond the 90-day period for filing sylvan is therefore distinguishable on its facts petitioner could have obtained a united_states postmark on a certified mail receipt but did not do so such postmark is treated as the postmark date of the document at least in cases where the envelope reaches its destination see sec_301 c and d proced admin regs while we are sympathetic with petitioner's plight because the petition was filed outside the 90-day period prescribed by sec_6213 we lack jurisdiction to hear petitioner's case consequently respondent's motion to dismiss for lack of jurisdiction will be granted petitioner however is not without a judicial remedy petitioner may pay the tax file a claim_for_refund with the internal_revenue_service and if the refund claim is denied sue for a refund in the appropriate federal district_court or the united_states court of federal claims to reflect the foregoing an order granting respondent's motion will be entered


t c no united_states tax_court benton williams jr petitioner v commissioner of internal revenue respondent docket no filed date p did not file a federal_income_tax return for r prepared a substitute for return and determined a deficiency in p’s federal_income_tax an additional tax under sec_72 and additions to tax under sec_6651 and p filed a petition containing frivolous arguments and then filed a series of frivolous pretrial motions and made frivolous posttrial arguments sec_6673 authorizes the tax_court to impose a penalty of up to dollar_figure on a taxpayer whenever it appears that the proceeding was instituted primarily for delay or that the taxpayer’s position is frivolous or groundless sec_6751 requires that no penalty under the i r c shall be assessed unless the initial determination of the penalty is personally approved by the immediate supervisor of the individual making the determination see graev v commissioner t c date supplementing and overruling in part 147_tc_460 held p is liable for the deficiency additional tax and additions to tax held further the authority of the tax_court to impose a penalty under sec_6673 is not subject_to the approval requirement of sec_6751 held further p is liable for a dollar_figure penalty under sec_6673 benton williams jr pro_se evan k like for respondent ruwe judge the commissioner determined a deficiency in petitioner’ sec_2012 federal_income_tax of dollar_figure and additions to tax under sec_6651 and of dollar_figure and dollar_figure respectively the issues for decision are whether dollar_figure of unreported wages that petitioner received in is includible in taxable_income whether dollar_figure of unemployment_compensation that petitioner received in is includible in taxable_income whether a dollar_figure distribution that petitioner received from his retirement account in is includible in taxable_income whether petitioner is liable for the 1unless otherwise indicated all section references are to the internal_revenue_code code in effect at all relevant times additional tax under sec_72 and whether petitioner is liable for the additions to tax under sec_6651 and the court will also consider whether it should impose a penalty on petitioner pursuant to sec_6673 findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in ohio when he filed his petition in petitioner received dollar_figure of wages from appleton papers inc unemployment_compensation of dollar_figure from the ohio department of job family services and a dollar_figure distribution from principal life_insurance co petitioner did not file a federal_income_tax return for as a result the commissioner prepared a substitute for return sfr that consisted of a form sec_6020 certification a form_4549 income_tax examination changes and a form 886-a explanation of items on date the commissioner issued petitioner a notice_of_deficiency for petitioner timely filed a petition with this court 2the commissioner determined that the distribution from principal life_insurance co was a distribution from a qualified_retirement_plan in his petition petitioner raised frivolous arguments he then filed several pretrial motions in which he raised the same type of arguments on date respondent’s counsel sent petitioner a letter informing him that the arguments he raised in a motion for summary_judgment were frivolous and that respondent would move for the court to impose a penalty under sec_6673 if he persisted on date respondent’s counsel sent petitioner another letter in which he reminded petitioner of the tax court’s authority to impose a penalty under sec_6673 at trial respondent filed a motion asking the court to impose a sec_6673 penalty on petitioner petitioner stated to the court at trial t he court just denied my motions for lack of subject matter jurisdiction personal territorial jurisdiction to force a direct income_tax and of course i was struck down on that so to me it appears that here in the c ourt the court will not recognize that type of argument the court later warned petitioner that the type of arguments he was pursuing was of the sort that have generated penalties however on brief petitioner continued raising frivolous arguments 3the following excerpt is an example of the type of arguments petitioner raised in his brief petitioner is not in any contract with the irs and is not domiciled in continued opinion i deficiency a unreported income sec_61 defines gross_income as all income from whatever source derived petitioner stipulated to receiving the amounts set forth in the notice_of_deficiency at trial petitioner neither testified nor presented any witnesses however he asserts using tax-protester type arguments that the income he received in is not taxable under the code his arguments are shopworn tax- protester arguments that have been universally rejected by this court see eg 136_tc_498 127_tc_200 aff’d 521_f3d_1289 10th cir blair v commissioner tcmemo_2016_215 at orr v commissioner tcmemo_1981_111 tax ct memo lexis we will not painstakingly address petitioner’s arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit 737_f2d_1417 5th cir see also kanofsky v continued the united_states federal zone article sec_3 cl it is illegal to kidnap the petitioner’s identity as a constitutional citizen by birth and move it to the district of columbia without the petitioner’s consent u s c commissioner tcmemo_2015_70 at accordingly we hold that the commissioner’s determinations of unreported income as set forth in the notice_of_deficiency are correct and those determinations are sustained b sec_72 additional tax sec_72 imposes with certain exceptions an additional tax on an early distribution from a qualified_retirement_plan equal to of the portion of the amount that is includible in gross_income because sec_72 imposes a tax rather than a penalty or an addition_to_tax within the meaning of sec_7491 petitioner has the burden of production on this issue see 144_tc_140 petitioner has not disputed that the distribution from principal life_insurance co was a distribution from a qualified_retirement_plan he has alleged no facts and produced no evidence showing that he had attained the age of when he received the distribution or that any other statutory exception applies we will accordingly sustain the commissioner’s determination that petitioner is liable for the additional tax under sec_72 c additions to tax the commissioner determined that petitioner is liable for additions to tax under sec_6651 and respondent has the burden of production with respect to these additions to tax see sec_7491 once respondent satisfies this burden petitioner has the burden_of_proof with respect to exculpatory factors such as reasonable_cause see 116_tc_438 sec_6651 sec_6651 imposes an addition_to_tax when a taxpayer fails to timely file a return unless the taxpayer establishes that the failure was due to reasonable_cause and not due to willful neglect petitioner was required to file a return for pursuant to sec_6012 and he stipulated that he did not do so thus respondent has met his burden and the burden shifts to petitioner although petitioner argues that he is not required to file a return he received gross_income greater than the exemption_amount see sec_6012 he did not present any evidence that his failure_to_file was due to reasonable_cause and not willful neglect accordingly petitioner is liable for the addition_to_tax under sec_6651 sec_6651 sec_6651 imposes an addition_to_tax for failure to timely pay the amount of tax shown on a return unless the taxpayer shows that the failure was due to reasonable_cause and not due to willful neglect an sfr prepared by the secretary pursuant to sec_6020 is treated as the return filed by the taxpayer for purposes of determining the amount of the addition under sec_6651 sec_6651 petitioner does not contend that he paid the amount shown on the sfr the sfr that respondent prepared consists of a form a form 886-a and a form_4549 that combination of documents is sufficient to constitute a valid sfr under sec_6020 143_tc_376 aff’d 616_fedappx_391 10th cir see also gleason v commissioner tcmemo_2011_154 tax ct memo lexi sec_151 at thus the sfr is a valid sec_6020 return deemed to have been filed by petitioner for the purposes of sec_6651 therefore respondent has met his burden petitioner did not offer evidence that his failure to pay was due to reasonable_cause and not due to willful neglect accordingly we hold that petitioner is liable for the addition_to_tax under sec_6651 ii sec_6673 penalty at trial respondent filed a motion asking the court to impose a penalty on petitioner pursuant to sec_6673 title_26 sec_6673 authorizes the tax_court to require a taxpayer to pay to the united_states a penalty not in excess of dollar_figure whenever it appears that proceedings in the tax_court have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer’s position in such proceedings is frivolous or groundless a sec_6751 and its impact on sec_6673 title_26 sec_6751 requires that n o penalty under this title shall be assessed unless the initial determination of such assessment is personally approved in writing by the immediate supervisor of the individual making such determination or such higher level official as the secretary may designate in graev v commissioner graev iii t c date supplementing and overruling in part 147_tc_460 which was decided after trial and the sec_6673 provides in pertinent part sec_6673 tax_court proceedings -- procedures instituted primarily for delay etc -- whenever it appears to the tax_court that-- a proceedings before it have been instituted or maintained by the taxpayer primarily for delay or b the taxpayer’s position in such proceeding is frivolous or groundless the tax_court in its decision may require the taxpayer to pay to the united_states a penalty not in excess of dollar_figure sec_6751 does not apply to the sec_6651 sec_6654 and sec_6655 additions to tax or to other penalties calculated through electronic means sec_6751 submission of briefs in the instant case we agreed with the holding of the court_of_appeals for the second circuit in 851_f3d_190 2d cir aff’g in part rev’g in part tcmemo_2015_42 that the commissioner’s compliance with sec_6751 is appropriately considered in a deficiency proceeding chai f 3d pincite this means that respondent must offer evidence in this court of written supervisory approval for penalties covered by sec_6751 in order to meet the burden of production under sec_7491 see graev iii t c at slip op pincite the penalty at issue in graev iii was a sec_6662 penalty which is a penalty determined by the commissioner in a notice_of_deficiency or by chief_counsel for the internal_revenue_service irs in the answer or amended answer filed on behalf of the commissioner in this court what graev iii made clear is that an initial determination by the irs to assert a penalty requires written approval by an irs supervisor and that an initial determination by a chief_counsel attorney to affirmatively plead such a penalty on behalf of the irs requires written supervisory approval by the attorney’s supervisor see graev iii t c at slip op pincite however graev iii left many questions unanswered see graev iii t c at slip op pincite holmes j concurring as relevant to this case the application of sec_6751 to sec_6673 is arguably unclear see graev iii t c at slip op holmes j concurring the sec_6673 penalty can be imposed only at the discretion of the court for misbehavior before the court it is not a penalty determined by the commissioner under sec_6673 the tax_court may impose the penalty regardless of whether the commissioner moves for its imposition b statutory construction a long-established canon of statutory construction is that w here there is no clear intention otherwise a specific statute will not be controlled or nullified by a general one regardless of the priority of enactment 426_us_148 quoting 417_us_535 further it is a cardinal rule_of statutory construction that repeals by implication are disfavored united_states v 425_us_164 morton u s pincite this principle is given special weight when deciding whether a specific statute has been repealed by a general statute united cont’l tuna corp u s pincite nevertheless an implied repeal may be found in certain limited circumstances where provisions in the two acts are in irreconcilable conflict the later act to the extent of the conflict constitutes an implied repeal of the earlier one and if the later act covers the whole subject of the earlier one and is clearly intended as a substitute it will operate similarly as a repeal of the earlier act but in either case the intention of the legislature to repeal must be clear and manifest 110_tc_140 quoting radzanower u s pincite sec_6673 and sec_6751 are not in irreconcilable conflict sec_6751 is not a substitute for sec_6673 and congress did not express a manifest intent to repeal sec_6673 or to modify the longstanding procedural rules that govern the processing of cases in the tax_court an irreconcilable conflict exists when there is a positive repugnancy between the statutes or they cannot mutually coexist radzanower u s pincite if the two statutes can coexist it is the duty_of the courts to give effect to both morton u s pincite here the purposes of sec_6751 and sec_6673 can both be served while giving effect to both provisions sec_6751 was enacted as part of the irs restructuring and reform act of pub_l_no sec_3306 sec_112 stat pincite congress expressed its intent with respect to sec_6751 in the legislative_history the senate_finance_committee believed that penalties should only be imposed where appropriate and not as a bargaining chip s rept no pincite 1998_3_cb_537 the committee further explained that sec_6751 requires the specific approval of irs management to assess all non-computer generated penalties unless excepted id emphasis added this is bolstered by the terms of sec_6751 which allow only two individuals to approve a penalty the immediate supervisor of the individual making the determination or such higher level official as the secretary may designate the committee’s intent was key to the holding in chai in chai f 3d pincite the court stated we must therefore consult legislative_history and other tools of statutory construction to discern congress’s meaning it is particularly useful to consider reliable legislative_history in cases like this where the statute is susceptible to divergent understandings and equally important where there exists authoritative legislative_history that assists in discerning what congress actually meant the most enlightening source of legislative_history is generally a committee report particularly a conference committee report which 6if a statute is ambiguous as it is in this case see 851_f3d_190 2d cir aff’g in part rev’g in part tcmemo_2015_42 graev v commissioner t c slip op pincite date holmes j concurring supplementing and overruling in part 147_tc_460 then we properly consult the legislative_history to discern the statute’s purpose see 138_tc_18 citing 481_us_454 we have identified as among ‘the most authoritative and reliable materials of legislative_history ’ the report from the senate_finance_committee on sec_6751 states clearly the purpose of the provision and thus congress’s intent the committee believes that penalties should only be imposed where appropriate and not as a bargaining chip the statute was meant to prevent irs agents from threatening unjustified penalties to encourage taxpayers to settle t he irs will often say if you don’t settle we are going to assert penalties citations omitted the legislative_history of sec_6673 shows that congress had different priorities in granting the tax_court the power to impose sec_6673 penalties sec_6673 was last amended by the omnibus budget reconciliation act of obra pub_l_no sec stat pincite the obra changed the award allowable under sec_6673 from damages to penalties and increased the amount allowable from a maximum of dollar_figure to a maximum of dollar_figure the legislative_history explains t he dollar_figure maximum award provided under present law appears to be ineffective in deterring taxpayers from taking frivolous positions the committee has explicitly chosen to call these awards penalties rather than damages as under present law so that it is clear that specific damages incurred by the united_states need not be proved before the court may impose this penalty the committee believes that dealing with these frivolous lawsuits wastes scarce judicial resources and delays the resolution of legitimate disputes the committee expects that its modifications to this provision will further decrease frivolous lawsuits h_r rept no pincite0 u s c c a n sec_6673 and sec_6751 are not in irreconcilable conflict and can coexist sec_6673 applies by its terms only to penalties imposed by the tax_court for frivolous and groundless claims that waste the time and resources of the court congress designed sec_6673 as a tool for the tax_court to combat frivolous_litigation and reduce its congested docket sec_6673 is a positive grant of power on the contrary sec_6751 was intended to apply only to irs determinations congress designed sec_6751 to clamp down on a perceived irs practice sec_6673 has an entirely different purpose there is no positive repugnancy between the sections and they can positively coexist the legislative_history makes clear that sec_6751 is intended to prevent the irs from improperly using penalties that are within its power to determine in order to coerce settlements the legislative_history states that congress intended for this to be accomplished by requiring that irs management approve penalties that it has the authority to determine consequently the individual making a penalty determination as described in sec_6751 is an irs employee s rept no supra pincite c b pincite the tax_court is not mentioned in sec_6751 or its legislative_history sec_6673 is designed to deter bad behavior in litigation before the tax_court and conserve judicial resources sec_6751 is clearly not intended as a mechanism to restrain the tax_court title_26 sec_7482 is similar to sec_6673 it grants the supreme court of the united_states and the u s circuit courts of appeals the power to impose penalties in cases where the decision of the tax_court is affirmed and the court decides that the appeal was instituted or maintained primarily for delay or that the taxpayer’s position in the appeal is frivolous or groundless sec_6673 authorizes the district courts to impose a penalty not in excess of dollar_figure if a taxpayer maintains a frivolous or groundless position in a sec_7433 proceeding sec_6751 was not intended as a broad restraint mechanism on the federal judiciary it was not intended to cover the imposition of penalties that congress intended could be imposed by courts because of misbehavior by a litigant during the course of a judicial proceeding accordingly we hold that sec_6751 does not apply to the tax_court when it imposes penalties under sec_6673 c petitioner’s liability for the sec_6673 penalty before trial respondent’s counsel warned petitioner that the arguments he was advancing were frivolous at trial petitioner seemed to acknowledge that his arguments would be viewed as frivolous we even warned petitioner that the arguments he was advancing appeared to be frivolous yet his brief consisted solely of frivolous arguments sec_6673 was designed to deter this type of behavior accordingly we impose a penalty of dollar_figure pursuant to sec_6673 in reaching our decision we have considered all arguments made by the parties and to the extent not mentioned or addressed they are irrelevant or without merit to reflect the foregoing an appropriate order and decision will be entered


internal_revenue_service number release date index number ------------------------------------ ---------------------------------- ------------------ --------------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi plr-101474-05 date june ------------- ---------------- ---------------------- --------------------------------- -------------------------------------- legend x --------------------------------------------------- state d1 d2 d3 trust --------------------------------------------------- trust --------------------------------------------------- a ------------------------- ------------------------------------------------------ b ------------------------ ----------------------------------------------------- dear -------------------- this responds to a letter dated date together with subsequent correspondence submitted on behalf of x requesting a ruling under ' f of the internal_revenue_code ------------------------------------------------------------------------- ------------------------------------------------------------------------- according to the information submitted x was incorporated under the laws of plr-101474-05 facts state on d1 x elected to be an s_corporation effective d2 among x’s shareholder are trust and trust x represents that trust and trust qualify as qualified subchapter_s trusts qssts a and b are the income beneficiaries of trust and trust respectively representatives of a and b did not timely file qsst elections for trust and trust and that consequently x’s s_corporation_election was ineffective on d3 the co-trustees of trust and trust discovered that the legal x represents that since d2 x and its shareholders including trust and trust have filed their income_tax returns as if x was an s_corporation x represents that its ineffective s_corporation_election was inadvertent x and all its shareholders who were shareholders since d2 agree to make any necessary adjustments consistent with the treatment of x as an s_corporation law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that a qsst whose beneficiary makes an election under sec_1362 will be treated as a_trust described in sec_1361 and the qsst's beneficiary will be treated as the owner for purposes of sec_678 of that portion of the qsst's s_corporation stock to which the election under sec_1361 applies under sec_1361 a beneficiary of a qsst may elect to have sec_1361 apply under sec_1361 this election will be effective up to days and two months before the date of the election sec_1361 defines a qsst as a_trust a the terms of which require that i during the life of the current income_beneficiary there shall be only one income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current beneficiary in the trust shall terminate on the earlier of the beneficiary's death or plr-101474-05 the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to that beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to one individual who is a citizen or resident_of_the_united_states sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in ineffectiveness steps were taken so that the corporation is once more a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the circumstances resulting in the ineffectiveness the corporation shall be treated as continuing to be an s_corporation during the period specified by the secretary conclusion based solely on the information submitted and the representations made we conclude that x’s subchapter_s_election was invalid because appropriate elections were not filed for trust and trust in addition we conclude that the election was inadvertently invalid within the meaning of ' f therefore x will be treated as continuing to be an s_corporation from d2 and thereafter provided that a and b or their legal representatives file qsst elections with the appropriate service_center within days of the date of this letter a copy of this letter should be attached to the qsst elections except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed concerning whether x is otherwise eligible to be treated as an s_corporation or whether trust and trust are eligible to be treated as qssts this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-101474-05 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely enclosures copy of this letter copy for ' purposes dianna k miosi chief branch associate chief_counsel passthroughs special industries


internal_revenue_service number release date index number ------------------------------- -------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ----------------- telephone number --------------------- refer reply to cc tege eb hw plr-122601-13 date date taxpayer state statute insurer ------------------------------- ------------------------- ------------ ------------------------------------------------------------ ------------------------------- -------------------------------------------- dear ---------------------- this is in reply to the letter dated date submitted on your behalf requesting a ruling with respect to whether certain no-fault automobile insurance benefits you receive are excludable from gross_income under sec_104 of the internal_revenue_code the code facts taxpayer serves as the court appointed guardian of her adult daughter a legally incapacitated adult taxpayer’s daughter the ward sustained physical injuries in an automobile accident and is unable to care for herself taxpayer coordinates care giving services for ward insurer pays benefits to taxpayer on behalf of ward pursuant to statute under statute every motor_vehicle accident occurring in state creates a claim for no fault insurance benefits no fault insurance benefits include all reasonable charges incurred for reasonably necessary products services and accommodations for an injured person’s care recovery or rehabilitation statute contains no further definition of allowable expenses allowable expenses are payable for life and without a dollar plr-122601-13 limitation benefits are paid_by the victim’s own insurance_company and are always paid regardless of who was at fault for the accident allowable benefits include for example medical and hospital expenses in-home nursing or attendant care physical and vocational rehabilitation and guardianship expenses law and analysis 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 of the code for any prior taxable_year gross_income does not include amounts received through 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 provides that sec_104 excludes from gross_income amounts received through accident_or_health_insurance for personal injuries or sickness other than amounts received by an employee to the extent that such amounts are attributable to contributions of the employer which were not includible in the gross_income of the employee or are paid_by the employer similar treatment is also accorded to amounts received under accident or health_plans and amounts received from sickness or disability funds revrul_73_154 1973_1_cb_50 considered a taxpayer who was injured in an accident and as a result of his injuries received disability payments under the automobile owner’s no fault insurance_policy the state statute required that disability insurance benefits be provided without regard to fault under motor_vehicle policies that provide bodily injury and property damage liability insurance for motor vehicles registered in that state the ruling held that disability benefits received under a no fault insurance_contract are amounts received through accident_or_health_insurance for personal_injury_or_sickness within the meaning of sec_104 of the code and are not includible in the gross_income of the recipients for federal_income_tax purposes based on the information submitted and authorities cited above we conclude that under sec_104 of the code the no fault automobile insurance benefits received pursuant to the statute are not includible in the gross_income of the taxpayer for federal_income_tax purposes no opinion is expressed as to the federal tax consequences of the transaction under any other section of the code or statute other than as specifically stated above this ruling letter is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent plr-122601-13 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely harry beker chief health welfare branch office of division counsel associate chief_counsel tax exempt government entities cc


internal_revenue_service number release date index numbers ------------------ ----------------------------- ---------------------------------------- --------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number --------------------- refer reply to cc psi b03 plr-100923-10 date date company ------------------------------------------------------------------------------------------------- ------------------------- date -------------------------- country ----------------- dear ---------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of company by company’s authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a disregarded_entity for federal tax purposes facts company was formed under country law on date company represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes company intended that it be classified as a disregarded_entity effective date however due to inadvertence a valid form_8832 entity classification election to treat company as a disregarded_entity effective date was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible plr-100923-10 entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result company is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a disregarded plr-100923-10 entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on the owner of company filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief being effective date to the extent appropriate these returns must include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to company’s authorized representative sincerely associate chief_counsel passthroughs special industries by s ________________________________ james a quinn senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc