t c memo united_states tax_court new york football giants inc petitioner v commissioner of internal revenue respondent docket no filed date michael a guariglia for petitioner john m altman for respondent supplemental memorandum opinion colvin judge this matter is before the court on petitioner’s motion to certify for interlocutory appeal pursuant to sec_7482 and rule certain issues decided in our opinion in n y football giants inc v commissioner t c this memorandum opinion supplements n y football giants inc v commissioner 117_tc_152 and our date order denying petitioner’s motion for reconsideration section references are to the internal_revenue_code as in effect for the years in issue rule references are to the tax_court rules_of_practice and procedure background in n y football giants inc v commissioner supra pincite we held that the built-in gains tax is a subchapter_s_item that must be determined in a tefra proceeding for an s_corporation and that we lack jurisdiction as to petitioner’s tax years and we granted respondent’s motion to dismiss for lack of jurisdiction and to strike petitioner’s tax years and and denied petitioner’s cross-motion to dismiss for lack of jurisdiction as to petitioner’s tax_year as barred by the statute_of_limitations by subsequent order denying petitioner’s motion for reconsideration we rejected petitioner’s contention that the tax_matters_person tmp lacks standing to engage in litigation on behalf of an s_corporation both as untimely and on the merits we also rejected petitioner’s contention that respondent is estopped from denying that the built-in gains tax is a subchapter_s_item because equitable_estoppel is an affirmative defense that must be pleaded and petitioner did not plead estoppel and estoppel does not apply to representations of law and respondent’s interpretations of the tefra statute were statements of law discussion petitioner asks us to certify for immediate appeal the following questions for tax years and whether the built-in gains tax is a subchapter_s_item with respect to an 8s corporation whether assessments against an s_corporation may be determined in a tefra proceeding whether a tmp has standing to sue the commissioner on behalf of an s_corporation whether respondent is estopped to deny that the built-in gains tax is not a subchapter_s_item with respect to petitioner as an s_corporation and whether petitioner raised issues and in a proper and timely manner only exceptional circumstances justify a departure from the policy of postponing appellate review until after entry of final judgment 437_us_463 921_f2d_21 2d cir 104_tc_248 affd 142_f3d_546 2d cir sec_7482 a was not intended to provide early review of adverse rulings gen signal corp v commissioner supra pincite we certify an interlocutory_order for an immediate appeal only if a controlling question of law is present substantial grounds for difference of opinion are present and an immediate q4e- appeal from the order may materially advance the ultimate termination of the litigation sec_7482 a rule failure to meet any of the three requirements is grounds for denial of certification gen signal corp v commissioner supra pincite 91_tc_74 affd without published opinion 933_f2d_1021 11th cir for reasons discussed next we deny petitioner’s motion a whether controlling questions of law are presented a controlling question of law is more than a question which if decided erroneously would lead to a reversal on appeal but entails a question of law which is serious to the conduct of the litigation kovens v commissioner supra pincite see 496_f2d_747 3d cir we agree with petitioner that the built-in gains and tefra issues present controlling questions of law but we disagree that the standing estoppel and timeliness issues present controlling questions of law our denial of petitioner’s standing and estoppel arguments because they were untimely and not properly pleaded was within our discretion matters within the discretion of a trial_court generally are not certifiable as controlling questions of law 498_f2d_1240 5th cir rulings relating to the sufficiency of pleadings pretrial rulings as to the admissibility of evidence and rulings on discretionary matters are not ordinarily certifiable b whether interlocutory appeal of these issues will materially advance the ultimate termination of this case petitioner contends that the immediate resolution of the built-in gains jurisdictional and thfra issues relating to its and tax years may preclude a trial of the built-in gains tax issue in the wrong proceeding avoid unnecessary tefra proceedings and assure petitioner that it 1s proceeding in the proper action petitioner does not contend that immediate appeal of those issues will materially advance termination of litigation in this case or reduce litigation costs we conclude that immediate appeal of the issues in this case will not materially advance the ultimate termination of this case petitioner now has three cases docketed in the tax_court n y football giants inc v commissioner docket no involving petitioner’s tax_year ' n y football giants inc john k mara tax_matters_person v commissioner docket no involving the final s_corporation administrative adjustment fsaa on which the tefra case is based relating to petitioner’s and tax years and n y football giants inc v commissioner docket no ' we dismissed for lack of jurisdiction petitioner’s and tax years in n y football giants inc v commissioner supra - - involving petitioner’s and tax years the issues and facts relating to the merits of the built-in gains tax issue for tax years and are the same for tax_year it is typically preferable to try all issues raised ina case in one proceeding to avoid piecemeal and protracted litigation 64_tc_989 haft trust v commissioner 62_tc_145 affd on this issue 510_f2d_43 n lst cir we believe that because the issues and facts for tax years and are the same for tax_year and because all years are currently docketed in this court consolidation of petitioner’s three cases for trial on the built-in gains tax issue may make it easier to resolve these cases expeditiously and preserve all issues for appeal an interlocutory appeal of the built-in gains jurisdictional and tefra issues may delay the trial of the issues in this case and would not expedite or advance it because an immediate appeal will not dispose_of the factually distinct built-in gains tax issue present in all years and all three docketed cases gen signal corp v commissioner supra pincite see 92_tc_1079 petitioner filed an election in docket no to convert its s_corporation items for tax years and to non-s corporation items respondent subsequently issued a notice_of_deficiency to petitioner for tax years and the petition in docket no is based on that notice_of_deficiency - certification will not materially advance the ultimate termination of the case if an issue will remain after interlocutory appeal we conclude that the instant case is not an exceptional circumstance which warrants interlocutory appeal to reflect the foregoing an appropriate order will be issued


t c no united_states tax_court florida country clubs inc a florida corporation suncoast country clubs inc a florida corporation deborah a hamilton and james r mikes petitioners v commissioner of internal revenue respondent docket no filed date petitioners ps two s_corporations and two shareholders of those corporations received letters of proposed deficiency with respect to their and federal_income_tax returns which allowed ps an opportunity for administrative review in respondent’s r appeals_office after ps protested the proposed deficiencies with the appeals_office the parties settled without r’s issuing either an appeals_office notice of decision or a notice_of_deficiency ps filed a petition with this court under sec_7430 i r c and rule tax_court rules_of_practice and procedure for reasonable_administrative_costs r moved for a summary_judgment that ps are not entitled to an award of administrative costs as a matter of law held r never took a position in the administrative_proceeding as provided by sec_7430 i r c because ps never received a notice of decision from the appeals_office and r never sent ps a notice_of_deficiency consequently ps do not qualify as prevailing parties under sec_7430 sec_2 held further the meaning of term notice_of_deficiency under sec_7430 i r c is the same as its meaning under sec_6212 sec_3 held further the proposed notice_of_deficiency that was never approved and never sent to ps is not a notice_of_deficiency for purposes of sec_7430 i r c james r mikes for petitioners michael d zima for respondent opinion kroupa judge this matter is before the court on respondent’s motion for summary_judgment under rule the sole issue for decision is whether petitioners are entitled to reasonable_administrative_costs under sec_7430 for expenses_incurred in proceedings within the internal_revenue_service irs regarding their and federal income taxes for the unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section chapter and subtitle references are to the internal_revenue_code reasons explained below we find that petitioners are not entitled to administrative costs background petitioners are james r mikes mikes deborah a hamilton hamilton florida country clubs inc fcc and suncoast country clubs inc scc fcc and scc are corporations that elected to be taxed under subchapter_s for and mikes and hamilton were married and filed joint returns for those years and they were shareholders of the corporations respondent commenced an audit of fcc for the years and in date to examine inter alia certain claimed depreciation expenses and a possible understatement of gross_receipts in respondent expanded the audit for those years to include mikes hamilton and scc the audit encompassed in addition to the depreciation_deductions the deductibility of net operating losses as well as interest_income and expenses claimed by petitioners on account of certain loans in date the audit was further widened to include the year for all petitioners on date respondent sent petitioner fcc a day letter proposing to increase the income reported on its and returns in the amounts of dollar_figure and dollar_figure at the time the petition was filed petitioners hamilton and mikes resided in florida and the principal_place_of_business of the corporate petitioners fcc and scc was also in florida respectively on date 30-day letters were sent to scc mikes and hamilton the letters proposed to increase mikes’s and hamilton’s income for and by the amounts of dollar_figure and dollar_figure respectively and to increase the income of scc by dollar_figure for and dollar_figure for those proposed changes would have resulted in deficiencies for mikes and hamilton of dollar_figure for and dollar_figure for on date a reviewer in respondent’s quality measurement staff submitted a proposed notice_of_deficiency the reviewer’s proposal with respect to the and federal_income_tax returns of mikes and hamilton the reviewer’s proposal was to be reviewed by the office of district_counsel district_counsel in jacksonville florida the reviewer’s proposal recommended an increase in the income reported on the and returns of fcc and scc and also proposed increases to the income reported on the and returns of mikes and hamilton in the amounts of dollar_figure and dollar_figure respectively on date district_counsel rejected the reviewer’s proposal and advised her to obtain petitioners’ agreement to extend the statutory period of limitations for assessment which would allow the staff time to further explore the facts of the case petitioners consented to extend the statutory period of limitations until date consequently respondent did not send petitioners any notice_of_deficiency nor did respondent issue the reviewer’s proposal to petitioners during and respondent issued to each petitioner at least three revised 30-day letters proposing adjustments to their and reported income upon receipt of the final 30-day letters petitioners protested the proposed adjustments to respondent’s appeals_office the parties settled the case sometime in date without respondent issuing either a notice_of_deficiency or an appeals_office notice of decision pursuant to the settlement the parties agreed that petitioners owed no additional taxes for either or and in fact were entitled to a refund for petitioners filed a request for administrative costs under sec_7430 with respondent and respondent denied their request on date consequently petitioners timely filed their petition with this court on date under sec_7430 and rule for administrative costs they incurred after date on date respondent filed a motion for summary_judgment claiming that petitioners were not entitled as a matter date is the effective date for the amendments to sec_7430 under the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_728 of law to recover administrative costs because respondent never took a position in the proceedings summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 summary_judgment may be granted where there is no genuine issue of any material fact and a decision may be rendered as a matter of law rule a and b see 98_tc_518 affd 17_f3d_965 7th cir 90_tc_753 the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences will be read in a manner most favorable to the party opposing summary_judgment 85_tc_812 79_tc_340 when a motion for summary_judgment is made and properly supported the adverse_party may not rest upon mere allegations or denials of the pleadings but must set forth specific facts showing that there is a genuine issue for trial rule d we conclude that there is no genuine issue of material fact precluding us from resolving the question raised in respondent's motion no hearing was requested and none is required rule a we therefore dispose_of the petition without a hearing or further written submissions discussion sec_7430 has been amended several times since it was enacted in which provisions and therefore which amendments apply in a given case depends on when the proceeding was commenced and the period within which the claimed costs were incurred because this proceeding was commenced on date and the costs were incurred after date the amendments to sec_7430 made by the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_727 apply in addition we are asked to interpret the amendment in to sec_7430 made by the taxpayer bill of right sec_2 tbor publaw_104_168 secs stat we begin by discussing the general operative provisions of sec_7430 then discuss the amendments made in tbor and rra we then analyze the arguments each party made and we conclude that petitioners cannot recover administrative costs sec_7430 was enacted in to allow certain prevailing parties to recover reasonable_litigation_costs but not administrative costs in cases brought by or against the united_states to determine collect or refund any_tax interest or penalty the tax equity and fiscal responsibility act of publaw_97_248 sec a 96_stat_572 sec_7430 was expanded in to allow for the recovery_of reasonable_administrative_costs the technical_and_miscellaneous_revenue_act_of_1988 tamra publaw_100_647 sec a stat i sec_7430 recovery_of administrative costs is governed by sec_7430 which permits a taxpayer who is a prevailing_party in any administrative proceedings brought by or against the united_states to recover reasonable_administrative_costs incurred by him or her in connection with such proceedings see sec_7430 to be a prevailing_party the taxpayer must inter alia substantially prevail with respect to the amount in controversy or the most significant issue or set of issues presented sec_7430 a taxpayer will not qualify as a prevailing sec_7430 provides in part prevailing_party -- a in general --the term prevailing_party means any party in any proceeding to which subsection a applies other than the united_states or any creditor of the taxpayer involved -- i which-- i has substantially prevailed with respect to the amount in controversy or ii has substantially prevailed with respect to the most significant issue or set of issues presented and b exception if united_states establishes that its position was substantially justified -- i general_rule --a party shall not be treated as the prevailing_party in a proceeding to which subsection a applies if the united_states establishes continued party however if the government establishes that the position_of_the_united_states was substantially justified see sec_7430 the position_of_the_united_states is in turn defined in sec_7430 as the position taken by the government in an administrative_proceeding as of the earlier of the date of receipt by the taxpayer of the notice of decision of the appeals_office or the date of the notice_of_deficiency thus prior to the issuance of a notice_of_deficiency or an appeals_office decision the government is not considered as having taken any position see eg richardson v commissioner tcmemo_1991_427 we cannot consider the conduct of the revenue_agent prior to date of notice_of_deficiency nathaniel v united_states aftr 2d ustc par big_number e d cal the plain language of sec_7430 precludes the court from considering the position taken by the united_states in the administrative proceedings prior to the date of a notice_of_deficiency or the date of the receipt by the taxpayer of a notice of a decision of the office of appeals respondent argues that because no notice_of_deficiency or appeals_office decision was ever issued to petitioners no position_of_the_united_states had been taken that can be shown continued that the position_of_the_united_states in the proceeding was substantially justified to be substantially justified under sec_7430 accordingly respondent contends petitioners cannot qualify as a prevailing_party under sec_7430 and cannot therefore recover administrative costs respondent’s contention presupposes of course that before a taxpayer can qualify as a prevailing_party under sec_7430 the government must take a position as defined in sec_7430 ie issue a notice_of_deficiency or an appeals_office decision this is the first time we are asked to determine this issue since sec_7430 was amended by tbor in and we turn to it now a pre tbor sec_7430 prior to the tbor amendment to sec_7430 the taxpayer had to substantially prevail and in addition had the burden of establishing that the position_of_the_united_states in the proceedings was not substantially justified if the prior to the tbor amendment sec_7430 read in relevant part as follows sec_7430 prevailing_party -- a in general --the term prevailing_party means any party in any proceeding to which subsection a applies other than the united_states or any creditor of the taxpayer involved -- i which establishes that the position_of_the_united_states in the proceeding was not substantially justified continued government had not taken a position as defined in sec_7430 the taxpayer could not meet his or her burden of showing that such position was not substantially justified and could not recover administrative costs see ball v commissioner tcmemo_1995_520 noting that sec_7430 does not allow an award of administrative costs for a position the commissioner takes before the commissioner issues the notice_of_deficiency or appeals issues a notice of decision in re acme music co bankr n bankr w d pa until an appeals_office decision is received by a taxpayer or a deficiency_notice is issued the i r s does not take any position in an administrative_proceeding and administrative costs cannot be recovered in any event b tbor amendment to sec_7430 congress amended sec_7430 in tbor to shift to the government the burden of establishing that its position was substantially justified congress shifted the burden by amending sec_7430 to provide that a taxpayer cannot be a prevailing_party if the government demonstrates that its position continued ii which-- i has substantially prevailed with respect to the amount in controversy or ii has substantially prevailed with respect to the most significant issue or set of issues presented and was substantially justified in doing so it eliminated any direct reference to the position_of_the_united_states in sec_7430 in its current form therefore the language of sec_7430 only requires that the taxpayer show that he or she substantially prevailed although the language of sec_7430 no longer mentions the position_of_the_united_states we interpret the section to require that such a position be taken before a taxpayer can qualify as a prevailing_party we interpret the language of sec_7430 by examining all subsections of sec_7430 it is a central tenet of statutory construction that when interpreting any one provision of a statute the entire statute must be considered see eg 523_us_26 huffman v commissioner 978_f2d_1139 9th cir the guiding principle in analyzing the plain meaning of sec_7430 is that the entire statute must be examined as a whole with all of its sections and subsections in mind affg tcmemo_1991_144 we turn now to analyzing sec_7430 in order to be a prevailing_party a taxpayer must also satisfy certain net_worth requirements see sec_7430 the net_worth requirements are not at issue however in this motion for summary_judgment action subparagraphs a and b of sec_7430 together set forth circumstances in which a taxpayer is allowed to recover administrative costs under subparagraph a a taxpayer who substantially prevails with respect to the amount in controversy or issues presented will be a prevailing_party unless the government shows under subparagraph b that its position was substantially justified subparagraph b of sec_7430 is not independent from subparagraph a but is instead a condition on which the recovery_of administrative costs depends if the government establishes that its position was substantially justified the taxpayer cannot be a prevailing_party thus even though the tbor amendment removed any direct reference to the term position in sec_7430 there still must be an analysis of whether the government has taken a position as that term is defined in subsection c in evaluating whether a taxpayer is a prevailing_party under subsection c indeed any contrary construction--that a position as defined in sec_7430 is not necessary for a taxpayer to qualify as a prevailing_party --would run contrary to the purpose behind the tbor amendment if no position is required taxpayers would always qualify as prevailing parties before a notice_of_deficiency or appeals_office decision had been issued this would result from the government’s inability to show that the stance it had taken in the proceedings was substantially justified because it would not be considered to have taken a position under sec_7430 taxpayers would therefore be able to recover administrative costs incurred before the issuance of a notice_of_deficiency or appeals_office decision whether or not the government’s position was substantially justified there is no indication that the tbor amendment was designed to have such an effect the tbor amendment sought to shift to the government the burden_of_proof to establish that it was substantially justified in maintaining its position against the taxpayer h rept pincite 1996_3_cb_49 there is no indication that the amendment was intended in addition to shifting the burden to the government to prevent the government from showing that its position was substantially justified likewise nothing in the legislative_history to tbor suggests that the amendment to sec_7430 was intended to alter the effect of sec_7430 we have previously found that the effect of subsection c is to protect the commissioner from claims by taxpayers that positions taken by for example the examination or collections division personnel before issuance of a notice_of_deficiency or of the decision of appeals are not substantially justified ball v commissioner supra the tbor amendment to sec_7430 is consistent with the congressional intent of immunizing the government against claims for costs until the irs’s position has crystallized in an appeals_office decision or notice_of_deficiency ii the parties’ arguments respondent maintains that since no appeals_office decision or notice_of_deficiency was ever issued to petitioners petitioners do not qualify as prevailing parties for purposes of sec_7430 and cannot recover administrative costsdollar_figure in response petitioners assert that respondent did take a position respondent’s position was manifested in the sec_7430 serves to protect the irs from liability before the appeals_office gets involved the appeals_office is the forum for the compromise of disputes between taxpayers and the irs and it is the first stage within the irs at which the proposed adjustments are fully reviewed and which expressly takes into account the hazards_of_litigation we disagree with respondent that 103_tc_395 and belshee v commissioner tcmemo_1999_380 establish that petitioners are not entitled to recover costs prior to the issuance of a notice_of_deficiency or an appeals_office decision these cases denied the taxpayers’ requests to recover costs on the grounds that such costs were not incurred during a period for which recovery was permitted under sec_7430 these cases did not address whether the taxpayers were prevailing parties under subsec c furthermore these cases were decided on the basis of sec_7430 before it was amended by rra to allow taxpayers to recover costs incurred on or after the date of mailing of the first letter of proposed deficiency because we interpret sec_7430 in light of its amendment by rra the logic of estate of gillespie and belshee is not dispositive of whether petitioners are entitled to recover administrative costs 30-day letters sent to petitioners during september and october of and the reviewer’s proposal dated date a the initial 30-day letters although petitioners acknowledge respondent issued 30-day letters to them during september and october of petitioners fail to develop this theory or make any comprehensible argument regarding the 30-day letters congress amended sec_7430 in rra to incorporate 30-day letters we now address whether our conclusion that administrative costs are not recoverable unless the government takes a position either in a notice_of_deficiency or an appeals_office decision is at odds with the rra amendment to sec_7430 in rra congress amended sec_7430 which defines the term reasonable_administrative_costs to include costs incurred from the the date on which the 1st letter of proposed deficiency the 30-day_letter which allows the taxpayer an opportunity for administrative review in the internal_revenue_service office of appeals is sent sec_7430 prior to the rra amendment reasonable_administrative_costs were limited to those incurred after the date of the notice_of_deficiency or appeals_office decision ie the same instance sec_11 petitioners’ arguments with respect to the 30-day_letter are confusing and incomprehensible because 30-day letters were issued in this case we take this opportunity to address the amendment rra made to sec_7430 in which the government is defined as having taken a position under sec_7430 the rra amendment therefore expanded the definition of reasonable_administrative_costs to include costs incurred from an earlier date while the rra amendment moves the point in time in which administrative costs come within sec_7430 the rra amendment does not move the point in time in which the government is considered to have taken a position in sec_7430 accordingly the rra amendment does not permit recovery_of administrative costs in situations where no notice_of_deficiency or appeals_office decision has been issued our interpretation of the rra amendment to sec_7430 is consistent with sec_7430 first paragraphs and of subsection c serve different functions in the statutory scheme governing the recovery_of administrative costs sec_7430 governs the determination of whether a taxpayer is a prevailing_party entitled to recover administrative costs sec_7430 on the other hand defines what costs are recoverable by a taxpayer who otherwise qualifies as a prevailing_party under sec_7430 stated simply if a taxpayer does not qualify as a prevailing_party eg because the government never took a position under c by issuing a notice_of_deficiency or appeals_office decision he or she cannot recover any administrative costs regardless of when such costs were incurred further while the legislative_history to the rra amendment contains language that may be interpreted to include the 30-day_letter among the instances in which the government will be considered to have taken a position such an interpretation is inconsistent with the plain language of sec_7430 in addition such an interpretation is contrary to congressional action taken during the legislative process in enacting the rra amendment to sec_7430 the house and senate reports accompanying the rra amendment to sec_7430 contain the following language the committee believes that taxpayers should be allowed to recover the reasonable_administrative_costs they incur where the irs takes a position against the taxpayer that is not substantially justified beginning at the time that the irs establishes its initial position by issuing the 30-day_letter s rept pincite c b pincite h rept 1998_3_cb_373 this legislative_history can be read as extending the period for accrual of recoverable costs under sec_7430 to the date on which the 30-day_letter is sent this legislative_history cannot be as easily read as indicating congress’s intent to alter the time at which the government is considered to have taken a sec_7430 position for purposes of sec_7430 indeed the statement of managers conference_report to the rra amendment to sec_7430 merely states that the bill m oves the point in time after which reasonable_administrative_costs can be awarded to the date on which the 30-day_letter is sent h conf rept pincite 1998_3_cb_747 any interpretation that the 30-day_letter constitutes a position of the government conflicts with the plain language of sec_7430 the language of sec_7430 does not include the 30-day_letter among the instances in which the government is considered to have taken a position rather the position of the government is defined as that taken in the notice_of_deficiency or appeals_office decision it is an established rule_of statutory construction that where there is a conflict between portions of the legislative_history and the words of the statute the language in the statute controls 870_f2d_1340 7th cir the words congress chooses to put in the statute represent the constitutionally approved method of communication 952_f2d_1230 10th cir 101_tc_260 u nequivocal evidence of legislative purpose reflected in the legislative_history is required to override the ordinary meaning of the statute kaiser steel corp v pearl brewing co supra pincite in this case not only is unequivocal evidence in support of reading the 30-day_letter into subsection c clearly absent but several factors support the opposite conclusion--congress specifically rejected adding the 30-day_letter to the instances in which the government is considered to have taken a position the first factor we rely upon to find that congress specifically rejected adding the 30-day_letter to the definition of position in sec_7430 is that congress failed to amend subsection c in rra even though congress amended subsection c to include within the definition of reasonable_administrative_costs those costs incurred on or after the date on which the 30-day_letter is sent where language is included in one section of a statute but omitted in another section of the same statute it is generaly presumed that the disparate inclusion and exclusion was done intentionally and purposely 980_f2d_506 8th cir see also 2b singer sutherland statutory construction sec_51 pincite 5th ed more substantial evidence exists here to persuade us that we cannot attribute congress’ failure to amend subsection c to mere congressional inadvertence or oversight first the original version of the rra amendment to sec_7430 included an amendment to subsection c that mirrored that of subsection c this proposed amendment rra was originally introduced as the internal_revenue_service restructuring and reform act of h_r 105th cong 1st sess would have added the issuance of the 30-day_letter to the instances in which the government is defined as having taken a position see h_r sec_301 sec_105th cong 1st sess s sec_301 sec_105th cong 1st sess this proposed amendment to subsection c never became law however it was omitted from subsequent versions of the bill in instances such as this where language is included in an earlier version of a bill but is deleted prior to enactment we may presume that the deletion was intentional see 508_us_200 464_us_16 at a minimum the attempt to amend subsection c demonstrates that congress was aware of this provision but chose not to amend it further congress received testimony from both the administration and the private sector during congressional hearings on the rra amendment to sec_7430 see testimony of donald lubick assistant secretary of treasury tax policy hearings on h_r 105th cong 1st sess date the american bar association tax section specifically requested that congress amend sec_7430 to add the 30-day_letter to the situations in which the government is defined as having taken a position see testimony of pamela f olson vice chair committee operations section of taxation american bar association hearings on h_r 105th cong 1st sess date reprinted in tnt we recommend that congress also amend the definition of ‘position of the united states’ to refer to the date of the issuance of the first notice_of_proposed_deficiency despite having the specific fact called to congress’s attention congress passed the rra legislation without making any conforming amendment to sec_7430 moreover we are mindful that the rra amendment to sec_7430 is not the first time congress rejected adding the 30-day_letter to sec_7430 the first time congress rejected adding the 30-day_letter to sec_7430 was in tamra in the senate amendment in tamra to sec_7430 would have included the 30-day_letter as a position of the government under sec_7430 as with the proposed rra amendment to sec_7430 congress rejected the proposed amendment to sec_7430 in tamra see h conf rept vol ii pincite 1988_3_cb_473 in addition despite the numerous amendments to sec_7430 since the section was first enacted in the position_of_the_united_states has never been defined in sec_7430 to include the 30-day_letter we find this fact compelling if congress had wanted the position_of_the_united_states to include the 30-day_letter it could have explicitly said so this court is not at liberty to supply by construction what congress has clearly shown its intention to omit 240_us_430 see also ins v cardoza-fonseca 480_us_421 few principles of statutory construction are more compelling than the proposition that congress does not intend sub silentio to enact statutory language that it has earlier discarded in favor of other language the fact that congress considered an amendment to sec_7430 to allow recovery_of administrative costs in situations before the issuance of a notice_of_deficiency or appeals_office decision but chose not to do so convinces us that it would be inappropriate to interpret the rra amendment of sec_7430 by grafting a concomitant amendment onto sec_7430 finally we note that neither sec_7430 nor sec_7430 is rendered meaningless or is otherwise contradicted by the other all parts of a statute must be read together and each part should be given its full effect see 38_tc_462 affd per curiam 324_f2d_957 5th cir we find no reason why the language of each should not be given its full effect accordingly we interpret sec_7430 to limit recovery_of administrative costs to those situations in which a notice_of_deficiency or appeals_office decision has been issued in these situations and these situations alone sec_7430 allows for the recovery_of administrative costs incurred from the date of the 30-day_letter b the reviewer’s proposal petitioners claim that respondent did take a position as manifested in the reviewer’s proposal specifically petitioners argue that the reviewer’s proposal constitutes a notice_of_deficiency for purposes of sec_7430 and that accordingly the date on which it was submitted for review to the district_counsel namely date is the date on which respondent took a position we disagree the reviewer’s proposal is not a notice_of_deficiency for purposes of sec_7430 a statutory_notice_of_deficiency has a specific technical meaning a notice_of_deficiency is defined in sec_6212 as a notice from the secretary sent to the taxpayer by certified or registered mail in which the secretary has determined that there is a deficiency in respect of any_tax imposed by subtitle a or b or chapter or see 77_tc_1197 the plain language of sec_6212 requires that the notice at a minimum indicate that the commissioner determined that a deficiency exists for a particular year specify the amount of the deficiency and be sent to the taxpayer see 787_f2d_1541 11th cir in this case respondent never determined a deficiency for any particular year and never sent the reviewer’s proposal to petitioners accordingly the reviewer’s proposal does not constitute a notice_of_deficiency within the meaning of sec_7430 see also 103_tc_395 30-day_letter not a notice_of_deficiency for purposes of sec_7430 petitioners further contend that the term notice_of_deficiency in sec_7430 should not be given the same meaning it has under sec_6212 and that for purposes of sec_7430 it is inconsequential that the reviewer’s proposal was neither issued nor sent to them again we disagree we have previously found and the regulations provide that the meaning of the term notice_of_deficiency in sec_7430 is the same as the meaning of that term in sec_6212 see estate of gillespie v commissioner supra sec_301 c proced admin regs under well-established rules of statutory construction identical words used in different parts of the same statute are to be given a similar meaning in the absence of a contrary legislative intent see 293_us_84 we find no reason for interpreting the term notice_of_deficiency in sec_7430 differently from the meaning of that term under sec_6212 see 503_us_393 475_us_851 c conclusion in conclusion given that petitioners were never issued a notice_of_deficiency or an appeals_office notice we find that respondent never took a position for purposes of sec_7430 and that petitioners are therefore not prevailing parties entitled to recover administrative costs under sec_7430 we have considered all of petitioners’ contentions and arguments to the extent any contention or argument is not discussed we find it to be without merit and or irrelevant to reflect the foregoing an appropriate order and decision will be entered


department of the treasury washington dc person to contact ---------------------------- id no -------------- --------------------------------------------------- telephone number ------------------- refer reply to cc psi b04 - plr-125538-18 date date internal_revenue_service number release date index number ---------------------------------- ---------------------------------- ---------------------------- re --------------------------------------------- ------- legend date grantor father mother sibling sibling trustee power_of_appointment committee ------------------------------------------------------------------------------ ------------------ -------------------------------------------------- ------------------------------------------------------------- --------------------------------------------------- ------------------------------------------------ -------------------------------------------------------- ------------------------ lifetime beneficiaries ------------------------------------------------------------------------------ -------------------------------------------------------------------------- trust ------------------------------------------------- ---------------------------------------------------------------------------------------- state --------- --------------------------------------------------------------------------------- dear -------------- this letter responds to your authorized representative’s letter of date requesting rulings under sec_671 sec_2501 sec_2514 and sec_2041 of the internal_revenue_code the facts submitted and representations made are as follows on date grantor created trust an irrevocable_trust for the benefit of grantor father mother sibling and sibling lifetime beneficiaries grantor is the only donor of all property plr-125538-18 contributed to trust a corporate trustee trustee is the trustee of trust trust is sitused in and governed by the law of state article five section dollar_figure of trust provides that during grantor’s lifetime trustee must retain all contributions to trust in a single trust for the benefit of the lifetime beneficiaries further pursuant to section dollar_figure of article five trustee must not make any distributions except as appointed by grantor or the power_of_appointment committee committee as follows during grantor’s lifetime grantor may appoint trust principal including the whole thereof outright or in trust to or for the benefit of any one or more of the lifetime beneficiaries as grantor deems advisable at any time and from time to time for the beneficiary’s health education maintenance or support grantor’s sole power grantor may not exercise this power to appoint any interest in trust to grantor grantor’s estate grantor’s creditors or the creditors of grantor’s estate grantor holds this power in a non-fiduciary capacity sec_5 b provides that during grantor’s lifetime a majority of the committee members with grantor’s written consent may but are not required to appoint trust income or principal including the whole thereof outright or in trust to or for the benefit of grantor or the lifetime beneficiaries for any purpose at any time and from time to time grantor’s consent power sec_5 b provides that during grantor’s lifetime the committee members other than grantor by unanimous vote may but are not required to appoint trust income including the whole thereof to or for the benefit of any one or more of grantor or the lifetime beneficiaries for any purposes at any time and from time to time unanimous member power section dollar_figure provides that during grantor’s lifetime if at any time the committee ceases to exist trustee may but is not required to distribute income or principal to the lifetime beneficiaries other than grantor as follows a independent_trustee may distribute any portion of trust property outright or in trust to or for the benefit of any lifetime beneficiary as independent_trustee determines advisable for any purpose including distribution of all or part of the trust principal to fund a beneficiary’s business ventures investment ventures or charitable giving an interested trustee must not make distributions from trust independent_trustee is defined as any trustee who is not an interested trustee an interested trustee is defined as a trustee who is a transferor or beneficiary is related or subordinate to a transferor or beneficiary can be removed and replaced by a transferor with either the transferor or a party who is related or subordinate to the transferor or can be removed and replaced by a beneficiary with either the beneficiary or a party who is related or subordinate to the beneficiary plr-125538-18 sec_5 a also provides that any net_income not distributed must be accumulated and added to principal sec_5 d provides that under no circumstances may trustee make any distribution to any beneficiary in a manner that would discharge any of grantor’s legal obligations section dollar_figure provides that upon grantor’s death grantor may appoint the balance of trust to any one or more persons or charities qualified under sec_2055 in equal or unequal proportions and on any terms or conditions grantor designates grantor may not exercise this power for the purpose of discharging grantor’s legal obligations or otherwise for grantor’s pecuniary benefit and may not exercise this power to appoint any interest in trust to grantor grantor’s estate grantor’s creditors or the creditors of grantor’s estate grantor’s testamentary_power_of_appointment further grantor may not exercise this power_of_appointment to create another power_of_appointment that under any applicable law can be validly exercised to postpone the vesting of any estate or interest in the property subject_to the power for a period ascertainable without reference to the first power_of_appointment article six section dollar_figure provides that in default of grantor’s exercise of grantor’s testamentary_power_of_appointment trustee must distribute ten percent of the remaining trust property in equal shares to each member of the committee other than grantor trustee shall administer the share for each beneficiary in a separate trust for the benefit of the beneficiary as provided in section in addition trustee must distribute ten percent of the remaining trust property to one or more charities supported by grantor during grantor’s lifetime trustee in trustee’s sole discretion may determine the charities amounts and charitable purposes of such distributions each charitable_organization must be a charity of a type described in sec_2055 finally trustee must allocate the balance of the remaining trust property among grantor’s descendants as provided in section trustee in trustee’s sole discretion may determine the beneficiaries amounts shares and interests of the allocations but must administer the allocation to a descendant as provided in section section dollar_figure of article five also provides that any member of the committee may resign as a member without prior approval of any court or the consent of any person however at all times there must be at least two members of the committee in addition to grantor if at any time there are fewer than two members serving on the committee then the committee automatically ceases to exist and all trust distributions are governed under sec_5 further pursuant to sec_5 b and as stated above the committee only has the authority to appoint under the grantor consent power and the committee unanimous member power only during grantor’s lifetime plr-125538-18 article five sec_5 b provides that the members of the committee include grantor father mother sibling and sibling committee will cease to exist upon grantor’s death further committee members exercise their powers of appointment in a nonfiduciary capacity article one sec_1 a provides that no trustee may or any other person may make any discretionary distribution to grantor or any trust where grantor is a beneficiary or to any trust which is a grantor_trust as to grantor under sec_672 through you have requested the following rulings as long as the power_of_appointment committee is serving no portion of the items of income deductions and credits against tax of trust shall be included in computing under sec_671 the taxable_income deductions and credits of grantor or any other member of the committee the contribution of property to trust by grantor is not a completed_gift subject_to federal gift_tax any distribution_of_property by the committee from trust to grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee any distribution_of_property by the committee from trust to any beneficiary of the trust other than grantor will not be a completed_gift by any member of the committee other than grantor no member of the committee upon his or her death will include in his or her estate any property held in trust because such member is deemed to have a general_power_of_appointment within the meaning of sec_2041 over property held in trust ruling sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual plr-125538-18 sec_672 provides for purposes of subpart e that the term adverse_party means any person having a substantial_beneficial_interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust sec_673 provides that the grantor shall be treated as the owner of any portion of a_trust in which the grantor has a reversionary_interest in either the corpus or the income therefrom if as of the inception of that portion of the trust the value of such interest exceeds five percent of the value of such portion sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to the power in sec_674 regardless of by whom held sec_674 provides that sec_674 shall not apply to a power exercisable only by will other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to a power to distribute corpus to or for a beneficiary provided that the power is limited by a reasonably_definite_standard under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant to its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both plr-125538-18 sec_677 provides in general that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor’s spouse held or accumulated for future distribution to the grantor or the grantor’s spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse sec_678 provides that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would within the principles of inclusive subject a grantor of a_trust to treatment as the owner thereof sec_679 provides that a united_states_person who directly or indirectly transfers property to a foreign_trust shall be treated as the owner for his taxable_year of the portion of such trust attributable to such property if for such year there is a united_states_beneficiary of any portion of the trust based solely on the facts submitted and representations made we conclude an examination of trust reveals none of the circumstances that would cause grantor to be treated as the owner of any portion of trust under sec_673 sec_674 sec_676 sec_677 or sec_679 as long as trust is a domestic_trust and the committee remains in existence and serving because none of the members of committee have a power exercisable by himself to vest trust income or corpus in himself none shall be treated as the owner of trust under sec_678 we further conclude that an examination of trust reveals none of the circumstances that would cause administrative controls to be considered exercisable primarily for the benefit of grantor under sec_675 thus the circumstances attendant on the operation of trust will determine whether grantor will be treated as the owner of any portion of trust under sec_675 this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office with responsibility for such examination ruling sec_2501 provides that a tax is imposed for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that the gift_tax applies whether the transfer is in plr-125538-18 trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete as to any property a part thereof or interest therein of which the donor has so parted with dominion and control as to leave the donor no power to change its disposition whether for the donor’s own benefit or for the benefit of another but if upon a transfer of property whether in trust or otherwise the donor reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the facts in the particular case accordingly in every case of a transfer of property subject_to a reserved power the terms of the power must be examined and its scope determined sec_25_2511-2 provides an example where the donor transfers property to another in trust to pay the income to the donor or accumulate it in the discretion of the trustee and the donor retains a testamentary power to appoint the remainder among the donor’s descendants the regulation concludes that no portion of the transfer is a completed_gift however if the donor had not retained a testamentary_power_of_appointment but had instead provided that the remainder should go to x or his heirs the entire transfer would be a completed_gift sec_25_2511-2 provides that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title in himself or herself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by the donor in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom a trustee as such is not a person having an adverse_interest in the disposition of the trust property or its income sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that if a donor transfers property to himself as trustee or to himself and some other person not possessing a substantial adverse_interest as trustees and retains no beneficial_interest in the trust property and no plr-125538-18 power over it except fiduciary powers the exercise or nonexercise of which is limited by a fixed_or_ascertainable_standard to change the beneficiaries of the transferred property the donor has made a completed_gift and the entire value of the transferred property is subject_to the gift_tax sec_25_2511-2 does not define substantial adverse_interest sec_25_2514-3 provides in part that a taker in default of appointment under a power has an interest that is adverse to an exercise of the power sec_25_2514-3 also provides that a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in 308_us_39 the taxpayer created a_trust for the benefit of named beneficiaries and reserved the power_to_revoke the trust in whole or in part and to designate new beneficiaries other than himself six years later in the taxpayer relinquished the power_to_revoke the trust but retained the right to change the beneficiaries in the taxpayer relinquished the right to change the beneficiaries the court stated that the taxpayer’s gift is not complete for purposes of the gift_tax when the donor has reserved the power to determine those others who would ultimately receive the property accordingly the court held that the taxpayer’s gift was complete in when he relinquished his right to change the beneficiaries of the trust a’s retention of a power to change the beneficial interests in a_trust causes the transfer to the trust to be incomplete for gift_tax purposes even though the power may be defeated by the actions of third parties 37_tc_897 see also 51_tc_352 in this case grantor retains the grantor’s consent power over the income and principal of trust under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom under sec_25_2514-3 a taker in default has an adverse_interest however the committee members are not takers in default for purposes of sec_25_2514-3 they are merely co-holders of the power under sec_25_2514-3 a co-holder of a power is only considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in this case the committee members only have the authority to exercise their powers under the grantor’s consent power and unanimous member power during grantor’s lifetime accordingly the committee members do not have interests adverse to grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 therefore grantor is considered as possessing the power to distribute income and principal to any beneficiary himself because he retained the grantor’s consent power plr-125538-18 if the committee ceases to exist trust provides that an independent_trustee has the power to distribute income or principal to the lifetime beneficiaries however the independent trustee’s power is not a condition_precedent to grantor’s consent power grantor’s consent power over income and principal is presently exercisable and not subject_to a condition_precedent thus the independent trustee’s power to distribute income and principal does not cause the transfer of property to be complete with respect to the income or principal interest in trust for federal gift_tax purposes therefore grantor is considered as possessing the power to distribute income and or principal to any beneficiary himself because he retained the grantor’s consent power grantor also retains the grantor’s sole power over the principal of trust under sec_25_2511-2 a gift is incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard in this case the grantor’s sole power gives grantor the power to change the interests of the beneficiaries even though grantor’s power is limited by an ascertainable_standard ie health education maintenance and support grantor’s power is not a fiduciary power accordingly the retention of the grantor’s consent power and the grantor’s sole power causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes further grantor retains grantor’s testamentary power to appoint the property to any one or more persons or charities qualified under sec_2055 other than grantor’s estate grantor’s creditors or the creditors of grantor’s estate under sec_25_2511-2 the retention of a testamentary power to appoint the remainder of a_trust is considered a retention of dominion and control_over the remainder accordingly the retention of this power causes the transfer of property to trust to be incomplete with respect to the remainder in trust for federal tax purposes finally the committee members possess the unanimous member power over income this power is not a condition_precedent to grantor’s powers grantor’s power over the income is presently exercisable and not subject_to a condition_precedent grantor retains dominion and control_over the income of trust until the committee members exercise their unanimous member power accordingly the retention of this power does not cause grantor’s transfer of property to trust to be complete for federal gift_tax purposes see 37_tc_897 51_tc_352 accordingly based on the facts submitted and the representations made we conclude that the contribution of property to trust by grantor is not a completed_gift subject_to federal gift_tax ruling sec_3 and plr-125538-18 sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power possessor the possessor’s estate the possessor’s creditors or the creditors of the possessor’s estate sec_25_2514-1 provides that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the possessor or his creditors or the possessor’s estate or the creditors of his estate or expressly not exercisable in favor of the possessor or his creditors or possessor’s estate or the creditors of his estate sec_2514 provides that in the case of a power_of_appointment created after october if the power is exercisable by the possessor only in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2514 provides that in the case of a power_of_appointment created after date if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the possessor such power shall not be deemed a general_power_of_appointment for purposes of sec_2514 a person who after the death of the possessor may be possessed of a power_of_appointment with respect to the property subject_to the possessor’s power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor’s power sec_25_2514-3 provides in part that a co-holder of a power has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y’s death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y plr-125538-18 sec_25_2514-1 provides that for purposes of sec_25_2514-1 through the term power_of_appointment does not include powers reserved by a donor to himself no provision of sec_2514 or of sec_25_2514-1 through is to be construed as in any way limiting the application of any other section of the code or of these regulations the power of the owner of a property interest already possessed by him to dispose_of his interest and nothing more is not a power_of_appointment and the interest is includible in the amount of his gifts to the extent it would be includible under sec_2511 or other provisions of the code sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent’s gross_estate under sec_2035 to inclusive under sec_2041 the term general_power_of_appointment is defined in relevant part to mean a power which is exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_2041 provides that in the case of a power_of_appointment created after date which is exercisable by the decedent only in conjunction with another person if the power is not exercisable by the decedent except in conjunction with the creator of the power such power shall not be deemed a general_power_of_appointment sec_2041 provides however that in the case of a power_of_appointment created after date if the power is not exercisable by the decedent except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the decedent -- such power shall not be deemed a general_power_of_appointment for purposes of sec_2041 a person who after the death of the decedent may be possessed of a power_of_appointment with respect to the property subject_to the decedent’s power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the decedent’s power sec_20_2041-3 of the estate_tax regulations provides in part that a co-holder of a power_of_appointment has no adverse_interest merely because of his joint possession of the power nor merely because he is a lifetime appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the decedent’s death and may exercise it at that time in plr-125538-18 favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y’s death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y sec_20_2041-1 provides that for purposes of sec_20_2041-1 through the term power_of_appointment does not include powers reserved by the decedent to himself within the concept of sec_2036 to see sec_20_2036-1 to no provision of sec_2041 or of sec_20_2041-1 to is to be construed as in any way limiting the application of any other section of the code or of these regulations the power of the owner of a property interest already possessed by him to dispose_of his interest and nothing more is not a power_of_appointment and the interest is includible in his gross_estate to the extent it would be includible under sec_2033 or some other provision of part iii of subchapter_a of chapter the powers held by the committee members under the grantor’s consent power are powers that are exercisable only in conjunction with the creator grantor accordingly under sec_2514 and sec_2041 the committee members do not possess general powers of appointment by virtue of possessing this power further the powers held by the committee members under the unanimous member power are not general powers of appointment for purposes of sec_2514 and sec_2041 as in the examples in sec_25_2514-3 and sec_20_2041-3 the committee members have substantial adverse interests in the property subject_to this power accordingly any distribution made from trust to a beneficiary other than grantor pursuant to the exercise of these powers the grantor’s consent power and the unanimous member powers are not gifts by the committee members instead such distributions are gifts by grantor further any distribution from trust to grantor is merely a return of grantor’s property further any distributions pursuant to grantor’s sole power are gifts by grantor see sec_2511 and sec_25_2514-1 based on the facts submitted and representations made we conclude that any distribution_of_property by the committee from trust to grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee a distribution to grantor is merely a return_of_capital to grantor further we conclude that any distribution_of_property by the committee from trust to any beneficiary of trust other than grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee finally we conclude that the powers held by the committee are not general powers of appointment for purposes of sec_2041 and accordingly no member of the plr-125538-18 committee upon his or her death will include in his or her estate any property held in trust because such member is deemed to have a general_power_of_appointment within the meaning of sec_2041 over property held in trust however upon grantor’s death the trust property will be includible in grantor’s gross_estate see sec_20_2041-1 and sec_20_2036-1 to except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion on the trust provisions permitting trustee to distribute income or principal to trustees of other trusts decanting this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives sincerely lorraine e gardner lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes cc


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-112094-08 date september legend ----------------------------------------------------- x ------------------ a ------------------------------------------- ---------------------------------------------- b ------------------------- c ------------------------------------------ ------------------------------ country ------------ country --------- d1 d2 --------------------- --------------------- dear ----- ------- this letter responds to a letter dated date and subsequent correspondence written on behalf of x requesting a ruling under sec_301_9100-3 of the procedure and administration regulations facts x was formed under the laws of country x represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes x plr-112094-08 was a wholly-owned subsidiary of a a country corporation b a country corporation acquired a through a subsidiary entity c on d1 upon b’s acquisition of a it was intended that x would be treated as a disregarded_entity effective d2 however due to inadvertence a form_8832 entity classification election to treat x as a disregarded_entity effective d2 was not timely filed law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 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 and an eligible_entity with a single owner can elect to be classified as an entity separate from its owner sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 unless the entity elects otherwise a foreign eligible_entity is a a 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 sec_301_7701-3 provides in part that an eligible_entity may elect to 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 sec_301_7701-3 provides that an election under sec_301_7701-3 will 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 sec_301_9100-2 provides the standards the commissioner will use to determine whether to grant an automatic_extension of time for making certain elections plr-112094-08 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 disregarded_entity effective d2 a copy of this letter should be attached to the form_8832 except as specifically set forth above we express no opinion concerning the federal tax consequences of the above described facts under any other provision of the internal_revenue_code in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely s william p o’shea associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


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-144691-08 date date legend parent ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- - subsidiary ----------------------------------------------------------------------------------------------- ------------------------- x ------------------- state -------------------- date -------------------------- dear ------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of parent by its authorized representatives requesting extensions of time under sec_301_9100-3 of the procedure and administration regulations to elect to treat parent as an association_taxable_as_a_corporation and subsidiary as a qualified_subchapter_s_subsidiary qsub and requesting relief under sec_1362 of the internal_revenue_code for parent to elect to be an s_corporation facts parent was organized as a business_trust under state law on date on date x the shareholder of subsidiary an s_corporation contributed all of x’s shares in plr-144691-08 subsidiary to parent in exchange for percent ownership of parent x intended for parent to elect to be treated as an association_taxable_as_a_corporation and then to elect to be treated as an s_corporation with both elections effective date in addition parent intended to make a qsub election for subsidiary effective date however due to inadvertence form_2553 election by a small_business_corporation form_8832 entity classification election and form_8869 qualified_subchapter_s_subsidiary election were not timely filed law and analysis sec_1362 provides that a small_business_corporation can elect to be treated as an s_corporation 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 that corporation will be treated as an s_corporation for the year in which the election was made if an election is made after the first two and one-half months of a corporation's taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year sec_1362 provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and the secretary determines reasonable_cause existed for the failure to timely make the election then the secretary can treat such an election as timely made for that taxable_year and effective as of the first day of that taxable_year sec_1361 provides that a qsub shall not be treated as a separate corporation and all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines a qsub as a domestic_corporation which is not an ineligible_corporation if percent of the stock of the corporation is held by an s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations provides the time and manner of making a qsub election a taxpayer makes a qsub election with respect to a subsidiary by filing a form_8869 with the appropriate service_center sec_1 a provides that a qsub election cannot be effective more than two months and days prior to the date of filing sec_301_7701-3 provides in part that a business_entity that is not 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 plr-144691-08 section an eligible_entity with a single owner can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a disregarded_entity sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the service_center designated on the form sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will 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 sec_301_9100-1 gives the commissioner discretion to grant reasonable extensions of time to make regulatory elections under the rules of sec_301_9100-2 and sec_301_9100-3 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-3 sets forth the standards that the commissioner uses to determine whether to grant a discretionary extension of time requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence 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 parent has satisfied the requirements of sec_301_9100-3 with respect to its late entity classification and late qsub election and provided that parent otherwise qualifies as an s_corporation that parent has satisfied the requirement of sec_1362 with respect to its late s election as a result parent is granted an extension of time of days from the date of this letter to file a properly executed form_8832 with the appropriate service_center effective date a properly executed form_2553 with the appropriate service_center effective date and a properly executed form_8869 with the appropriate service_center effective date a copy of this letter should be attached to each election plr-144691-08 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes cc


internal_revenue_service number release date index number ---------------------- - --------------- ------------------------------------------------------------ - ------------------------------------ ----------------------------------- ----------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------------------------------- telephone number ---------------------- refer reply to cc fip b04 plr-131792-12 date date legend taxpayer ------------------------------------------------------------- ----------------------------------------------------- year date a date b foreign_country ------- --------------------------- --------------------------- ----------------------------------- trust ------------------------------------------------------------ ----------------------------------------------- law firm accounting firm individual date c date d date e month a --------------------------------- ------------------------------- --------------------- -------------------------- ------------------------ -------------------- --------------- plr-131792-12 dear ---------------- this is in response to a request submitted on behalf of taxpayer for a ruling granting an extension of time for making the election under sec_831 of the internal_revenue_code pursuant to sec_301_9100-3 of the procedure and administration regulations to be effective for year the ruling contained in this letter is based upon information and representations submitted by 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 ruling_request it is subject_to verification on examination facts taxpayer represents that it was incorporated on date a and licensed to issue various property and casualty insurance contracts on date b under the laws of foreign_country taxpayer represents that it qualifies as an insurance_company for federal_income_tax purposes making it eligible to have the option to elect to be taxed pursuant to sec_831 all of the stock of taxpayer is owned by trust which is an irrevocable_trust law firm was retained to provide legal counsel on the formation and operation of taxpayer while accounting firm and specifically individual a certified_public_accountant was retained to prepare taxpayer’s tax returns on date c law firm filed a foreign_insurance_company election under sec_953 statement for taxpayer on date d law firm sent a reminder memorandum to accounting firm regarding the time for requesting an extension of time for taxpayer to file a year income_tax return due to an oversight accounting firm did not timely request an extension on date e accounting firm discovered the error and during month a taxpayer filed a form 1120-pc u s property and casualty insurance_company income_tax return and this request for relief under sec_301_9100-3 taxpayer represents that granting relief by the internal_revenue_service will not result in a lower tax_liability than taxpayer would have had if the sec_831 election was timely made law and analysis insurance_companies other than life_insurance_companies are taxable under sec_831 however certain insurance_companies can elect to pay an alternative_tax provided in sec_831 on only their taxable_investment_income sec_831 requires that a company elect the application of the alternative_tax imposed by sec_831 plr-131792-12 pursuant to sec_301_9100-8 this election must be made by the due_date taking into account any extensions of time to file obtained-by the taxpayer for the first taxable_year for which the election is effective under sec_301_9100-1 the commissioner may grant reasonable extension of time pursuant to sec_301_9100-2 and sec_301_9100-3 to make a regulatory election but no more than months except in the case when the taxpayer is abroad under all subtitles of the code except subtitles e g h and i sec_831 is part of subtitle a sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic_extension must be made pursuant to sec_301_9100-3 under sec_301_9100-3 relief will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not be prejudice the interests of the government under sec_301_9100-3 a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the internal_revenue_service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the advice of the internal_revenue_service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election under sec_301_9100-3 a taxpayer will not be considered to have reasonably relied on a qualified_tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or was not aware of all relevant facts under sec_301_9100-3 the interests of the government are not prejudiced if the tax_liability in the aggregate for all taxable years affected by the election will not be lower by granting the relief than if the election had been timely made taking into account the time_value_of_money based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_302 have been satisfied taxpayer requested relief under these provisions before the failure to make the regulatory election was discovered by the service and taxpayer reasonably relied on a qualified_tax professional ruling plr-131792-12 taxpayer is granted an extension of time until days following the date of this letter to make the election to be subject_to the alternative_tax provided in sec_831 for year caveats notwithstanding that an extension of time is granted under sec_301_9100-3 to make an election under sec_831 additions penalties and interest that would otherwise be applicable if any continue to apply with respect to the tax_return for year no ruling has been requested and no opinion is expressed or implied whether taxpayer is engaged in the issuing of insurance or annuity_contracts or the reinsuring of risks underwritten by insurance_companies or whether taxpayer qualifies as an insurance_company under sec_831 for year see sec_301_9100-1 which provides that the granting of an extension of time is not a determination that the taxpayer is otherwise eligible to make the extension a copy of this ruling letter should be attached with taxpayer’s federal_income_tax return this ruling is directed only to the taxpayer who requested it sec_6110 k provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this ruling is being furnished to your authorized representative sincerely john e glover senior counsel branch office of the associate chief_counsel financial institutions and products