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 eoeg teb presp-150126-06 date date dear ----------------- this letter is in response to your application_for an allocation of authority to issue dollar_figure------- ------------------in clean renewable energy bonds crebs under sec_54 of the internal_revenue_code the code pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the projects described in appendix a attached hereto are qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------------------------- ------------------------------ the issuer a qualified issuer under sec_54 to issue up to dollar_figure-- ------------------of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the projects described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met sec_54 of the code imposes a limitation of dollar_figure on the amount of crebs which may be issued to finance qualified projects the limitation sec_54 provides that the limitation is to be allocated by the secretary of treasury in such manner as the secretary deems appropriate except that no more than presp-150126-06 dollar_figure of the limitation may be allocated to finance qualified projects of qualified borrowers which are governmental bodies section of notice_2005_98 2005_52_irb_1211 provides that the limitation will be allocated among qualified projects for which a share of such limitation has been requested beginning with the project s requesting the smallest share in dollar amount and continuing with the project s requesting the next-smallest share until the total limitation has been exhausted however in the event that dollar_figure has been allocated to qualified projects of qualified borrowers that are governmental bodies the remaining shares of the limitation will be allocated under the methodology described in the previous sentence only to qualified projects of qualified borrowers that are not governmental bodies for purposes of allocating the limitation among projects all qualified projects located at the same site and owned by the same qualified_borrower are treated as a single project and each project is treated as requesting a single allocation an allocation of shares of the limitation cannot be made with respect to the projects owned by the borrowers listed in appendix b because such borrowers are governmental bodies and dollar_figure has already been allocated to applications requesting a smaller share of the limitation to finance qualified projects owned by qualified borrowers that are governmental bodies we appreciate your submission of the application_for our consideration and encourage you to continue to pursue your plans for constructing clean renewable energy projects if you have any questions with respect to this allocation please contact --------------------- ---------------------------------------- of the office of division counsel associate chief_counsel tax-exempt and government entities on --------------------- not a toll-free call 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 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in the appendices attached hereto is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above 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 form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation presp-150126-06 the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation 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 application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch amount allocated dollar_figure----------- dollar_figure-------------- dollar_figure-------------- dollar_figure-------------- dollar_figure-------------- dollar_figure-------------- dollar_figure--------------- presp-150126-06 borrower name appendix a project type project location ---------------------------------- ---------------------------------- -------------- ---------------------------------- ---------------------------------- -------------- ---------------------------------- ---------------------------------- -------------- ---------------------------------- ---------------------------------- -------------- ---------------------------------- ---------------------------------- -------------- ---------------------------------- ---------------------------------- -------------- total solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility solar_energy_facility -------------------------------- ------------------------ -------------------------------- ----------------- -------------------------------- ----------------------------- ----------------- ---------------------------- ------------------ ---------------------------- -------------------- ------------------------------ presp-150126-06 borrower name --------------------------------- --------------------------------- -------------- --------------------------------- --------------------------------- -------------- --------------------------------- --------------------------------- -------------- total ---------------------------------- appendix b project type project location solar_energy_facility solar_energy_facility solar_energy_facility -------------------- ------------------------------- ---------------------- ------------------- -------------------- ------------------------ amount requested dollar_figure-------------- dollar_figure-------------- dollar_figure-------------- dollar_figure---------------- ------------------------------------------------ ------------------------------------------------- -------------------------- -------------------------------------------- ---------------------------


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 b02 plr-101979-08 date date legend x ------------------------------------------------------------------------------------------------------ ------------------------ state ---------------- d1 ----------------------- dear -------------------- this responds to a letter dated date and subsequent correspondence 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 in state on d1 it was intended for x to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x accordingly x requests a ruling that it will be treated as an s_corporation effective d1 sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the plr-101979-08 corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning d1 a copy of this letter should be attached to the form_2553 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 including whether x was or is a small_business_corporation under sec_1361 this ruling is directed only to the taxpayer who requested it sec_6110 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 x's authorized representative sincerely melissa liquerman senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


uniform issue list department of the treasury internal_revenue_service l washington d c tax_exempt_and_government_entities_division nov a - ep le my - gok hr hr ak fe af af fe ae fe af hch oe ee he fe a ofc i 2k eo ak ee fe a a ee fe fe hf age a c2 fe oe ae fe ae 2h he ee ae oe fe fe ba df a ae a hehe eo ee a a oe ae 2s ae ae oa oe ot he oe fe ae fe oi oe ag fe ae he sf eae af of fea ae ff oe ea ok ae shee fe fe ae ae ae ake he ie ee ee ke fe fe 24s fe a of of ofc fe oie ik sec_2s legend amount b bank n tra x credit_union o dear a a a a this is in response to your request dated date as supplemented by correspondence dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalties of perjury to support the ruling requested you maintained a self-directed individual_retirement_account ira x with bank n that you invested in a certificate of deposit cd you underwent surgery followed by radiation and chemotherapy you were recovering from the mentally debilitating effects of this treatment when you received a notice from bank n that ira x’s cd had matured in a state of confusion you directed bank n to pay you the proceeds of the cd bank n mailed you a check for amount b on date that you page deposited in a savings account in credit_union o on date bank n did not tell you that this distribution from ira x was taxable nor did it provide you with information about the option to make a tax-free_rollover to another ira when you prepared your tax returns your accountant informed you that since you failed to rollover the distribution from bank n into another ira you are subject_to tax on amount b based on the above facts you request that the service waive the 60-day rollover requirement with respect to the distribution of ira x of the amount b because the failure to waive such requirement would be against equity or good conscience sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers page sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the 1-year rollover limitation under sec_408 of the code does not apply to a situation where the trustee or custodian of an ira makes a direct transfer of the amount in the ira to the trustee or custodian of another ira information you presented shows that you were confused by the trauma of hospitalization surgery and chemotherapy when you directed bank n to pay you the proceeds of ira x’s cd and deposited them in a taxable savings account under these unusual circumstances you could not reasonably satisfy the requirement that amount b be deposited in an ira within days of the distribution from ira x the failure to deposit amount b into another ira within the 60-day period was beyond your reasonable control and the failure to waive the 60-day requirement would be against equity or good conscience therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to that part of the distribution of ira x of the amount b you are granted a period of days from the issuance of this ruling letter to contribute amount b in cash into another ira provided all other requirements of sec_408 of the code are satisfied except the 60-day requirement with respect to such contribution then this amount will be considered a rollover_contribution with the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent page if you have any questions please contact sn sincerely yours oo fee alan c pipkin jr employee_plans technical group manager enclosures deleted copy of this letter notice of intention to disclose notice


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-135834-09 date august internal_revenue_service number release date index number ---------------------------------- -------------- --------------------------------------- --------------------------- legend x -------------- ------------------------------------ state ------------------- date ----------------------- dear ------------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was formed on date under the laws of state x represents that x intended to be an s_corporation effective date however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed plr-135834-09 sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year based solely on the facts submitted and the representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date accordingly provided that x makes an election to be an s_corporation by filing a complete form_2553 effective date along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for date except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent 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 bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


pe es ea es oe om department of the treasury internal_revenue_service te_ge eo examinations fulton street room brooklyn ny tax_exempt_and_government_entities_division release number release date legend org organization name address address org address certified mail dear date xx date person to contact taxpayer_identification_number identification_number contact telephone number last date for filing a pleading with the tax_court the claims_court or the united_states district_court for the district of columbia april 20xx this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter to you dated december 19xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reason s you are not operating exclusively for any charitable purpose educational purpose or any other exempt_purpose our examination reveals that you are not engaged primarily in activities which accomplish charitable educational or other exempt purposes as required by sec_1_501_c_3_-1 your activities including your financial transactions more than insubstantially furthered non-exempt purposes moreover you failed to establish that you did not operate for the benefit for the private interest of a private_shareholder_or_individual as required for continued recognition of exemption pursuant to sec_1_501_c_3_-1 your income inured to the benefit of private shareholders and individuals contributions to your organization are no longer deductible under sec_170 after january 20xx you are required to file income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the tax_year ending december 20xx and for all tax years thereafter in accordance with the instructions of the return you have filed taxable returns on form_1120 for the years ended december 20xx december 20xx december 20xx and december 20xx with us processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination under the declaratory_judgment provisions of sec_7428 of the code a petition to the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia must be filed before the ' day after the date this determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication you may write to these courts at the following addresses you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at we will notify the appropriate state officials of this action as required by code sec_6104 you should contact your state officials if you have any questions about how this final_determination may affect your state responsibilities and requirements if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter enclosure publication sincerely nanette m downing acting director eo examinations letter catalog number 34198j tax exempt and government entities oivision org address department of the treasury internal_revenue_service flair dr 2nd floor el monte ca date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at lf you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication sec_892 report of examination form_6018 sincerely sunita b lough director eo examinations letter catalog number 34809f schedule number or exhibit form io 886-a date name of organization taxpayer org explanation of items tax identification_number year period ended 20xx legend org organization name address address dir-3 dir-4 dir-5 2n directors companies xx date city city co-1 thru co-9 4th 5th 6th 7th gil ot president president state state dir-1 dir-2 issue whether the activities conducted by org org throughout the years of its existence were in compliance with the rules and regulations under the internal_revenue_code the code sec_501 o l o g whether org’s net_earnings inure to the benefit of its officers and board members within the meaning of the income_tax regulations the regulation sec_1_501_c_3_-1 whether org complied with record keeping requirements as required under the code sec_6001 and sec_6033 organizational information facts org was incorporated on xx in the state of state the specific purpose of the organization as stipulated by article ii of the articles of incorporation is to engage in the solicitation receipt and administration of property and from time to time to disburse such property and the income therefrom for activities related to the development of new housing for low to moderate income families or for other charitable purposes in accordance with sec_501 the internal_revenue_service the service received the form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code signed by president the president of org on xx its intended purposes as described in the application were rehabilitation of dilapidated single family dwellings a the organization will purchase dilapidated single family dwellings from the department of housing and urban development hud these units will be hud repossessions the purchase_price for each unit will be based on an independent appraisal the purchase of each unit will be financed through loans from hud approximately of the purchase_price and loans at market interest rates from private investors including president the president of the organization approximately of the purchase_price the organization will then rehabilitate each unit so that it meets all applicable building codes and is suitable for marketing all rehabilitation work will be done by local building contractors at prevailing rates contractors will be unrelated to the officers or directors of the organization the rehabilitation of each unit will be financed through loans from hud approximately of rehabilitation costs and loans at market or below market interest rates from private investors including president the president of the organization approximately of rehabilitation costs this activity will consume about of the organization’s time form 886-a page of department of the treasury-internal revenue service schedule number or exhibit 886-a form ia date explanation of items name of organization taxpayer tax identification_number year period ended org 20xx this activity furthers the organization’s goal of rehabilitating existing housing stock in depressed urban neighborhoods thereby helping to halt the deterioration of such neighborhoods and contributing to their revitalization this activity will begin as soon as the organization locates a suitable property being offered for sale by hud and hud determines that the organization is eligible to participate in its sale and loan programs c this activity will be conducted in depressed urban neighborhoods located within city the organization’s president president will handle all day to day tasks related to purchase rehabilitation and financing of housing units sale of rehabilitated dwellings to very low low and moderate income families a b c the organization will sell the units it rehabilitates to very low low and moderate income families at market prices the units will be marketed through periodicals and through local real_estate agents who specialize in homes for very low low and middle income buyers the organization will provide education and advice to first-time homebuyers especially with regard to available sources of financing this activity will consume about of the organization’s time this activity furthers the organization’s voals of i assisting very low low and moderate income families to achieve the goal of home ownership and ii contributing to the stability and revitalization of depressed urban neighborhoods by helping families become stakeholders in those neighborhoods this activity will begin as soon as the organization completes rehabilitation of its first property this activity will be conducted in depressed urban neighborhoods located within city the organization’s president president and volunteers who support the organization’s goals will handle all day to day tasks related to marketing and sales development and support of after-school tutoring and sports programs for ‘at risk high school and junior high school students a all profits from the sales of rehabilitated units will be used to finance after-school tutoring and sports programs for at risk high school and junior high school students the organization will work with school district personnel and other non-profit organizations to strengthen existing programs and to develop new programs of this type is anticipated that most programs will recruit and compensate credentialed teachers and physical education instructors to provide students with academic tutoring and sports instruction after school hours this activity will consume about of the it form 886-a page of department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanation of items name of organization taxpayer tax identification_number year period ended 20xx org b c organization’s time this activity furthers the organization’s goals of providing constructive activities for at risk youth which will encourage them to stay in school and which will counteract the negative influences which they encounter each day this activity will begin as soon as the organization realizes a profit from the sale of rehabilitated units initially the organization will focus on developing and supporting programs at school located in city state and school-2 located in city state the organization’s president president and volunteers who support the organization’s goals will handle all day to day tasks related to the development and support of these after-school programs a determination_letter was issued on xx granting exemption status under the code sec_501 as an organization described under the code sec_509 with an advanced ruling period through xx the service reaffirmed the exempt status of org as a publicly_supported_organization in 20xx issue - operational_test on xx the service initiated a review of the forms return of organization exempt from income_tax and activities of org for the years ending xx org was involved in two separate but related activities one of the activities was rental for residential purpose org owned two properties in the beginning of 20xx and rented them out the other activity that org was involved in was the purchasing refurbishing and reselling of hud properties this activity began in 19xx and reached its peek in 20xx and then tapered off by 20xx org was no longer purchasing properties from hud however org fixed-up and sold one of the properties on xx forms filed by org indicated that board members of org were the same since 19xx president was the president dir-1 dir-2 and dir-3 were directors dir-1 and dir-3 were also directors of co-1 co-1 during the same period org stopped its operation and dissolved its assets in early 20xx the remaining single property was transferred to co-1 and cash assets of about dollar_figure were contributed to other exempt_organizations the other activity that org was involved in was purchasing refurbishing and reselling hud properties this activity began in 19xx and continued through 20xx during these years org purchased properties from hud two of these properties were sold to dir-4 the president of co-1 we reviewed forms for the years ending december 19xx through 20xx the sales of the properties were only in 19xx through 20xx and they were reported on forms as follows _account description res property sales fees contracts from gov't agencies 20xx12 20xx12 20xx12 20xx12 20xx12 19xx12 form 886-a page of department of the treasury-internal revenue service schedule number or exhibit form 886-a eter name of organization taxpayer explanation of items tax identification_number year period ended org 20xx total income acquisition costs broker commission buyer costs pd by seller yet pee carrying at costs closing costs closing closing costs at a costs paid_by seller development fees rehab costs total expenses net gain loss net gain loss the table above appeared to indicate that org made little or no profits from these transactions however president received substantial compensation and benefits the follow table is a summary of the expenses reported on forms and displays how the funds earned from the two activities were utilized for the years 19xx through 20xx account description 19xx12 20xx12 20xx12 20xx12 20xx12_ 20xx12 comp to officers directors etc pension_plan contribution n1 health insurance payroll_taxes total pymt to for a gooch other expenses total office administrative expenses ww paid to for a gooch the table above indicates over of office administrative expenses in 19xx through 20xx were paid to president in the forms of compensation and benefits which was substantially higher than the dollar_figure estimated annual compensation to him on form_1023 issue - net_earnings inuring to the benefit of an insider in the form_1023 org indicated it would be operating after-school programs for at risk school students there were no records supporting the existence of or expenses_incurred for the purpose of this activity cancelled checks indicated that org made the following payments to an entity wholly owned by dir-4 co-2 co-2 form 886-a department of the treasury-internal revenue service page of amount date payee total ck schedule number or exhibit form 886-a rev date name of organization taxpayer explanation of items tax identification_number year period ended org 20xx xx o1 xx o2 xx cq-2 total co-2 was formerly known as co-3 in response to our request for supporting records org states that it does not have any written bills invoices service contracts etc for any of these payments facts applicable to all issues president and dir-4 owned and or controlled the following entities during the years most if not all of these entities utilized the same office space and staff paid for by co-1 owned owned own sec_50 address city state co-4 co-5 entity name dir-4 co-6 co-6 co-2 co-2 co-7 _co-8 co-8 owns owns through his wife own sec_50 owns own sec_50 own sec_50 own sec_50 president co-1 co-1 co-9 president owned owned own sec_50 in the year 20xx co-1 paid dollar_figure to for co-6 president documentation to substantiate the purpose of these payments owner of co-6 was unable to provide sufficient during the years 20xx through 20xx five properties owned by co-1 were quitclaimed out of co-1 and eventually went to co-8 co-8 co-8 was equally owned by president and dir-4 in exchange for each of the five properties co-8 assumed the outstanding mortgage of these properties the outstanding mortgages were substantially below fair market values of the properties co-1 had full-time employees dir-4 and the office manager since xx co-1 provided health_insurance_coverage for the entire family of these employees however beginning on xx co-1 also provided health insurance for president’s family at dollar_figure per month we questioned why co-1 was paying for president’s family and the response was it was agreed that co-1 would pay the health insurance for president from xx his department of the treasury-internal revenue service form 886-a page of form 886-a eee explanation of items schedule number or exhibit name of organization taxpayer tax identification_number year period ended org 20xx insurance was paid for until xx dir-5 was a board member of co-1 however no other board members received the same benefit from co-1 minutes of meetings in response to our request for the minutes of the meetings of the governing body including committee meetings org provided the minutes of annual meetings for 20xx without a date as to when it was held the signature page was not provided it contains the following statements minutes of annual meetings of both shareholders and directors of org we the undersigned being all of the shareholders directors and the secretary of the corporation hereby agree and consent that the annual meeting of the shareholders and the annual meeting of directors of the corporation be held on the date designated hereunder and do hereby waive all notice whatsoever of such meeting and of any adjournment thereof we do further agree and consent that any and all lawful business may be transacted at such meetings or at any adjournment or adjournments thereof as may be deemed advisable by any shareholder or director present thereat any business transacted at such meetings or a any adjournment or adjournments thereof shall be a valid and legal and of the same force and effect as if such meeting or adjourned meetings we held after the notice ‘the directors and shareholders of this company pursuant to statutory requirements of that law held its annual meeting of the shareholders and immediately thereafter held its annual meeting of board_of directors as of the day set forth below the undersigned constituting all the shareholders directors and the secretary of this company hereby acknowledge that by placing their signatures below they consent to the waiver notice of these meetings and consent to said meetings being held by said shareholders board_of directors and secretary upon motion duly noted and seconded and unanimously carried out the following was considered and voted upon by the undersigned the minutes listed some of the matters that took place during the year org has not paid dividends there being no further business to come before the meeting of the undersigned upon motion duly make and seconded and unanimously carried the meeting was adjourned form 886-a department of the treasury-internal revenue service page of schedule number or exhibit form 886-a ev date explanation of items name of organization taxpayer tax identification_number year period ended org _ 20xx a review of org’s bylaws indicate that section dollar_figure states directors shall be elected at each annual meeting of the board_of directors to hold office until the next annual meeting by plurality vote of the directors in office immediately preceding the election section dollar_figure of the bylaws states annual meetings of the board_of directors shall be held for the purpose of organization election of directors and officers and the transaction of other business annual meetings shall be held on the fifteenth day of february of each year pincite a m section dollar_figure of the bylaws states a majority of the authorized number of directors shall constitute a a meeting at which a quorum is initially present may continue to quorum for the transaction of business transact business notwithstanding the withdrawal of directors if any_action taken is approved by at least a majority of the required quorum for that meeting we compared the minutes to the bylaws to see whether org complied with its own rules and observed the following inconsistencies e e e e e with the reference to shareholders and dividends the minutes appear to follow the format of a for-profit corporation the minutes did not mention which officers and board members were present and whether a quorum was met although the minutes didn’t indicate when it was held the content indicated it was held at the end of the year the bylaws required it to be held on or the next working day after the fifteenth day of february there were no elections of directors the nearly dollar_figure in payments to co-2 represented a substantial expenditure however there were no discussions or approval by the board law the code dollar_figure a states an organization described in subsection c shall be exempt from taxation under this subutle the exempt_organization listed under the code sec_501 is described as corporations organized and operated exclusively for religious charitable no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual emphasis added the income_tax regulations the regulation sec_1_501_a_-1 states the words private_shareholder_or_individual in sec_501 refer to persons having a personal and private interest in the activities of the organization phe regulation sec_1_501_c_3_-1 states an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose form 886-a department of the treasury-internal revenue service page of schedule number or exhibit form 886-a rev date explanation of items name of organization taxpayer tax identification_number year period ended org 20xx the regulation sec_1_501_c_3_-1 states ‘an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals emphasis added phe regulation dollar_figure1 c -1 d i states an organization is not organized or operated exclusively for one or more of the purposes specified in subdivision i of this subparagraph unless it serves a public rather than a private interest thus to meet the requirement of this subdivision it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests the regulation sec_1_501_c_3_-1 although states in terms of the net_earnings of an organization the inurement doctrine applies to any of an organization's charitable assets see 75_tc_127 petroleum corp v payment ofa full-ume salary for part-time work was inurement payment of excessive_compensation is a form of inurement for example in 203_f2d_872 cir the fifth circuit held that the organization’s the regulation sec_1_501_c_3_-1 states the term charitable includes relief of the poor and distressed or of the underprivileged or iv to combat community deterioration and juvenile delinquency in 326_us_279 the supreme court held that the presence of a single nonexempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes revrul_70_585 1970_2_cb_115 provides that nonprofit housing organizations created to aid low and moderate income families by lessening neighborhood tensions eliminating prejudice and discrimination and combating community deterioration may qualify for exemption under sec_501 of the code receipt by an exempt_organization of less than fair_market_value in a sale_or_exchange of property with an insider is also a form of inurement in 46_tc_519 two doctors transferred their private practice of medicine including the building in which the practice was housed to a non-profit hospital they controlled a portion of the building was occupied by a for-profit laboratory under a prior agreement with the two doctors the doctors caused the hospital to acquiesce in the arrangement with the laboratory the hospital received no consideration for the assignment of its space to the laboratory either as part of the sale or through a share of the laboratory’s gross revenues payments in consideration of the assignment that should have been paid to the hospital were paid directly to the two doctors the doctors performed no services for the laboratory the tax_court held that the arrangement resulted in an inurement of the hospital’s charitable assets to the two doctors in anclote psychiatric ctr v commissioner t c memo an organization’s board_of directors caused the organization to sell its largest asset - a hospital - to a for-profit entity formed by the directors the board_of directors obtained an independent appraisal of the hospital and hired independent counsel to represent the organization the closing however occurred almost two years after the appraisal the parties failed to make adjustments to the values established in the appraisal the tax_court determined that the purchase_price received by the organization on the sale of the hospital was not within a reasonable range of what could be form 886-a department of the treasury-internal revenue service page of schedule number or exhibit form rev date explanation of items 886-a name of organization taxpayer tax identification_number year period ended org 20xx considered fair_market_value accordingly the tax_court held that the sale transaction resulted in inurement within the meaning of sec_501 the provision of inurement can be direct or indirect in anclote psychiatric ctr supra the sale transaction giving rise to the inurement was between an exempt_organization and a for-profit corporation formed by the organization’s directors although the for-profit corporation was the direct beneficiary of the below-market sale transaction the tax_court held that the transaction resulted in ‘an advantage to the shareholders of the for-profit corporation and that this advantage constituted inurement of the organization’s charitable assets to the shareholders in 765_f2d_1387 cir the ninth circuit treated as inurement compensation paid_by a controlled_entity to the organization’s insiders in church by mail two individuals reverend ewing and reverend mcelrath ran a church that mailed printed sermons to several million homes they also owned a for-profit advertising agency which provided the church's printing and mailing services the ninth circuit found that the combined compensation paid to reverend ewing and reverend mcelrath by the church and the advertising agency was excessive the ninth circuit rejected the church's argument that the portion of the compensation paid_by the advertising agency should not be included in the determination of reasonableness and treated this portion as indirect inurement of the church’s earnings to the church’s insiders ii the ninth circuit based its conclusion on the following legal principle w hen a second organization is created which serves to funnel income to the individual who controls the purportedly exempt_organization and the income exceeds a reasonable salary the income inures to the benefit of a private person within the meaning ol lr c sec_501 fd in church of scientology of california vy indirect inurement can occur even if the organization’s insiders are not formally in control of the intermediary used to funnel the funds from the organization to the insiders commissioner 823_f2d_1310 cir the organization transferred in excess of dollar_figure million toa for-profit corporation incorporated by the organization’s founder and his wife the directors of the corporation were high-ranking members of the church of scientology at the time of the transfer the founder and his wife were not directors officers or employees of the corporation the founder was no longer serving as the head of the church but continued to exert significant control_over the church by making policy statements directives and orders f 2d pincite in particular his approval was required for all financial planning d the directors of the corporation approved the founder’s decision to transfer dollar_figure million from the corporation’s account to the ship apollo_aboard which the founder and his family lived the ninth circuit held that the organization's funds funneled through the corporation constituted inurement to the founder and his family f 2d pincite u s 222_fsupp_151 e d wash the 412_f2d_1197 the prohibition on inurement in the code sec_501 is absolute the service has the authority to revoke an organization's exempt status for inurement regardless of the amount of inurement see spokane motorcycle club v 283_fsupp2d_58 moreover for purposes of establishing that inurement occurred it is not necessary to calculate the precise amount of inurement as long as it is shown that the value of the transfer giving rise to inurement is not within a reasonable range of what could be considered fair_market_value see anclote psychiatric ctr vy commissioner t c memo form 886-a department of the treasury-internal revenue service page of schedule number or exhibit form 886-a rev date explanation of items name of organization taxpayer tax identification_number year period ended org 20xx record keeping requirement the code sec_6001 states every person liable for any_tax imposed by this title or for the collection thereof shall keep such records render such statements make such returns and comply with such rules and regulations as the seeretary may from time to time prescribe whenever in the judgment of the secretary it is necessary he may require any person by notice served upon such person or by regulations to make such returns render such statements or keep such records as the secretary deems sufficient to show whether or not such person is liable for tax under this title the code sec_6033 states in general every organization_exempt_from_taxation under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purpose of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and shall keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe che regulation dollar_figure01-1 a states n general any person required to file a return of information with respect to income shall keep such permanent books of account or records including inventories as are sufficient to establish the amount of gross_income deductions credits or other matters required to be shown by such person in any return of such tax or information the regulation sec_1_6001-1 states exempt_organizations -in addition to such permanent books_and_records as are required by paragraph a of this section with respect to the tax imposed by sec_511 on unrelated_business_income of certain exempt_organizations every organization exempt from tax under sec_501 shall keep such permanent books of account or records including inventories as are sufficient to show specifically the items of gross_income receipts and disbursements such organizations shall also keep such books_and_records as are required to substantiate the information required by sec_6033 the regulations sec_1_6001-1 states retention of records -the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained so long as the contents thereof may become material in the administration of any internal revenue law phe revrul_59_95 1959_1_cb_627 jan states an organization previously held exempt from federal_income_tax was requested to produce a financial statement as of the end of the year and a statement of its operations during such year however its records were so incomplete that it was unable to furnish such statements held failure or inability to file the required information_return or otherwise to comply with the provision of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of an exempt status effective date of revocation the regulation sec_1 a -1 a states subject only to the commissioner's inherent power_to_revoke rulings because of a change in the law or regulations or for other good cause an organization that has been form 886-a _ page of department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date name of organization taxpayer tax identification_number year period ended - explanation of items org 20xx determined by the commissioner or the district_director to be exempt under sec_501 a or the corresponding provision of prior_law may rely upon such determination so long as there are no substantial changes in the organization's character purposes or methods of operation the regulation sec_601_201 states a ruling or determination_letter recognizing exemption may not be relied upon if there is a material_change inconsistent with exemption in the character the purpose or the method of operation of the organization the regulation sec_601_201 states a n exemption ruling or determination_letter may be revoked or moditied by a ruling or determination_letter addressed to the organization the revocation or modification may be retroactive if the organization omitted or misstated a material fact operated in a manner materially different from that originally represented issue - operational_test government position in order for an organization to retain its exempt status it must demonstrate to the service that it meets both the organizational and the operational tests the facts stated above indicate that org failed the operational_test charitable purposes include relief activily and selling of real properties in the manner described above doesn’t address the needs of low-income people in fact the rental_activity and the selling of real properties were operated in a manner no different than other business entities that are engaging in such activities in a commercial manner of the poor and distressed the regulation sec_1_501_c_3_-1 org’s rental in 20xx org sold properties fixing and selling properties at market rate doesn’t constitute assisting low- income families therefore the activities as described above did not meet the operational_test as described under dollar_figure1 c -1 c of the regulation org has bylaws but chooses not to comply with them it held the annual board member meetings in december instead of february it made no elections during the annual meetings it did not discuss and or approve many of the significant matters that took place during the years these actions represent org disregarding its own rules and regulations which in turn indicates that org did not meet the operational_test as described under dollar_figure1 c -1 c of the regulation issue - net_earnings inuring to the benefit of an insider although dir-4 wasn't an officer or director of org the facts and circumstances indicate that he had significant influence over org therefore dir-4 president and all entities they own owned are private shareholders or individuals within the meaning of the regulation sec_1 a -i c in the year 20xx org paid dollar_figure to co-2 an entity wholly owned by dir-4 a private_shareholder_or_individual within the meaning of the regulation sec_1_501_a_-1 org failed to provide sufficient substantiation that the payments were for the expenses_incurred on org’s behalf the board members of org did not approve these form 886-a department of the treasury-internal revenue service page of schedule number or exhibit form 886-a rev date name of organization taxpayer explanation of items tax identification_number year period ended org __12 20xx payments therefore all payments paid to or for co-2 constitute inurement to dir-4 and represent an act prohibited by the code sec_501 issue - record keeping requirement through out the examination org was unwilling or unable to produce the records necessary to support and substantiate the financial information reported on the annual returns it filed accordingly org failed to comply with requirements under the code sec_6001 and sec_6033 and the regulations thereunder conclusion based on the information secured during the examination we conclude that org is not operated for exempt purposes under sec_501 of the code an organization can not be recognized as exempt under sec_501 unless it shows that it is operated exclusively for charitable education or other exempt purposes and its net_earnings does not inure to the benefit of any private_shareholder_or_individual among other things org’s activities must demonstrate conclusively that it meets the operational_test of sec_1_501_c_3_-1 of the regulations the activities show that the primary purpose is renting properties out to the general_public which does not exclusively serve a purpose described in sec_501 of the code it also engaged in many transactions enabling its net_revenues to benefit dir-4 the private shareholders or individuals of org therefore the exempt status granted to org should be revoked effective from january 20xx in accordance with the regulation sec_601_201q form 886-a department of the treasury-internal revenue service page of


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-113164-06 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities subject railroad_retirement_tax_act status ----------------------------------------------------- in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the majority of the board concludes that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act effective ---- -------------------------- ---------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we agree with the majority and conclude that the ----------- ------------------ --------------------became an employer under the railroad_retirement_tax_act effective ---- -------------------------- please take the appropriate action regarding this business _____________________________ janine cook-


t c memo united_states tax_court electric picture solutions inc petitioner v commissioner of internal revenue respondent docket no filed date herman h pettegrove for petitioner aely k ullrich for respondent memorandum findings_of_fact and opinion thornton judge respondent determined a dollar_figure deficiency in petitioner’s federal_income_tax for the taxable_year ended date the issue is whether petitioner is entitled to a theft_loss deduction under sec_165 for an investment in corporate shares that became worthless because of alleged fraud by the issuer and the stockbroker the parties have stipulated some facts which are so found when the petition was filed petitioner’s principal office was in california findings_of_fact at the heart of this case is petitioner’s investment in common_stock of novatek international inc novatek petitioner purchased novatek shares on six occasions in and most recently on date petitioner purchased the shares through a stockbroker joseph roberts co inc roberts with which petitioner had a history of doing business novatek’s common_stock was traded on the national association of securities dealers automated quotations small cap market system until date when trading in the stock was suspended on date novatek filed a voluntary petition for protection pursuant to chapter of the bankruptcy code when petitioner later attempted to sell its novatek shares there was no market for them on date the u s securities_and_exchange_commission sec filed a civil enforcement action against novatek’s successor_in_interest and novatek’s principals and unless otherwise indicated section references are to the internal_revenue_code in effect for the year at issue and rule references are to the tax_court rules_of_practice and procedure officers the complaint alleged that the defendants had committed a massive fraud on investors by among other things orchestrating a series of sham transactions announcing highly profitable nonexistent contracts and filing materially false and misleading financial statements subsequently without admitting or denying the sec allegations one of the individual defendants consented to the entry of a final judgment that imposed civil sanctions against him for his role in the novatek matter and in a related fraud action on its form_1120 u s_corporation income_tax return for the year ended date petitioner claimed a dollar_figure fraud and embezzlement loss under the category other deductions petitioner reported no capital_gain_net_income on its form_1120 and did not attach a schedule d capital_gains_and_losses in a notice_of_deficiency dated date respondent disallowed the claimed theft_loss deduction the record does not establish the consequences if any of the u s securities and exchange commission’s enforcement action as to any of the other defendants on brief petitioner concedes that the dollar_figure figure reflected a computational error in its cost_basis for the novatek stock and contends that the correct amount of loss is dollar_figure we deem petitioner to have conceded a corresponding amount of its claimed theft_loss the notice_of_deficiency is silent as to the proper characterization of the loss and provides for no tax_benefit related to the loss the parties have stipulated however that respondent characterized the loss as a capital_loss that may be continued opinion sec_165 permits a deduction against ordinary_income for any loss sustained during the taxable_year and not_compensated_for_by_insurance_or_otherwise for this purpose any loss arising from theft is treated as sustained during the taxable_year in which the taxpayer discovers the loss sec_165 petitioner has the burden of proving it has sustained a theft_loss see rule a 290_us_111 continued deducted in the year of loss carried back three years and carried forward five years on brief respondent calculates the loss to be dollar_figure as previously noted petitioner contends that the amount of the loss is dollar_figure neither party has expressly addressed the amount if any of capital_loss that is deductible in the record before us does not establish that petitioner is entitled to deduct any amount of capital_loss in inasmuch as petitioner reported no capital_gains in that year and the record does not otherwise establish that petitioner had any capital_gains for that year see sec_1211 consequently we do not take literally the stipulation that respondent has characterized petitioner’s loss as a capital_loss that may be deducted in the year of loss because we do not have before us the preceding or subsequent tax years in which petitioner might be eligible to claim a capital_loss_carryback or carryover and because as discussed infra we hold that petitioner has not established that it sustained a theft_loss we need not and do not in this proceeding undertake to resolve the parties’ relatively small difference as to the amount of the loss petitioner does not claim and has not established that the conditions of sec_7491 have been met to shift the burden_of_proof to respondent with regard to any factual issue as to petitioner’s liability for tax whether a theft_loss has been sustained depends upon the law of the state where the loss was sustained 540_f2d_448 9th cir affg 61_tc_354 79_tc_846 63_tc_736 affd without published opinion 523_f2d_1053 5th cir the parties agree that california law applies in determining whether a theft occurred with respect to petitioner’s investment in novatek stock cal penal code sec a west provides every person who shall feloniously steal take carry lead or drive away the personal_property of another or who shall knowingly and designedly by any false or fraudulent representation or pretense defraud any other person of money labor or real or personal_property is guilty of theft this criminal statute encompasses various larcenous offenses including at least two varieties of theft involving alleged fraud see people v ashley p 2d cal distinguishing theft by false pretenses and theft by trick or device we need not concern ourselves with the technical distinctions among these larcenous offenses inasmuch as petitioner appears to allege theft involving fraud for present purposes it is sufficient to observe that the following elements are essential under california law the perpetrator made a false pretense or representation which materially influenced the owner to part with his property the perpetrator did so knowingly with the intent to defraud the property owner and the owner was actually defrauded id pincite people v traster cal rptr 3d ct app people v sanders cal rptr 2d ct app implicit in these elements is a relationship of privity between perpetrator and victim crowell v commissioner tcmemo_1986_314 generally a taxpayer who purchases securities on the open market cannot support a claim of theft under california law because there is no privity between the perpetrator and the victim marr v commissioner tcmemo_1995_250 crowell v commissioner supra de fusco v commissioner tcmemo_1979_ cf first chicago corp v commissioner tcmemo_1995_109 holding that the taxpayer was entitled to a theft_loss with respect to an investment in newly issued shares of a foreign company where the stock purchase was not on an open market but from the company itself petitioner has not alleged or established a purchaser-seller relationship between itself and novatek instead at trial and on brief petitioner contends that it was defrauded by roberts on brief petitioner argues in certain narrow circumstances a theft_loss deduction has been allowed where the taxpayer suffered a loss which arose indirectly from a theft between other parties see 768_f2d_1140 9th cir allowing a theft_loss deduction with respect to the taxpayer’s purchase of nonexistent rights to land even though the taxpayer was not the immediate purchaser from the fraudulent vendor revg 82_tc_804 petitioner has not alleged or established that it suffered a loss which arose from a theft between other parties clearly roberts was aware that it was making claims about the company in order to sell its stock to support this allegation petitioner asserts that statements made by roberts’s representative were breaches of the stockbroker’s duty_of truth and fitness for his customer’s portfolio petitioner alleges that roberts was sued and lost in two separate arbitrations held before the national association of securities dealers nasd with respect to complaints made by other investors the evidence is inadequate however to establish that roberts or its agents had guilty knowledge or intent bellis v commissioner t c pincite similarly the evidence is inadequate to establish that roberts or its agents made any false pretense or representation to petitioner with intent to deceive see people v ashley supra pincite neither the filing of the sec complaint against novatek and its principals nor the entry of judgment against one of these defendants establishes criminal intent on the part of roberts or its agents similarly petitioner’s allegation that roberts was unsuccessful in nasd arbitration proceedings involving other investors even if true does not establish that roberts or its agents had the requisite criminal intent with respect to petitioner’s investment in novatek see eg schmidt v commissioner tcmemo_1989_188 judgment rendered in a civil_proceeding was insufficient to establish a theft_loss affd without published opinion 891_f2d_283 3d cir moreover petitioner has not shown that it was actually defrauded by roberts or its agents as required under cal penal code sec a because it has not established that roberts appropriated petitioner’s property see crowell v commissioner supra de fusco v commissioner supra cf first chicago corp v commissioner supra on brief petitioner alleges that the shares petitioner purchased were owned or controlled by roberts possibly as the lead underwriter or as the so-called market maker of the novatek stock petitioner has failed to prove this allegation by competent evidence even if we were to assume for purposes of argument that roberts was the lead underwriter or market maker of the novatek shares the evidence in the record would still be inadequate to establish the essential elements for theft under cal penal code sec a in sum petitioner has failed to establish that a theft occurred under california law as a result we hold that petitioner is not entitled to a theft_loss deduction under sec_165 to reflect the foregoing for respondent decision will be entered


number release date index no 4251-dollar_figure control no tam-115903-99 cc dom p si b8 internal_revenue_service national_office technical_advice_memorandum district_director taxpayer’s name taxpayer’s address taxpayer identification no periods involved no conference held legend taxpayer issue is taxpayer exempt from the tax imposed by sec_4251 of the internal_revenue_code with respect to the services described below by reason of sec_4253 conclusion taxpayer is not exempt from the tax imposed by sec_4251 with respect to the services described below by reason of sec_4253 facts taxpayer is a common carrier in the business of transporting chemicals and fuels in the conduct of its business it has subscribed to toll_telephone_service provided by two different carriers the first carrier charges a flat per minute rate for all outgoing long distance calls within the continental_united_states and a different flat per minute rate for all incoming long distance calls within the united_states tam-115903-99 the second carrier charges a flat per minute rate for switched access service for interstate long distance calls within the continental_united_states and a different flat per minute rate for switched access service for intrastate long distance calls it charges a different flat per minute rate for service using a dedicated line for interstate long distance calls within the continental_united_states and a different flat per minute rate for service using a dedicated line for intrastate long distance calls different per minute rates apply to international toll telephone calls monthly minimum usage requirements apply law and analysis sec_4251 imposes a tax on amounts paid for certain communications_services sec_4251 provides that the term communications_services includes toll_telephone_service sec_4252 defines toll_telephone_service as a telephonic quality communication for which a there is a toll_charge which varies in amount with the distance and elapsed transmission time of each individual communication and b the charge is paid in the united_states and a service which entitles the subscriber upon payment of a periodic charge determined as a flat amount or upon the basis of total elapsed transmission time to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with the service is located sec_4253 provides that no tax shall be imposed under sec_4251 on the amount_paid for any toll_telephone_service described in sec_4252 to the extent that the amount so paid is for use by a common carrier telephone or telegraph company or radio broadcasting station or network in the conduct of its business as such in revrul_79_404 1979_2_cb_382 the service considered the applicability of sec_4252 to telephone messages that were relayed by an offshore radio telephone service by satellite between sites outside the united_states and landline stations in the united_states the charge for the service varied only with elapsed transmission time the charge was stated to be 3x dollars per minute for the first three minutes thereof and 1x dollar for each additional minute or fraction thereof the ruling states that prior to the amendment of sec_4252 by sec_302 of the excise_tax reduction act of 1965_2_cb_568 toll_telephone_service was defined in part as a telephone or radio telephone message or conversation for which there was a toll_charge and the charge is paid within the united_states the legislative tam-115903-99 history of sec_4252 indicates that in amending sec_4252 the congress intended to exempt certain private communication services from the tax and repeal the tax on telegraph service and wire and equipment service but there was no indication that the congress otherwise intended to make changes in the types of service subject_to tax see h_rep_no pincite 1965_2_cb_643 s rep no pincite 1965_2_cb_676 accordingly the ruling holds that the above-described service is toll_telephone_service within the meaning of sec_4252 notwithstanding that the charge for the service did not vary by distance as provided by sec_4253 amounts paid for_the_use_of any toll_telephone_service described in sec_4252 by a common carrier or communications company in the conduct of its business as such are exempt from the communications tax however a common carrier or communications company is not exempt with respect to toll_telephone_service that is described in sec_4252 the definition contained in sec_4252 is intended to describe service commonly known as wide area telephone service or wats which is described in the legislative_history to sec_4252 as a service whereby for a flat charge the subscriber is entitled to make an unlimited number of calls within a defined area sometimes limited as to the maximum amount of hours see h_rep_no supra s rep no supra thus wats resembles on a wide area basis a service similar to traditional local_telephone_service wherein the subscriber pays a fixed monthly rate for an unlimited number of calls and the charge does not vary according to the length destination or number of calls taxpayer emphasizes that the charge per fixed unit of time for each service is computed based upon total elapsed transmission time as used in the parenthetical in sec_4252 however calls are billed on the basis of the duration of each individual call not on the total elapsed transmission time of all calls to a specified area thus the services are similar to the service in revrul_79_404 which was held to be described in sec_4252 not sec_4252 that is the services for which taxpayer pays do not entitle taxpayer to an unlimited number of calls to a specified service area for which a charge is made based on a flat fee or elapsed transmission time but rather provide taxpayer with telephone service for which taxpayer is charged an amount that varies based upon the duration of each call caveats a copy of this technical_advice_memorandum is to be given to the taxpayer sec_6110 provides that it shall not be used or cited as precedent in accordance with sec_6110 names addresses and other identifying numbers have been deleted


t c summary opinion united_states tax_court harry lewis petitioner v commissioner of internal revenue respondent docket no 19598-05s filed date harry lewis pro_se kathleen k raup for respondent ruwe judge this case was heard pursuant to section in effect when 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 section references are to the internal_revenue_code in effect for the years in issue rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies in petitioner’ sec_2002 and federal income taxes of dollar_figure and dollar_figure respectively and accuracy-related_penalties under sec_6662 of dollar_figure and dollar_figure respectively after concessions by respondent the issues for decision are whether petitioner is entitled to claimed itemized_deductions for charitable_contributions of dollar_figure for and dollar_figure for and whether petitioner is liable for accuracy-related_penalties pursuant to sec_6662 as determined by respondent some facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated by this reference when the petition was filed petitioner resided in downingtown pennsylvania petitioner has a master’s degree from penn state university and is a high school principal petitioner timely filed and electronic federal_income_tax returns petitioner’s tax returns for the years in issue were prepared by mr chester muhammad on these returns petitioner claimed charitable_contribution deductions of dollar_figure for and dollar_figure for petitioner filed his returns as a head_of_household and claimed a dependency_exemption deduction for his daughter respondent’s notice_of_deficiency changed petitioner’s filing_status to single and disallowed the dependency_exemptions for both and the parties have since stipulated that petitioner is entitled to head_of_household filing_status and the dependency_exemptions for both years at trial petitioner introduced typed documents which purport to be lists of hi sec_2002 and cash contributions donated to souls for the kingdom fellowship church the church the lists indicate contributions of dollar_figure per week in and dollar_figure per week in totaling dollar_figure in and dollar_figure in petitioner admits that he did not prepare the lists until after he was notified by respondent about the examination of his returns petitioner also admits that the sums were not accurate pertaining to each amount but accurate in the sum of money and that he basically somewhat divvied up the total sum petitioner did not offer any other documentation to substantiate his alleged charitable_contributions discussion as a general_rule the commissioner’s determinations set forth in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of proving that these determinations are in error rule a 290_us_111 pursuant to sec_7491 the burden_of_proof as to factual issues may shift to the commissioner where the taxpayer introduces credible_evidence and complies with substantiation requirements maintains records and cooperates fully with at one point in his testimony petitioner said that he also gave money to his brother-in-law another minister and that he included this on the lists showing contributions to his brother’s church reasonable requests for witnesses documents and other information petitioner has not met the requirements of sec_7491 because he has not met the substantiation requirements or introduced credible_evidence regarding the deductions at issue charitable deductions deductions are strictly a matter of legislative grace and the taxpayer bears the burden of proving entitlement to the claimed deduction rule a 503_us_79 292_us_435 sec_170 allows as a deduction any charitable_contribution the payment of which is made within the taxable_year deductions for charitable_contributions are allowable only if verified under regulations prescribed by the secretary sec_170 in general the regulations require a taxpayer to maintain for each contribution one of the following a canceled check a receipt from the donee or in the absence of a check or receipt other reliable written records sec_1_170a-13 income_tax regs sec_1_170a-13 income_tax regs provides special rules to determine the reliability of records on the basis of all the facts and circumstances of the particular case and further provides factors to consider in making this determination a receipt is required to contain the name of the donee the date of the contribution and the amount of the contribution sec_1_170a-13 income_tax regs including whether the writing that evidences the contribution was written contemporaneously and whether the taxpayer keeps regular records of the contributions any charitable_contribution of more than dollar_figure must further be substantiated by a contemporaneous written acknowledgment of the contribution by the donee organization sec_170 separate contributions of less than dollar_figure are not subject_to the requirements of sec_170 regardless of whether the sum of the contributions made by a taxpayer to a donee organization during a taxable_year equals dollar_figure or more sec_1 170a- f income_tax regs petitioner contends that he gave cash on a regular basis to the church petitioner testified that his brother is the pastor of the church and that he petitioner is not a churchgoer petitioner testified that he was given a receipt from his brother’s church for his contributions but he did not produce the receipt at trial petitioner kept no contemporaneous_records of his claimed contributions only after receiving notification of an examination of hi sec_2002 and returns did petitioner prepare written lists of cash contributions given to the church petitioner admitted that the lists were not accurate and that he essentially divvied up the sum of his contributions into equal parts for each week of each year additionally the deductions claimed on petitioner’ sec_2002 and returns differ greatly compared to the sums he calculated on these lists petitioner also testified that he made contributions of approximately dollar_figure and dollar_figure but produced no written acknowledgments of these contributions by the donee and offered no reliable evidence of these alleged contributions such as canceled checks or receipts we find that petitioner failed to provide reliable evidence of his purported contributions and failed to meet his burden_of_proof we hold that respondent’s determinations disallowing petitioner’s claimed charitable_contribution deductions are sustained sec_6662 with respect to the accuracy-related_penalty under sec_6662 the commissioner has the burden of production sec_7491 to prevail the commissioner must produce sufficient evidence that it is appropriate to apply the penalty to the taxpayer 116_tc_438 once the commissioner meets his burden of production the taxpayer bears the burden of supplying sufficient evidence to persuade the court that the commissioner’s determination is incorrect id pincite as we have previously mentioned petitioner claimed deductions for charitable_contributions of dollar_figure for and dollar_figure for however the lists he offered at trial show contributions totaling only dollar_figure in and dollar_figure in sec_6662 provides an accuracy-related_penalty equal to percent of the underpayment required to be shown on a return due to negligence or disregard of rules or regulations sec_6662 for purposes of sec_6662 the term negligence includes any failure to make a reasonable attempt to comply with the provisions of the code and the term ‘disregard’ includes any careless reckless or intentional disregard sec_6662 negligence also includes any failure by a taxpayer to keep adequate books_and_records or to substantiate items properly sec_1_6662-3 income_tax regs an accuracy-related_penalty is not imposed with respect to any portion of the underpayment as to which the taxpayer acted with reasonable_cause and in good_faith sec_6664 see higbee v commissioner supra pincite this determination is made based on all the relevant facts and circumstances higbee v commissioner supra pincite sec_1_6664-4 income_tax regs relevant factors include the taxpayer’s efforts to assess his proper tax_liability including the taxpayer’s reasonable and good_faith reliance on the advice of a professional such as an accountant higbee v commissioner supra pincite petitioner has failed to keep adequate_records or to substantiate properly the items in question respondent has provided sufficient evidence to meet his burden of production petitioner has not produced evidence to prove that respondent’s determination of negligence is incorrect we hold that petitioner is liable for the accuracy-related_penalties under sec_6662 to reflect the foregoing decision will be entered under rule


department of the treasury _ internal_revenue_service washington d c e tax_exempt_and_government_entities_division re request_for_ruling on behalf of the plan a plan b dear gill lets uh h s -0o this letter is in response to your request for a ruling with respect to the creation of plan b and its effect on plan a you have asked us to rule on the following issues the establishment operation and funding of plan b will not cause plan a to lose its qualified status under sec_401 of the internal_revenue_code code contributions made to plan b if otherwise deductible will be deductible by the employers under sec_404 of the code employer payments to plan b of employer portions of applicable employment_taxes under sec_162 of the code in the taxable_year in which plan b disburses those payments to the applicable taxing authorities employer payments to plan b to reimburse plan b’s administrative expenses are deductible under sec_162 of the code in the taxable_year in which plan b disburses those payments to the administrative service providers this office can rule on issues and above however issues and aye outside of the purview of this office and must be referred to chief_counsel for ruling we have forwarded issues and to the associate chief_counsel tax exempt and government entities for their action facts according to the facts as stated in your ruling_request plan a is a qualified multiemployer defined benefit pension_plan operated under the employee_retirement_income_security_act_of_1974 as amended erisa plan a provides collectively-bargained pension benefits for its retiree-participants it is governed by a board_of trustees half of whom are union representatives and half of whom are employer representatives the benefits of participants in plan a are subject_to the maximum annual_benefit limitations of sec_415 of the code because some of plan a’s participants are or soon may be experiencing benefit reductions as a result of the limitations imposed by sec_415 the trustees have created plan b plan b is designed to provide on a nonqualified basis the additional benefits that a participant would receive under plan a if there were no benefit limitations under sec_415 plan b provides that on a monthly basis the administrator of both plan a and plan b will allocate a portion of total employer contributions to plan b this amount will consist of excess_benefits that cannot be paid under plan a because of the limitations imposed by sec_415 fica and futa taxes that would otherwise be payable on the excess_benefit and sufficient funds to pay all of plan b’s administrative expenses including attorneys’ fees accounting fees and any taxes payable by plan-b the remainder of the employer contributions will then be allocated to plan a upon receipt of the contributions by plan a they cannot be shifted to plan b plan b is intended to serve as a passthrough_entity for excess_benefit payments plan b will not permit any accumulation of assets a participant's benefit under plan b equals the amount payable under plan a that exceeds the amount limited by sec_415 of the code the amount under plan b is further increased to reflect employment_taxes due on that amount so that payments to the participant net of the employment_taxes are the same amounts the participant would receive if the amounts were not subject_to employment_taxes applicable law sec_3 of title of erisa provides that the term excess_benefit_plan means a plan maintained by an employer's diely for the purpose of providing benefits for certain employees in excess of the limitations on contributions and benefits imposed by sec_415 of the code on plans to which that section applies without regard to whether the plan is funded to the extent that a separable part of a plan as determined by the secretary of labor maintained by an employer is maintained for such purpose that part shall be treated as a separate plan which is an excess_benefit_plan sec_401 of the code provides that a qualified_plan must not provide for benefits or contributions that exceed the limitation of sec_415 sec_404 of the code provides deduction rules for contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan sec_404 provides that if contributions are paid_by an employer to or under a stock bonus pension profit-sharing or annuity plan or if compensation is paid_or_accrued on account of any employee under a plan deferring the receipt of such compensation such contributions or compensation are not deductible under that chapter but if they would otherwise be deductible they shall be deductible under that section subject however to the limitations in that section as to the amounts deductible in any year sec_404 provides that contributions or compensation deferred under a plan not included in sec_404 or are deductible in the taxable_year in which an amount attributable to the contribution is includible in the gross_income of the employees participating in the plan but in the case of a plan in which more than one employee participates only if separate_accounts are maintained for each employee sec_415 of the code provides limitations on benefits_and_contributions that may be provided under qualified_plans sec_415 provides limitations that qualified defined benefit plans must satisfy sec_415 provides in general that the annual_benefit a participant can receive under a qualified defined_benefit_plan must not exceed the lesser_of a specified dollar amount of percent of the participant's average compensation_for his high_three_years effective for plan years beginning after december the percent of average compensation limit does not apply to multiemployer plans the specified dollar amount effective date is dollar_figure sec_1_404_a_-12 of the income_tax regulations provides that in general a deduction is allowable for a contribution only in the taxable_year of the employer in which or with which ends the taxable_year of an employee in which an amount attributable to such contribution is includible in the employee's gross_income as compensation and then only to the extent allowable under sec_404 of the code in the case of a funded plan under which more than one employee participates no deduction is allowable under sec_404 of the code for any contribution unless separate_accounts are maintained for each employee sec_1 i -1 b of the income_tax regulations provides that for purposes of that section a plan is a single_plan if and only if on an ongoing basis all of the plan assets are available to pay benefits to employees who are covered by the plan and their beneficiaries t y rationale sec_401 of the code provides that a qualified_plan must satisfy sec_415 sec_415 provides limitations that benefits provided under a qualified defined_benefit_plan must satisfy thus where a participant's benefit under plan a’s benefit formula exceeds the limitation under sec_415 applicable to the participant adjusted as necessary for the commencement age and the form in which the benefit will be paid the participant's benefit under plan a must be limited reduced so that it does not exceed such limitation sec_3 of title of erisa provides that an excess_benefit_plan is a plan maintained by an employer solely for the purpose of providing benefits for certain employees in excess of the limitations under sec_415 of the code applicable to the employee without regard to whether the plan is funded plan b is intended to be an excess_benefit_plan under sec_3 of erisa sec_1 i -1 b of the regulations provides that a plan is a single_plan for purposes of that section if and only if all the plan assets are available to pay benefits to participants and beneficiaries the assets of plan a are not available to pay benefits under plan b and the assets of plan b are not available to pay benefits under plan a therefore plan a and plan b do not constitute a single_plan plan b is separate from plan a and provides benefits on a nonqualified basis which supplement the benefits that certain participants under plan a receive from plan a furthermore the benefit provided to a participant under plan b cannot be provided under plan a because it would cause the participant’s plan a benefit to exceed the limitation of sec_415 of the code thus the existence of plan b an excess_benefit_plan does not affect the status of plana -- sec_404 of the code provides the general deduction rules applicable to a stock_bonus_plan pension profit sharing or annuity plan or if compensation is paid_or_accrued on account of any employee under a plan or arrangement for deferring compensation regardless of the section of the code under which the amounts might otherwise be deductible pursuant to sec_404 contributions or compensation deferred under a nonqualified_plan or arrangement if otherwise deductible are deductible in the taxable_year in which an amount attributable to the contribution are includible in the gross_income of the employees participating in the plan but in the case of a plan in which more than one employee participates only if separate_accounts are maintained for each employee sec_1_404_a_-12 of the regulations provides that the deduction is allowable for contributions paid only in the taxable_year in which or with which ends the taxable_year of an employee in which an amount attributable to the contribution is includible in his or her income as compensation and then only to the extent allowable under sec_404 of the code because employees who participate in plan b are fully vested in their benefits when employer contributions are made and separate_accounts are maintained for each employee each employer who participates in plan b is entitled to the deduction under sec_404 of the code in an amount equal to the amount included in income by their respective employees assuming all other requirements for deductibility are met the deduction is allowable in the taxable_year in which or with which ends the taxable_year of the employee in which the amount is includible in the employee’s income as compensation holdings the establishment operation and funding of plan b will not cause plan a to lose its qualified status under sec_401 of the internal_revenue_code code contributions made to plan b if otherwise deductible will be deductible by the employers under sec_404 of the code this ruling is directed only to the taxpayer that requested it sec_61 k of the internal_revenue_code provides that it may not be used or cited by others as precedent this letter does not consider the more general issue of plan a’s qualified status specifically whether plan a complies with all the requirements under the code for qualification this letter addresses only the impact if any of the adoption and funding of plan b on the purportedly otherwise qualified status of plan a additionally except as specifically ruted above no opinion is expressed regarding the subject transaction under any provision of the code including the consequences to participants under sec_83 and sec_402 of the code moreover we express no opinion regarding the federal employment_tax aspects of the transaction described above if you require further assistance in this matter please contact sincerely yours tletten upped martin l pippins manager employee_plans actuarial group