internal_revenue_service number release date index number ------------------------------------------------------------ -------- ---------------------------------------------- ------------------------- ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------- id no ------------- ----------------- telephone number ---------------------- refer reply to cc psi plr-124091-16 date date legend x state date date date a_trust year ------------------------------------------------------------------------------------------------- -------------------------------- --------------------- ---------------------------- --------------------------- ------------------------ ---------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- -------------------------------------- ------- dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to make an election under sec_754 of the internal_revenue_code facts according to the information submitted x was formed as a partnership under the laws of state and became a limited_partnership under the laws of state on date x is classified as a partnership for federal tax purposes a owned a general_partner interest in x through trust a grantor_trust and individually owned a limited_partner interest in x on date of year a died x’s plr-124091-16 partnership return was timely filed for year but a sec_754 election to adjust the basis of partnership property was inadvertently not filed with the return law analysis sec_754 provides that if a partnership files an election in accordance with the regulations prescribed by the secretary the basis of the partnership property is adjusted in the case of a transfer of a partnership_interest in the manner provided in sec_743 such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions therefore for filing the return for the taxable_year sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the item regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant and extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-3 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election under sec_754 effective for year and thereafter the election should be plr-124091-16 made in a written_statement filed with the appropriate service_center for association with x’s year return a copy of this letter should be attached to the election x must calculate the adjustments under sec_734 and c and sec_1_755-1 as if x had timely made the sec_754 election and allocated the increase in basis among the properties held by x at that time if the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year subject_to this grant of late relief then the partners of x must reduce their respective basis of their interests in x to reflect any additional basis adjustments under sec_734 that would have been allocated under sec_755 to any properties sold in such years as if the sec_754 election had been timely 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 internal_revenue_code and the regulations thereunder 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 copy of this letter is being sent to x’s authorized representative sincerely associate chief_counsel passthroughs special industries by david r haglund david r haglund branch chief branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc psi 7-plr-118573-00 date date number release date index number legend taxpayer product consultant investor company country partnership marketer company daughter daughter year year year year year year year year date date date date date date date date date date date date date date date a plr-118573-00 b c d e f g h i j k l m n p q r dear we received your letter dated date requesting a ruling that taxpayer’s pre-transfer status as a holder under sec_1235 of the internal_revenue_code will be retained following the transfer of his entire_interest in certain patents to a newly formed limited_liability_company llc in exchange for a membership interest in the llc in letters dated date date date and date additional information was submitted regarding taxpayer’s request beginning in year taxpayer an independent inventor began to develop product between year and year the united_states patent office issued to taxpayer several patents related to product currently taxpayer is contemplating filing additional u s patent applications for product taxpayer was issued a foreign patent from country on date and other applications corresponding to the u s patents have been or are being filed in industrialized countries throughout the world the product related patents and patent applications are referred to collectively hereinafter as the patents taxpayer represents that by august of year basic product functionality the subject of the first patent had been tested and operated successfully under operating conditions and thus product had actually been reduced_to_practice within the meaning sec_1235 of the code taxpayer also represents that in year sec_5 through subsequent related inventions were reduced_to_practice and additional patents obtained during the year sec_2 through taxpayer represents that he invested dollar_figureb in product in order to obtain technical and financial assistance in developing and marketing product the taxpayer entered into several agreements plr-118573-00 on date taxpayer entered into a consulting agreement with consultant pursuant to which consultant agreed to provide services to taxpayer in connection with the product as compensation_for his services taxpayer agreed to pay consultant dollar_figurec per hour by subsequent amendments consultant was given a right to a percentage of certain amounts received by taxpayer from licensing product on date taxpayer entered into an invention exploitation agreement with investor pursuant to which investor agreed to fund up to d of the costs of the product in exchange for up to d of the income after recovery_of expenses by year investor had contributed dollar_figuree towards the cost of the product and that amount had been repaid from the proceeds received from company between year and year taxpayer engaged in discussions with company concerning company 1’s interest in obtaining an exclusive license for all patents and products relating to product although no formal agreement was concluded company funded dollar_figuref of taxpayer’s product related costs in addition company spent substantial amounts on its own in an effort to develop parts for product and to understand the market when company decided in year to abandon its product related project company 1’s work product including a patent that it had obtained was assigned to taxpayer pursuant to an agreement dated date between company and taxpayer on date taxpayer entered into a royalty participation_agreement with partnership pursuant to which partnership agreed not to claim any infringement of a u s patent as a result of taxpayer’s development and exploitation of product partnership’s patent was for its invention of a similar type product in return for partnership’s agreement taxpayer agreed to pay partnership g of the royalties that taxpayer received from the u s exploitation of product on date and date taxpayer and marketer entered into an agreement relating to product pursuant to which marketer agreed to provide certain assistance in finding a licensee to market product in return for graduated payments of between h and i of the net royalties received by taxpayer from any licensee introduced by marketer on date taxpayer entered into a preliminary license agreement with company a foreign_corporation pursuant to which company made an initial non-refundable royalty payment of dollar_figurej on date taxpayer and company entered into a superceding license agreement pursuant to which taxpayer granted company an exclusive foreign license to make use or sell products covered by the foreign patents and patent applications relating to product for the life of such patents in return for such licenses company i paid taxpayer an advance royalty in the amount of dollar_figurek dollar_figurel of which is held in an escrow account and is refundable if company is unable to obtain the required approval of the foreign ministry of health and welfare and half of which is creditable against the percentage royalties and ii agreed to pay royalties ranging between g and m of the net selling_price of licensed products subject_to plr-118573-00 certain minimums in year and year taxpayer transferred certain interests in the patents to daughter and daughter in year taxpayer represents that he made oral gifts of an undivided n participation interest in the net positive cash_flow from product to each of daughter and daughter in year taxpayer represents that he made additional oral gifts of p interests to daughter and daughter taxpayer acknowledged the year and year gifts to daughter and daughter and summarized the status of the product in letters dated date date date date and date13 as of date taxpayer has a u s patents relating to product that were issued to him during the period year through year he also has one u s patent acquired from company that is relevant to product taxpayer is currently pursuing foreign patents in r foreign jurisdictions that are applications corresponding to g of his u s patents to date the number of foreign patents issued to taxpayer is h taxpayer represents that in a transaction qualifying under sec_721 taxpayer and his daughters will transfer their interests in product including without limitation all of their interest in the patents and in the trade secrets know how and other intellectual_property associated with product to a newly formed limited_liability_company llc in exchange for membership interests in llc the sole members of the llc would be taxpayer who would have a q interest in both capital and profits and his two daughters each of whom would have a i interest in capital and profits corresponding to their existing i participation in net positive cash_flow llc would be manager-managed with taxpayer as the manager taxpayer requests a ruling that a following the transfer of his interest in the patents to llc taxpayer will retain his status as a holder for purposes of sec_1235 of the code and b assuming the other requirements of sec_1235 are satisfied taxpayer’s share of any gain recognized by llc on disposition of all substantial rights in the patents will qualify under sec_1235 as long term capital_gain sec_1235 of the code provides that a transfer other than by gift inheritance or devise of property consisting of all_substantial_rights_to_a_patent or an undivided_interest therein which includes a part of all such rights by any holder shall be considered the sale_or_exchange of a capital_asset held for more than year regardless of whether or not payments in consideration of such transfer are payable periodically over a period generally coterminous with the transferee’s use of the patent or contingent on the productivity use or disposition of the property transferred sec_1235 provides that for purposes of sec_1235 the term holder means- any individual whose efforts created such property or any other individual who has acquired his interest in such property in exchange for consideration in money or money’s worth paid to such creator prior to actual reduction to practice of the invention covered by the patent if such individual is neither- a the employer of plr-118573-00 such creator nor b related to such creator within the meaning of subsection d sec_1_1235-2 of the income_tax regulations provides that although a partnership cannot be a holder each member of a partnership who is an individual may qualify as a holder as to his share of a patent owned by the partnership for example if an inventor who is a member of a partnership composed solely of individuals uses partnership property in the development of his invention with the understanding that the patent when issued will become partnership property each of the inventor’s partners during this period would qualify as a holder if in this example the partnership were not composed solely of individuals nevertheless each of the individual partner’s distributive shares of income attributable to the transfer of all substantial rights to the patent or an undivided_interest therein would be considered proceeds from the sale_or_exchange of a capital_asset held for more than year months for taxable years beginning before months for taxable years beginning in sec_1_1235-2 provides that for purposes of determining whether an individual is a holder under paragraph d of this section the term actual reduction to practice has the same meaning as it does under sec_102 of title of the united_states_code generally an invention is reduced to actual practice when it has been tested and operated successfully under operating conditions this may occur either before or after application_for a patent but cannot occur later than the earliest time that commercial exploitation of the invention occurs sec_301_7701-3 of the procedure and administration regulations provides that a domestic eligible_entity a business organization not classified as a corporation under sec_301_7701-2 or with two or more owners is treated as a partnership for tax purposes unless the entity elects to be treated as a corporation in the present case the llc formed by taxpayer and his daughters would be classified as a partnership for federal tax purposes under sec_301_7701-3 consequently llc would be classified as any other partnership for purposes of sec_1235 and the regulations under sec_1235 based on the information submitted and the representations made we conclude that a following his transfer of his interest in the patents to llc taxpayer will retain his former status as a holder for purposes of sec_1235 and b provided the other requirements of sec_1235 are satisfied taxpayer's share of any gain recognized by llc on a disposition of an interest in the patents will qualify under sec_1235 as long term capital_gain except as specifically set forth above we express or imply no opinion regarding any federal tax consequences of the facts of this ruling_request under any other provisions of the code in particular we express or imply no opinion concerning a taxpayer's status as a holder before the transfer of the patents to llc b whether the plr-118573-00 taxpayer’s transfers of undivided interests in the net positive cash_flow from product to his daughters were effective under applicable law or whether such transfers if effective created a partnership c whether taxpayer's grant of an interest in the patents to his daughters constituted gifts for federal gift_tax purposes or d the application of sec_1235 to any person other than taxpayer in particular we express or imply no opinion concerning whether daughter and daughter who acquired their interests in the patents by gift have holder status under sec_1235 in addition we express or imply no opinion concerning the federal tax consequences of forming llc taxpayer must attach a copy of this ruling to each of his tax returns that includes income from llc's disposition of an interest in the patents this letter_ruling is addressed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with the ruling_request a copy of this letter has been sent to two of taxpayer’s authorized representatives sincerely christine ellison chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


department of the treasury internal_revenue_service p o box irs cincinnati oh release number release date dear date date employer id number contact person id number contact telephone number form you must file tax years uil this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final because you don’t qualify as a tax-exempt_organization under sec_501 of the code donors can’t deduct contributions to you under sec_170 of the code you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we’ll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action we'll also notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed determination_letter under sec_6104 of the code you should contact your state officials if you have questions about how this determination will affect your state responsibilities and requirements letter rev catalog number 47632s if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 sincerely jeffrey i cooper director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 redacted letter final adverse determination under sec_501 - no protest letter rev catalog number 47632s department of the treasury internal_revenue_service cincinnati oh legend v date w date x state y organization z number dear date date employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issues e e do you meet the organizational_test under sec_501 of the code no for the reasons stated below do you meet the operational_test under sec_501 of the code no for the reasons stated below facts you submitted form 1023-ez streamline application_for recognition of exemption under sec_501 of the internal_revenue_code on v you attest that you were incorporated on w in the state of x you attest that you have the necessary organizing document that your organizing document limits your purposes to one or more exempt purposes within the meaning of sec_501 that your organizing document does not expressly empower you to engage in activities other than an insubstantial part that are not in furtherance of one or more exempt purposes and that your organizing document contains the dissolution provision required under sec_501 you attest that you are organized and operated exclusively to further charitable purposes you attest that you have not conducted and will not conduct prohibited activities under sec_501 specifically you attest you will e e e e refrain from supporting or opposing candidates in political campaigns in any way ensure that your net_earnings do not inure in whole or in part to the benefit of private shareholders or individuals not further non-exempt purposes such as purposes that benefit private interests more than insubstantially not be organized or operated for the primary purpose of conducting a trade_or_business that is not related to your exempt_purpose s not devote more than an insubstantial part of your activities attempting to influence legislation or if you made a sec_501 election not normally make expenditures in excess of expenditure limitations outlined in sec_501 not provide commercial-type_insurance as a substantial part of your activities during review of your form 1023-ez detailed information was requested supplemental to the above attestations this information shows you currently are recognized as an organization described in sec_501 of the internal_revenue_code prior to being recognized as exempt under sec_501 your exempt status under c was revoked you were incorporated on w in x the purposes for which you were formed are as follows to purchase lease or otherwise acquire and to hold own use develop mortgage lease sell or otherwise dispose_of all real or personal_property necessary or convenient for use as an indoor or outdoor archery range and to do all things necessary convenient or incident to the operations of an archery club to practice protect and perpetuate the sports of archery and bow hunting within the community encourage good ethics and sportsmanship among all participants cooperate with local state and federal wildlife and conservation organizations in regards to land and wildlife management to sponsor indoor archery leagues maintain a field course and conduct outdoor tournaments and games in accordance with your rules your constitution describes your purposes as follows your constitution provides that in the event you become inactive and disband your assets shall be put into an escrow account for a period of up to three years disbandment is subject_to the approval of two-thirds of the members in good standing present at a general membership meeting with all members having prior notice of the intention to disband in the event you do not reorganize the members in attendance shall decide where your assets will go however they are to be used for the betterment of bow hunting organizations your bylaws describe your membership types membership application procedures membership rights and entitlements committees finances and election and duties of officers and trustees committees described in your bylaws include the house membership publicity youth activity grounds long range planning concessions registration target painting and newsletter the grounds committee shall supervise the upkeep of grounds and roads and make recommendation concerning necessary repairs and improvements the concessions committee will supervise and operate food service for all club events letter rev catalog number 47630w your standing rules permit members to camp on the grounds members are permitted to borrow your club tables and chairs club grounds and or facilities can only be rented to club members in good standing members are allowed 24-hour access to club facilities days of the year you stated that you were originally formed on w so that a group of people could have an organization that would secure land and a building to practice the sport of archery over the years things may have changed slightly but your main focus was always fostering archery competition you grew and became a member-only club and received a designation as a c organization you indicated that in the last years you are much more available to the public you still offer memberships that allow a member to enjoy the ground sec_24 hours a day every day of the year for archery or conservation based programs to become a member an individual submits an application to the board_of trustees for approval regular membership is limited to z individual and family memberships you charge an annual membership fee a set fee per adult shooter for public shoots a reduced fee for kids ages and kid sec_12 and younger are free youth leagues are offered for a fee and last weeks during the winter months you also offer a week adult league for a fee which is discounted for members you have a written policy that if someone is unable to pay they may contact your board and you will deal with each circumstance on an individual basis all leagues are open to the public but preference will be given to your members if leagues reach maximum participation you have monthly shoots per year winter leagues that run months and various summer leagues all monthly shoots leagues and conservation programs put on by other organizations are also open to the public you stated that of your time is dedicated to growing the sport of archery within your community and is devoted to habitat conservation all of the events you sponsor take place on your 40-acre wooded lot you are open to all ages and open your property to youth groups who need a safe place to enjoy nature you went on to further state that the use of your archery facilities on an annual basis i sec_30 members general_public and adult leagues youth leagues and other c organizations your certified usa archery instructors are strictly volunteer and are not reimbursed for their time spent teaching instructors are available at all public shoots group functions and leagues with volunteer staff you are more suited to introduce kids and adults to archery at a recreational level and help direct them to other established programs for higher development if they desire you are focused on educating families about the health benefits of archery and the natural world around them you stated that a top quality archer who has the potential to compete internationally is better suited with a paid coaching staff organizations that focus on the top archers generally don’t engage the general_public like you do substantially_all of your income goes towards maintaining your property the property includes an indoor range with twenty-yard shooting lanes that also doubles as a clubhouse for you and other non-profits to hold events the 40-acre outdoor range contains thirty targets on a mile trail along with the maintenance of buildings and ranges you also provide equipment for free public use you must replace equipment each year as the public becomes for involved in archery and equipment is used to the point of failure other minor expenses are for conservation initiatives that support your mission statement letter rev catalog number 47630w you indicated you are an affiliate of many other non-profit organizations strong partnerships with like-minded hunting and conservation groups is a key to your success whenever a shoot or event generates extra revenue you may also donate to other non-profit groups for example you opened your property to habitat conservancy by y a conservation organization y contacted you asking if you were interested in habitat restoration y is restoring your property with grant monies it has received you coordinate workdays which involves the removal of invasive species that crowd out native species on your property y and other like organizations use your property for guided hikes and demonstrations you believe you now qualify for exemption as a 501_c_3_organization because your main goal is fostering archery an amateur sport your secondary goal is promoting legal- and science-based conservation of natural_resources you are affiliated with many other c groups that are very similar to your club you are happy to open your doors or gates to other non-profits that share a similar goal to yours without charge law sec_501 of the internal_revenue_code code exempts from federal_income_tax corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition or for the prevention of cruelty to children or animals no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_501 of the code defines the term qualified_amateur_sports_organization to mean any organization organized and operated exclusively to foster national or international amateur sports competition if such organization is also organized and operated primarily to conduct national or international competition in sports or to support and develop amateur athletes for national or international competition in sports sec_1_501_c_3_-1 of the income_tax regulations regulations provides that in order for an organization to be exempt under sec_501 of the code it must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1 c b iv of the regulations provides that in no case shall an organization be considered to be organized exclusively for one or more exempt purposes if by the terms of its articles the purposes for which such organization is created are broader than the purposes specified in sec_501 sec_1_501_c_3_-1 of the regulations states than an organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt_purpose an organization's assets will be considered dedicated to an exempt_purpose if upon dissolution such assets would by reason of a provision in the organization's articles of organization or by operation of law be distributed for one or more exempt purposes 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 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 letter rev catalog number 47630w sec_1_501_c_3_-1 of the regulations provides that the term charitable is used in sec_501 of the code in its generally accepted legal sense and includes relief of the poor and distressed or of the underprivileged advancement of religion advancement of education or science erection or maintenance of public buildings monuments or works lessening of the burdens of government and promotion of social welfare by organizations designed to accomplish any of the above purposes revrul_64_275 1964_2_cb_142 held an organization formed for the purpose of training suitable candidates in the techniques of racing sailboats in national and international competition and thereby improving the caliber of candidates representing the united_states in olympic and pan-american games qualifies for exemption as an educational_organization described in sec_501 of the code revrul_65_2 1965_1_cb_227 held a foundation which is organized and operated exclusively for the purpose of teaching a particular sport to children by holding clinics conducted by qualified instructors in schools playgrounds and parks and by providing free instruction equipment and facilities qualifies for exemption under sec_501 of the code revrul_66_273 1966_2_cb_222 describes a nonprofit organization may qualify for exemption from federal_income_tax under sec_501 of the code where it provides a community with supervised facilities for rifle pistol and shotgun practice and instructions in the safe handling and proper care of weapons the activities as described promote the common good and general welfare of the community revrul_67_109 1967_1_cb_136 describes a nonprofit corporation organized and operated exclusively for the purpose of establishing and maintaining a roller skating rink as a recreational facility for the benefit and use of the residents of a particular county in a county-owned building which it occupies rent free in cooperation with the county government may qualify for exemption from federal_income_tax under sec_501 of the code where the rink is open to the general_public upon payment of such nominal dues and admissions charges as are needed to defray operating_expenses revrul_70_4 1970_1_cb_126 provides that an organization whose activities consisted primarily of the promotion and regulation of a sport for amateurs is not exempt as a sec_501 educational_organization because the promotion and regulation of a sport for amateurs as described neither improve nor develop the capabilities of the individual nor instruct the public on subjects useful to the individual and beneficial to the community the organization was found to be exempt under sec_501 instead revrul_76_204 c b provides that preserving ecologically significant land is a charitable purpose and activity even without educational or open public access it recognizes that efforts to preserve and protect the natural environment for the benefit of the public serve as a charitable purpose revrul_80_215 1980_2_cb_174 provides that an organization formed to develop promote and regulate a sport for individuals under years of age by organizing local and statewide competitions promulgating rules organizing officials presenting seminars distributing a newsletter and otherwise encouraging growth of the sport qualifies for exemption under sec_501 of the code in better business bureau v united_states 326_us_278 the court held that an organization is not operated exclusively for charitable purposes and thus will not qualify for exemption under sec_501 if letter rev catalog number 47630w it has a single non-charitable purpose that is substantial in nature this is true regardless of the number or importance of the organization's charitable purposes in media sports league inc v commissioner t c memo the tax_court dealt with an organization that arranged football softball volleyball and other games among its members with membership open to all persons over age twenty-one without regard to their skills in the sport the organization offered members informal instruction in the fundamentals of each sport but members were not required to receive instruction or to participate in any athletic activities the tax_court held that the organization was not exempt from federal income_taxation under sec_501 because the social and recreational interests of its members constituted a substantial purpose which is not an exempt one under sec_501 application of law you are not organized and operated exclusively for purposes within the meaning of sec_501 of the code because you do not meet the organizational and operational tests you do not meet the requirements of sec_1_501_c_3_-1 of the regulations because your purposes as stated in your organizing document are broader than the purposes specified in sec_501 your purpose is to acquire property for the purpose of operating an archery club you do not meet the requirements of sec_1_501_c_3_-1 of the regulations because your assets upon dissolution are not dedicated exclusively to an exempt_purpose under sec_501 you do not meet the requirements of sec_1_501_c_3_-1 regulations because you are not organized and operated exclusively for exempt purposes a substantial part of your activities is the provision of indoor and outdoor archery ranges for the recreation and pleasure of your members and the general_public and coordinating archery competitions the majority of which are for adults you do not meet the requirements of sec_1_501_c_3_-1 of the regulations because you are not operated exclusively for one or more exempt purposes within the meaning of sec_501 a substantial activity is providing and maintaining archery ranges for your members and the general_public which furthers recreational purposes rather than charitable purposes less than of your time is devoted to educational and conservation activities you do not meet the requirements of sec_1_501_c_3_-1 of the regulations a substantial part of your activities involves providing archery ranges and coordinating leagues for the recreational use of your members and the general_public which is not exclusively charitable or educational you are unlike the organization described in revrul_64_275 you do not provide a training program which prepares participants for national and international competitions you state that with volunteer staff you are more suited to introduce kids and adults to archery at a recreational level and help direct them to other established programs for higher development if they desire there is no structured training program you stated that a top quality archer who has the potential to compete internationally is better suited with a paid coaching staff organizations that focus on the top archers generally don’t engage the general_public like you do letter rev catalog number 47630w you are unlike the organization described in revrul_65_02 because you are not organized and operated exclusively for educational_purposes only an insubstantial amount of your total activities is devoted to educational activities for children you are like the organization described in revrul_66_273 by providing the community with facilities and equipment dedicated to the sport of archery you are promoting the common good and general welfare of the community you are like the organizations described in revenue rulings and you provide and maintain indoor and outdoor archery ranges for the recreation and pleasure of your members and the general_public in addition you coordinate leagues and competitions primarily for adults these are your principal activities you are unlike the organization in revrul_76_204 you have not demonstrated that you exclusively engage in conservation activities you do host cleanup days encourage the public to assist you with the cleanup of your property and allow conservation organizations to conduct conservation restoration on a portion of your property and to use your facilities for educational activities however the provision of adult recreational archery activities is a substantial activity which precludes exemption under c you are unlike the organization described in revrul_80_215 you are not operated exclusively to develop promote and regulate a sport for youth ages years or younger your primary activity is providing facilities and coordinating leagues for adult participants as held in better business bureau a single non-exempt purpose if substantial will preclude tax exemption under sec_501 of the code a substantial part of your activities do not serve educational or charitable purpose within the meaning of sec_501 unlike a qualified_amateur_sports_organization described in sec_501 of the code you are not operated exclusively to foster national or international amateur sports competition e e e e the only prerequisite to become a member is approval by your board_of trustees subject_to total membership of z individuals and families you do not provide formal instruction your volunteer staff introduces kids and adults to archery at a recreational level only you are not devoted to improving the performance of a small_group of elite athletes your participants are not required to have a certain level of talent and achievement in order to attend your events you do not provide intensive daily training to prepare your participants for national or international competition instead you provide recreational events that are open to and attract a broad range of competitors you are similar to the organization described in media sport league you likewise offer informal instruction to the general_public participants are not required to receive instruction members are available to provide instruction if asked your primary activities are providing and maintaining indoor and outdoor archery ranges and coordinating adult leagues and competitions letter rev catalog number 47630w conclusion you are not organized and operated exclusively for exempt purposes you do not meet the organizational_test because your organizing document does not properly limit your purposes to those described in sec_501 c or permanently dedicate your assets to exempt purposes you are not operated exclusively for educational or charitable purposes within the meaning of sec_501 of the code you engage in a substantial amount of recreational activities that are not in furtherance of an exempt_purpose within the meaning of sec_501 finally you do not support the development of amateur athletes for participation in national or international competition and conduct your activities in a recreational manner your exemption under c will continue if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include e e e e e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with anexplanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative one of the following declarations for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we’ll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we'll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more letter rev catalog number 47630w information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service 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 can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter sincerely jeffrey i cooper director exempt_organizations rulings and agreements enclosure publication letter rev catalog number 47630w


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp plr-118160-98 date date distributing controlled sub sub sub llc spunco business a business b plr-118160-98 class c class d a date b c date d date e date f date g date h i j we reply to your september request for rulings on certain federal_income_tax consequences of a proposed transaction summary of facts publicly traded distributing is the parent of an affiliated_group that comprises both domestic and foreign_corporations and conducts among others business a and business b distributing joins with its includible affiliates in filing a consolidated federal_income_tax return one of these affiliates is wholly owned sub which is engaged in business b distributing has two classes of common_stock outstanding class c common the class c common_stock and class d common we have received financial information indicating that business a and business b each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years on date b the internal_revenue_service issued to distributing private letter plr-118160-98 ruling c in which we concluded that the distribution of spunco stock by distributing to certain of its shareholders would qualify for nonrecognition treatment under sec_355 of the internal_revenue_code the prior ruling letter the transaction described in the prior ruling letter was completed on date d approximately a percent of business b’s current production is used by distributing in business a business b is attempting to increase its sales to unrelated third parties but potential customers are reluctant to purchase business b products while it and business a are both owned by distributing proposed transaction to eliminate this barrier to the expansion business b seeks distributing has proposed and partially undertaken the following transaction i on date e distributing formed wholly owned sub ii on date f distributing formed wholly owned sub iii on date g distributing formed wholly owned controlled iv distributing will restructure its foreign operations in a series of taxable and nontaxable transactions designed to separate the business a assets from the business b assets and position the foreign business b assets for contribution by distributing to sub the restructuring v on or about date h a distributing will contribute to sub the foreign business b assets including stock of subsidiaries including those assets separated in step iv above b distributing will contribute to sub certain intellectual_property c distributing will contribute the stock of sub to sub and sub will contribute certain intellectual_property to sub sub then will license the intellectual_property received from distributing in the preceding step and from sub in this step to distributing on a nonexclusive royalty-free basis certain intellectual_property retained by distributing will be licensed to sub on similar terms d distributing will contribute to newly formed llc all of the business b domestic assets including the stock of sub distributing intends that llc be treated as an unincorporated division of distributing for federal_income_tax purposes see sec_301_7701-3 of the income_tax regulations plr-118160-98 e distributing will contribute to controlled the stock of sub and its membership interest in the llc in exchange for controlled stock and the assumption by controlled of liabilities associated with the contributed assets the contribution vi controlled will offer to sell i percent of its common_stock in an initial_public_offering the ipo vii controlled will arrange a commercial bank credit line of approximately j dollars loan proceeds will be used as working_capital and controlled will be solely responsible for repayment no proceeds will be distributed to distributing viii distributing will distribute the controlled stock it owns to its shareholders through a an exchange of controlled stock for class c common_stock split-off b a pro_rata distribution of controlled stock on class c common_stock spin-off or c some combination of a and b altogether the distribution the means finally selected will depend on market conditions at the relevant time representations the taxpayers have made the following representations concerning the contribution and distribution a the fair_market_value of controlled stock and other consideration received by each holder of class c common_stock in a split-off will approximately equal the fair_market_value of the class c common_stock surrendered by the shareholder in the exchange b no part of the consideration distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing c the five years of financial information submitted on behalf of distributing represents its present operation and with regard to business a and business b there have been no substantial operational changes since the date of the last financial statements submitted d following the proposed transaction distributing and controlled each will continue the active_conduct of its business independently and with its separate employees e the distribution will be carried out to increase the amount of business controlled is able to conduct with unrelated third parties the distribution is motivated in whole or substantial part by this corporate business_purpose plr-118160-98 f there is no plan or intention by any five_percent_shareholder and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of either distributing or controlled after the distribution g there is no plan or intention by distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the distribution other than through stock purchases meeting the requirements of sec_4 l b of revproc_96_30 1996_1_cb_696 h there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the distribution except in the ordinary course of business i the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing each equals or exceeds the sum of the liabilities to be assumed by controlled plus any liabilities to which the transferred assets are subject j the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred k no intercorporate debt will exist between distributing and controlled at the time of or after the distribution other than payables and receivables arising in the ordinary course of business l immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further any excess_loss_account distributing may have in the controlled or sub stock will be included in income immediately before the distribution to the extent required by the applicable intercompany_transaction regulations see sec_1_1502-19 m except during a transition_period payments made in all continuing transactions between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arms' length n no two parties to the transaction are investment companies as defined in sec_368 and iv plr-118160-98 o the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled p the fair_market_value of licenses granted by sub to distributing will approximately equal the fair_market_value of the licenses granted by distributing to sub see step v c above rulings based on the information submitted and representations made we rule as follows on the contribution and distribution the contribution followed by the distribution will be a reorganization under a d distributing and controlled each will be a_party_to_a_reorganization under sec_368 no gain_or_loss will be recognized by distributing on the contribution sec_357 and sec_361 no gain_or_loss will be recognized by controlled on the contribution sec_1032 the basis of each asset received by controlled will equal the basis of that asset in the hands of distributing immediately before the contribution sec_362 the holding_period of each asset received by controlled will include the period during which distributing held that asset sec_1223 no gain_or_loss will be recognized by distributing on the distribution sec_361 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of distributing's shareholders on the distribution sec_355 for those shareholders of distributing who surrender all of their distributing stock for controlled stock the basis of the controlled stock in the hands of each such shareholder will equal the basis of the distributing stock exchanged therefor sec_358 for those shareholders of distributing who do not surrender all of their distributing stock the aggregate basis of the distributing stock and the controlled stock plr-118160-98 held by each such shareholder immediately after the distribution will equal the aggregate basis of such shareholder’s distributing stock held immediately before the distribution allocated in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 the holding_period of controlled stock received by a distributing shareholder in a split-off will include the holding_period of the distributing stock exchanged therefor provided the distributing stock is held as a capital_asset on the date of the split-off sec_1223 the holding_period of controlled stock received by a distributing shareholder in a spin-off will include the holding_period of the distributing stock on which the spin-off is made provided the distributing stock is held as a capital_asset on the date of the spin-off sec_1223 as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 the transaction described in this ruling letter will not adversely affect the rulings contained in the prior ruling letter caveats we express no opinion about the tax treatment of this transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings in particular we express no opinion regarding the tax treatment of a the transition payments referred to above in representation m b the contributions by distributing to sub sub and sub described above in steps v a b and c by sub to sub in step v c and by distributing to llc in step v d including whether the contributions qualify under sec_351 c the cross-licenses described above in step v c d the transfer of intellectual_property by distributing and sub to sub described above in steps v b and c including whether the intellectual_property is property under sec_351 see revrul_69_156 c b and e the restructuring described above in step iv in particular whether the restructuring has international tax implications see generally sec_367 and sec_1248 the restructuring may be the subject of a separate private_letter_ruling plr-118160-98 procedural statements this ruling has no effect on any earlier documents and is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in this transaction should attach a copy of this ruling letter to the taxpayer’s federal_income_tax return for the taxable_year in which the transaction is completed in accordance with the power_of_attorney on file in this office the taxpayer and other authorized representatives each will receive a copy of this letter sincerely assistant chief_counsel corporate by wayne t murray senior technician reviewer branch


internal_revenue_service department of the treasury index nos washington dc ‘ - person to contact telephone number refer r er cc pdom etea plr-113798-98 to date ein attn pear this is in reference to a form_1128 application to adopt change or retain a tax_year submitted on behalf of the above- named taxpayers hereinafter together referred to as the taxpayer requesting permission to change its accounting_period for federal_income_tax purposes from a taxable_year ending november december effective for the tax_year beginning december the taxpayer intends to elect s_corporation status for the tax_year immediately following the short_period ie commencing with the tax_year beginning january that the form_1128 be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations to a taxable_year ending and has requested the taxpayer’s form_1128 requesting a change in accounting period to a tax_year ending december was due on or before february information furnished indicates that the taxpayer intended to make the change in a timely and proper manner but that due to an error or misunderstanding the form was not timely filed the due_date and the information furnished shows that the late filing was not due to any lack of due diligence or prompt action on the part of the taxpayer however the form was filed shortly after sec_1_442-1 of the income_tax regulations provides that in order to secure the commissioner’s consent to a change in accounting_period the taxpayer must file an application on form_1128 with the commissioner on or before the 15th day of the second calendar month following the close of the short_period sec_301_9100-3 of the regulations provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case must be made under the rules of sec_301_9100-3 be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government requests for relief subject_to sec_301_9100-3 will based on the facts and information submitted and the is held that the taxpayer has acted representations made it reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government the requirements of the regulations for the granting of relief have been satisfied in this case and taxpayer’s late filed form_1128 requesting permission to change to a tax_year ending december effective for the tax_year beginning date is considered timely filed accordingly pursuant to revproc_93_23 1993_1_cb_538 an additional user_fee is required in order to process the form_1128 fee will be requested in a separate correspondence begin processing the taxpayer’s application after the user_fee is submitted the user we will the ruling contained in this letter is based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling information representations and other data may be required as part of an examination process verification of the factual this ruling addresses the granting of sec_301_9100-3 relief only no opinion is expressed regarding the tax treatment of the instant transaction under the provisions of any other sections of the code or regulations that may be applicable thereto or regarding the tax treatment of any conditions existing at the time of specifically no opinion is expressed as to whether the taxpayer is permitted under the code and applicable regulations to change to the tax_year requested in the subject form_1128 or effects resulting from the instant transaction a copy of this letter_ruling is being sent to the taxpayer’s district_director of attorney currently on file with this office the original of this ruling is being sent to the taxpayer’s authorized representative and a copy is being furnished to the taxpayer in accordance with the provisions of a power this ruling is directed only to the taxpayer that requested it that it may not be used or cited as precedent sec_6110 of the internal_revenue_code provides sincerely yours assistant chief_counsel income_tax and accounting by u w_i irwin a lei deputy assistant chief_counsel abad enclosures copy of this letter copy for sec_6110 purposes a a a y e o e z e d n n q a r e r r o n n e n e c u a s e r c y e r a r


internal_revenue_service number release date index number -------------------------------------- ----------------------------------------------- --------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ---------------- telephone number -------------------- refer reply to cc psi b03 plr-133060-15 date date x ----------------------------------------------- ------------------------------------------------- ----------------------------------- date state date date --------------------- ------------ -------------------- --------------------- trust ----------------------------------- --------------------------------------------------------------- ----------------------------------------------------- ------------------------------------------------- a date ---------------- --------------------- trust ------------------------------------------------- ------------------------------ date n -------------------- ------ new trusts ----------------------------------- plr-133060-15 --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- ---------------------------------------------------- dear ------------ this responds to a letter dated date and supplemental information submitted on behalf of x by x’s authorized representative requesting relief under sec_1362 of the internal_revenue_code the code facts according to the information submitted and representations made x was incorporated on date under the laws of state effective date x elected to be taxed as an s_corporation under sec_1362 of the code prior to date trust was a grantor_trust wholly owned by a and was an eligible shareholder of x on date a died and trust ceased being a grantor_trust trust qualified under sec_1361 as an eligible shareholder for two years from a’s date of death however a timely election to treat trust as an electing_small_business_trust esbt after this period was not made trust became an ineligible shareholder of x causing x’s s_corporation_election to terminate effective date on or about date trust was reconstituted as trust and trust was considered the sole shareholder of x during the period commencing on date and ending on date effective date pursuant to the trust agreement governing both trust and trust n separate trusts were created one for each of the current income beneficiaries with the intention that each trust would qualify as a qualified_small_business trust qsst under sec_1361 of the code the new trusts each beneficiary of the new trusts authorized x to file a qsst election on its behalf with the service effective date x represents that since date it has filed its federal_income_tax returns consistent with being an s_corporation x represents that its s_corporation_election termination was inadvertent and was not motivated by tax_avoidance or retroactive tax planning trust and x represent that trust would have qualified as an esbt since date and the new trusts have qualified as qssts since date trust has agreed to file amended returns consistent with being an esbt further x represents that x and its shareholders will make any adjustments required as a condition of obtaining relief under the inadvertent_termination_rule as provided under sec_1362 of the code that may be required by the secretary law and analysis plr-133060-15 sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides in relevant part that for purposes of sec_1361 the following trusts may be shareholders of an s_corporation i a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states ii a_trust that was described in sec_1361 immediately before the death of the deemed owner and which continues in existence after such death but only for the 2-year period beginning on the day of the deemed owner’s death and iii an esbt sec_1361 provides that in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 -- a such trust shall be treated as a_trust described in sec_1361 c a i b for purposes of sec_678 the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under paragraph is made and c for purposes of applying sec_465 and sec_469 to the beneficiary of the trust the disposition of the s_corporation stock by the trust shall be treated as a disposition by such beneficiary sec_1361 provides that a beneficiary of a qualified_subchapter_s_trust or his legal_representative may elect to have sec_1361 apply an election under sec_1362 shall be made separately with respect to each corporation the stock of which is held by the trust sec_1361 defines qualified_subchapter_s_trust as a_trust a the terms of which require that i during the life of the current income_beneficiary there shall be only income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of such beneficiary’s death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to such beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to individual who is a citizen or resident_of_the_united_states sec_1361 provides that 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 which 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 plr-133060-15 sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1_1361-1 provides 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 sec_1_1361-1 provides that the election must be filed within the time requirements prescribed in sec_1_1361-1 for filing a qualified_subchapter_s_trust election generally within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust sec_1362 provides that an election under sec_1362 will be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides in relevant part that if an election under sec_1362 or sec_1361 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of such corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election inadvertently terminated within the meaning of sec_1362 on date due to the trustee’s failure to make an esbt election for trust pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date trust it will be treated as an esbt from date to date and the new trusts will be treated as qssts from date this conclusion is reached provided that x’s s_corporation_election and the new trusts’ qsst elections were otherwise valid and have not otherwise terminated under sec_1362 plr-133060-15 this ruling is contingent upon within days from the date of this letter the trustee filing with the appropriate service_center an election to treat trust as an esbt effective from date to date this ruling is also contingent upon the trustee filing within days from the date of this letter any amended returns that may be required to conform with trust 2’s treatment as an esbt from date to date a copy of this letter should be attached to the esbt election and the amended returns except as specifically ruled upon above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding x’s eligibility to be an s_corporation trust 2’s eligibility to be an esbt or the new trusts’ eligibility to be qssts this ruling is directed only to the taxpayer that requested it according to sec_6110 this ruling may not be used or cited as precedent pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely bradford r poston senior counsel branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jan uniform issue list tep rats legend company m company n dear this is in response to correspondence dated date and date in which you request a ruling under sec_408 of the internal_revenue_code code you submitted the following facts and representations in support of your request company m and its affiliate company n are non-bank entities that provide precious metals administration and safekeeping services to various customers based on the above facts and representations you request the following ruling that trustees of individual_retirement_accounts iras may utilize the precious metals administration and safekeeping services of company m and its affiliate company n with respect to bullion coins and bullion bars that are assets of such iras and not have such bullion coins and bullion bars constitute collectibles under sec_408 of the code sec_408 of the code provides in pertinent part that the acquisition of a collectible by an individual_retirement_account shall be treated as a distribution from such account in an amount equal to the cost to such account of such collectible a270 page sec_408 of the code provides that for purposes of sec_408 the term collectible means a any work_of_art b any rug or antique c any metal or gem d any stamp or coin e any alcoholic beverage or f any other tangible_personal_property specified by the secretary for purposes of sec_408 sec_408 of the code provides that for purposes of sec_408 the term collectible shail not include a any coin which is i a gold coin described in paragraph or of sec_5112 of title united_states_code ii a silver coin described in sec_5112 of title united_states_code iii a platinum coin described in sec_5112 of title united_states_code or iv a coin issued under the laws of any state or b any gold silver platinum or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market as described in section of the commodity exchange act u s c requires for metals which may be delivered in satisfaction of a regulated_futures_contract if such bullion is in the physical possession of a trustee described in sec_408 sec_408 and sec_408 of the code define collectible for purposes of sec_408 of the code as including any metal or gem and any stamp or coin respectively the only exception to classifying bullion as a collectible for purposes of sec_408 relates to any gold silver platinum or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market requires for metals which may be delivered in satisfaction of a regulated_futures_contract if such bullion is in the physical possession of a trustee this limited exception applies only if a certain type of bullion is in the physical possession of the ira trustee in this case all of the bullion coins and bullion bars at issue are in the physical possession of company m or company n not the ira trustee as a result this exception is inapplicable with respect to your ruling_request we believe that based on the information submitted and the representations contained herein that bullion coins and bullion bars that are assets of iras in the physical possession of company m or its affiliate company n are collectibles within the meaning of sec_408 of the code as a result iras that deposit such bullion coins and bullion bars with company m or company n would have to treat such deposit as a distribution from the ira in an amount equal to the cost to the ira of such collectible 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 letter is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as precedent page if you wish to inquire about this ruling please contact me at or sincerely yours bou fy alan c pipkin manager technical group employee_plans te_ge division of x


t c memo united_states tax_court william and arlene g kingston petitioners v commissioner of internal revenue respondent docket no filed date william and arlene g kingston pro_se elizabeth flores for respondent memorandum opinion wells judge this case was assigned to special_trial_judge d irvin couvillion pursuant to sec_7443a and rule sec_180 sec_181 and sec_183 the court agrees with and adopts the opinion of the special_trial_judge which is set forth below unless otherwise indicated section references are to the internal_revenue_code all rule references are to the tax_court rules_of_practice and procedure opinion of the special_trial_judge couvillion special_trial_judge this case is before the court on petitioners' motion for administrative and litigation cost sec_2 pursuant to sec_7430 and rule neither party requested a hearing and the court concludes that a hearing is not necessary for the proper disposition of this motion rule a accordingly the court disposes of this motion on the basis of the parties' submissions and the record in the instant case as a whole the court incorporates herein by reference those portions of the opinion on the merits in this case set forth in kingston v commissioner tcmemo_1997_512 that are relevant to the disposition of this motion background on date the court issued its opinion on the substantive issues in this case the primary issue was whether petitioner husband was protected from loss within the meaning of sec_465 with regard to his investment in a partnership known as hambrose leasing the partnership the court held that petitioner husband was not protected from loss within the meaning of sec_465 with respect to although petitioners' motion is styled petitioners motion for award of reasonable litigation cost the substance of the motion evidences an intent to move for administrative costs as well as litigation costs the court therefore considers the motion accordingly this investment and thus petitioners were entitled to loss and investment_interest expense deductions claimed on their and federal_income_tax returns discussion a taxpayer who substantially prevails in an administrative or court_proceeding may be awarded a judgment for reasonable costs incurred in such proceedings sec_7430 and a judgment may be awarded under sec_7430 if a taxpayer is the prevailing_party exhausted the administrative remedies available to the taxpayer within the internal_revenue_service irs and did not unreasonably protract the proceedings sec_7430 and b a taxpayer must satisfy each of these three requirements to be entitled to a judgment under sec_7430 respondent concedes that petitioners exhausted the administrative remedies available and did not unreasonably protract the proceedings therefore the court is left to decide whether petitioners were the prevailing_party to qualify as the prevailing_party the taxpayer must establish that the position_of_the_united_states in the proceeding was not substantially justified the taxpayer this requirement does not apply to an award for reasonable administrative costs sec_7430 in relevant part the taxpayer bill of right sec_2 tbor publaw_104_168 secs 110_stat_1452 amended sec_7430 to place on the commissioner the burden of continued substantially prevailed with respect to the amount in controversy or with respect to the most significant issue or set of issues presented and the taxpayer satisfies the applicable net_worth requirements sec_7430 respondent concedes that petitioners meet the second and third criteria listed above however respondent contends that the position taken in both the administrative and litigation aspects of the proceedings was substantially justified rule e 94_tc_708 92_tc_192 affd 905_f2d_241 8th cir accordingly the issue is whether the position_of_the_united_states in the proceeding was not substantially justified gantner v commissioner f 2d pincite in deciding this issue the court must first identify the point at which the united_states is considered to have taken a position and then decide whether the position taken from that point forward was not substantially justified the not substantially justified standard is applied as of the separate dates that respondent took a position in the administrative continued proving that the commissioner's position in the administrative_proceeding and the proceeding in this court was substantially justified however the provisions of tbor are effective only with respect to proceedings commenced after date the provisions of tbor do not apply to this case because petitioners filed their petition on date see 108_tc_430 proceeding and in the proceeding in this court sec_7430 and b han v commissioner tcmemo_1993_386 for purposes of the administrative_proceeding respondent took a position on date the date of the notices of deficiency sec_7430 for purposes of the proceeding in this court respondent took a position on date the date respondent filed the answer see huffman v commissioner 978_f2d_1139 9th cir affg in part and revg in part on other grounds and remanding tcmemo_1991_144 in this case respondent's position on each of these dates was the same more specifically respondent's position was that petitioner husband was protected from loss within the meaning of sec_465 with regard to his investment in the partnership and therefore petitioners were not entitled to loss and investment_interest expense deductions claimed on their and federal_income_tax returns whether respondent's position was not substantially justified turns on a finding of reasonableness based upon all the facts and circumstances as well as the legal precedent sec_5 sec_7430 provides that the commissioner takes a position in an administrative_proceeding on the earlier of the date of the receipt by the taxpayer of the notice of the decision of the irs office of appeals or the date of the notice_of_deficiency no notice of decision of the irs appeals_office was ever issued or received by petitioners before the date of the notices of deficiency therefore respondent is considered to have taken a position on the date the notices of deficiency were issued relating to the case 487_us_552 89_tc_79 affd 861_f2d_131 5th cir a position is substantially justified if the position is justified to a degree that could satisfy a reasonable person pierce v underwood supra pincite 100_tc_457 affd in part and revd in part 43_f3d_172 5th cir a position that merely possesses enough merit to avoid sanctions for frivolousness will not satisfy this standard rather it must have a reasonable basis both in law and fact pierce v underwood supra pincite the court must consider the basis for respondent's legal position and the manner in which the position was maintained 86_tc_962 the fact that respondent eventually loses or concedes a case does not establish an unreasonable position 92_tc_760 83_tc_822 vacated on other issues 787_f2d_637 d c cir the reasonableness of respondent's position and conduct necessarily requires considering what respondent knew at the time cf 88_tc_1329 85_tc_927 petitioners have the burden of establishing that respondent's position was unreasonable rule e to show lack of substantial justification petitioners must demonstrate that the legal precedent does not substantially support respondent's position given the facts available to respondent 94_tc_685 petitioners argue that respondent's position was not reasonable as a matter of law or fact petitioners contend that respondent ignored the worst-case scenario test applied by the court_of_appeals for the sixth circuit in 949_f2d_841 6th cir affg tcmemo_1990_246 and 30_f3d_743 6th cir revg tcmemo_1992_311 in determining whether a taxpayer is protected from loss within the meaning of sec_465 petitioners contend further that respondent erroneously relied on the economic reality test applied by the majority of courts of appeals in determining whether a taxpayer is protected from loss under sec_465 petitioners argue that since the instant case is appealable to the court_of_appeals for the sixth circuit and the material facts of the substantive issues in the instant case parallel the facts in emershaw v commissioner supra and martuccio v commissioner in their motion petitioners do not distinguish between reasonableness as a matter of law or as a matter of fact therefore the court assumes that petitioners intended to dispute the reasonableness of respondent's position both in law and in fact consequently the court treats the two items in conjunction with one another as petitioners have done in their motion supra respondent's position was not supported by the relevant legal precedent based on the facts available to respondent respondent contends that respondent's position did not ignore the worst-case scenario standard but rather acknowledged that it would apply to the instant case respondent argues that the facts pertinent to the substantive issues in the instant case could be readily distinguished from the facts in emershaw v commissioner supra and martuccio v commissioner supra therefore respondent contends that respondent's position was substantially supported by legal precedent given the facts available to respondent and thus was reasonable as a matter of law and fact the court agrees that respondent acknowledged the worst- case scenario test should be applied to the facts of the instant case nevertheless respondent failed to sufficiently distinguish the facts of the instant case from those in emershaw v commissioner supra and martuccio v commissioner supra to show that the result reached in the instant case should be different from that in emershaw and martuccio in fact in the opinion on the merits herein this court found that the sale- in both 949_f2d_841 6th cir affg tcmemo_1990_246 and 30_f3d_743 6th cir revg tcmemo_1992_311 the court_of_appeals held that under the worst-case scenario test the taxpayers were not protected from loss within the meaning of sec_465 leaseback_transaction in the instant case was indistinguishable from the sale-leaseback transactions in emershaw v commissioner supra and martuccio v commissioner supra although respondent may have acknowledged the application of the worst-case scenario test respondent's position failed to properly apply that test to the facts of the instant case as clearly mandated by the legal precedent of emershaw v commissioner supra and martuccio v commissioner supra in cases with facts similar to those in the instant case and to those in emershaw v commissioner supra and martuccio v commissioner supra other courts of appeals have applied the economic reality test and have found that the taxpayers in those cases were protected from loss within the meaning of sec_465 it is the opinion of this court that although respondent acknowledged the application of the worst- case scenario test in the instant case the substance of respondent's position indicated that respondent was actually analyzing the facts of the instant case under the reasoning of the economic reality test this was in direct conflict with the legal precedent set by the court_of_appeals for the sixth circuit respondent was fully aware that where the court of this is readily apparent in respondent's trial memorandum and in respondent's posttrial briefs respondent argues that respondent's position was continued appeals to which appeal lies has already passed upon the issue before us efficient and harmonious judicial administration calls for us to follow the decision of that court 54_tc_742 affd 445_f2d_985 10th cir conclusion on this record the court concludes that respondent's position on the substantive issues in the instant case had no basis in fact or law at the time respondent issued the notices of deficiency or during the litigation of this casedollar_figure it follows that respondent's position was not substantially justified either when respondent issued the notices of deficiency or during the litigation herein accordingly the court holds that petitioners are entitled to an award for administrative and litigation costs under sec_7430 petitioners' motion therefore will be granted continued substantially justified because it was supported by hayes v commissioner tcmemo_1995_151 and 103_tc_120 affd without published opinion 77_f3d_497 11th cir respondent overlooks the fact that both of these cases applied the economic reality test rather than the worst-case scenario test and that neither case was appealable in the sixth circuit both emershaw v commissioner supra and martuccio v commissioner supra were decided by the court_of_appeals before respondent's issuance of the notices of deficiency since respondent concedes that the amount of administrative and litigation costs claimed by petitioners is reasonable it is not necessary for the court to decide the amount of petitioners' reasonable administrative and litigation costs the court holds that petitioners are entitled to reasonable administrative and litigation costs of dollar_figure as claimed in their motion additionally this court has recognized that 'so long as the government's position justifies recovery_of fees any reasonable fees to recover such fees are recoverable ' galedrige constr inc v commissioner tcmemo_1997_485 quoting huffman v commissioner f 2d pincite thus the court holds that the fees incurred by petitioners for their motion for administrative and litigation costs are recoverable an appropriate order and decision will be entered


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc intl br1-plr-114831-02 date date ty a date b country c date d dear this is in response to your letter dated date requesting a ruling that a’s loss of lawful permanent resident status expatriation did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code additional information was submitted in a letter dated date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination a was born on date b in country c a came to the united_states for employment reasons and obtained a green card a is also a citizen of country c where she now lives on date d a relinquished her green card a will be subject_to country c tax on her worldwide income on the date of a's expatriation a’s net_worth exceeded the applicable_amount set forth in sec_877 sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be subject_to the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s plr-114831-02 taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former u s citizen or former u s long-term_resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual’s average income_tax_liability or the individual’s net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 under notice_98_34 1998_2_cb_29 modifying notice_97_19 1997_1_cb_394 a former long-term_resident whose net_worth or average tax_liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax_avoidance if that former resident is described within certain categories and submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes notice_98_34 requires that certain information be submitted with a request for a ruling that an individual’s expatriation did not have for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_98_34 because she is a citizen and resident fully subject_to tax in country c the country in which she was born a submitted all of the information required to be submitted by notice_97_19 as modified by notice_98_34 including additional information requested by the service after review of the submission accordingly based solely on the facts submitted and the representations made we conclude that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 therefore a will not be presumed under sec_877 to have had as one of her principal purposes for expatriating the avoidance of u s taxes we further conclude that a will not be treated under sec_877 as having had as one of her principal purposes for expatriating the avoidance of u s taxes because the information submitted clearly establishes the lack of a principal purpose to avoid taxes under subtitle a or b of the code 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 in addition no opinion is expressed as to a’s u s tax_liability plr-114831-02 for the taxable years prior to or after her expatriation under sections of the code other than sec_877 sec_2107 and sec_2501 a copy of this letter must be attached to a’s u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return 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 a power_of_attorney on file in this office a copy of this letter will be sent to a sincerely w edward williams senior technical reviewer cc intl br1