internal_revenue_service oct number info release date uilc cc p si 1-cor-117930-00 we are responding to your correspondence requesting relief in order to establish date as the effective date for your s_corporation_election the information submitted explains that your former accountant had indicated to you that your election was timely and accepted no proof of timely mailing was provided by your former accountant based on internal_revenue_service records it appears that your original election was never received although we are unable to respond to to your request as submitted this letter provides useful information based on the instructions to form_2553 taxpayers are generally notified of acceptance or nonacceptance of their election within three months of date of filing_date mailed if the irs questions whether the election was filed acceptable proof of filing is a certified or registered mail receipt b form_2553 with an accepted stamp c form_2553 with stamped irs received date or e an irs letter stating the election has been accepted announcement copy enclosed provides guidance on seeking relief for late s_corporation elections and inadvertent invalid s_corporation elections generally to request relief for a late or invalid s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a private_letter_ruling are set out in revproc_2000_1 copy enclosed in addition revproc_2000_1 requires taxpayers to submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their last-filed tax_return qualify for a reduced user_fee in the amount of dollar_figure if you are eligible to pay the reduced fee a statement certifying your gross_income must accompany your request otherwise you will be billed for the higher fee please review appendix b for a sample format for requesting a private_letter_ruling if you decide to submit a formal request for a private_letter_ruling please provide documents supporting your intention to be an s_corporation from inception and include the proper user_fee please refer your request to our office by adding the following to the address attn cc p a p o box ben franklin station washington dc direct to cc psi b1 room please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2000_1


t c memo united_states tax_court horace m chambers petitioner v commissioner of internal revenue respondent docket no filed date horace m chambers pro_se daniel j parent for respondent memorandum findings_of_fact and opinion gerber judge in a notice_of_deficiency addressed to petitioner respondent determined deficiencies and additions to tax as follows additions to tax_year deficiency sec_6651 a sec_6651 a sec_6654 dollar_figure dollar_figure s485 dollar_figure big_number - after concessions ’ the issues for our consideration are whether petitioner must include in his income wages in the amount of dollar_figure and dollar_figure for tax years and respectively that he earned as a civilian employee of the department of defense whether petitioner can exclude from his wage income dollar_figure and dollar_figure that were garnished from his wages during and respectively to pay court ordered alimony and child_support whether petitioner is entitled to deduct dollar_figure and dollar_figure in alimony that he paid during the and tax years respectively and whether petitioner is liable for additions to tax under sec_6651 a and for the and tax years findings_of_fact petitioner resided pincite ellis lake drive marysville california at the time he filed his petition ' petitioner has conceded he failed to report interest_income of dollar_figure and dollar_figure for the and tax years respectively he failed to report dividend income of dollar_figure for the tax_year and he failed to report the sale of stock totaling dollar_figure for the tax_year respondent concedes that petitioner had a basis of dollar_figure in the stock and that petitioner had a capital_loss of dollar_figure in unless otherwise indicated section references are to the internal_revenue_code in effect for the years at issue and rule references are to the tax_court rules_of_practice and procedure the stipulation of facts and the exhibits attached thereto are incorporated herein by this reference - - petitioner failed to file federal_income_tax returns for the and tax years during and petitioner was employed as a budget analyst by the department of defense petitioner earned wages in the amount of dollar_figure in and dollar_figure in in date petitioner separated from his wife and in date the parties entered into a marital settlement agreement that resolved numerous issues related to child custody visitation child_support identification and division of community assets and obligations and disposition of the family residence on date an agreement was filed as a stipulated judgment the nevada county superior court ordered petitioner to pay both child and spousal support petitioner appealed the superior court’s rulings regarding child and spousal support to the court_of_appeals of the state of california third appellate district the appellate court affirmed the nevada county superior court’s judgment petitioner was reguired to pay both alimony and child_support but failed to pay either petitioner’s wages were garnished from his employer by the nevada county family support division to pay the child_support and spousal support during dollar_figure was garnished from petitioner’s wages for alimony and dollar_figure was garnished for child_support during dollar_figure was garnished from petitioner’s wages for alimony and dollar_figure was garnished for child_support q4e- opinion we must decide whether petitioner must include in his income wages of dollar_figure and dollar_figure for the and tax years respectively and whether petitioner may exclude from his income amounts that were garnished from his wages during and to pay court ordered alimony and child_support whether petitioner is entitled to deduct amounts that he paid in alimony in and and whether petitioner is liable for any additions to tax under sec_665l1 a a or i income sec_61 provides that gross_income includes all income from whatever source derived subsection a specifically provides that compensation_for services is included in income see also 348_us_426 sec_1_61-2 income_tax regs petitioner was a civilian employee of the department of defense and earned gross wages of dollar_figure in and dollar_figure in accordingly petitioner is required to include these amounts in his taxable_income for the and tax years respectively petitioner argues that he should not be required to include in his taxable_income amounts that were garnished from his wages petitioner contends that he is a cash_basis taxpayer and never had control of the amounts that were garnished and his civil rights were violated during his divorce proceedings it is well established that income from personal services - - must be included in the gross_income of the person who renders the services see 281_us_111 even if a taxpayer delivers the payor’s check to a third party before cashing the check income earned by the taxpayer for services rendered must be included in gross_income see 551_f2d_208 8th cir moreover if the taxpayer caused the check to be issued directly to the third party the taxpayer must include the compensation in gross_income see hicks v commissioner tcmemo_1982_200 affd 718_f2d_1110 9th cir lack of control_over the earnings does not justify exclusion of earnings from the employee’s gross_income used to pay an obligation of the employee see 69_tc_675 an employer’s payment of an obligation of the taxpayer is equivalent to the taxpayer’s receipt of the income in the amount_paid see 279_us_716 minor v commissioner tcmemo_1998_237 where the transfer of funds at least partially discharges a legal_obligation of the taxpayer the transfer is equivalent to receipt by the taxpayer see 311_us_112 the fact that the transfer is involuntary such as by garnishment has no significance see vorwald v commissioner tcmemo_1997_15 taxpayer was required to include in income as a distribution from his ira amounts transferred from his ira to his former spouse in a garnishment proceeding -- - petitioner’s wages were garnished to pay court ordered alimony and child_support the garnished funds were paid to satisfy a legal_obligation owed by petitioner petitioner’s gross wages are taxable to him regardless of whether he received the funds and then used them to pay his alimony and child_support_obligations or whether his employer paid the funds directly in satisfaction of petitioner’s alimony and child_support_obligations thus the amounts garnished from petitioner’s wages during the and tax years are not excludable from petitioner’s income petitioner also argues that he was the victim of racial discrimination and denied due process during his divorce proceedings petitioner contends that he should not owe any_tax liability on money that in his view was garnished in violation of his civil rights this court however lacks the jurisdiction to address petitioner’s allegations regarding civil rights violations that may have occurred during his divorce proceedings in state court child and spousal support determinations are matters of local law and we are not permitted to reassess the merits of those judgments see eg 300_us_5 although petitioner may not agree with the state court ruling regarding his alimony and child_support_obligations he has not shown a basis for excluding the garnished wages from his taxable_income ti deductions sec_215 provides that an individual shall be allowed a deduction in an amount equal to the alimony or separate_maintenance payments paid during the taxable_year petitioner paid alimony as defined under sec_71 in the amounts of dollar_figure and dollar_figure during and respectively respondent concedes that assuming petitioner is required to include in income the amounts garnished to pay alimony he is entitled to deduct those amounts paid as alimony accordingly petitioner is entitled to a deduction in the amount of dollar_figure for and dollar_figure for tiil additions to tax we now address whether petitioner is liable for additions to tax for failure_to_file tax returns under sec_6651 failure to make timely payment of taxes under sec_6651 and failure by an individual to pay estimated income_tax under sec_6654 petitioner bears the burden of we note that payments made to support children do not gualify as alimony see sec_71 sec_1_71-1t income_tax regs fed reg date accordingly petitioner is not entitled to a deduction in or for amounts paid for child_support in his brief respondent states that the sec_6651 a addition_to_tax for was erroneously included in the notice_of_deficiency and concedes that there is no addition_to_tax under this section for the tax_year respondent is relying on sec_6651 which is effective for returns with a due_date after date accordingly the sec_6651 addition_to_tax is at issue only with regard to the tax_year - proving respondent’s determination is in error see rule a a additions to tax under sec_665l1 a and sec_6651 provides for an addition_to_tax of percent of the tax required to be shown on the return for each month or fraction thereof for which there is a failure_to_file not to exceed percent sec_6651 provides for an addition_to_tax of percent per month up to percent for failure to pay the amount shown or required to be shown on a return a taxpayer may be subject_to both sec_6651 and in which case the amount of the addition_to_tax under sec_6651 is reduced by the amount of the addition_to_tax under sec_6651 for any month to which an addition_to_tax applies under both paragraphs and the combined amounts under paragraphs and cannot exceed percent per month see sec_6651 to avoid the additions to tax for filing late returns a taxpayer bears the burden of proving both that the failure_to_file did not result from willful neglect and that the failure_to_file was due to reasonable_cause see 469_us_241 if the taxpayer does not meet this burden the imposition of the addition_to_tax is mandatory see 32_tc_479 affd 283_f2d_227 8th cir petitioner admits that he failed - to file his and income_tax returns but has presented no evidence as to why he should not be liable for the addition_to_tax for failure_to_file petitioner has also failed to show that his failure to pay was due to reasonable_cause cf 98_tc_294 accordingly we sustain the determinations of respondent with respect to the sec_6651 and additions to tax taking into account respondent’s concession regarding the sec_6651 determination for the tax_year b additions to tax under sec_6654 sec_6654 requires the imposition of an addition_to_tax in the case of any underpayment of estimated_tax by an individual see 33_tc_1071 this addition_to_tax is mandatory absent a showing by the taxpayer that one of the statutorily provided exceptions applies see 75_tc_1 petitioner introduced no evidence as to the applicability of any such exceptions and accordingly we sustain respondent’s determinations with respect to sec_6654 we have considered all other arguments advanced by the parties and to the extent that we have not addressed these arguments we consider them irrelevant moot or without merit -- - to reflect the foregoing and concessions of the parties decision will be entered under rule


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person telephone number identification_number employer_identification_number release number release date date date uil legend t z dear letter of date requesting a ruling under sec_4947 of the internal_revenue_code ordinary complex_trust taxable under sec_661 et seq of the code t has represented that it has filed income_tax returns and paid taxes in accordance with those provisions same transaction that is the subject of this present ruling that earlier ruling held this is in response to your letter dated date as supplemented by your t was created by a_trust instrument dated z t has described itself as an not long ago t received a ruling from the internal_revenue_service regarding the income of t paid for a purpose specified in sec_170 will be paid pursuant to the terms of t and t will be entitled to a deduction under sec_642 in computing taxable_income of distributions of t gross_income paid to qualified charitable organizations presently t has the power under the terms of its trust instrument to distribute part or all of t’s income to charitable organizations as selected by its trustees thus t proposes from time to time to distribute its income for charitable purposes in its ruling_request t made the following representation t is not exempt from tax under sec_501 of the code and a deduction has not been allowed under sec_170 sec_545 sec_642 sec_2055 sec_2106 or for any amounts contributed or retained in the trust t t has not permanently set_aside any amounts for a purpose specified in sec_170 any trust income distributed in accordance with the terms of the trust to one or more charitable organizations will be distributed free of trust t has requested the following ruling ruling requested the distribution of t’s income to charitable organizations in the exercise of the trustees power to make discretionary distributions will not result in the characterization of t as a split interest trust under sec_4947 of the code law and analysis sec_4947 of the code provides in substance that in the case of a_trust which is not exempt from tax under sec_501 not all of the unexpired interests in which are devoted to one or more of the purposes described in sec_170 and which has amounts in trust for which a deduction was allowed under sec_170 sec_545 sec_556 sec_642 sec_2055 sec_2106 or sec_2522 certain private_foundation rules will be applicable to such split-interest_trusts including sec_4941 of the code based on the representations made by t in its ruling_request we understand that t is not exempt from tax under a of the code and further t does not hold amounts in trust devoted to charitable purposes for which as deduction was previously allowed under sec_170 sec_545 sec_556 sec_642 sec_2055 sec_2106 or sec_2522 conclusion follows accordingly based on the facts and representations submitted we rule as the distribution of t’s income to charitable organizations in exercise of the trustees’ power to make discretionary distributions will not result in t being described as a_trust coming under or within the provisions of sec_4947 of the code this ruling is based on the facts as they were presented and on the this ruling is directed only to the organization that requested it section we express no opinion of the tax consequences to t under any other section of this ruling will be made available for public inspection under sec_6110 of the the code code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice k of the code provides that it may not be used or cited by others as precedent understanding that there will be no material changes in these facts because it could help resolved questions concerning your federal_income_tax status this ruling should be kept in your permanent records being sent to your authorized representative name and telephone number are shown in the heading of this letter enclosure notice robert c harper jr manager exempt_organizations technical group if you have any questions about this ruling please contact the person whose pursuant to a power_of_attorney on file with this office a copy of this ruling is sincerely


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date legend n date dear contact person identification_number contact number fax number employer_identification_number uil we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below issue sec_1 do your activities constitute substantial non-exempt purposes which cause you to fail the operational_test and disqualifies you from exemption under sec_501 of the code yes for the reasons described below do the payments for the personal expenses of your founder constitute inurement disqualifying you from exemption under sec_501 of the code yes for the reasons described below facts you were incorporated in the state of m on n date you were previously granted exemption under sec_501 of the code your exemption was revoked due to non-filing of form_990 for three tax years accordingly you submitted this new form_1023 application_for recognition of exemption your articles of incorporation state that your purposes include church telemarketing social services shelter for battered women drug alcohol rehab club 12step program halfway housing for men and women rehab program your officers are four persons with the same last name c is listed as the program director the other three listed officers have been identified as uncles of c none of these three officers spend hours working for you at this time they are business men who you identified as your advisors you reported estimated compensation to be paid to c as your program director and the other officers but to date no one has received any compensation as an officer_or_employee you explained that the proposed salaries for c and the other officers are dream compensation in the event your operations expand to the point where enough revenue is generated to permit these payments to date you also stated that you have not received adequate funding to conduct the activities enumerated in your articles of incorporation c is your sole contributor c’s contributions are primarily payments for her services as a personal assistant to clients through m’s home service programs m deposits c’s earnings into your checking account review of your bank statements found you issued checks to pay loans and repair expenses associated with c’s vehicle you made disbursements to pay c’s student loans and help c’s daughter who is in college you pay for phone lines in c’s home and a phone line in another city about dollar_figure is paid on a rent-to-own_contract for a small building which serves as your office according to bank statements small purchases were made at gas stations a liquor store a tobacco outlet car rental agencies beauty supply outlets and a restaurant there were also several atm withdrawals and many checks written throughout the years numerous overdraft fees were incurred and paid_by you when asked to explain the monthly payments of almost dollar_figure made to the u s department of education you stated was trying to pay on a student_loan the people who was paying was sic not telling me the truth about the program desire to go back to school to finish my degree in business so was paying them in order to go back to school but they lied to me about their program my organization will help people go to an sic higher learning institution if they choose to go back to college when asked to provide a list of your activities you reported that c has provided assistance to to teens with room and board and serves as godmother for children in addition c provides christmas and birthday gifts to less fortunate children baby supplies for unwed mothers food for employees once a year clothes for the women’s shelter tax preparation assistance shared with neighbors when they were in need and assistance and transportation to the elderly church members and unemployed you were instructed to include detailed information concerning each of your activities you have not provided any of the requested details you did not describe how the public is made aware of your services you have not explained the methods used to select persons who received assistance you have not provided any records to substantiate the time required or the dates and costs associated with these activities you stated that this is a private family organization created by c in order to leave some type of legacy for my kids and grandchildren in your date response you stated c am d you law sec_501 of the code describes corporations organized and operated exclusively for charitable purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the regulations states that in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in such section test it is not exempt if an organization fails to meet either the organizational_test or the operational sec_1_501_a_-1 of the regulations provides that the terms private_shareholder_or_individual in sec_501 refer to persons having a personal and private interest in the activities of the organization sec_1_501_c_3_-1 of the regulations provides that an organization 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 of the code an organization will not be so regarded if more than an insubstantial part of its activities in not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the regulations provides that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals as defined in sec_1 a -1 c sec_1_501_c_3_-1 of the regulations provides that an exempt_organization must serve a public rather than a private interest the organization must demonstrate that it is not organized or operated to benefit 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 thus if an organization is operated to benefit private interests rather than for public purposes or is operated so that there is prohibited inurement of earnings to the benefit of private shareholders or individuals it may not retain its exempt status in revrul_78_232 1978_1_cb_69 held that a church is operated for the private purposes of the taxpayer and thus is not operated exclusively for religious or other charitable purposes where an individual who claims to be a minister organizes a church deposits checks for salary earned from outside employment in the church's bank account and uses the funds of the account for lodging food clothing and other living_expenses the court concluded that the taxpayer had retained complete control and enjoyment of the church's money revrul_81_94 1981_1_cb_330 determined that a church that was formed by a professional nurse who is also the church's minister director and principal officer and that is used primarily as a vehicle for handling the nurse's personal financial transactions is not exempt from tax under sec_501 c of the code all salary payments received from the nurse’s third-party employer were deposited in a bank account maintained in the name of the corporation in return all of the nurse's existing liabilities such as a home mortgage and all outstanding credit card balances were assumed by the corporation the nurse was also provided with a full living allowance sufficient to maintain or improve the nurse's previous standard of living the corporation permitted the nurse to use the house and automobile for personal purposes in kj's fund raisers v commissioner t c memo affid 166_f3d_1200 2d cir the tax_court held and the second circuit affirmed that an organization formed to raise funds for distribution to charitable causes did not qualify for exemption under sec_501 because its activities resulted in substantial private benefit to its founders in reaching this conclusion the court found that the organization could not operate without its original founders therefore the officers were free to set policy for their own benefit without objection from the board in 73_tc_196 aff'd without op f 2d736 cir cert den 450_us_981 the tax_court held that although separate requirements the private_inurement test and the operated exclusively for exempt purposes test often overlap substantially the court concluded that organization had failed the inurement of net_earnings test because the organization was unable to definitively document its financial dealings due to inadequate records the court also concluded that the organizations activities were more personal than church oriented because the founder selected the individuals who allegedly received the money from the checks written on its bank account to cash the founder testified that the individuals selected were people whom he personally knew to be in need of funds in its decision the court pointed out that the grants were not made in an objective and nondiscriminatory manner based on established criteria the court stated that grants made on a personal basis do not constitute exempt activity in 74_tc_507 it was held that the prohibition against inurement or private benefit is absolute the amount or extent not being determinative the court found that the petitioner's financial decisions were controlled by x one of petitioner's ministers and his wife x received widely fluctuating parsonage allowances over a 3-year period as compensation_for leading services and for being available for pastoral counseling there was no evidence in the administrative record of any differing duties that he performed over these years there was insufficient evidence in the record regarding some of the travel_expenses paid to x and his wife and regarding two loans made to x's secular employer parsonage allowances of fluctuating amounts were paid in some years to petitioner's other two ministers yet there was no evidence in the record about any services they performed for petitioner the tax_court concluded that petitioner was not entitled to exemption because a part of its net_earnings inures to the benefit of private shareholders or individuals application of law sec_501 of the code and sec_1 c -1 a of the regulations sets forth two key tests for qualification for exempt status an organization must be organized and operated exclusively for purposes described in sec_501 of the code sec_501 and the regulations are clear in denying exemption when an organization operates to benefit the private interests of the persons who are in control of its income and activities ample clarification and reinforcement for this concept is provided by revenue rulings and court decisions like the organizations described in revenue rulings and c’s income is deposited into your bank accounts she maintains sole control_over those bank accounts and you pay her debts with your funds you are similar to kj’s fund raisers because you would be unable to continue to operate without your founder c as a result c is in complete control of you and your assets she is free to spend money to pay personal expenses without objection from the board your operations resemble those of western catholic church in your inability to furnish definitive documentation of your financial dealings additional similarities are found in the fact that all your officers are related and none of your officers or board members other than c is actively involved in your governance or operations like the founder of western catholic c personally selected the individuals who would be helped by your organization based on her own circle of family friends and acquaintances finally like unitary mission church you have not provided sufficient evidence regarding the charitable purpose of your expenditures and there is no detailed information about the charitable services c claims to have performed throughout the application process you have stated emphatically that you are a private family_foundation which was formed to leave some type of legacy for c’s children and grandchildren you made payments for c’s truck and student loans you helped c’s daughter and made numerous small purchases your debit card and bank account were used regularly by c for personal purposes you like the organizations described in the revenue rulings and court cases have failed the operational_test because you have allowed your income to inure to the benefit of your founder c applicant’s position in response to our assertion that you failed the operational_test you stated maybe have questioned perhaps you all have classified me under the wrong exempt status this before you also said i have also informed you of that because only have had a total of clients since and at this present time only have client that only get hrs a week to work for you went on to say with the office expense and keeping me on the road to take care of this government client how do you or anyone else expect for me to start a business and am not suppose to be the one to start it you said this is a very personal organization if must say so myself you continued by stating am avery generous person to people who know without a shadow of a we feel real peoples sic personal needs and we enjoy doing that when you help people it should be a personal thing all doubt are having serious issues believe in what am doing in the community live in and on the job that work to keep the organization stay alive sic for a lifetime working with you all are the experts at this really believe that should be classified as a public charity but its sic very hard with no help would think or why choose to help at just do the best that can with what i’m you stated you are in the process of changing the board_of directors due to the fact that of them are deceased at this time and that the others sic ones are getting to s c old to be involved you are presently speaking to certain people who think would be interested in helping you are a very selective person and am not in any hurry or should be you said to check your records or do the research on the program director before you assume of me sic please service response to applicant’s position you did not explain or substantiate your position using citations of legal precedent as we requested rather your response emphasized the fact that c considers the organization her personal business although you say you are currently considering other individuals to serve on your board your past activities and your operations are such that the service position is unchanged by your response you do not qualify for exemption under sec_501 of the code conclusion based on the above facts and law we have concluded that you have failed to operate exclusively for purposes described in sec_501 of the code because you serve the private benefit of c and her family and the payment of the personal expenses of c constitutes prohibited inurement you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues types of information that should be included in your appeal can be found on page of publication under the heading regional_office appeal item must be accompanied by the following declaration the statement of facts under penalties of perjury declare that have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete the declaration must be signed by an officer or trustee of the organization who has personal knowledge of the facts your appeal will be considered incomplete without this statement if an organization’s representative submits the appeal a substitute declaration must be included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications lf you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if we do not hear from you within days we will issue a final adverse lf you do not intend to protest this determination you do not need to take any further action determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you may fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois g lerner director exempt_organizations enclosure publication notice redacted copy of this letter


internal_revenue_service number release date index no cc psi plr-118219-00 in re legend ph dear this responds to your date request for a ruling whether ph is eligible for a credit or refund under sec_6416 of the internal_revenue_code of the excise_tax it pays on gasoline under the circumstances described below the following facts and representations have been submitted in the request ph is a position_holder with respect to gasoline in a terminal ph proposes to enter into an agreement agreement with a wholesale_distributor of gasoline wholesaler and a credit card issuer issuer under which certain state and local governments and nonprofit educational organizations state would use issuer’s card to buy gasoline for its exclusive use from wholesaler as a condition to receiving a card from issuer state would provide issuer a statement that contains the substance of the certificate of ultimate_purchaser described in sec_48_6416_b_2_-3 of the manufacturers and retailers excise_tax regulations state also would provide issuer a statement that it will not claim a refund under sec_6421 relating to the gasoline under the agreement ph would sell gasoline to wholesaler at a tax-included price when the gasoline is removed from the terminal at the terminal rack ph would pay the tax to the government on this removal wholesaler would sell the gasoline to state state would buy the gasoline using issuer’s card state would pay issuer the pump price for the gasoline less the amount of the federal excise_tax issuer would pay ph the pump price for the gasoline less the amount of the federal excise_tax ph would pay wholesaler the pump price for the gasoline which includes the amount of the federal excise_tax ph would claim a credit or refund and include with its claim the evidence required by sec_48_6416_a_-3 and a statement supported by sufficient available evidence that satisfies the requirements of sec_48_6416_b_2_-3 sec_4081 imposes a tax on certain removals entries and sales of gasoline sec_6402 provides the authority of the irs to credit any overpayment against any liability in respect of an internal revenue tax on the part of the person that made the overpayment and to refund the balance to that person sec_6416 provides that the tax paid under sec_4081 on gasoline is deemed to be an overpayment if the gasoline was sold to a state_or_local_government or nonprofit_educational_organization for its exclusive use sec_6416 provides that a wholesale_distributor that buys gasoline on which the sec_4081 tax has been paid and that sells the gasoline to its ultimate_purchaser is treated as the person and the only person that paid the tax to the government sec_6416 was added to the code by the technical_and_miscellaneous_revenue_act_of_1988 pub l the act the conference_report to this legislation notes that the provision is limited to cases where the gasoline is purchased tax-paid by a wholesale_distributor who sells the fuel directly to a state or other exempt purchaser h_r conf_rep no pincite 1988_3_cb_473 pincite notice_89_29 1989_1_cb_669 provides guidance with respect to the application of sec_6416 the sixth paragraph of notice_89_29 provides that if a wholesale_distributor purchases gasoline at a price that includes the tax sells such gasoline directly to the ultimate_purchaser for an exempt_purpose and meets the other requirements of sec_6416 of the code and this notice then the wholesale_distributor is treated as the person who paid the tax to the government and is the only person eligible to claim a credit or refund under sec_6416 in such a case the person that actually paid the tax on the gasoline is not eligible to claim the credit or refund however if the tax is not included in the price of the gasoline purchased by the wholesale_distributor or the gasoline is not sold directly to the ultimate_purchaser by the wholesale_distributor then only the person who actually paid the tax to the government may file a claim under sec_6416 the ninth paragraph of the notice provides that i n order for the wholesale_distributor to obtain a credit or refund under sec_6416 of the code for gasoline sold to an ultimate_purchaser the wholesale_distributor must submit a statement that it sold the gasoline at a price that did not include the tax and did not otherwise collect the amount of the tax from a purchaser and obtain a certificate of ultimate_purchaser as described in sec_48 b -3 b of the regulations the gasoline in question would be sold to state for its exclusive use thus under sec_6416 the tax paid on the gasoline would be deemed to be an overpayment under sec_6402 a credit or refund is to be allowed to the person that made the overpayment that is the person that paid the tax to the government under sec_6416 however the wholesale_distributor that buys gasoline on which the tax has been paid is treated as the person that paid the tax to the government if the wholesale_distributor sells the gasoline to the ultimate_purchaser ph argues that under notice_89_29 wholesaler should not be treated as the person that paid the tax and that it ph would be the proper person to claim a credit or refund of the tax on gasoline sold to state ph notes that the ninth paragraph of notice_89_29 provides that for a wholesale_distributor to obtain a credit or refund the wholesale_distributor must submit a statement that it sold the gasoline at a price that did not include the tax and did not otherwise collect the amount of the tax from the buyer in this case wholesaler would not be able to submit that statement because wholesaler would have sold gasoline to state at a price that included the amount of the tax that is the pump price and wholesaler eventually would receive the actual pump price from ph because wholesaler would not meet these requirements of notice_89_29 ph concludes that wholesaler would not be eligible to claim a credit or refund and thus ph would be eligible ph is incorrect the ninth paragraph in notice_89_29 describes the procedural requirements that a wholesale_distributor must follow to obtain a credit or refund if the wholesale_distributor is treated as the person that paid the tax to the government however it must first be determined whether a wholesale_distributor is to be so treated the first sentence of the sixth paragraph in notice_89_29 provides that a wholesale_distributor is treated as the person that paid the tax to the government and is the only person eligible to claim a credit or refund under sec_6416 if the wholesale_distributor buys gasoline at a price that includes the tax sells the gasoline directly to the ultimate_purchaser for an exempt_purpose and meets the other requirements of sec_6416 and the notice the first two requirements which reflect the provisions of sec_6416 and the conference_report to the act state the substantive requirements for treating a wholesale_distributor as the person that paid the tax to the government the third requirement simply states the procedural requirements that a wholesale_distributor that meets the first two must satisfy in order to obtain a credit or refund this analysis is supported by the last sentence of the sixth paragraph which provides that the person that actually paid the tax to the government such as a position_holder may file a claim under sec_6416 if the tax is not included in the price of the gasoline purchased by the wholesale_distributor or the gasoline is not sold directly to the ultimate_purchaser by the wholesale_distributor in this case wholesaler would buy gasoline at a price that includes the tax and sell the gasoline directly to the ultimate_purchaser for an exempt_purpose thus wholesaler would be treated as the person and the only person that paid the tax to the government this conclusion is not changed by the fact that wholesaler might not meet the procedural requirements for obtaining a credit or refund accordingly we conclude that based on the facts and representations that have been submitted with the request ph would not be eligible to claim a credit or refund under sec_6416 of the excise_tax it pays on gasoline under the circumstances described above because wholesaler and not ph would be treated as the person that paid the tax to the government this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in the letter_ruling see dollar_figure of revproc_2000_1 2000_1_irb_4 pincite however when the criteria in dollar_figure of revproc_2000_1 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances sincerely associate chief_counsel passthroughs and special industries by ruth hoffman senior technician reviewer branch enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number 280g -------------------------- --------------------------- ----------------------------------- in re --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- telephone number --------------------- refer reply to cc tege eb ec plr-126792-07 date december taxpayer --------------------------- owner trusts ------- ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------------------------------------- this letter is in response to a request for a private_letter_ruling filed on may dear ---------------- requesting a ruling on whether taxpayer meets the definition of a small_business_corporation for purposes of sec_280g of the internal_revenue_code_of_1986 as amended code and sec_1_280g-1 q a-6 a of the income_tax regulations regulations taxpayer is a privately-held corporation taxpayer is entirely owned by the owner family through the trusts taxpayer represents that it is a domestic_corporation that is not an ineligible_corporation within the meaning of sec_1361 of the code and it has never had in effect an election to be treated as an s_corporation under sec_1362 taxpayer further represents that it meets the definition of a small_business_corporation described in sec_1361 c and d taxpayer further represents that a an election under sec_1361 to be an electing_small_business_trust esbt has never been filed by been in effect for or applied to any of the trusts b the trusts have never been and currently are not trusts described in clauses i ii iii iv or vi of sec_1361 and c the trusts have never owned and currently do not own any stock in any s_corporation taxpayer also represents that each of the trusts a meets plr-126792-07 the requirements for the definition of an esbt in clauses i and ii of sec_1361 and b is not a_trust described in subparagraph b of sec_1361 taxpayer has entered into agreements that would provide for payments to a number of its employees that would constitute parachute payments under sec_280g of the code taxpayer represents that none of such employees is a a shareholder of taxpayer b a trustee or beneficiary of the trusts or c a member of or related to the owner family taxpayer has requested a ruling that for purposes of sec_280g of the code and the applicable regulations taxpayer is a small_business_corporation as defined in sec_1361 without regard to paragraph c thereof sec_280g of the code provides that no deduction will be allowed for any excess_parachute_payment sec_280g defines the term excess_parachute_payment as an amount equal to the excess of any parachute_payment over the portion of the base_amount as defined in sec_280g allocated to such payment sec_280g of the code defines the term parachute_payment as any payment in the nature of compensation to or for the benefit of a disqualified_individual if such payment is contingent on a change in the ownership or effective_control of the corporation or in the ownership of a substantial portion of the assets of the corporation a change in control and the aggregate present_value of the payments in the nature of compensation to or for the benefit of such individual that are contingent on such change equals or exceeds an amount equal to three times the base_amount as defined in sec_280g sec_280g of the code provides that a parachute_payment does not include any payment to a disqualified_individual with respect to a corporation that immediately before a change in control is a small_business_corporation as defined in sec_1361 but without regard to paragraph c of that section sec_1_280g-1 q a-6 a of the regulations provides that a parachute_payment does not include any payment to a disqualified_individual with respect to a corporation that immediately before the change in control would qualify as a small_business_corporation as defined in sec_1361 of the code without regard to paragraph c of that section without regard to whether the corporation had an election to be treated as a corporation under sec_1361 in effect on the date of the change in control sec_4999 of the code imposes on any person who receives an excess_parachute_payment an excise_tax equal to percent of the amount of such payment plr-126792-07 under sec_1361 of the code a corporation is not a small_business_corporation if it has as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 of the code provides that certain trusts may be shareholders of an s_corporation including an esbt sec_1361 of the code defines an esbt sec_1361 provides that except as provided in sec_1362 an esbt means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in sec_170 or or iv an organization described in sec_170 that holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee sec_1_1361-1 of the regulations provides in general that the trustee of an esbt must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of sec_1_1361-1 based upon the facts submitted and the representations made taxpayer is eligible to make an s_corporation_election and in conjunction therewith if taxpayer made an s_corporation_election each of the trusts would be eligible to make esbt elections accordingly we rule that taxpayer is a small_business_corporation as defined in sec_1361 of the code without regard to paragraph c thereof for purposes of sec_280g and regulation sec_1_280g-1 q a-6 a a copy of this letter must be attached to any of your income_tax returns to which it is relevant except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-126792-07 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a properly executed penalty of perjury statement while this office has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination sincerely yours william c schmidt senior counsel executive compensation branch office of division counsel associate chief_counsel tax exempt and government entities


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date conex-111943-09 uil --------------------------- ----------------------------- ------------------------------- dear ---------------- thank you for your letter of date to commissioner douglas shulman about guidance on the tax consequences to victims of the investment fraud mr bernard l madoff perpetrated on date we issued guidance revrul_2009_9 and revproc_2009_20 on the tax treatment of losses from so-called ponzi schemes similar to that mr madoff operated i am enclosing copies for your information revrul_2009_9 explains the income_tax law that applies to an investor who loses money in a fraudulent investment arrangement it provides that an investor who was the victim of a fraudulent investment arrangement is entitled to a theft_loss deduction that is not limited by the rules that apply to capital losses investment theft losses are not subject_to limitations that apply to personal casualty and theft losses the theft_loss is deductible in the year the fraud is discovered except to the extent the investor has a reasonable_prospect_of_recovery the amount of the theft_loss includes not only the investor's unrecovered investment but also amounts reported as income from the investment in prior years and reinvested in the fraudulent investment arrangement a theft_loss deduction that creates a net_operating_loss for the investor can be carried back and forward according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years conex-111943-09 to claim a theft_loss deduction in any taxable_year an investor must prove that the loss was due to theft and that no reasonable prospect exists of recovering the investment investors often cannot make highly factual determinations with certainty in the year the loss is discovered for this reason we published revproc_2009_20 to provide a simplified_method for investors to compute and report their losses from fraudulent investment schemes this revenue_procedure generally allows an investor who was a victim of mr madoff’s fraud to claim a theft_loss in the amount the investor may deduct is up to percent of the loss less the amount of reimbursement he or she expects to receive as an advance for customer claims from the securities investor protection corporation sipc or from private insurance or other contractual arrangements that guarantee the investor against loss i hope this information is helpful if you have any questions please call me or ------------- ------------- office_of_chief_counsel income_tax and accounting division at ---------------- ---- sincerely john p moriarty chief branch income_tax and accounting enclosures