internal_revenue_service number release date index number ----------------------------- -------------------------------------- ---------------------------- -------------------- --------------------------- in re -------------------- ---------------------------------------- ------------------------------------- --------- ty ------- department of the treasury washington dc person to contact ---------------------- id no --------------- telephone number --------------------- refer reply to cc intl br1 - plr-155677-04 date date ---------------- ----------------- -------------------- ------- --------------------- ------------------------ a date b country c date d country e dear --------------- 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 the information submitted for consideration is substantially as set forth below 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 now lives in country e where his wife was born a surrendered his green card on date d a will be subject_to country e tax on his this is in response to a letter dated date requesting a ruling that the rulings contained in this letter are based upon information and --------- a former u s citizen whose net_worth or average tax_liability exceeds these sec_877 generally provides that a citizen who loses u s citizenship or a u s plr-155677-04 worldwide income on the date of a's expatriation his net_worth exceeded the applicable_amount set forth in sec_877 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 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 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 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 fully subject_to tax in country e the country in which his spouse was born modified by notice_98_34 including additional information requested by the service after review of the submission a is eligible to request a ruling pursuant to notice_98_34 because he is a resident under notice_98_34 1998_2_cb_29 modifying notice_97_19 1997_1_cb_394 a a submitted all of the information required to be submitted by notice_97_19 as plr-155677-04 except as expressly provided herein no opinion is expressed or implied 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 his principal purposes for expatriating the avoidance of u s taxes we further conclude that the taxpayer will not be treated under sec_877 as having as one of his 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 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 for the taxable years prior to or after his expatriation under sections of the code other than sec_877 sec_2107 and sec_2501 which a obtained the ruling whether or not a is otherwise required to file a return the code provides that it may not be used or cited as precedent will be sent to a in accordance with a power_of_attorney on file in this office a copy of this letter this ruling is directed only to the taxpayer requesting it sec_6110 of a copy of this letter must be attached to a's u s income_tax return for the year in sincerely _______________ s karen a rennie senior technical reviewer cc intl br1


t c summary opinion united_states tax_court gregory paul grunsted petitioner v commissioner of internal revenue respondent docket no 15654-08s filed date gregory paul grunsted pro_se melissa j hedtke for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax and additions to tax under sec_6651 and and a the parties agree that the deficiency in petitioner’s federal_income_tax is dollar_figure therefore the issue remaining for decision is whether petitioner is liable for the additions to tax background some of the facts have been stipulated and are so found the stipulation of facts and the exhibits received into evidence are incorporated herein by reference for convenience the court includes some of the facts in the discussion portion of the opinion when the petition was filed petitioner resided in minnesota petitioner failed to file a federal_income_tax return failed to pay his federal_income_tax and failed to pay his estimated_tax for respondent from third-party payor reports determined that petitioner received and failed to report various income items respondent prepared a substitute for return sfr for petitioner in date the sfr reflects that respondent determined total income of dollar_figure and that respondent allowed petitioner an adjustment to income of dollar_figure a personal_exemption of dollar_figure and a standard_deduction of dollar_figure for net taxable_income of dollar_figure respondent computed an income_tax of dollar_figure and a self- employment_tax of dollar_figure for a net tax of dollar_figure respondent further determined additions to tax for failure_to_file failure to pay and failure to pay estimated_tax in date respondent sent petitioner a notice_of_deficiency reflecting the aforementioned adjustments thereafter petitioner submitted a form_1040 u s individual_income_tax_return to respondent on date on the form_1040 petitioner reported some income items claimed certain deductions and reported an income_tax_liability of dollar_figure but no self-employment_tax as indicated the parties agree as to the amount of the deficiency and the only dispute is whether petitioner is liable for the additions to tax discussion initially the commissioner has the burden of production with respect to any penalty addition_to_tax or additional_amount sec_7491 the commissioner satisfies this burden of production by coming forward with sufficient evidence that indicates that it is appropriate to impose the penalty see 116_tc_438 once the commissioner satisfies this burden of production the taxpayer 1respondent has not accepted the form_1040 as filed must persuade the court that the commissioner’s determination is in error by supplying sufficient evidence of an applicable exception id i sec_6651 addition_to_tax sec_6651 imposes an addition_to_tax for failure_to_file a return on the date prescribed determined with regard to any extension of time for filing unless the taxpayer can establish that the failure is due to reasonable_cause and not due to willful neglect the sec_6651 addition_to_tax is equal to percent of the amount of tax required to be shown on the return if the failure is not for more than month with an additional percent to be added for each month or partial month during which the failure_to_file continues not to exceed percent in the aggregate petitioner was required to file his form_1040 by date because his gross_income for exceeded his filing threshold and respondent had not granted him an extension of time to file see sec_6012 sec_6072 sec_6081 revproc_2003_85 sec_3_10 sec_3 2003_2_cb_1184 petitioner did not do so respondent has produced sufficient 2if the secretary makes a return for the taxpayer under sec_6020 it is disregarded for purposes of determining the amount of the addition_to_tax under sec_6651 but it is treated as a return filed by the taxpayer for purposes of determining the amount of the addition_to_tax under sec_6651 sec_6651 evidence that petitioner is liable for the sec_6651 addition_to_tax unless an exception applies see higbee v commissioner supra pincite ruggeri v commissioner tcmemo_2008_300 ii sec_6651 addition_to_tax sec_6651 imposes an addition_to_tax for failure to pay the amount shown as tax on the taxpayer’s return on or before the date prescribed determined with regard to any extension of time for payment unless the taxpayer can establish that the failure is due to reasonable_cause and not due to willful neglect the sec_6651 addition_to_tax is equal to percent of the amount of tax required to be shown on the return if the failure is not for more than month with an additional percent to be added for each month or partial month during which the failure to pay continues not to exceed percent in the aggregate respondent submitted a copy of the sfr that he prepared for petitioner and petitioner did not pay his federal_income_tax as shown on the sfr by date see 127_tc_200 affd 521_f3d_1289 10th cir hawkins v commissioner tcmemo_2008_168 3the amount of the addition_to_tax under sec_6651 reduces the amount of the addition_to_tax under sec_6651 for any month to which an addition_to_tax applies under both paragraphs sec_6651 respondent has produced sufficient evidence that petitioner is liable for the sec_6651 addition_to_tax through date unless an exception applies see higbee v commissioner supra pincite ruggeri v commissioner supra iii exceptions to the sec_6651 and additions to tax reasonable_cause is a defense to the sec_6651 and additions to tax to prove reasonable_cause for a failure_to_file timely the taxpayer must show that he she exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time 92_tc_899 sec_301_6651-1 proced admin regs to prove reasonable_cause for a failure to pay the amount shown as tax on a return the taxpayer must show that he she exercised ordinary business care and prudence in providing for payment of his her tax_liability and nevertheless was either unable to pay the tax or would suffer undue_hardship if he she paid the tax on the due_date sec_301_6651-1 proced admin regs in determining whether the taxpayer was unable to pay the tax in spite of the exercise of ordinary business care and prudence consideration will be given to all of the facts and circumstances of the taxpayer’s financial situation including the amount and nature of the taxpayer’s expenditures in view of the income or other_amounts he she could at the time of the expenditures reasonably expect to receive before the date prescribed for the payment of the tax see id from through petitioner was working to build his business at an investment banking firm firm he testified about strife at the firm because of internal politicking a dysfunctional board_of directors the shenanigans of management negative repercussions from its mergers and the effects of its weak capital structure and its releasing of stock before payment that caused it to implode also the date terrorist attacks occurred which had a negative impact on the financial services industry petitioner also indicated that his father had a heart attack in and subsequently died according to petitioner he was just bumping along but he decided to grind it out because he believed things would improve petitioner found new employment late in but his income was reduced by percent he did not realize that he was depressed while petitioner attempted to get back into his routine in he did not make estimated_tax payments the court recognizes that petitioner had some difficult work and personal circumstances during the year in issue the court concludes however that these circumstances do not give rise to a reasonable_cause defense when asked by the court whether petitioner was on medication or getting medical treatment for depression he merely replied coffee petitioner remained gainfully_employed during and there is no evidence that he was not employed through date the court has consistently held that if a taxpayer is able to continue his her business affairs despite an illness or incapacity then the illness or incapacity does not establish reasonable_cause ruggeri v commissioner tcmemo_2008_300 and cases cited therein hazel v commissioner tcmemo_2008_134 jordan v commissioner tcmemo_2005_266 and cases cited therein similarly the court has also held that a taxpayer’s selective incapacity or inability to meet his her tax obligations when he she can conduct normal business activities does not establish reasonable_cause jordan v commissioner supra wright v commissioner tcmemo_1998_224 affd without published opinion 173_f3d_848 2d cir tabbi v commissioner tcmemo_1995_463 consequently respondent’s determinations are sustained iv sec_6654 addition_to_tax sec_6654 imposes an addition_to_tax on an underpayment of estimated income_tax unless an exception applies the sec_6654 addition_to_tax is determined by applying the underpayment rate established under sec_6621 to the amount of the underpayment4 for the period of the underpayment the a mount of the underpayment means the excess of the required_installment over the amount if any of the installment continued addition_to_tax is also calculated with reference to four required_installment payments sec_6654 wheeler v commissioner t c pincite each required_installment of estimated income_tax is equal to percent of the required_annual_payment sec_6654 the required_annual_payment is generally equal to the lesser_of percent of the tax shown on the taxpayer’s return for the year or percent of the taxpayer’s tax for the year if no return is filed or percent of the tax_shown_on_the_return if the taxpayer filed a return for the immediately preceding_taxable_year sec_6654 wheeler v commissioner supra pincite petitioner was required to file his form_1040 by date but he did not do so in addition the parties submitted a copy of petitioner’s form_1040 and they agree that petitioner did not make any estimated income_tax payments for respondent has produced sufficient evidence that continued paid on or before the due_date for the installment sec_6654 5the period of the underpayment runs from the due_date for the installment to the earlier of the 15th day of the 4th month following the close of the taxable_year or with respect to any portion of the underpayment the date on which such portion is paid sec_6654 petitioner is liable for the sec_6654 addition_to_tax unless an exception applies v exceptions to the sec_6654 addition_to_tax generally no reasonable_cause exception exists for the sec_6654 addition_to_tax sec_1_6654-1 income_tax regs see also bray v commissioner tcmemo_2008_113 but no addition_to_tax is imposed under sec_6654 with respect to any underpayment if the secretary determines that the taxpayer became disabled6 in either the taxable_year for which estimated income_tax payments were required or in the preceding_taxable_year and the underpayment was due to reasonable_cause and not willful neglect sec_6654 additionally no addition_to_tax is imposed under sec_6654 with respect to any underpayment to the extent the secretary determines that by reason of casualty disaster or other unusual circumstances the imposition of the addition_to_tax would be against equity or good conscience sec_6654 6the term disabled includes a significant psychiatric disorder and mental incapacitation during the period under consideration shaffer v commissioner tcmemo_1994_618 or confinement to various hospitals for severe mental illness carnahan v commissioner tcmemo_1994_163 affd without published opinion 70_f3d_637 d c cir see also jones v commissioner tcmemo_2006_176 meyer v commissioner tcmemo_2003_12 taxpayer’s severe health problems and mental condition incapacitated him thus a sec_6654 exception was applicable in addition the disability may constitute reasonable_cause jones v commissioner supra petitioner has not established a disability within the meaning of sec_6654 he also has not established a casualty a disaster or other unusual circumstances for which the imposition of the sec_6654 addition_to_tax would be against equity or good conscience consequently respondent’s determination is sustained to reflect the foregoing decision will be entered under rule 7as indicated the parties have agreed that the deficiency for is dollar_figure the court leaves it to the parties to compute the additions to tax based upon this deficiency


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-105765-01 date legend x d1 a dear this letter responds to a letter dated date and subsequent correspondence written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code that x's s_corporation_election will be effective as of the taxable_year beginning d1 according to the information submitted x was incorporated on d1 and a x’s sole shareholder decided that x would be an s_corporation the form_2553 election by a small_business_corporation however was not timely filed facts x requests a ruling that it will be recognized as an s_corporation effective for the taxable_year beginning d1 under sec_1362 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides when an s election will be effective generally if an s election is made within the first two and one half months of a corporation's taxable_year then that corporation will be treated as an s_corporation beginning the year in which the election is made if an s election is made after the first two and one half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-105765-01 sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year conclusions after applying the law to the facts submitted and the representations made we conclude that x has established reasonable_cause for not making a timely election and is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 containing an effective date of d1 for the election within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent under the power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely yours mary beth collins assistant to the chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


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-113535-06 date date ------------ ---------------------- ---------------------------------------------------- this letter responds to a letter dated date written on behalf of x legend legend x ------------------------------------------- country d1 dear ------------------ requesting a ruling under sec_301_9100-3 of the procedure and administration regulations facts of country x represents that it is a foreign_entity eligible to elect to be classified as a partnership for federal tax purposes however due to inadvertence a form_8832 entity classification election to treat x as a partnership effective d1 was not timely filed law and analysis classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in this section an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 unless the entity elects otherwise a foreign eligible_entity is a a the information submitted discloses that x was organized on d1 under the laws sec_301_7701-3 provides in part that a business_entity that is not sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 provides that an election under sec_301_7701-3 will sec_301_7701-3 provides in part that an eligible_entity may elect to plr-113535-06 partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 entity classification election with the service_center designated on form_8832 be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed if an election specifies an effective date more than days prior to the date on which the election is filed it will be effective days prior to the date it was filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but not 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 determine whether to grant an automatic_extension of time for making certain elections sec_301_9100-2 provides the standards the commissioner will use to sec_301_9100-3 provides the guidelines for granting extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301 a provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301 and sec_301_9100-3 as a result x is granted an extension of sixty days from the date of this letter to file a properly executed form_8832 with the appropriate service_center to elect to be classified as a partnership effective d1 a copy of this letter should be attached to the form_8832 except as specifically set forth above we express no opinion concerning the this ruling is directed only to the taxpayer who requested it sec_6110 plr-113535-06 federal tax consequences of the above described facts under any other provision of the internal_revenue_code provides that it may not be used or cited as precedent sincerely s heather c maloy associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc ----------------------------------- ---------------------------------------- ---------------------------------------- ----------------------------- ----------------------------- ---------------- --------------- --------------------------------- ------------------------------------------


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number release date uilc internal_revenue_service national_office field_service_advice wta-n-139414-01 eo2 memorandum for director indian tribal governments from attn therese nosie division counsel associate chief_counsel tax exempt and government entities cc tege subject request for opinion income from arts and crafts this chief_counsel_advice responds to your request dated date for counsel opinion with respect to the following issue in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend region a tribe b issues i ii iii is income received by individual tribal members from the sale of arts and crafts made on federal trust allotted land exempt from federal_income_tax because the income is directly derived from the land if the income is derived in part from the tribe member’s labor to produce the products and in part directly derived from federal trust allotted land does this affect its taxability if the income is directly derived from leased land rather than federal trust allotted land under the general allotment act of does this affect its taxability iv if the income is derived from the sale of products made from resources directly derived from a tribal member’s own allotted land does this affect its taxability conclusions i ii iii iv tribal member’s income directly derived from arts and crafts made from plants or animals grown or raised on federal trust allotted land is exempt from tax if the income is primarily derived from those materials income directly derived from the sale of items produced on allotted land is not exempt from federal_income_tax if the income is derived primarily from labor or from the use of equipment income directly derived primarily from unallotted tribal land that has been leased by an individual tribal member from the tribe is not excluded from the gross_income of the lessee for purposes of federal_income_tax income directly derived primarily from natural products grown on unallotted tribal land is not exempt from taxation when received by a tribal member facts members of indian tribes produce native crafts which they market locally as well as world-wide some of the products are made entirely from items taken from the land and some are made from purchased items the crafts include pottery basketry dolls and rugs the majority of the tribes of the region a did not receive allotments under the general allotment act of ch 24_stat_388 u s c sec_331 et seq however they were affected by the indian reorganization act of ch 48_stat_984 u s c sec_461 et seq ira generally the land is held in trust and leased to tribal members for periods of to years depending on the tribe in the case of the tribe b the land is held communally law and analysis in 351_us_1 the supreme court held that income received by a member of an indian_tribe is excluded from federal_income_tax when it is directly derived from federal trust land allotted under the general allotment act of gaa revrul_67_284 1967_2_cb_55 sets forth five tests that must be met for income to be excludible the land in question must be held in trust by the united states such land must be restricted and allotted and held for an individual noncompetent indian and not for a tribe the income must be derived directly from the land the statute treaty or other authority involved must evince congressional intent that the allotment be used as a means of protecting the indian until such time as he becomes competent and the authority in question must contain language indicating clear congressional intent that the land until conveyed in fee simple to the allottee is not to be subject_to taxation this memorandum will first consider the requirement that income be derived directly from the land and second the type of land from which the income is required to be directly derived i when is income directly derived from the land income derived directly from the land includes rentals including crop rentals royalties proceeds of sales of the natural_resources of such land income from the sale of crops grown on the land income from the sale of livestock raised on the land and income from the use of the land for grazing purposes revrul_62_16 1962_1_cb_7 modified revrul_74_13 1974_1_cb_14 where the income is not derived primarily from exploitation of the land the income does not qualify as income derived directly from the land for instance where the income is derived primarily from capital improvements to the land and or the tribal member’s labor the income cannot be said to be derived directly from the land see 597_f2d_708 cert_denied 444_us_920 income from operation of motel is not derived directly from the land the courts have used two slightly different standards for determining whether income is directly derived from the land in beck v commissioner 67_tcm_2469 the court distinguished income received from activities that diminish the value of the land from income received from activities that are a result of capital_investment or labor although the activity takes place on land held in trust however in 792_f2d_849 9th cir aff’g 83_tc_561 the ninth circuit concluded that the exploitation rationale did not adequately describe the scope of the derived directly standard it stated than an exploitation rationale could not adequately explain why income generated from ranching and farming was exempted from income_taxation because unless done improperly these activities do not exploit the land the court concluded that only income that was generated principally from the use of reservation land and resources is derived directly from the land ii is allocation between exempt_income attributable to land and non-exempt income attributable to labor or use of equipment permitted the issue of allocation was first raised by the court in critzer v united_states ct_cl where the court suggested that allocation of income into exempt and nonexempt portions might be appropriate in some cases in that case the taxpayer did not request allocation so the court did not rule on the issue in critzer a member of the cherokee tribe sought exemption for income received from the operation of a motel a restaurant a gift shop and from the rental of a craft shop and apartment units the court held the income was not exempt under capoeman the courts denied taxpayers’ requests to allocate income between exempt and unexempt categories in three cases in beck v commissioner 67_tcm_2469 the taxpayer argued that the portion of the rental income equal to the fair_market_value of the rental of the trust property was directly derived from the land and should be exempt from income_tax in 806_f2d_1053 fed cir the taxpayer argued that an amount equal to the fair rental value of the land upon which the taxpayers operated their commercial ventures was directly derived from the land and should be exempt in 83_tc_561 aff’d sub nom 792_f2d_849 9th cir the taxpayer argued that an amount equal to the fair rental value of the land upon which the petitioner’s smokeshop was located should be exempt the service’s original position on allocation is set forth in revrul_60_377 1960_2_cb_13 allowing allocation of proceeds from the sale of cattle horses sheep and goats raised on allotted land the income was allocated between exempt_income attributable to the land and non-exempt income attributable to labor and use of the equipment however this revenue_ruling was revoked by revrul_62_16 1962_1_cb_7 which ruled that all of the proceeds were exempt currently the service will allow a total exemption if income is primarily attributable to land factors id in addition the service permitted an indian to divide his income into exempt and nonexempt portions when the primary source_of_income is taxable but the income directly derived from the land is from a separate business with separate books_and_records iii from which type of land must the arts and crafts be derived a allotment land capoeman states that the general allotment act of exempts an indian’s income derived directly from his or her allottted and restricted land from income_taxation however this rule applies only to indians who hold allotted land under a_trust patent and who may not alienate or encumber that land without the consent of the united_states 32_fedclaims_170 in revrul_67_284 the first requirement for exemption is that an allotment must be held in trust by the federal government this requirement appears to exclude restrictive allotments from exemption a restrictive allotment is one that cannot be alienated without federal consent but that is not held in trust by the federal government if an allotment meets the first and second requirements of revrul_67_284 held in trust and is subject_to restrictions upon alienation it is unlikely that the courts will deny an exemption for income directly derived from that land courts have concluded that the gaa tax-exemption can be read into the ira even though the ira itself does not contain express exemption language 749_f2d_567 9th cir see also revrul_74_13 1974_1_cb_14 tax exempt status of lands purchased under sec_5 of the ira the authority for reading the tax exemption from the gaa into other allotment statutes was explained in 845_f2d_206 9th cir citing 452_f2d_741 9th cir congress had made clear by two legislative acts that all future allotments would be subject_to the terms of the general allotment act and would carry the same rights and privileges in light of the long-standing congressional policy of treating indians equally except where differences in tribal circumstance justify special legislation we concluded that those statutes indicated that congress intended the terms of the general allotment act to apply to all allotments see also revrul_69_164 1969_1_cb_220 quapay trust allotments not exempt by treaty or statute from direct taxation income derived from allotted quapay lands not taxable because the quapaws should be treated the same as any other tribe of indians citing 304_f2d_620 10th cir handbook of federal indian law states that all allotments are tax exempt several tribes were however specifically excepted from the general allotment act and special allotment laws for them are not subject_to it in practice the only contested tax issues raised by these exceptions have concerned the quapay and osage allotment laws lower federal courts have determined that these laws have the same general purpose as the general allotment act and should imply the same tax status these decisions concluded that the supreme court’s essential holding in capoeman depended on interpretation of the purpose of the general allotment act rather than on the specific terms of sec_5 and the i r s has acquiesced in these decisions it is thus settled law that all allotted lands are subject_to the same tax exempt status as the supreme court recognized in capoeman f cohen handbook of federal indian law pincite citing 304_f2d_620 10th cir b leased land income directly derived by a tribal member from leased land is not exempt when the leased land is owned by the tribe income derived by an indian as lessee or permittee under a grazing permit obtained from the tribe is not derived directly from the land and is not exempt 364_f2d_38 8th cir cert_denied 386_us_931 revrul_58_320 1958_1_cb_24 nor is income directly derived from land leased from the owner of the allotment exempt to a tribal member lessee 625_f2d_910 9th cir revrul_57_523 1957_2_cb_51 c fee simple land income derived from fee simple land owned by an individual tribal member is not tax exempt see 364_f2d_38 8th cir revrul_67_284 1967_2_cb_55 d possessory interest in critzer v united_states ustc ct_cl trial div rev’d on other grounds cl_ct the court considered whether a possessory interest was the equivalent of a_trust allotment for purposes of the exemption under capoeman in critzer the government argued that income derived from possessory interests provided under the cherokee allotment act of ch 43_stat_376 u s c sec_331 note was not exempt from income_tax the government contended that the cherokee allotment act caa does not provide an exemption from taxation and that a possessory interest is not the equivalent of a_trust allotment because it is a permanent rather than a temporary interest the court held that income directly derived from a possessory interest is exempt the court explained that the caa does provide an exemption it further explained that subsequent to the enactment of the indian reorganization act in a_trust allotment is no longer a temporary interest and consequently the chief difference between the two interests has disappeared e tribe b land tribe b land does not satisfy the five requirements of revrul_67_284 because it is unallotted tribal land nevertheless the service has determined that income derived from these lands is exempt from income_tax absent a provision in a treaty or statute to the contrary income directly derived by a member of an indian_tribe from unallocated indian tribal lands is subject_to federal_income_tax revrul_67_284 according to the service provisions of the indian allotment act of applicable to tribe b provide such an exception summary income from allotted land that is held in trust for an individual indian and cannot be alienated without the consent of the federal government will almost always be held by the courts to be exempt from federal_income_tax under capoeman under revrul_67_284 however the service also considers whether there is authority in a statute or treaty for the exemption with respect to income directly derived from that particular allotment land income derived from unallotted land owned by the tribe is not generally exempt under capoeman but may be exempt pursuant to a treaty or statute income derived from leased land whether leased from the tribe or from the individual allotment owner is not tax exempt to the lessee income derived from fee simple land owned by an individual indian is not tax exempt iv application to the present case income from the sale of indian arts and crafts is subject_to federal income_taxation unless the seller created the arts and crafts item from materials derived from their own allotted land and the value of such materials constitutes the major portion of the selling_price only in very unusual cases does the major portion of the selling_price of indian arts and crafts come from crops raised on the allotted land or animal products from animals raised on the allotted land for example the income from the sale of a doll would rarely be tax exempt because the primary source of the income from the sale of the doll is usually the equipment and labor rather than the value of the materials used to produce the doll the income from the sale of indian baskets and rugs is also rarely exempt from federal income_taxation the income from the sale of baskets is tax exempt if the reeds or grasses from which the basket is made grew on allotted land and the primary source of the income derived from the sale of the basket is the value of the reeds or grasses rather than the equipment and labor involved in producing the basket the income from the sale of a wool rug would be tax exempt only if the wool is derived from sheep raised on the allotted land and the primary source of the income derived from the sale of the rug is the value of the wool rather than the equipment and labor involved in producing the rug if the rug is made from wool from sheep not raised on the allotted land than the income from its sale is clearly not tax exempt this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views please contact carol cook pincite0 if you have questions case development hazards and other considerations none attachment administrative file elizabeth a purcell chief eo branch division counsel associate chief_counsel tax exempt and government entities


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 fip b03 plr-116052-16 date date legend ------------------------------------------------------------------------ parent -------------------------------------------------- sub1 --------------------------------------------------------- sub2 ------------------- state1 ------------- state2 -------------------------------------------------------------- old bond -------------------------------------------------------------- old bond ---------------------------------------------------------- old bond ------------------------------------------------------- old bond -------------------------------------------------------------- old bond ----------------------------------------------------------- old bond ------------------------------------------------------------ old bond new bond ------------------------------------------------------------ new bond ------------------------------------------------------------- new bond ---------------------------------------------------------- new bond ------------------------------------------------------ new bond --------------------------------------------------------- new bond ----------------------------------------------------------- new bond ----------------------------------------------------------- date a b c d e f g ------------------ ---------- -------- ---------- ---------- ---------- ---------- ---------- plr-116052-16 dear ------------------ this letter responds to your letter of date and subsequent correspondence requesting the following rulings parent must account for any bond_issuance_premium arising from the issuance of its bonds in exchange for certain tendered bonds of which sub2 was the obligor in accordance with sec_1_163-13 of the income_tax regulations and sub2 is entitled to a deduction pursuant to sec_1_163-7 for any repurchase premium realized upon the deemed satisfaction of certain tendered bonds in the taxable_year in which the deemed satisfaction occurred facts parent is a publicly traded corporation organized under the laws of state1 sub1 a state2 corporation is a wholly owned subsidiary of parent sub2 a state1 corporation is a wholly owned subsidiary of sub1 parent sub1 and sub2 are members of an affiliated_group_of_corporations which files a consolidated federal_income_tax return parent is the common parent of the affiliated_group sub2 was the obligor of seven tranches of fixed-rate senior unsecured bonds old bond old bond old bond old bond old bond old bond and old bond old tranches the bonds in old bond had been integrated previously with three interest rate swaps under sec_1_1275-6 parent and sub2 represent that old bond and the swaps constituted a qualifying_debt_instrument within the meaning of sec_1_1275-6 and sec_1_1275-6 hedges within the meaning of sec_1_1275-6 respectively they further represent that the requirements of sec_1_1275-6 - vii were satisfied in a timely manner on date parent issued bonds in seven corresponding tranches new bond new bond new bond new bond new bond new bond and new bond new tranches none of which belongs to an issue for which a substantial amount of the bonds was issued for money within the meaning of sec_1_1273-2 parent offered to exchange a newly issued bond from new bond and a consent fee for each bond tendered from old bond parent made similar offers with respect to new bond and old bond with respect to new bond and old bond with respect to new bond and old bond with respect to new bond and old bond with respect to new bond and old bond and with respect to new bond and old bond these seven offers will be referred to collectively as the tender offer plr-116052-16 pursuant to the tender offer holders tendered a of the bonds in old bond b of the bonds in old bond c of the bonds in old bond d of the bonds in old bond e of the bonds in old bond f of the bonds in old bond and g of the bonds in old bond on date parent exchanged newly issued bonds from the new tranches and consent fees for the tendered bonds collectively the exchange parent and sub2 represent that the tendered bonds were not intercompany obligations within the meaning of sec_1_1502-13 before the exchange the aggregate stated principal_amount of each of the seven new tranches of bonds issued by parent ie new bond new bond new bond new bond new bond new bond and new bond was equal to the aggregate stated principal_amount of the bonds tendered from the seven corresponding old tranches of bonds ie old bond old bond old bond old bond old bond old bond and old bond parent represents that the newly issued bonds in each of the new tranches were traded_on_an_established_market within the meaning of sec_1_1273-2 parent further represents that the newly issued bonds in each of the new tranches provided for stated_interest which met the definition of qualified_stated_interest qsi in sec_1_1273-1 sub2 retired each of the tendered bonds from the old tranches in exchange for an intercompany payable to parent parent and sub2 recorded the intercompany receivable and intercompany payable in their respective books_and_records for an amount equal to the aggregate stated principal_amount of the tendered bonds sub2 did not issue notes to parent or otherwise document the intercompany payable the recorded amount did not bear interest and was being paid over time by sub2 to parent in cash sub2 remained the obligor on the bonds from the old tranches that were not tendered ruling_request sec_163 provides that there shall be allowed as a deduction all interest_paid or accrued within the taxable_year on indebtedness subject_to certain exceptions not relevant here sec_1_163-13 limits the amount of the issuer’s interest_deduction otherwise allowable under sec_163 for debt instruments issued with bond_issuance_premium see sec_1_163-13 in general an issuer determines its interest deductions by offsetting the interest allocable to an accrual_period with the bond_issuance_premium allocable to that period see sec_1_163-13 bond_issuance_premium is the excess if any of the issue_price of a debt_instrument over its stated_redemption_price_at_maturity see sec_1_163-13 plr-116052-16 under sec_1_163-13 an issuer amortizes bond_issuance_premium by offsetting the qsi allocable to an accrual_period with the bond_issuance_premium allocable to the accrual_period this offset occurs when the issuer takes the qsi into account under its regular_method of accounting sec_1_163-13 provides rules to determine the amount of bond_issuance_premium allocable to an accrual_period sec_1_163-13 provides rules for the case that the bond_issuance_premium allocable to an accrual_period exceeds the qsi allocable to the accrual_period sec_1_1273-2 provides that if a substantial amount of the debt instruments in an issue is issued for money the issue_price of each debt_instrument in the issue is the first price at which a substantial amount of the debt instruments is sold for money thus if an issue consists of a single debt_instrument that is issued for money the issue_price of the debt_instrument is the amount_paid for the instrument sec_1_1273-2 provides that if a substantial amount of the debt instruments in an issue is traded_on_an_established_market and the issue is not described in sec_1_1273-2 the issue_price of each debt_instrument in the issue is the fair_market_value of the debt_instrument determined as of the issue_date sec_1_1273-2 provides rules for determining whether property including a debt_instrument described in sec_1_1273-2 is traded_on_an_established_market the stated_redemption_price_at_maturity of a debt_instrument is the sum of all payments provided by the debt_instrument other than qsi payments see sec_1_1273-1 qsi generally is stated_interest that is unconditionally payable in cash at least annually at a single fixed rate see sec_1_1273-1 based on the representations and facts submitted the newly issued bonds in each of the new tranches were separate issues the bonds were traded_on_an_established_market and were not issued for money accordingly the issue_price of each newly issued bond was determined under sec_1_1273-2 and was equal to the bond’s fair_market_value on date see sec_1_1273-2 sec_1_1273-2 moreover because the stated_interest for each newly issued bond constituted qsi the stated redemption at maturity of each bond was its stated principal_amount for each newly issued bond in each of the new tranches the excess if any of the bond’s issue_price its fair_market_value over the bond’s stated_redemption_price_at_maturity its stated principal_amount constituted bond_issuance_premium for which parent must account in accordance with sec_1_163-13 thus the interest_deduction with respect to each newly issued bond must be determined by offsetting the plr-116052-16 qsi allocable to an accrual_period with the bond_issuance_premium allocable to that period ruling_request sec_163 provides that there shall be allowed as a deduction all interest_paid or accrued within the taxable_year on indebtedness sec_1_163-7 provides in part that except to the extent disallowed by any other section of the code eg sec_249 or sec_1_163-7 if a debt_instrument is repurchased by the issuer for a price in excess of its adjusted_issue_price the excess repurchase premium is deductible as interest for the taxable_year in which the repurchase occurs if the issuer repurchases a debt_instrument in a debt-for-debt exchange the repurchase price is the issue_price of the newly issued debt_instrument reduced by any unstated_interest within the meaning of sec_483 however if the issue_price of the newly issued debt_instrument is determined under either sec_1273 or sec_1274 any repurchase premium is not deductible in the year of the repurchase but is amortized over the term of the newly issued debt_instrument in the same manner as if it were original_issue_discount oid sec_1_1275-1 provides that the adjusted_issue_price of a debt_instrument at the beginning of the first accrual_period is the issue_price thereafter the adjusted_issue_price of the debt_instrument is the issue_price of the debt_instrument increased by the amount of oid previously includible in the gross_income of any holder and decreased by the amount of any payment previously made on the debt_instrument other than a payment of qsi sec_1_1502-13 provides rules for taking into account items of income gain deduction and loss of members of a consolidated_group from intercompany obligations sec_1_1502-13 defines a debt of a member as any obligation of the member constituting indebtedness under general principles of federal_income_tax law for example under non-statutory authorities or under sec_108 sec_163 or sec_1_1275-1 but not an executory obligation to purchase or provide goods or services sec_1_1502-13 defines an intercompany obligation as an obligation between members but only for the period during which both parties are members sec_1_1502-13 provides rules that apply if an obligation that is not an intercompany obligation becomes an intercompany obligation plr-116052-16 sec_1_1502-13 provides that if the intercompany obligation is debt of a member then the debt is treated for all federal_income_tax purposes immediately after it becomes an intercompany obligation as having been satisfied by the debtor for cash in an amount determined under the principles of sec_1_108-2 and then as having been reissued as a new obligation with a new holding_period but otherwise identical terms for the same amount of cash if the intercompany obligation is a security of a member similar principles apply with appropriate adjustments to treat the security immediately after it becomes an intercompany obligation as satisfied and reissued by the debtor for cash in an amount equal to its fair_market_value generally under sec_1_108-2 except as otherwise provided in sec_1_108-2 the amount of discharge_of_indebtedness income realized under sec_1_108-2 is measured by reference to the adjusted_basis of the related holder or of the holder that becomes related to the debtor in the indebtedness on the acquisition_date if the holder acquired the indebtedness by purchase on or less than six months before the acquisition_date under sec_1_1502-13 the deemed satisfaction and deemed reissuance are treated as transactions separate and apart from the transaction in which the debt becomes an intercompany obligation and the tax consequences of the transaction in which the debt becomes an intercompany obligation must be determined before the deemed satisfaction and reissuance occurs sec_1_1502-13 provides that if an obligation to which sec_1_1502-13 applies is acquired in exchange for the issuance of an obligation to a nonmember and the issue_price of this newly issued obligation is not determined by reference to its fair_market_value for example the issue_price is determined under sec_1273 or sec_1274 or any other provision of applicable law then under the principles of sec_1_163-7 any repurchase premium from the deemed satisfaction of the intercompany obligation under sec_1_1502-13 will be amortized by the debtor over the term of the obligation issued to the nonmember in the same manner as if it were oid and the obligation to the nonmember had been issued directly by the debtor sec_1_1275-6 sets forth rules for legging_out of an integrated transaction subject_to certain exceptions not relevant here sec_1_1275-6 provides in pertinent part that if a taxpayer has integrated a qualifying_debt_instrument and a sec_1_1275-6 hedge under sec_1_1275-6 legging_out means that prior to maturity of the synthetic_debt_instrument the taxpayer disposes of or otherwise terminates all or a part of the qualifying_debt_instrument or the sec_1_1275-6 hedge if the issuer of a qualifying_debt_instrument that has been integrated with a sec_1_1275-6 hedge legs out of the integrated transaction for example by repurchasing the qualifying_debt_instrument immediately before the issuer legs out the issuer is plr-116052-16 treated as repurchasing or otherwise terminating the synthetic_debt_instrument for its fair_market_value and except as provided in sec_1_1275-6 any income deduction gain_or_loss is realized and recognized at that time see sec_1_1275-6 the acquisition by parent of the tendered bonds from the old tranches on date caused the tendered bonds to become intercompany obligations see sec_1_1502-13 immediately after the tendered bonds became intercompany obligations the tendered bonds were deemed to be satisfied in cash for an amount equal to parent’s adjusted_basis therein under the principles of sec_1_108-2 see sec_1_1502-13 the issue_price of each newly issued bond from the new tranches was determined under sec_1273 and was equal to its respective fair_market_value see discussion under ruling_request infra sec_1_1273-2 sec_1_1273-2 as a result of the deemed satisfaction of the tendered bonds from the old tranches other than old bond sub2 realized repurchase premium to the extent of any excess of parent’s adjusted_basis in each tendered bond over the respective bond’s adjusted_issue_price because the issue_price of each newly issued bond was not determined under sec_1273 or sec_1274 the special rule in sec_1_1502-13 requiring repurchase premium to be amortized over the term of the bond as if it were oid does not apply but cf sec_1_1502-13 ex iii accordingly the realized repurchase premium if any is deductible by sub2 as interest under sec_1_163-7 in determining the consolidated_taxable_income in the taxable_year in which the deemed satisfaction occurred for the tendered bonds from old bond the deemed satisfaction under sec_1_1502-13 is a legging_out under sec_1_1275-6 which causes a deemed repurchase under sec_1_1275-6 any income_or_deduction realized on the deemed repurchase is recognized in lieu of recognition of any income_or_deduction on the deemed satisfaction caveats no opinion is expressed about the tax treatment of the transaction under other provisions of the code and regulations or about the tax treatment of conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the above rulings specifically no opinion is expressed as to whether the intercompany payables constituted bone fide indebtedness further no opinion is expressed as to whether the retirement of each tendered bond in exchange for an plr-116052-16 intercompany payable constituted a triggering transaction within the meaning of sec_1_1502-13 or qualified for the exception pertaining to the routine modification of an intercompany obligation within the meaning of sec_1_1502-13 finally no opinion is expressed as to whether each bond issued by parent qualified as publicly traded within meaning of sec_1_1273-2 and sec_1_1273-2 this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent parent should attach a copy of this ruling to each tax_return to which it applies in accordance with the provisions of a power_of_attorney currently on file we are sending copies of this ruling letter to your authorized representatives sincerely _______________________ charles w culmer senior technician reviewer branch office of the associate chief_counsel financial institutions products cc


id office uilc cca_2011110810103237 ---------- number release date from ------------------- sent tuesday november am to ------------------ cc ------------------------------- subject re tefra case - counsel advice - linkage below trusts the subtrusts are indirect partners potentially subject_to assessment under the last sentence of sec_6231 and constitute partners for the purposes of this proceeding under sec_6231 under 323_f3d_1210 9th cir the information relating to these subtrusts may be disclosed as part of the tefra administrative audit


internal_revenue_service number release date index number --------------- ---------------------------- ---------------------------------------------- ------------------------ -------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ---------------------- id no ------------ telephone number -------------------- refer reply to cc intl plr-140233-04 date date taxpayer legend legend ------------------------------------------------------------------------------------------ ----------------------- ----------------------------- --------------------------------------- ------------------------------------------- ------------------------------------------------------------------ de a de b branch s tax_year one ------- tax_year two ------- tax_year three cpa firm individual a dear --------------- this replies to your representative’s letter dated date in which your representative requests on behalf of taxpayer an extension of time under sec_301_9100-3 to file the elections and agreements described in sec_1_1503-2 and the annual certifications described in sec_1_1503-2 as set forth in the table below additional information was submitted in a letter dated date --------------------------------------- --------------------- de a de b branch s tax_year one tax_year two tax_year three x x not applicable y y x y z y z x x election and agreement described in sec_1_1503-2 y annual certification described in sec_1_1503-2 for tax_year one dual_consolidated_loss dcl legend plr-140233-04 z annual certification described in sec_1_1503-2 for tax_year two dcl the ruling contained in this letter is predicated upon facts and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process taxpayer is a u s_corporation and the common parent of an affiliated_group that files a u s consolidated federal_income_tax return de a and de b are members of the consolidated_group and each elected under sec_301_7701-3 to be treated as disregarded entities under the dcl rules de a and de b are hybrid_entity separate units beginning with tax_year one accordingly de a and de b are dual resident corporations and the losses_incurred by each in tax_year one are dcls taxpayer did not file the elections and agreements described in sec_1_1503-2 for the dcls incurred by de a and de b in tax_year one with its consolidated federal_income_tax return for that tax_year furthermore taxpayer did not file the annual certifications described in sec_1_1503-2 with its consolidated federal_income_tax return for tax_year two for the dcls incurred by de a and de b in tax_year one likewise taxpayer did not file the annual certifications with its consolidated federal_income_tax return for tax_year three for the dcls incurred by de a and de b in tax years one and two branch s is a separate_unit as defined under sec_1_1503-2 taxpayer filed election statements under sec_1_1503-2 for branch s for tax years two and three for the dcl’s incurred in each of those years however the election statements were not filed in the name of branch s but in the name of another member of taxpayer’s group taxpayer relies on cpa firm to prepare its consolidated federal_income_tax returns and to ensure that all relevant statutory and regulatory requirements are adequately addressed individual a a partner in that firm is responsible for reviewing taxpayer’s returns individual a reviewed taxpayer’s consolidated federal_income_tax return for tax_year one but did not realize that the election statements for de a and de b were missing from that return in addition it was determined that the annual certifications with respect to de a and de b were omitted from the consolidated federal_income_tax returns for tax years two and three because of a misunderstanding as to the taxability of these entities in their respective foreign jurisdictions and as to whether annual certifications were required to be filed furthermore individual a did not realize that the elections statements for branch s were prepared incorrectly plr-140233-04 taxpayer represents that it filed this application_for relief before the internal_revenue_service discovered the failure_to_file the elections and agreements and the annual certifications with respect to the dcls as set forth in the table above sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation the election and agreement and the annual certification described in sec_1_1503-2 and vi b respectively are regulatory elections as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the rules set forth in sec_301_9100-3 based on the facts and representations submitted we conclude that taxpayer satisfies the rules set forth in sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the election and agreement described in sec_1_1503-2 and the annual certification described in sec_1_1503-2 as set forth in the table above the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the elections and agreements and the annual certifications sec_301_9100-1 a copy of this ruling letter should be associated with the elections and agreements and the annual certifications this ruling is directed only to taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-140233-04 no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representatives sincerely associate chief_counsel international by s richard l chewning richard l chewning senior counsel office of the associate chief_counsel international enclosures copy for purposes cc


internal_revenue_service number release date index number - -------------------- ---------------------------- -------------------- ------------------------- department of the treasury washington dc person to contact ---------------------- --------- ------------- telephone number --------------------- refer reply to cc psi - plr-128381-05 date date ---------------------------- legend x --------------------------------------------------- a d1 dear -------------------- -------------------- -------------------------- ---------------------- this letter responds a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 a x’s sole shareholder intended for x to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed except as specifically set forth above no opinion is expressed concerning the sec_1362 provides that if -- a an election under sec_1362 is made for plr-128381-05 any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective d1 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for d1 federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code provides that it may not be used or cited as precedent being sent to x’s authorized representative enclosures beverly katz senior technician reviewer branch associate chief_counsel passthroughs and special industries this ruling is directed only to the taxpayer who requested it sec_6110 pursuant to a power_of_attorney on file with this office a copy of this letter is copy of this letter copy for sec_6110 purposes sincerely yours


internal_revenue_service nov number info release date uilc we are responding correspondence forwarded to the national_office submitted requesting relief in to the memphis service_center on your behalf by order to establish as the effective year for s_corporation status the information presented explains that you mailed your original election using an improper sole_proprietor employer_identification_number in date an internal_revenue_service letter indicating the invalidity of that number was sent in date and a new ein was issued shortly thereafter please note that you are precluded from automatic late s_corporation relief under revproc_97_48 because your tax_return was filed late based on the instructions to form_2553 taxpayers are generally notified of acceptance or nonacceptance of their election within three months of date of filing_date mailed if the irs questions whether the election was filed acceptable proof of filing is a certified or registered mail receipt b form_2553 with an accepted stamp c form_2553 with stamped irs received date or e an irs letter stating the election has been accepted if you have proof of mailing the original election in date we may be able to assist you otherwise you should follow the general_rule for requesting late s_corporation relief as set forth in the remainder of this letter announcement copy enclosed provides guidance on seeking relief for late s_corporation elections and inadvertent invalid s_corporation elections generally to request relief for a late or invalid s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a private_letter_ruling are set out in revproc_2000_1 copy enclosed in addition revproc_2000_1 requires taxpayers to submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their last-filed tax_return qualify for a reduced user_fee in the amount of dollar_figure if you are eligible to use the reduced fee provision you must include the statement described in b b of appendix a with your request please review appendix b for a sample format for requesting a private_letter_ruling if you submit a formal request for a private_letter_ruling please include the proper user_fee if applying under the reduced fee provisions send a statement certifying gross_income and refer your request to our office by adding the following to the address attn cc p a p o box ben franklin station washington dc direct to cc psi room please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2000_1


office_of_chief_counsel internal_revenue_service memorandum number release date presp-111796-10 uilc date may to cheryl sherwood director campus compliance services sb s ccs crc brady bennett director compliance se w c from michael j montemurro branch chief office of associate chief_counsel income_tax accounting subject california registered domestic partners on date the office of associate chief_counsel income_tax accounting issued chief_counsel_advice cca concluding that an individual who is a registered domestic partner in california must report all of his or her income earned from the performance of personal services in light of a change to california law effective in you asked us whether california registered domestic partners should each report half of the community_income on their federal returns you also asked whether individuals who filed returns in accordance with cca must amend those returns facts in california law significantly expanded the rights and obligations of persons entering into a california domestic_partnership for state property law purposes but not for state_income_tax purposes specifically the california domestic partner rights and responsibilities act of the california act effective on date provided that registered domestic partners shall have the same rights protections and benefits and shall be subject_to the same responsibilities obligations and duties under law as are granted to and imposed upon spouses however the california act provided that earned_income may not be treated as community_property for state_income_tax purposes presp-111796-10 on date california enacted senate bill senate bill repealed the language of the california act providing that earned_income was not to be treated as community_property for state_income_tax purposes thus effective date the earned_income of a registered domestic partner must be treated as community_property for state_income_tax purposes unless the rdps execute an agreement opting out of community_property treatment as a result of the legislation california as of date treats the earned_income of registered domestic partners as community_property for both property law purposes and state_income_tax purposes law and analysis sec_61 of the internal_revenue_code provides that gross_income means all income from whatever source derived including compensation_for services such as fees commissions fringe_benefits and similar items federal tax law generally respects state property law characterizations and definitions u s v mitchell 403_us_190 287_us_103 in 282_us_101 the supreme court held that for federal_income_tax purposes a wife owned an undivided one-half interest in the income earned by her husband in washington a community_property_state and was liable for federal_income_tax on that one-half interest accordingly the court concluded that husband and wife must each report one-half of the community_income on his or her separate_return regardless of which spouse earned the income 282_us_792 applied the rule_of poe v seaborn to california’s community_property law california community_property law developed in the context of marriage and originally applied only to the property rights and obligations of spouses the law operated to give each spouse an equal interest in each community asset regardless of which spouse is the holder of record d’elia v d’elia cal app 4th by california had extended full community_property treatment to registered domestic partners applying the principle that federal_law respects state law property characterizations the federal tax treatment of community_property should apply to california registered domestic partners consequently for tax years beginning after date a california registered domestic partner must report one-half of the community_income whether received in the form of compensation_for_personal_services or income from property on his or her federal_income_tax return prior to date the earned_income of a registered domestic partner was treated as community_property for state property law purposes but not for state_income_tax purposes presp-111796-10 you also asked how to treat a registered domestic partner who reported all of his or her earned_income in accordance with cca for tax years beginning before date registered domestic partners may but are not required to amend their returns to report income in accordance with this cca please call shareen pflanz or steve toomey at if you have any questions concerning this memorandum


department of the treasury internal_revenue_service washington d c date number release date cc dom fs proc uilc internal_revenue_service national_office field_service_advice memorandum for deborah a butler assistant chief_counsel field service cc dom fs from subject derivative use of evidence from an intercepted wire communication by the revenue_agent this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend a b c d e year year year year year year date date date date date x y z issue s whether the service may use evidence that was obtained from an intercepted wire communication wiretap relating to an act not enumerated in u s c sec_2516 without a derivative use order as required by u s c sec_2517 whether the service is permitted to request a nunc_pro_tunc derivative use order to be applied retroactively to the evidence obtained from the wiretap whether the evidence obtained from a legally authorized intercepted wire communication would be suppressed if the service fails to obtain a derivative use order conclusion the service’s use of evidence obtained from a wiretap for a non-enumerated act is derivative evidence and u s c sec_2517 requires the government to obtain a derivative use order before the evidence is permitted to be disclosed by testimony in a proceeding u s c sec_2517 requires the government to obtain a derivative use order as soon as practicable and prior to the use of derivative evidence in a judicial proceeding it appears from the legislative_history of u s c sec_2517 and case law that the service will be able to obtain a nunc_pro_tunc derivative use order if the application_for the derivative use order meets all the other requirements the suppression of evidence section of u s c sec_2515 is generally only applied if the original interception of evidence by the wiretap was obtained illegally most courts have held that the suppression of evidence section should not apply to an improper disclosure if the original interception was valid instead courts are more likely to provide a civil cause of action for damages as the appropriate remedy facts for year sec_1 through year b was a director and employee of e a was a x percent shareholder of e a was also one of the directors of e and the secretary and treasurer of e d was a x percent shareholder of e d was also one of the directors and the president of e b and c are married and a is the child of b and c a b and d obtained illegal income for themselves and e primarily through bribery to obtain jobs and creating false and fictitious invoices following a grand jury investigation of e d pled guilty to violating u s c sec_371 conspiracy to commit offense or to defraud the united_states u s c a interstate and foreign_travel or transportation in aid of racketeering enterprises and sec_7206 fraud and false statements a plead guilty to filing a false individual_income_tax_return for year criminal charges were dropped against b due to poor health and advanced age c died on date and b died on date a revenue_agent was assigned to the civil tax cases against a b c d and e d and e agreed to the civil tax_liabilities a statutory_notice_of_deficiency was issued to a on date for year year year and year based upon the service’s determination that a received unreported income from a’s illegal activities a statutory_notice_of_deficiency was issued to the estates of b and c on date for year through year based upon the service’s determination that b and c received unreported income from b’s illegal activities in determining the amount of the adjustments the revenue_agent used both public information contained in the court file for the criminal case and grand jury information including information obtained by wiretaps the grand jury information was obtained by the revenue_agent from the special_agent who handled the criminal matter the special_agent listened to the wiretaps and divulged some of the contents of the wiretaps to the revenue_agent the grand jury wiretap information was used to determine the cost_of_goods_sold for e and the amount of unreported income for a b and d the grand jury wiretap information was used by the service to determine that the illegally obtained income was divided with a and d receiving y of the income and b receiving z 1it is presumed in this field_service_advice that the authorization for the original wiretap was properly gained pursuant to u s c sec_2516 the service recently learned that this evidence that was provided by the special_agent was obtained without the benefit of a derivative use order pursuant to u s c sec_2517 the only information that clearly came from the wiretaps was how much each of the participants received of the illegal income the revenue_agent used this information for the figures on the statutory notices of deficiency law and analysis in congress passed the omnibus crime control and safe streets act of act title iii of the act u s c regulated wiretaps and other forms of electronic surveillance u s c sec_2511 generally prohibits the use of nonconsensual interceptions of wire communications by anyone other than duly authorized law enforcement officers engaged in the investigation or prevention of specific crimes enumerated in u s c sec_2516 title_26 offenses are not included in the enumerated offenses and wiretap evidence will be suppressed if the wiretap order targeted title_26 violations see 808_fsupp_803 s d ga while wiretaps will not be authorized for the purpose of obtaining evidence of title_26 violations relevant information or evidence which is developed during the course of a properly authorized wiretap for an enumerated offense may be used for tax purposes evidence concerning nonenumerated violations is referred to as derivative evidence and it is controlled by u s c sec_2517 u s c sec_2517 permits a law enforcement officer who obtains wiretap evidence to turn over such evidence to another law enforcement officer for use by the receiving law enforcement officer to the extent that such disclosure is appropriate to the proper performance of the official duties of the law enforcement officer making or receiving the disclosure u s c sec_2517 permits the receiving law enforcement officer to use wiretap evidence and derivative evidence to the extent that such use is appropriate to the proper performance of the law enforcement officer’s official duties u s c sec_2517 permits a person who has received wiretap evidence or derivative evidence in accordance with this chapter to disclose the contents of the communication or such derivative evidence while giving testimony under oath in any criminal proceeding u s c sec_2517 states that when an investigative or law enforcement officer while engaged in intercepting wire oral or electronic communications in the manner authorized herein intercepts wire oral or electronic communications relating to offenses other than those specified in the order of authorization or approval the contents thereof and the evidence derived therefrom may be disclosed or used as provided in subsections and of this section such contents and any evidence derived therefrom may be used under subsection of this section when authorized or approved by a judge of competent jurisdiction where such judge finds on subsequent application that the contents were otherwise intercepted in accordance with the provisions of this chapter such application shall be made as soon as practicable in other words a derivative use order must be obtained as soon as practicable in order for the derivative evidence to be used in a judicial proceeding case development hazards and other considerations whether the service may use evidence that was obtained from a wiretap relating to an act not enumerated in u s c sec_2516 without a derivative use order as required by u s c sec_2517 the first issue to be decided is whether u s c sec_2517 applies to the case at issue most legal authority concerning the disclosure of evidence obtained through a wiretap are criminal cases the legal authority for these criminal cases states that section u s c sec_2517 authorizes the disclosure and use of such interceptions in evidence except where the intercepted communication relates to offenses other than those specified in the original order in the latter situations a second application was required to be made to the judge for permission to disclose such evidence of other offenses see 528_f2d_214 7th cir 535_f2d_697 2nd cir however other criminal cases narrowed this requirement in the case 533_f2d_838 3rd cir the court stated that unrelated communications may be disclosed or used without judicial authorization if such use was in conformity with sub sec_1 and of u s c sec_2517 on the other hand sub sec_3 and of u s c sec_2517 require judicial approval for the disclosure of unrelated communications in connection with giving testimony under oath or affirmation in any proceeding held under the authority of the united_states id pincite see also 773_f2d_823 7th cir and 461_fsupp_800 s d n y we note that the case 547_f2d_872 5th cir provides some support for the proposition that a derivative use order would not be required in the fleming case the court held that derivative evidence obtained from communications lawfully intercepted as part of a bona_fide criminal investigation pursuant to u s c sec_2516 that results in the taxpayer’s conviction may properly be admitted in a civil tax proceeding at least when the evidence is already part of the public record of the prior criminal prosecution id this line of cases held that no statutory purpose would be served by a more restrictive interpretation of the government’s authority to allow inter-agency disclosures of wiretap information where there is no showing that the original criminal investigation was a subterfuge for developing information for civil tax proceedings and there is no infringement on any privacy interest caused by disclosure of the conversation from one agency to another 588_f2d_521 5th cir in other words if the evidence was intercepted properly through a lawfully authorized wiretap and the evidence had already previously been disclosed in a criminal proceeding then it is unnecessary for the government to obtain a derivative use order pursuant to u s c sec_2517 id see also 547_f2d_872 5th cir 752_f2d_415 9th cir 767_f2d_285 6th cir the recent case london v commissioner tcmemo_1998_346 applied an even more relaxed method to distinguish a civil_proceeding from a criminal trial this case was before the tax_court for the court to redetermine the tax_deficiency owed by the taxpayers the issue in the tax_court was whether respondent was required to obtain a derivative use order before the incidently intercepted contents of the wiretaps could be disclosed or used and if disclosure occurred without the derivative use order whether u s c sec_2515 would mandate a suppression of the derivative evidence in london the court stated that u s c sec_2517 applies when an investigative or law enforcement officer while engaged in intercepting wire or oral communications in the manner authorized herein intercepts wire or oral communications relating to other offenses emphasis added the london court interpreted the word offenses to mean crimes or criminal conduct therefore the london court determine that u s c sec_2517 was not violated because the respondent was not using the derivative evidence in a criminal tax case but was instead using the derivative evidence in a civil tax case to satisfy the commissioner’s burden_of_proof london v commissioner tcmemo_1998_346 76_tcm_539 as in the other civil_proceeding cases in london the interceptions by the wiretap were made a part of the public record in the criminal proceeding whether the service is permitted to request a nunc_pro_tunc derivative use order to be applied retroactively to the evidence obtained from the wiretap u s c sec_2517 states that the application_for a derivative use order shall be made as soon as practicable congress intended that judicial approval of the interception of derivative evidence might retroactively be granted pursuant to u s c sec_2517 united_states v masciarelli f 2d 2nd cir see also 721_f2d_19 1st cir the legislative_history of u s c sec_2517 states that the application_for a derivative use order might be retroactively granted upon a showing that the original order was lawfully obtained that it was sought in good_faith and not as a subterfuge search and that the communication was in fact incidently intercepted during the course of a lawfully executed wiretap order s rept no reprinted in u s c c a n in the case 773_f2d_823 7th cir the court held that the mere passage of time between the time of interception and the time of testimonial use does not allow the government to avoid or to evade these factors required to obtain a derivative use order because we fail to understand how the passage of time between the time of interception and the time of testimonial use allows the government to alter these factors we hold that requiring the government to submit a judicial application immediately upon intercepting new crimes evidence is unnecessary to satisfy sec_2517 id pincite whether the evidence obtained from a legally authorized wiretap would be suppressed if the service failed to obtain a derivative use order in determining the appropriate sanction to be applied to an improper disclosure and use of derivative evidence without a derivative use order pursuant to u s c sec_2517 the legislative_history of u s c sec_2515 notes that u s c sec_2515 must be read in light of u s c sec_2518 s rept no reprinted in u s c c a n u s c sec_2518 defines the class of persons entitled to make a motion to suppress and enumerates the circumstances that trigger suppression under u s c sec_2515 u s c sec_2518 provides three grounds for a motion to suppress the communication was unlawfully intercepted the order of authorization or approval under which it was intercepted is insufficient on its face or the interception was not made in conformity with the order of authorization or approval u s c sec_2517 addresses the use and disclosure of lawfully authorized intercepted wire oral or electronic communications in specified circumstances therefore a violation of sec_2517 does not appear to implicate the grounds for suppression specified in u s c sec_2518 london v commissioner tcmemo_1998_346 based upon the legislative_history many courts have decided that the remedy for a violation of u s c sec_2517 is not the suppression of evidence pursuant to u s c sec_2515 as the court stated in 767_f2d_285 6th cir we conclude that the act does not authorize suppression of the evidence in this action regardless of whether the disclosure violated sec_2517 we construe sec_2515 to permit suppression of evidence only if that evidence was derived from unlawful improper or unauthorized interceptions of wire or oral communications it does not authorize suppression for disclosure of such information even if they violate sec_2517 this determination is based upon the legislative_history of the act and court decisions that require sec_2515 to be read in light of u s c sec_2518 if you have any further questions please call by nancy b romano senior technician reviewer procedural branch