t c memo united_states tax_court ferdinand a marla morabito et al petitioners v commissioner of internal revenue respondent docket nos filed date edward j shapiro for petitioners patricia a riegger for respondent memorandum opinion raum judge the commissioner determined deficiencies in petitioners' federal income taxes as follows cases of the following petitioners are consolidated herewith william j prechtl and roberta e prechtl docket no joseph j chiffone docket no douglas r gamble and joan a gamble docket no petitioners deficiency ferdinand a and marla morabito joseph j chiffone douglas r and joan a gamble william j and roberta e prechtl dollar_figure big_number big_number big_number this matter is before the court on respondent's motions for summary_judgment pursuant to rule in each case petitioners submitted in opposition a so-called petitioner's opposition motion which was filed simply as petitioner's opposition the cases were consolidated and each presents the same issue that is whether an amount_paid to an employee of ibm upon his severance therefrom conditioned upon his signing of a release relinquishing all existing claims against ibm is excludable from income under sec_104 petitioners are ferdinand a and marla morabito joseph j chiffone douglas r and joan a gamble and william j and roberta e prechtl petitioners lived in hicksville ny holbrook ny locust valley ny and holtsville ny respectively when their petitions in these cases were filed references to petitioners will be to the male petitioners prior to and during a portion of petitioners were employees of ibm in they each signed a document entitled unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure general release and covenant not to sue the release in exchange they received a lump sum from ibm consisting of weeks' salary for every year_of_service on their returns they each excluded the lump-sum payment from gross_income they each attached form_8275 disclosure statement to their returns asserting that the lump-sum amount was excluded because it was a payment reeived sic in exchange for the release and or settlement of tort-type rights as part of the former employer's ito ii program ibm instituted the ito ii program as a method of reducing its workforce employees who participated in the program resigned or retired from ibm receiving lump-sum cash payments and other_benefits in exchange for signing the release if an ito ii participant was subsequently rehired by ibm or any of its subsidiaries he was required to repay a prorated portion of the ito ii payment the release provides in pertinent part in exchange for the sums and benefits which you will receive pursuant to the terms of the modified and extended individual transition option program ito ii program individual petitioner agrees to release international business machines corporation hereinafter ibm from all claims demands actions or liabilities you may have against ibm which are related to your employment with ibm or the termination of that employment you also agree that this release covers but is not limited to claims arising in docket no involving petitioners douglas and joan gamble reeived was correctly shown as received from the age discrimination in employment act of as amended title vii of the civil rights act of as amended and any other federal or state law dealing with discrimination in employment on the basis of sex race national origin religion disability or age you also agree that this release includes claims based on theories of contract or tort whether based on common_law or otherwise you acknowledge and agree that the benefits provided pursuant to the ito ii program constitute consideration for this release in that there are benefits to which you would not have been entitled had you not signed this release this release does not waive any claims you may have which arise after the date you sign this release none of the petitioners filed a claim of any type against ibm either prior to signing the release or at any other time sec_104 provides that gross_income does not include the amount of any damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal injuries or sickness sec_1_104-1 income_tax regs explains that the term damages received means an amount received through prosecution of a legal suit or action based upon tort or tort type rights or through a settlement agreement entered into in lieu of such prosecution petitioners' oppositions do not allege nor does the record otherwise show that any petitioner ever made any formal or informal claim against ibm it therefore appears that there were no settlements for ibm and petitioners to reach petitioners waived all claims before asserting them so this cannot be a damage settlement by definition 835_fsupp_744 s d n y affd 35_f3d_93 2d cir however even if we assume that the signed releases represent settlement agreements for the awards to be excludable under sec_104 petitioners must demonstrate that the underlying cause of action giving rise to the recovery is 'based upon tort or tort type rights' and that the damages were received 'on account of personal injuries or sickness ' 515_us_323 underlying cause of action the nature of the claim controls whether a damage amount is excludable from gross_income 98_tc_1 determining the nature of the claim is a factual matter sodoma v commissioner tcmemo_1996_275 if there is no express language in the agreement explaining why the settlement amount is being paid the most important factor is the intent of the payor stocks v commissioner supra the best indicator of the intent of the payor in this case is the language of the release the release freed ibm from all claims demands actions or liabilities you may have against ibm which are related to your employment with ibm or the termination of that employment the release covered adea claims employment discrimination claims and claims based on theories of contract or tort the release also provided that the benefits received for signing constitute consideration for this release in that there are benefits to which you would not have been entitled had you not signed this release this language indicates that ibm considered the payments to petitioners as compensation_for release of all potential claims including but not limited to tort claims this is supported by ibm's inclusion of each award in petitioners' w-2 forms there is nothing in the release to show that it was tailored to a specific incident or named individual the release is so broad it covers any potential existing claim it is not designed to compensate for a specific tort violation except incidentally damages received petitioners must also demonstrate that the damages were received 'on account of personal injuries or sickness ' commissioner v schleier supra pincite quoting sec_104 where a settlement agreement contains a number of claims does not allocate the portion excludable under sec_104 and there is no other evidence that a specific claim was meant to be singled out the court must consider the entire amount taxable taggi v united_states supra pincite sodoma v commissioner tcmemo_1996_275 cf stocks v commissioner supra pincite in this case there was no division of the award by the parties petitioners have presented no evidence that a portion of the award was intended to be excluded therefore the entire amount must be included in gross_income petitioners contend that they were singled out by ibm because they could have filed age job discrimination claims they contend that ibm purposely intimidated and harassed them in order to reduce its work force ultimately they were told to take the buy-out or risk losing their jobs they allege that they were then forced to sign the release before they were paid the ito ii program paid weeks per year_of_service versu sec_1 week per year under ibm's existing ito reduction in force program petitioners claim that the additional week represented payment for personal injury while petitioners may or may not have had actionable claims against ibm at issue here is the excludability of the ito ii payments when petitioners signed the releases they had not brought suits against ibm there is no evidence that they even talked to ibm about doing so regardless of whether any of them may have had a bona_fide grievance against ibm each accepted ibm's offer which ibm sweetened by adding an extra week's pay to the formula for computing the amount payable and although petitioners may have thought they were settling claims they presented no evidence that ibm shared that belief the ito ii payments more fully resemble severance_pay than settlements this conclusion is supported by the release itself which was not tailored specifically for petitioners but was used generally for the ito ii program see keel v commissioner tcmemo_1997_ webb v commissioner tcmemo_1996_50 it is also supported by the amounts paid which were based on years_of_service rather than specific injury petitioners also argue that ibm's actions caused personal injuries to petitioners after they signed the release this argument does not help petitioners since the release covered only existing claims against ibm petitioner agrees to release ibm from all claims you may have against ibm which are related to your employment with ibm emphasis added see id petitioners have failed to demonstrate that a material issue of fact remains for trial they have not shown that the amounts received under the ito ii program were paid in settlement of tort claims or that any portion was received 'on account of personal injuries or sickness ' commissioner v schleier supra pincite quoting sec_104 respondent's motions for summary_judgment will be granted and decisions will be entered for respondent


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number tax_exempt_and_government_entities_division release number release date date date uil code legend son foundation t u o w dear this is in response to your letter dated date in which you requested certain rulings with respect to il r c sec_507 sec_4941 sec_4945 and sec_642 background you are an irrevocable charitable_lead_annuity_trust that is treated as a private_foundation you were formed under article iv of your trust agreement trust agreement’ you were initially funded dy your founder who is now deceased under your original terms your initial annuity_payment was three percent of the initial fair_market_value of your trust fund in each year after that the annuity_payment was to equal the previous year’s annuity amount multiplied by a certain factor the annuity payments are made to one or more qualified charitable organizations where a qualified charitable_organization means any organization described in sec_170 sec_2055 or sec_2522 chosen by a designated appointer your designated appointer is son the son of your founder as the appointer son chooses not only the qualified charitable_organization but also your trustee the initial trust terms provided that any remaining principle at the end of twenty years of annuities would go to son throughout the twenty years of annuities of which you are now in year fifteen son has chosen to provide the annuity payments to foundation foundation is exempt from federal_income_tax under sec_501 as an organization described in sec_501 and is classified as a private_foundation within the meaning of sec_509 son is a founder of foundation and retains the ability to appoint and remove members of the board_of directors of foundation your trustee has determined given the required payout amounts that you will run out of funds by your eighteenth year the annuity_payment in that year will be higher than the amount remaining in the trust fund and you will be unable to finish the final two years of the annuity payments and no funds will remain for son given the likely end of your ability to continue paying annuities your trustee petitioned the court to amend your terms allowing you to terminate this year and pay all of the remaining funds to foundation son would receive none of the payments from you and has represented that he has relinquished any and all claims regarding payments under the trust agreement the court granted your amendments conditional upon receiving a ruling_request from the service indicating that there are no negative tax consequences rulings requested the distribution of your remaining assets to foundation will not terminate your status as a private_foundation under sec_507 and cause you to be subject_to a termination_tax under sec_507 the distribution of your remaining assets to foundation will not be an act of self-dealing under sec_4941 the distribution of your remaining assets to foundation will not be a taxable_expenditure with respect to which you need to exercise expenditure_responsibility under sec_4945 foundation will not be required to exercise expenditure_responsibility with respect to outstanding grants made to itself you will be allowed a deduction under sec_642 for the taxable_year in which the assets are distributed to foundation in an amount equal to the annuity_payment that otherwise would have been payable for the taxable_year prorated on a daily basis if the year of distribution is a short taxable_year to the extent paid from your gross_income law sec_507 provides that the status of any organization as a private_foundation shall be terminated only if such organization notifies the secretary of its intent to accomplish such termination or there have been willful and repeated acts or a willful and flagrant act giving rise to liability for tax under chapter and the secretary notifies such organization that it is liable for such tax ‘1 r c sec_507 provides that for purposes of sec_507 sec_508 and sec_509 in the case of a transfer of assets of any private_foundation to another private_foundation pursuant to any liquidation merger redemption iecapitalization or other adjustment organization or reorganization the tranferee foundation shall not be treated as a newly created organization sec_507 provides that a substantial_contributor means any person who contributed or bequeathed an aggregate amount of more than dollar_figure to the private_foundation if such amount is more than two percent of the total contributions and bequests received by the foundation sec_642 provides in pertinent part that a_trust shall be allowed as a deduction in computing its taxable_income in lieu of the deduction allowed by sec_170a any amount of the gross_income without limitation which pursuant to the terms of the governing instrument during the taxable_year is paid out for a purpose specified in sec_170 determined without regard to sec_170 a r c sec_4941 imposes a tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 defines self-dealing as the furnishing of goods services or facilities between a disqualified_person and a private_foundation as well as the transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation sec_4945 imposes a twenty percent tax on each taxable_expenditure of a private_foundation sec_4945 defines taxable_expenditure as any amount_paid or incurred by a private_foundation as a grant to an organization unless the private_foundation exercises expenditure_responsibility with respect to such grant in accordance with subsection h or an amount_paid for any purpose other than one specified in sec_170 r c sec_4945 defines expenditure_responsibility as the private_foundation will assert all reasonable efforts and establish adequate procedures to see that the grant is spent solely for the purpose for which it was made to obtain full and complete reports from the grantee on how the funds are spent and to make full and detailed reports with respect to such expenditures to the secretary sec_4946 provides that a disqualified_person with respect to a private_foundation includes a substantial_contributor as defined under sec_507 a foundation director or officer and any spouse ancestor child grandchild great grandchild of that contributor director or officer sec_4947 provides that in the case of a split-interest trust sec_507 sec_4941 and sec_4945 shall apply to the trust as if it were a private_foundation sec_1_507-3 provides that a transferee organization to which sec_507 applies shall succeed to the aggregate tax_benefit of the transferor organization in an amount equal to the amount of such aggregate tax_benefit multiplied by a faction the numerator of which is the fair_market_value of the assets transferred to such transferee and the denominator of which is the fair_market_value of the assets of the transferor immediately before the transfer sec_1_507-3 provides that if a private_foundation incurs liability for one or more of the taxes imposed under chapter prior to or as a result of making a sec_507 transfer to one or more private_foundations each transferee foundation shall be treated as receiving the transferred assets subject_to such liability to the extent that the transferor does not satisfy such liability sec_1_507-3 example describes a_trust whose trustees created and controlled foundations r s and t when the trust provides funds to r s and t in a b transfer r s and t are treated as the trust for sec_4945 purposes and are responsible for any expenditure responsibilities remaining under sec_4945 distributions the example goes on to state since r s and t are treated as the trust rather than as recipients of ‘expenditure responsibility’ grants there are no expenditure_responsibility requirements which must be exercised under sec_4945 and h with respect to the transfers of assets to r s and t sec_1_507-3 provides that if a private_foundation transfers all of its net assets to one or more private_foundations which are effectively controlled by the same person or persons which effectively controlled the transferor private_foundation such a transferee foundation shall be treated as if it were the transferor sec_1_507-3 provides that for the purposes of sec_507 the terms other adjustment organization or reorganization shall include any partial_liquidation or any other significant disposition of assets to one or more private_foundations other than transfers for full and adequate_consideration or distributions out of current income the term significant disposition of assets shall include any disposition for a taxable_year where the aggregate of the dispositions to one or more private_foundations is twenty-five percent or more of the fair_market_value of the net assets of the foundation at the beginning of the taxably year sec_1_507-3 states that unless a private_foundation voluntarily gives notice pursuant to sec_507 a transfer of assets described in sec_507 will not constitute a termination of the transferor’s private_foundation_status under sec_507 sec_53_4946-1 provides that for purposes of sec_4941 only the term disqualified persons’ shall not include any organization which is described in sec_501 other than organizations described in sec_509 sec_53 e provides that for a split-interest trust the provision of sec_507 will not apply by reason of any payment to a beneficiary that is directed by the terms of the governing instrument by reason of or following the expiration of the last remaining charitable interest sec_53 e example provides that if h creates a_trust under which x a 501_c_3_organization receives money annually for a period of years remainder to s h’s son when the final payment to x has been made at the end of the year period in accordance with the terms of the trust the provisions of sec_4947 will cease to apply to the trust but the final payment to x will not be considered a termination of the trust’s private_foundation_status within the meaning of sec_507 revenue rung 2002_1_cb_241 provides a transfer of assets described in sec_507 does not constitute a termination of the transferor's private_foundation_status under sec_507 unless the transferor voluntarily gives notice pursuant to sec_507 see sec_1_507-1 and sec_1_507-3 the transferor foundation is not required to provide such notice in situation p’s dissolution under state law has no effect on whether p has terminated its private_foundation_status for federal tax purposes the ruling also goes on to state that the distributions are made to c organizations which cannot be disqualified persons for sec_4941 purposes therefore there is no self-dealing the ruling also commented on sec_4945 stating that because each transferor foundation transfers all of its assets to one or more private_foundations effectively controlled by the same persons that effectively control the transferor the transferee foundations are treated as though they were the transferor for purposes of sec_4945 see sec_1_507-3 because the transferee foundations are treated as the transferor foundation rather than as recipients of expenditure_responsibility grants there are no expenditure_responsibility requirements that must be exercised under sec_4945 or h with respect to the transfers to the transferee foundations see sec_1 a i and iii example analysis ruling the distribution of your remaining assets to foundation will not terminate your status as a private_foundation under sec_507 and cause you to be subject_to a termination_tax under sec_507 because you have represented that you are a charitable_lead_unitrust which has amounts in trust for which a deduction was allowed under sec_2055 and are a nonexempt split-interest trust within the meaning of sec_4947 sec_507 relating to termination of private_foundation_status sec_508 relating to governing instruments to the extent applicable to a_trust described in this paragraph sec_4941 relating to taxes on self-dealing sec_4943 relating to taxes on excess_business_holdings except as provided in subsection b sec_4944 relating to investments which jeopardize charitable purpose except as provided in subsection b and sec_4945 relating to taxes on taxable_expenditures shall apply as if you were a private_foundation sec_507 applies to a significant disposition of assets by one private_foundation to one or more private_foundations other than transfers for full and adequate_consideration or distributions out of current income see sec_1_507-3 sec_1_507-3 provides that a transfer of all of a private foundation’s assets to one or more private_foundations constitutes a significant disposition here you are seeking to distribute all of your remaining funds to foundation prior to the end of your annuity term and for no compensation from foundation therefore this qualifies as a sec_507 distribution a transfer of assets described in sec_507 does not constitute a termination of the transferor's private_foundation_status under sec_507 unless the transferor voluntarily gives notice pursuant to sec_507 see sec_1 b and d pursuant to sec_1_507-4 a private_foundation that makes a transfer described in sec_507 is not subject_to the tax imposed under sec_507 with respect to such transfer however sec_507 states that the status of any organization as a private_foundation shall be terminated only if the organization notifies the secretary of its intent to accomplish such termination or with respect to the organization there have been either willful repeated acts or failures to act or committed a willful and flagrant act or failure to act which gives rise to tax under chapter you have represented that you have not and will not notify the secretary of your intent to terminate your status as a private_foundation and that you have not ever either committed willful repeated acts or failures to act or committed a willful and flagrant act or failure to act which gives rise to tax under chapter therefore your proposed transfer of all your assets to foundation under sec_507 will not terminate your private_foundation_status under sec_507 and does not result in a termination_tax imposed by sec_507 additionally sec_53 e provides that for a split-interest trust the provision of sec_507 will not apply by reason of any payment to a beneficiary that is directed by the terms of the governing instrument by reason of or following the expiration of the last remaining charitable interest this rule is further clarified by example in sec_53 e example which discusses a scenario where h creates a_trust under which x a 501_c_3_organization receives money annually for a period of years with the remainder going to s h’s son when the final payment to x has been made at the end of the year period in accordance with the terms of the trust the provisions of sec_4947 will cease to apply to the trust but the final payment to x will not be considered a termination of the trust’s private_foundation_status within the meaning of sec_507 you have petitioned a judge to alter the language in your governing instrument to provide for a final payment to foundation consisting of all of the remaining funds this payment will constitute the last remaining charitable interest in your trust therefore the provision of sec_507 will not apply without further notice by you to the commissioner ruling the distribution of your remaining assets to foundation will not be an act of self- dealing under sec_4941 sec_4941 imposes a tax on each act of self-dealing between a disqualified_person and a private_foundation under sec_53_4946-1 a disqualified_person does not include organizations that are exempt from sec_501 other than organizations also described in sec_509 rev_rul supra also discusses the distribution from a private_foundation to another sec_501 organization stating that such a distribution is not subject_to sec_4941 due to the exception for sec_501 organizations here your final distribution will be entirely to foundation a private_foundation described in sec_501 given that the recipient of your distribution is described in sec_501 such distribution will not be an act of self-dealing ruling sec_3 and the distribution of your remaining assets to foundation will not be a taxable_expenditure with respect to which you need to exercise expenditure_responsibility under sec_4945 and foundation will not be required to exercise expenditure_responsibility with respect to outstanding grants made to itself with a sec_507 transfer if all of the assets of a private_foundation are transferred to another private_foundation effectively controlled by the same person s the transferee foundation will be treated as if it were the transferor organization and would be subject_to any liabilities not paid_by the transferor sec_1_507-3 and i since the transferee organization in such a transaction is treated as the transferor there are no expenditure_responsibility requirements with respect to such transactions sec_1_507-3 example revrul_2002_28 supra you have represented that there is effective_control since your son both appoints your trustee and determines the board_of directors for foundation given your representations of effective_control foundation will be treated as you for sec_4945 purposes since foundation is treated as you there are no expenditure_responsibility requirements that must be exercised under sec_4945 and h with respect to your transfer of assets to foundation ruling you will be allowed a deduction under sec_642 for the taxable_year in which the assets are distributed to foundation in an amount equal to the annuity_payment that otherwise would have been payable for the taxable_year prorated on a daily basis if the year of distribution is a short taxable_year to the extent paid from your gross_income based solely on the facts and representations submitted we conclude that you should be allowed a deduction under sec_642 for the year in which your assets are distributed to foundation in an amount equal to the annuity_payment that would have been payable for that taxable_year pursuant to the terms of the trust agreement to the extent paid from your gross_income except as specifically set forth above we express no opinion as to the tax consequences of the transaction described above under the cited provisions of the code or under any other provisions of the code in particular we express no opinion as to whether or not the foundation is described in sec_170 sec_2055 and sec_2522 and whether the foundation is a private_foundation within the meaning of sec_509 and is not described in sec_509 rulings the distribution of your remaining assets to foundation will not terminate your status as a private_foundation under sec_507 and cause you to be subject_to a termination_tax under sec_507 the distribution of your remaining assets to foundation will not be an act of self-dealing under sec_4941 the distribution of your remaining assets to foundation will not be a taxable_expenditure with respect to which you need to exercise expenditure_responsibility under sec_4945 foundation will not be required to exercise expenditure_responsibility with respect to outstanding grants made to itself you will be allowed a deduction under sec_642 for the taxable_year in which the assets are distributed to foundation in an amount equal to the annuity_payment that otherwise would have been payable for the taxable_year prorated on a daily basis if the year of distribution is a short taxable_year to the extent paid from your gross_income this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative lf you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records ronald shoemaker manager exempt_organizations technical group sincerely notice enclosure


t c summary opinion united_states tax_court nada nahhas petitioner v commissioner of internal revenue respondent docket no 3235-05s filed date glenn seiden for petitioner thomas d yang for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a dollar_figure deficiency in petitioner’ sec_2002 federal_income_tax respondent also determined an addition_to_tax under sec_6651 and an accuracy-related_penalty under sec_6662 in the amounts of dollar_figure and dollar_figure respectively the issues before the court are whether dollar_figure is includable in petitioner’s income as alimony whether petitioner failed to report dollar_figure in interest_income whether petitioner is liable for the alternative_minimum_tax whether petitioner is liable for the addition_to_tax under sec_6651 for failure to timely file and whether petitioner is liable for the accuracy-related_penalty background some of the facts are stipulated and are so found at the time the petition in this case was filed petitioner resided in orland park illinois petitioner and mohammed m nahhas mr nahhas were married on date three children were born in the marriage nn respondent has determined that petitioner is liable for alternative_minimum_tax for her taxable_year this issue is computational in nature and will be addressed in a rule computation mn and mn on or about date mr nahhas moved out of the marital residence in early petitioner filed a petition with the circuit_court of cook county illinois domestic relations division circuit_court to commence divorce proceedings against mr nahhas on date the circuit_court entered a temporary order for maintenance and support the order provides in pertinent part without prejudice mohammed shall pay to nada as and for unallocated maintenance support the amount of dollar_figurenn month payable on 15th and 30th each month 1st payment due on date the circuit_court entered an agreed order and stated that the temporary order would remain in effect until further order of the court on date the court entered an order amending the temporary order by reducing the unallocated maintenance and support obligation of mr nahhas from dollar_figure per month to dollar_figure per month effective date the reduction was based on changes in an affidavit of expenses provided by petitioner and an affidavit of monthly income provided by mr nahhas on date the circuit_court entered a judgment for dissolution of marriage between petitioner and mr nahhas the court uses only the initials of the minor children the judgment provided in the findings section the court finds this is a case that utilizing the factors in sec_504 for an award of permanent maintenance is warranted the court ordered unallocated support shall be in the amount of dollar_figure per month the payment of unallocated maintenance and support from the husband to the wife shall be reviewed when the youngest child attains the age of years old the maintenance portion of unallocated maintenance and support shall be permanent further the ordered adjudged and decreed part of the order provided c that mr nahhas shall pay to petitioner the sum of dollar_figure per month as and for the unallocated support of his family it is the intention of the court that such sum shall be taxable to petitioner and deductible by mr nahhas further the duration of such award shall be until the minor child reaches years of age that mr nahhas is barred from any claim for maintenance from petitioner on line of her federal_income_tax return petitioner reported income of dollar_figure as alimony received but lined out this figure and reported only dollar_figure of schedule c profit or loss from business income discussion the commissioner’s determinations are presumed correct and taxpayers generally bear the burden of proving otherwise welch apparently the dollar_figure amount represents monthly payments of dollar_figure or bi-monthly payments of dollar_figure however if one uses the date effective payment_date as provided by the temporary order monthly or bimonthly payments were made in totaling dollar_figure v helvering 290_us_111 petitioner did not argue that sec_7491 is applicable in this case nor did he establish that the burden_of_proof should shift to the respondent moreover the issues involved in this case alimony and the alternative_minimum_tax are legal issues and should be decided on the record without regard to the burden_of_proof petitioner however bears the burden of proving that respondent’s determination in the notice_of_deficiency is erroneous see rule a welch v helvering supra pincite an individual may deduct from his or her gross_income the payments he or she made during a taxable_year for alimony or separate_maintenance sec_215 conversely the recipient of alimony or separate_maintenance payments must include those payments when calculating his or her gross_income sec_61 sec_71 defines alimony_or_separate_maintenance_payment as any payment in cash if a such payment is received by or on behalf of a spouse under_a_divorce_or_separation_instrument b the divorce_or_separation_instrument does not designate such payment as a payment which is not includable in gross_income under this section and not allowable as a deduction under sec_215 c in the case of an individual legally_separated from his spouse under a decree of divorce or of separate_maintenance the payee spouse and the payor spouse are not members of the same household at the time such payment is made and d there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment in cash or property as a substitute for such payments after the death of the payee spouse the test under sec_71 is conjunctive a payment is deductible as alimony only if all four requirements of sec_71 are present see jaffe v commissioner tcmemo_1999_196 sec_71 defines a divorce_or_separation_instrument as a a decree of divorce or separate_maintenance or a written instrument incident to such a decree b a written_separation_agreement or c a decree not described in a subparagraph a requiring a spouse to make payments for the support or maintenance of the other spouse sec_71 provides that the general inclusion rule_of sec_71 for alimony and separate_maintenance payments in gross_income does not apply to any payment which the terms of the divorce_or_separation_instrument fix in terms of an amount of money or a part of the payment as a sum which is payable for the support of the children of the payor spouse i characterization of monthly payments petitioner argues that none of the monthly payments she received in as unallocated maintenance and support from mr nahhas should be included in her gross_income since the amounts are properly characterized as nontaxable child_support respondent disagrees and contends that the payments made in to petitioner qualified as alimony taxable to petitioner as the recipient under sec_71 in particular respondent notes that the temporary order did not expressly provide that the payments were not includable in petitioner’s gross_income and not allowable as a deduction by mr nahhas under sec_71 moreover respondent points out that the temporary order did not fix any portion of the payment as payable for the support of the children as required by sec_71 for child_support we agree with respondent it is clear from the record that the payments satisfy the requirements of subparagraphs a and c of sec_71 petitioner received the payments under the terms of the temporary order and petitioner and mr nahhas were not members of the same household in the court now considers sec_71 which provides that a payment will not be alimony if the divorce_or_separation_instrument designates the payment as not includable in gross_income and not allowable as an alimony deduction the designation in the divorce_or_separation_instrument does not need to specifically refer to sec_71 or sec_215 112_tc_317 affd without published opinion sub nom schutter v commissioner 242_f3d_390 10th cir the divorce_or_separation_instrument however must contain a clear explicit and express direction that the payments are not to be treated as alimony 125_f3d_551 7th cir affg tcmemo_1995_554 the court declines petitioner’s invitation to go beyond the language of the temporary order the plain language of sec_71 provides that when under the divorce_or_separation_instrument the payment by one spouse to the other spouse is not includable in the gross_income of the receiving spouse and is not allowable as a deduction to the payor spouse the payments do not constitute alimony in this case the language contained in the temporary order does not expressly state that the payments are not includable in petitioner’s gross_income and not deductible to mr nahhas and sec_71 therefore is satisfied next the court considers the requirements of sec_71 which requires as a condition to qualify as alimony that the obligation to make payments must terminate upon the death of the former spouse if the payor is liable for even one otherwise qualifying payment after the recipient’s death none of the related payments required before death will be alimony sec_1_71-1t q a-13 temporary income_tax regs the court observes that unlike the temporary order the final judgment of dissolution contains express language providing that the payments would be taxable to petitioner and deductible by mr nahhas fed reg date whether such obligation exists may be determined by the terms of the applicable instrument or if the instrument is silent on the matter by looking to state law 309_us_78 kean v commissioner tcmemo_2003_163 affd 407_f3d_186 3d cir gilbert v commissioner tcmemo_2003_92 affd sub nom 94_fedappx_126 3d cir thus to qualify as alimony the obligation of mr nahhas to make the payments must terminate at the death of petitioner in deciding whether the payments were alimony the court looks to the language of the temporary order to ascertain whether it contains a termination upon death condition and if it does not whether state law supplies such a condition 102_f3d_842 6th cir affg tcmemo_1995_183 see gonzales v commissioner tcmemo_1999_ see also cunningham v commissioner tcmemo_1994_474 state law determines certain rights of the parties and federal_law determines the federal_income_tax consequences of those rights morgan v commissioner supra pincite 281_us_111 in this instance the temporary order does not explicitly order that the payments terminate upon petitioner’s death and thus the court looks to illinois law to determine whether the payments would terminate by operation of illinois law hoover v commissioner supra pincite neither party has addressed the application of sec_71 further neither party cites nor are we aware of any illinois cases addressing the issue of whether absent an agreement of the parties or a directive in the divorce decree an obligation to pay unallocated maintenance and support terminates upon the death of the payee spouse the court concludes that the payments qualify as alimony under sec_71 section c of the illinois dissolution of marriage act provides the obligation to pay future maintenance is terminated upon the death remarriage or cohabitation of the recipient unless otherwise agreed by the parties in a written_agreement set forth in the judgment or otherwise approved by the court ill comp stat ann c west thus under illinois law there is an automatic termination of the unallocated maintenance portion of the payments see id contrary to petitioner’s argument that the payments are nontaxable child_support the temporary order provided for monthly or bimonthly payments in the total amount of dollar_figure per month for unallocated maintenance and support the temporary order does not contain a clear explicit and express direction that the payments are not includable in petitioner’s gross_income and are not allowable as a deduction to mr nahhas richardson v commissioner supra pincite petitioner argues that the payments were always intended to be nontaxable child_support to support her contention petitioner presented testimony at trial that the dollar amounts provided for in the temporary order were based on guidelines set forth under state law for child_support in addition petitioner’s attorney during the marital dissolution proceedings testified at length that he intended that the payments under the temporary order to be for child_support and hence nontaxable to petitioner the court concludes that the payments do not qualify as child_support under sec_71 thus petitioner received alimony under the temporary order in in the amount of dollar_figure dollar_figure per month x months ii interest_income generally gross_income means all income from whatever source derived including interest_income sec_61 during respondent received information from third-party payers that petitioner received interest_income from three petitioner’s attorney evidently drafted the temporary order after a hearing and at the direction of the circuit_court upon review the circuit_court adopted the temporary order separate bank accounts the bank accounts and interest_income were harris bank argo heritage community bank citibank f s b dollar_figure dollar_figure dollar_figure at trial petitioner’s attorney during the marital dissolution proceedings credibly testified that an escrow account was opened that contained funds from both petitioner and mr nahhas ownership of the funds in the escrow account was transferred to petitioner in under the date judgment for final dissolution petitioner confirmed that the escrow account was located at the harris community bank petitioner however did not address the ownership of either the heritage or citibank bank accounts in it is a general_rule of taxation that income is not constructively received if a taxpayer’s control of its receipt is subject_to substantial limitations or restrictions see sec_1_451-2 income_tax regs moreover it is well established that gross_income generally refers to assets over which the taxpayer can exercise dominion and control 98_tc_165 thus when amounts are deposited in an escrow account beyond that taxpayer’s reach they generally are not includable in his gross_income see eg 723_f2d_138 1st cir no receipt where escrow arrangement was bona_fide deferred payment agreement between buyer and seller revg tcmemo_1982_734 based on the record the court finds that petitioner retained an interest in the heritage and citibank bank accounts in and therefore such income is includable in her gross_income the court further finds that the interest_income from the escrow account at the harris community bank is not includable in petitioner’s gross_income for iii sec_6651 addition_to_tax sec_6651 imposes an addition_to_tax equal to percent of the amount_required_to_be_shown_as_tax on a return for each month or fraction thereof past the prescribed due_date in which the return is not filed not to exceed a total of percent generally the amount of the addition_to_tax under sec_6651 is reduced by the amount of any addition_to_tax imposed under sec_6651 which relates to failure to pay the tax shown on a return by the prescribed date with respect to each month in which both are otherwise applicable sec_6651 a taxpayer may avoid the addition_to_tax under sec_6651 if he establishes that the failure_to_file is due to reasonable_cause and not due to willful neglect reasonable_cause requires the taxpayer to demonstrate that he exercised ordinary business care and prudence and was nonetheless unable to file a return within the prescribed time 469_us_241 w illful neglect means a conscious intentional failure or reckless indifference id pincite although respondent bears the burden of production with respect to this addition_to_tax petitioner ultimately bears the burden_of_proof sec_7491 rule a 116_tc_438 in the absence of an extension the last date for petitioner to file her federal_income_tax return for taxable_year was date instead petitioner filed her return on date petitioner did not attempt to explain the failure_to_file and provided no indication that she had reasonable_cause therefor respondent has therefore satisfied his burden of production by establishing that petitioner filed her return late we sustain respondent’s determination that petitioner is liable for the addition_to_tax under sec_6651 iv accuracy-related_penalty the last issue for decision is whether petitioner is liable for an accuracy-related_penalty pursuant to sec_6662 for the taxable_year a taxpayer is liable for an accuracy- related penalty of percent of any part of an underpayment attributable to negligence or disregard of rules or regulations sec_6662 and b the term negligence includes any failure to make a reasonable attempt to comply with the provisions of the internal revenue laws or to exercise ordinary and reasonable care in the preparation of a tax_return sec_6662 gowni v commissioner tcmemo_2004_154 the term disregard includes any careless reckless or intentional disregard sec_6662 sec_1_6662-3 income_tax regs the accuracy-related_penalty does not apply to any part of an underpayment for which there was reasonable_cause and with respect to which the taxpayer acted in good_faith sec_6664 sec_1_6664-4 income_tax regs the determination of whether a taxpayer acted with reasonable_cause and in good_faith is made on a case-by-case basis taking into account all pertinent facts and circumstances sec_1_6664-4 income_tax regs generally the most important factor is the extent of the taxpayer’s effort to assess the taxpayer’s proper tax_liability id here the income_tax return in question was prepared by someone from abbasi accounting and tax services we note that on line of the income_tax return for reporting alimony received the amount of dollar_figure originally reported was lined-out as previously noted this amount represents dollar_figure received for months in petitioner reported only dollar_figure of schedule c income evidently either the tax_return_preparer or petitioner recognized that the payments petitioner received could be alimony sec_7491 places on the commissioner the burden of producing evidence showing that it is appropriate to impose any penalty or addition_to_tax once the commissioner meets that burden the taxpayer must produce evidence sufficient to show that commissioner’s determination is incorrect higbee v commissioner supra pincite the commissioner need not produce evidence relating to defenses such as reasonable_cause id pincite petitioner does not contest receiving the payments from mr nahhas petitioner’s position that the amounts were nontaxable child_support clearly conflicts with the designation of the payments as unallocated maintenance and support in the temporary order petitioner also did not report interest_income received from the heritage and citibank bank accounts accordingly we conclude that respondent has met his burden of production for the ground of negligence by showing that petitioner failed to exercise ordinary and reasonable care in preparing her tax_return see sec_6662 gowni v commissioner supra with respect to the inclusion of the payments in her gross_income petitioner testified that she relied on the representation made by the attorney who represented her in the marital dissolution proceeding that the amounts were not taxable reliance on an attorney may relieve a taxpayer from the accuracy- related penalty where the taxpayer’s reliance is reasonable stolz v commissioner tcmemo_1999_404 however in this case petitioner’s attorney did not draft the temporary order to provide that the amount for support or temporary maintenance was not includable in her income and therefore these facts do not support reasonable_cause petitioner’s reliance on the divorce attorney also does not constitute reasonable_cause as she failed to show that the attorney was skilled or knowledgeable in the tax consequences of the divorce proceeding therefore we sustain respondent’s determination of the penalty under sec_6662 and b for taxable_year reviewed and adopted as the report of the small_tax_case division decision will be entered under rule


internal_revenue_service index nos number release date cc dom it a plr-104599-99 attention date ein dear this is in reference to a form_1128 application to adopt change or retain a tax_year submitted on behalf of the above- named taxpayer requesting permission to change its accounting_period for federal_income_tax purposes from a taxable_year ending to a taxable_year ending effective the taxpayer has requested that the form_1128 be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations the taxpayer's form_1128 requesting a change in accounting_period to a tax_year ending was due on or before the information furnished indicates that the application_for the change in accounting_period was filed late because of an oversight on the part of the taxpayer however the form was filed within days of the due_date sec_1_442-1 of the income_tax regulations provides that in order to secure the commissioner's consent to a change in accounting_period the taxpayer must file an application on form_1128 with the commissioner on or before the 15th day of the second calendar month following the close of the short_period sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government based on the facts and information submitted and the representations made it is held that the taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government accordingly the requirements of the regulations for the granting of relief have been satisfied in this case and taxpayer’s late filed form_1128 requesting permission to change to a tax_year ending effective for the short_period of is considered timely filed the ruling contained in this letter is based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as part of an examination process this ruling addresses the granting of sec_301_9100-3 relief only no opinion is expressed regarding the tax treatment of the instant transaction under the provisions of any other sections of the code or regulations that may be applicable thereto or regarding the tax treatment of any conditions existing at the time of or effects resulting from the instant transaction specifically no opinion is expressed as to whether the taxpayer is permitted under the code and applicable regulations to change to the tax_year requested in the subject form_1128 in accordance with the provisions of a power_of_attorney currently on file we are sending a copy of this letter_ruling to the taxpayer's authorized representatives this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel income_tax and accounting s irwin a leib by irwin a leib deputy assistant chief_counsel enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court edward k and jeri l glover petitioners v commissioner of internal revenue respondent docket no 17042-09s filed date ellin vicki palmer for petitioners halvor r melom for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the years at issue and rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies in petitioners’ federal income taxes of dollar_figure for and dollar_figure for the issue for decision is the location of edward k glover’s petitioner’s tax_home with respect to certain unreimbursed employee_expenses for and this case was submitted on a stipulation of facts and a supplemental stipulation of facts the stipulated facts are so found the stipulation of facts the supplemental stipulation of facts and the attached exhibits are incorporated herein by reference petitioners resided in missouri when the petition was filed background during the years at issue petitioners resided in jackson missouri jeri l glover was employed by southeast missouri hospital association in cape girardeau petitioner was employed by reinauer transportation cos l l c reinauer which is headquartered in staten island new york and maintains an office 1respondent determined that petitioners had unreported interest_income of dollar_figure for petitioners failed to address the issue in either their pretrial memorandum or the stipulation of facts and supplemental stipulation of facts the court considers petitioners to have conceded the issue see 100_tc_367 96_tc_226 91_tc_524 ndollar_figure in east boston massachusetts petitioner was employed by reinauer as a merchant mariner aboard certain tugboats and barges in and reinauer is in the business of transporting petroleum and chemical products by tug and barge along the eastern seaboard of north america petitioner generally travels to the new york city area to pick up tugboat and barge combinations that are used to load and deliver petroleum or chemical products or both petitioner’s pay begins when his vessel leaves the local dock the collective bargaining agreement cba between reinauer and the union to which petitioner belonged for the years at issue states that reinauer will use its employees to perform work in the area of the port of new york and vicinity and any regular coastwise run having as one of its terminal points a point in or north of norfolk virginia in addition the cba provides for reimbursement of employee travel_expenses if a the employee is required to go from one vessel to another b not more than once a month the employee is given time off and must travel between his vessel and a common carrier or c not more than once a month the employee travels round trip between his vessel and its home port or if less expensive another city in petitioner worked on the east coast of the united_states from maine through virginia and in he worked on the east coast from new hampshire through florida petitioner took voyages in of which originated in or around new york city he disembarked from those trips five times in the new york city area in petitioner voyaged times embarking from the new york city area times and disembarking there times petitioner paid various expenses to travel between his residence and the terminals from which he boarded and disembarked from the tugboats and barges on which he worked petitioner paid a vehicle expenses of dollar_figure for b miscellaneous parking fees tolls and transportation_expenses of dollar_figure in and dollar_figure in and c travel_expenses while away_from_home_overnight of dollar_figure for and dollar_figure for the parties stipulated various receipts as substantiation for travel_expenses and a summary table of the dates and locations of petitioner’s voyages in the years at issue in addition to the summary stipulated by the parties they stipulated copies of petitioner’s u s sea time employee schedule employee schedule that lists for petitioner the vessel and date for each of his voyages in both years the 2petitioners presented as substantiation a receipt from the baymont inns and suites in lexington kentucky for a stay from june to but do not explain how it relates to petitioner’s employment parties also stipulated copies of port listings for each of the vessels on which he served showing the loading terminal loading date unloading terminal and unloading date for each vessel an examination of petitioner’s documentation raises some questions that are not answered by other evidence in the record petitioner presented receipts that show the purchase of a southwest airlines ticket for a p m flight from st louis missouri to orlando florida on date and an american airlines ticket for a flight from st louis missouri to new york new york pincite p m on the same date the conflicting receipts are unexplained although other stipulated evidence indicates that petitioner went to orlando for a port canaveral embarkation on date petitioner presented an airtran airways receipt for a p m flight from new york to newport news virginia on date while other stipulated evidence indicates that he arrived in new york on that date in preparation for an embarkation on date petitioner provided copies of ticket stubs showing that on date pincite p m he left norfolk virginia on southwest airlines flew to baltimore-washington international airport then to chicago-midway airport and finally to st louis international airport petitioner also presented a copy of a receipt for an american airlines flight leaving new york at noon and arriving in st louis pincite p m on the same date date the employee schedule shows vessel rtc 120’s having a voyage beginning on date and ending on date the port listing shows vessel rtc loading at a terminal in new jersey on october and unloading in connecticut on date loading in virginia on october and unloading in massachusetts on date the summary table indicates that petitioner disembarked in manhattan on date and arrived in jackson missouri on date the record does not explain why petitioner’s documents show him leaving virginia for st louis and leaving manhattan for st louis on october the summary shows him disembarking in manhattan on the 13th and the port listing shows his vessel loading in virginia on the 13th in any event almost all of petitioner’s substantiated flights were between st louis international airport and la guardia airport in new york city or newark liberty international airport burden_of_proof discussion the commissioner’s determinations are presumed correct and generally taxpayers bear the burden of proving otherwise rule a 290_us_111 in some cases the burden_of_proof with respect to relevant factual issues may shift to the commissioner under sec_7491 petitioners argue that the provisions of sec_7491 apply and that the burden_of_proof is on respondent because petitioners have not met all the requirements of sec_7491 the burden_of_proof does not shift to respondent tax deductions are a matter of legislative grace and the taxpayer bears the burden of proving entitlement to the deductions claimed rule a 503_us_79 sec_162 expenses sec_162 generally allows a deduction for ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business an expense is considered ordinary if commonly or frequently incurred in the trade_or_business of the taxpayer 308_us_488 an expense is necessary if it is appropriate and helpful in carrying on a taxpayer’s trade_or_business 320_us_467 welch v helvering supra pincite services performed by an employee constitute a trade_or_business for this purpose 91_tc_352 sec_162 allows a taxpayer to deduct traveling expenses including amounts expended for meals_and_lodging if such expenses are ordinary and necessary incurred while away from home and incurred in the pursuit of a trade_or_business 326_us_465 the exigencies of business rather than the personal conveniences and necessities of the traveler must be the motivating factors id pincite this court has generally defined the word home or tax_home as used in sec_162 to mean the vicinity of a taxpayer’s principal_place_of_business 74_tc_578 72_tc_190 affd 662_f2d_253 4th cir 49_tc_557 under this definition commuting expenses are not deductible and are considered personal expenses 60_tc_834 see sec_262 on the other hand if a taxpayer accepts temporary employment outside the vicinity of his principal place of residence his travel_expenses are generally deductible because it would be unreasonable for him to move his residence for temporary employment ireland v commissioner tcmemo_1979_ citing 55_tc_783 if a taxpayer does not have a principal_place_of_business his personal_residence will be considered his tax_home 115_tc_210 citing 69_tc_920 54_tc_663 and 12_tc_20 a taxpayer must have a tax_home from which to be away to be entitled to a deduction under sec_162 henderson v commissioner tcmemo_1995_559 affd 143_f3d_497 9th cir married couples that both work and file a joint tax_return may have separate tax homes allen v commissioner tcmemo_2009_102 see 20_tc_285 affd 213_f2d_43 5th cir chwalow v commissioner tcmemo_1971_185 affd 470_f2d_475 3d cir in order to decide what expenses petitioners are entitled to deduct the court must first decide the location of petitioner’s tax_home the determination of a taxpayer’s tax_home is a question of fact to be decided on the entire record nicholls v commissioner tcmemo_1995_291 citing 608_f2d_1269 9th cir affg in part and revg in part 67_tc_426 petitioners argue that petitioner’s employment is in the transportation industry and on that basis alone he is entitled to treat his personal_residence as his tax_home petitioners rely heavily on the cases of johnson v commissioner supra pincite and westling v commissioner tcmemo_2000_289 in johnson the taxpayer husband was a merchant seaman who lived in freeland washington and was the captain of a vessel that sailed worldwide the primary office of the taxpayer husband’s employer was in jacksonville florida johnson v commissioner supra pincite the taxpayer husband and his crew flew to and from whatever port around the world in which the vessel was docked to begin and end each work shift id pincite the court found that the taxpayer husband had no principal_place_of_business and that his personal_residence was his tax_home id pincite to support its finding the court noted that the taxpayer husband’s family did not travel with him and that there was no reason to second guess the taxpayer husband’s decision to maintain his principal_residence in washington state instead of florida or one of the many cities to which he traveled id pincite in westling v commissioner supra the court discussed not the taxpayer’s tax_home but whether he was entitled to use the federal per_diem rates to determine his incidental_expenses for his employment as a merchant seaman the primary office of the taxpayer’s employer was in juneau alaska and the taxpayer piloted a tugboat to various ports in and around southeast alaska id the taxpayer also began and ended his shifts on the tugboat at several different ports id although there was no discussion of the taxpayer’s tax_home the court found that the taxpayer was entitled to deduct his incidental_expenses using the federal per_diem rate because the taxpayer’s meals_and_lodging were supplied by his employer at no charge when he was working id respondent takes the position that petitioner’s tax_home was in the vicinity of new york city and that he maintained his home in jackson for personal reasons the court agrees with respondent petitioner’s employment situation is factually different from those of the taxpayers in johnson and westling the primary office of petitioner’s employer was in staten island a borough of new york city almost all of petitioner’s embarkations were from the new york city area and most of his disembarkations were there too in addition the cba provided for reimbursement of employee travel_expenses if petitioner had to go from one vessel to another was given time off or had to travel between his vessel and its home port or if less expensive another city petitioner’s situation is more analogous to that of the taxpayers in swicegood v commissioner tcmemo_1989_467 and in dady v commissioner tcmemo_1981_440 affd without published opinion 696_f2d_1006 11th cir in swicegood the taxpayer was a pilot for an international airline that was headquartered in new york city he maintained residences in hollywood florida where his wife and daughter lived and in freeport bahamas which i sec_84 nautical miles from hollywood 3petitioners offered no evidence of the home ports of the four vessels on which petitioner worked in the subject years and the court infers from the record that the home port of the vessels was in the new york city area many but not all of the taxpayer’s flights originated or terminated in new york city the taxpayer could have flown on his own to the beginning or terminating airport of a particular flight or he could have relied on his airline to provide transportation between new york city and the other airport from which he would depart if he chose the latter he would be responsible for transportation between his home and new york city he argued as petitioner does here that he did not have a regular place of employment and that therefore his residence was his tax_home the court pointed out that new york city was his base station as well as being the headquarters of his employer his employer took responsibility to get him between new york city and any other airport where his flight would begin or end upon that basis and the taxpayer’s significant work ties of his flights began and or ended in new york city the court found that his principal_place_of_business was new york city in dady the taxpayer was a tugboat captain who resided in lauderhill florida while the tugboat’s home port was in the new york city area the taxpayer might have reported to or been relieved from duty at other east coast locations or in puerto rico the taxpayer flew between his residence and the various ports his employer was required by union contract to pay only half the expense of one round-trip ticket a month that he actually incurred in travel originating in new york the taxpayer offered no evidence of where he had boarded or disembarked from the boat for a crew change or whether he had boarded or disembarked more frequently in new york than somewhere else the court held that the taxpayer had not shown that his tax_home was other than new york unlike the taxpayer’s situation in dady the record here shows that almost all of petitioner’s embarkations were from the new york city area and most of his disembarkations were there as well on the basis of the stipulated facts and the inferences reasonably to be drawn from them the court finds that petitioner’s tax_home in and was in the new york city area petitioners are not entitled to deduct petitioner’s unreimbursed employee_expenses conclusion we have considered all of the parties’ arguments and to the extent not addressed herein we conclude that the arguments are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number ---------------------------------- ---------------------- ------------------------------- ----------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------------------------------- ------------------------------------ telephone number --------------------- refer reply to cc psi b04 plr-136477-16 date february legend decedent spouse date date dear ------ -------- ------------------------------------------------ -------------------- ------------------------- -------------------- this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code a portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are summarized as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 to provide for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election spouse served as executor of decedent’s estate spouse represents that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of decedent’s death and that during his lifetime decedent made no taxable_gifts as plr-136477-16 executor spouse requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 plr-136477-16 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i 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 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means 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_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 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 that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 plr-136477-16 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date as executor spouse represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives except as expressly provided herein we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void plr-136477-16 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries melissa c liquerman by melissa c liquerman chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc