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 ita b05 plr-147736-04 date legend legend partnership ---------------------------------- company --------------------------- llc ----------------------------------------- a ---------------- b -------------- c ---------------------- d ---------------- e --------------------- f ---------------- g ------------------------ family -------------------------------------------------------------------------------------------------------- ------------------ percent h --------- percent i --- percent j --------- plr-147736-04 percent k ----------- plr-147736 percent l --- percent m --------- percent n -------- addre sec_1 ------------------- addre sec_2 -------------------------- city x ----------- city y ------------------ dear ----------------- this is in reply to a letter dated date and subsequent correspondence submitted on your behalf by your authorized representative requesting a private_letter_ruling on the applicability of sec_1031 of the internal_revenue_code_of_1986 code to the sale of certain cooperative apartments and the subsequent purchase of replacement properties statement of facts partnership is a partnership for federal_income_tax purposes company is an s_corporation for federal_income_tax purposes both entities use the cash_method_of_accounting and file their federal_income_tax returns on the calendar_year a and d each own h percent of partnership b owns i percent of partnership and c owns j percent of partnership llc owns k percent of partnership e and family each own l percent of llc f and g each own m percent of company and e owns n percent of company partnership owns shares of stock in cooperative apartments and garage spaces at addre sec_1 in city x which is located in new york state company owns shares of stock in cooperative apartments at addre sec_2 in city y which is also located in new york state partnership and company rent these properties and collect rental payments all of the properties are owned by cooperative housing corporations organized under new york state law plr-147736-04 plr-147736-04 partnership and company intend to sell their interests in the above-described properties they now own partnership and company have identified replacement properties consisting of improved and unimproved real properties to be received in transactions intended to qualify as like_kind_exchanges under sec_1031 these replacement properties will be owned by partnership and company as tenants in common you have represented that partnership and company will comply with the 45-day identification period and the 180-day replacement_period provided for in sec_1031 as well as the rules governing the use of an intermediary to facilitate a like_kind exchange accordingly your letter_ruling requests concern whether partnership’s and company’s interests in cooperative apartments in new york state will be considered like_kind to the real_property interests that partnership and company intend to acquire in the exchange statement of law and analysis sec_1031 of the code provides for the nonrecognition_of_gain_or_loss in an exchange of properties that are held for productive use in a trade_or_business or for investment if such properties are exchanged solely for like_kind properties that are held for productive use in a trade_or_business or for investment a deferred_exchange is an exchange wherein the property to be exchanged by the taxpayer is relinquished before the replacement_property is acquired generally a deferred like_kind exchange utilizes an intermediary to hold the relinquished or acquired property before such property is transferred to the exchanging taxpayer if a taxpayer in a deferred like_kind exchange actually or constructively receives money or non-like kind property before the taxpayer actually receives the replacement_property gain may be recognized on the exchange further if a taxpayer in a deferred_exchange actually or constructively receives money or non-like kind property in the full amount of the consideration for the relinquished_property then the transaction will constitute a taxable sale and not an exchange even though the taxpayer may ultimately receive like_kind replacement_property sec_1_1031_k_-1 to assist taxpayers in structuring like_kind_exchanges the sec_1031 regulations provide four safe harbors whereby taxpayers will not be in actual or constructive receipt of exchange proceeds in a deferred like_kind exchange security or guarantee arrangements qualified escrow accounts and qualified trusts qualified intermediaries and interest and growth factors of these four only the safe_harbor for qualified intermediaries also provides a safe_harbor against characterization of the accommodator facilitating the deferred_exchange as an agent of the taxpayer plr-147736-04 plr-147736-04 sec_1_1031_k_-1 the use of the qualified_intermediary safe_harbor further requires that the qualified_intermediary not be considered a disqualified_person with respect to the taxpayer involved in the exchange within the meaning of sec_1_1031_k_-1 sec_1_1031_a_-1 defines like_kind for purposes of sec_1031 and explains that the term like_kind has reference to the nature or character of the property and not to its grade or quality properties to be exchanged tax free under sec_1031 must be of the same kind or class with respect to real_estate sec_1_1031_a_-1 states that whether the real_estate is improved or unimproved is not material because that relates only to the grade or quality of the property and not to its kind or class sec_1_1031_a_-1 sets forth examples of properties that will be considered like_kind the most relevant examples pertain to real_estate and provide that a taxpayer who is not a dealer in real_estate may exchange city real_estate for a ranch or farm a leasehold of a fee with years or more to run for real_estate or improved real_estate for unimproved_real_estate whether stock in a cooperative apartment located in new york state constitutes real or personal_property under sec_1031 is determined under new york law see eg revrul_55_749 1955_2_cb_295 although new york case law might suggest that there are conflicts concerning whether a cooperative interest_in_real_property is real_property state tax comm’n v shor n y 2d n e 2d n y s 2d questioned in 201_br_865 bankr s d n y various new york statutes treat an interest in a cooperative as equivalent to an interest_in_real_property n y civ prac l r sec_5206 mckinney homestead_exemption n y real prop law sec_279 mckinney and n y pub auth law mckinney supp mortgage for cooperative interest n y real prop tax law sec_467 3-a mckinney supp real_property tax for senior citizens n y tax law 1402-a a mckinney mansion tax and n y real prop law 254-b mckinney limit on mortgage late charges accordingly we rule that the interests in cooperative apartments in new york owned by partnership and company will be considered like_kind for purposes of sec_1031 to the improved and unimproved real_property that partnership and company intend to acquire as replacement properties 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 plr-147736-04 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 plr-147736-04 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 temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in the letter_ruling see section dollar_figure of revproc_06_1 2006_1_irb_1 however when the criteria in section dollar_figure of revproc_06_1 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant sincerely william a jackson branch chief branch income_tax accounting


t c memo united_states tax_court william m donovan petitioner v commissioner of internal revenue respondent docket nos filed date alyce c halchak for petitioner julia a cannarozzi for respondent memorandum opinion dawson judge these cases were assigned to special_trial_judge lewis r carluzzo pursuant to sec_7443a and rule sec_180 sec_181 and sec_183 the court agrees with and adopts the opinion of the special_trial_judge which is set forth below ‘unless otherwise indicated section references are to the internal_revenue_code in effect at the time that the petitions were filed in these cases rule references are to the tax_court rules_of_practice and procedure - - opinion of the special_trial_judge carluzzo special_trial_judge on date respondent issued a notice of final_determination denying petitioner’s request to abate interest on deficiencies for the years and on date respondent issued a notice of final_determination denying petitioner’s request to abate interest on deficiencies for the years and in response to each notice a timely petition was filed pursuant to sec_6404 the two abatement cases were consolidated for trial briefing and opinion the issue for decision is whether respondent’s failure to abate accrued interest assessed on deficiencies for the years through inclusive as requested in petitioner’s claims for abatement was an abuse_of_discretion background some of the facts have been stipulated and are so found at the time the petitions in these cases were filed petitioner resided in new canaan connecticut although not readily apparent from the magnitude of the record in these cases which include sec_109 exhibits and the after the petitions were filed in these cases sec_6404 g was redesignated sec_6404 by the internal_revenue_service restructuring reform act of publaw_105_206 sec_3309 112_stat_685 testimony of four witnesses over days of trial the relevant facts are not in dispute and are easily summarized during and petitioner invested in certain tax_shelter partnerships the tax_shelters deductions or losses stemming from the tax_shelters were claimed on his federal_income_tax returns for those years a deficiency was determined for each of those years the deficiency years on date petitioner petitioned this court for a redetermination of the deficiency and on date petitioner petitioned this court for redeterminations of the and deficiencies the deficiency cases the tax_shelters generated approximately big_number tax_court cases most of the taxpayers involved in those cases were represented by two attorneys the project attorneys petitioner was not instead petitioner was represented by attorney robert w taylor after various pretrial proceedings and arrangements in a settlement was negotiated between the project attorneys and respondent although not represented by the project attorneys petitioner was given the opportunity in to settle the deficiency cases upon the same terms that the project attorneys negotiated for their clients upon the advice and recommendation of mr taylor petitioner rejected the settlement seven years later in petitioner accepted the settlement offered to him in stipulated decision documents reflecting - the redetermined deficiencies the deficiencies were entered in petitioner paid the and deficiencies on date he paid the deficiency on date and he paid the deficiency on date none of the interest that has accrued on any of the deficiencies has been paid in claims for abatement originally made in date and resubmitted in date petitioner requested abatements of all of the interest that had accrued on the deficiencies as noted above petitioner’s claims were denied in notices of final_determination issued by respondent in discussion subject_to exceptions not relevant here interest on a deficiency begins to accrue on the due_date of the return and continues to accrue compounding daily until payment is made see sec_6601 sec_6622 the commissioner has the authority to abate the assessment of interest on a deficiency if the accrual of such interest is attributable to an error or delay by an official or employee of the internal_revenue_service in performing a ministerial_act see sec_6404 a ministerial_act means a procedural or sec_6404 was amended by sec_301 of the taxpayer bill of right sec_2 publaw_104_168 110_stat_1452 to permit respondent to abate interest with respect to an unreasonable error or delay resulting from managerial or continued - - mechanical act that does not involve the exercise of judgment see 113_tc_145 sec_301_6404-2t temporary proced admin regs fed reg date subject_to various procedural and other requirements set forth in the statute and not here in dispute the court has jurisdiction over any_action brought by a taxpayer to determine whether the commissioner’s failure to abate interest was an abuse_of_discretion see sec_6404 as a preliminary point we note that interest is defined as compensation_for the use or forbearance of money 308_us_488 use or forbearance connotes the passage of time consistent with the definition of interest sec_6404 requires not only the identification of an error or delay caused by a ministerial_act on the commissioner’s part but the identification of a specific period of time over which interest should be abated as a result of the error or delay see eg 112_tc_230 douponce v commissioner tcmemo_1999_398 the expected correlation between the error or delay attributable to a ministerial_act on respondent’s part anda specific period of time is for the most part missing in these continued ministerial acts the amendment is effective for interest accruing with respect to deficiencies or payments for tax years beginning after date and is therefore inapplicable here -- - cases because petitioner requests that all interest with respect to the deficiencies be abated in effect petitioner is not so much seeking an abatement of interest as he is an exemption from it characterized in that manner and among other infirmities’ the scope of petitioner’s request simply put is beyond that contemplated by the statute which the congress did not intend would be used routinely to avoid payment of interest h rept pincite 1986_3_cb_1 s rept pincite 1986_3_cb_1 respondent’s failure to abate interest as requested in petitioner’s claims is supported not only by the overly broad scope of those claims but for other reasons as discussed below in the context of specific time frames subject_to other requirements under e a taxpayer is entitled to an abatement of assessed interest on a deficiency only for any period starting after the internal_revenue_service has contacted the taxpayer in writing with respect to such there are variances between the relief requested in petitioner’s claims for abatement and the relief requested in petitioner’s brief because we review respondent’s failure to abate interest for abuse_of_discretion we focus upon the claims for abatement cf sego v commissioner t c -the petitions suggest that because the deficiencies reflected in the stipulated decisions entered in the deficiency cases are less than the deficiencies determined in the notices of deficiency upon which those cases were based respondent erred within the meaning of sec_6404 the pure folly of this position is reflected by its abandonment on brief - deficiency sec_6404 stated differently sec_6404 e does not provide for the abatement of interest assessed on a deficiency for the period between the dates that the return is due and the taxpayer is contacted in writing with respect to the deficiency in his brief petitioner appears to have recognized this limitation but he does not expressly concede entitlement to abatements of interest that accrued prior to the relevant dates which are not in dispute in any event for each of the deficiency years respondent’s failure to abate interest for the period that ran from the due_date of the return until respondent contacted petitioner in writing with respect to the deficiency is consistent with the statute because the statute does not authorize an abatement of interest for such period respondent’s failure to do so is not an abuse_of_discretion petitioner’s primary contention is that interest on the deficiencies should be abated because of respondent’s conduct in connection with the deficiency cases according to petitioner the deficiency cases could have been concluded much sooner than they were if not for certain actions on respondent’s part first we disagree with petitioner’s suggestion that progress in the deficiency cases was controlled by respondent more importantly to the extent that petitioner identified specific actions taken by respondent in the deficiency cases such actions --- - were not ministerial acts within the meaning of sec_6404 see 113_tc_206 lee v commissioner supra furthermore sec_6404 applies only if no significant aspect of such error or delay can be attributed to the taxpayer involved as we view the matter petitioner’s conduct more so than respondent’s resulted in the length of time that the deficiency cases were pending before this court petitioner could have settled the deficiency cases within year after the second case was filed instead he waited approximately years to do so mr taylor petitioner’s attorney in the deficiency cases testified that at the time he did not understand respondent’s settlement offer and the delay in accepting it was due to respondent’s failure or refusal to explain it to him mr taylor’s explanation for the delay is less than compelling considering his testimony long after the fact that in his opinion petitioner should not have accepted respondent’s offer because of the weaknesses in respondent’s positions in the deficiency cases nevertheless even if respondent had some obligation to explain the settlement proposal to petitioner’s attorney in the deficiency cases an obligation assumed by petitioner but unsupported by any authority and even if respondent failed to do so respondent’s failure does not constitute a ministerial_act --- - we have considered all of petitioner’s complaints regarding respondent’s conduct in connection with the deficiency cases including the claim made in petitioner’s brief that the deficiency was erroneously overstated in the stipulated decision entered in the case involving that year and find that none supports a ground for relief under sec_6404 respondent’s conduct in connection with the deficiency cases provides no basis to conclude that respondent’s failure to abate interest was an abuse_of_discretion petitioner paid the deficiencies on various dates between september and date none of the interest has been paid as of the date that each of the deficiencies was paid interest ceased to run on the underlying tax however because no interest was paid and because interest that accrued after date is compounded daily interest continued to accrue and continues to accrue after the dates that the deficiencies were paid interest accruing after the dates that the deficiencies were paid is due to petitioner’s failure to pay the outstanding interest obligations and not due to a ministerial_act on respondent’s part see douponce v commissioner tcmemo_1999_398 respondent’s failure to abate interest for any period after the dates that the deficiencies were paid was not an abuse_of_discretion to reflect the foregoing decisions will be entered for respondent


internal_revenue_service number release date index no legend department of the treasury washington dc person to contact telephone number refer reply to cc ita -plr-117096-03 date date d agreement b c d f g h m n o p date date date date date x y dear this is in reply to your request for a ruling dated date to allow the members of d to use an alternative method of basis recovery under sec_15a_453-1 of the temporary income_tax regulations to report contingent payments d is a broker of electricity natural_gas coal and other energy related products it uses a cash_method_of_accounting for federal_income_tax purposes and files its returns on a calendar_year basis on date b purchased percent of the outstanding member units of d from its members under the agreement b agreed to make contingent payments to the members based on a percentage of d’s estimated annualized agreed earnings as defined in schedule c of the agreement for each of tax years x through y the total consideration d expects to receive from b is dollar_figurec the amount of dollar_figurec is calculated by using annualized agreed earnings for the months ended date to calculate the projected amount of each future payment as of date d had recovered basis of dollar_figureg leaving a remaining basis of dollar_figureh to be recovered by date d proposes that basis be allocated to each payment received by the members based on the percentage that each payment represents of the total expected consideration d projects that the amount of each future principal payment and the resulting allocated percentages will be as follows date date date date date dollar_figureg percent dollar_figurem percent dollar_figuren percent dollar_figureo percent dollar_figurep percent total expected consideration dollar_figurec percent the agreement nevertheless provides that the total purchase_price to be paid_by b will not exceed dollar_figured d represents that the dollar_figured purchase_price was included in the agreement to avoid a shareholder vote and is not indicative of the total value of the transaction d notes that under sec_15a_453-1 it is nevertheless required to treat the stated maximum selling_price of dollar_figured as the expected total sales_price if the members had to allocate basis assuming that the maximum selling_price of dollar_figured would be the amount ultimately received under the agreement then basis would be allocated to the first four payments as follows date date date date percent dollar_figureg dollar_figurem percent percent dollar_figuren dollar_figureo percent total percentage percent this would result in the remaining basis of percent being allocated to the final payment on date resulting in a large capital_loss to the members in tax_year y d notes that if it is allowed under sec_15a_453-1 to recover basis by having b make contingent payments to the members based on a percentage of d’s estimated annualized agreed earnings d will recover basis at a rate twice as fast percent by date therefore d asks that it be allowed to recover the remaining dollar_figureh of basis in its y tax_year sec_453 of the internal_revenue_code provides that income from an installment_sale shall be taken into account under the installment_method sec_453 defines the term installment_sale to mean a disposition of property if at least one payment is to be received after the end of the taxable_year in which the disposition occurs the term installment_method is defined in sec_453 as a method under which the income recognized for any taxable_year from a disposition is that proportion of the payments received in that year which the gross_profit realized or to be realized when the payment is completed bears to the total_contract_price sec_15a_453-1 defines a contingent_payment_sale as a sale_or_other_disposition of property in which the aggregate selling_price cannot be determined by the close of the taxable_year in which such sale_or_other_disposition occurs unless a taxpayer makes an election under sec_15a_453-1 contingent_payment_sales are to be reported on the installment_method sec_15a_453-1 provides that a contingent_payment_sale will be treated as having a stated maximum selling_price if under the terms of the agreement the maximum amount of sale proceeds that may be received by the taxpayer can be determined as of the end of the taxable_year in which the sale_or_other_disposition occurs generally the taxpayer’s basis shall be allocated to payments received and to be received by treating the stated maximum selling_price as the selling_price for purposes of sec_15a_453-1 if however application of the foregoing rules in a particular case would substantially and inappropriately accelerate or defer recovery_of the taxpayer’s basis a special rule will apply sec_15a_453-1 provides that the normal basis recovery rules set forth in sec_15a_453-1 may with respect to a particular contingent_payment_sale substantially and inappropriately defer recovery_of the taxpayer’s basis sec_15a_453-1 provides that the taxpayer may use an alternative method of basis recovery if the taxpayer is able to demonstrate prior to the due_date of the return including extensions for the taxable_year in which the first payment is received that application of the normal basis recovery rule will substantially and inappropriately defer recovery_of basis to demonstrate that application of the normal basis recovery rule will substantially and inappropriately defer recovery_of basis the taxpayer must show a that the alternative method is a reasonable method of ratably recovering basis and b that under that method it is reasonable to conclude that over time the taxpayer likely will recover basis at a rate twice as fast as the rate at which basis would have been recovered under the otherwise applicable normal basis recovery rule the taxpayer must receive a ruling from the internal_revenue_service before using an alternative method of basis recovery sec_15a_453-1 further provides that the taxpayer must file the request for a ruling prior to the due_date for the return including extensions in demonstrating that application of the normal basis recovery rule would substantially and inappropriately defer recovery_of the taxpayer’s basis the taxpayer in appropriate circumstances may rely upon contemporaneous or immediate past relevant sales profit or other factual data that are subject_to verification the taxpayer ordinarily is not permitted to rely upon projections of future productivity receipts profits or the like however in special circumstances a reasonable projection may be acceptable based upon a specific event that has already occurred based on the information provided and the representations made it is reasonable to conclude that d’s use of the proposed alternative method of basis recovery will result in basis recovery at a rate twice as fast as the rate at which basis would be recovered under the normal basis recovery rules the proposed alternative method of basis recovery represents a reasonable method of basis recovery accordingly d’s use of the proposed alternative method of basis recovery is approved caveats a copy of this letter must be attached to any income_tax return to which it is relevant we enclose a copy of the letter for this purpose also enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely robert a berkovsky branch chief office of associate chief_counsel income_tax accounting enclosures cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division uniform issue list no person to contact telephone number office symbols t bp ra t1 date jul legend employer a city charter d plan x ordinance p employees c ladies and gentlemen employer a requests a ruling concerning the pick- up of certain employee contributions under its qualified_retirement_plan pursuant to sec_414 of the internal_revenue_code code plan x is a defined_benefit_plan the terms of which are set forth in the provisions of city charter d which provides retirement income to qualifying employees and former employees of employer a and survivor income to their qualifying beneficiaries the case of employees c employee contributions the amount of which is determined as charter d states that plan x qualified_pension plan under sec_401 of the internal_revenue_code a percentage of compensation plan x requires annual is intended to be a city in employer a adopted ordinance p which provides in part as follows sec_1 city charter d is hereby amended to read as follows sec_2 member contributions-amounts a effective as of january - member contributions to the retirement_system shall be deducted from each member's paychecks at the following rates benefit group of annual compensation general_public safety non-command public safety command continuation of employment by a member shall constitute consent and agreement to the deduction of applicable member contributions b the employer shall pick-up the member the contributions so picked up contributions required by this section for all compensation earned after the effective date of this subsection shall be treated as employer contributions in determining tax treatment under the united_states internal_revenue_code the employer shall pick-up the member contributions from funds established and available in the salaries account which funds would otherwise have been designated as member contributions and paid to member contributions the retirement_system picked up by the employer pursuant to this subsection shall be treated for all other purposes of this and other laws of the employer in the same manner and to the same extent as member contributions made prior to the effective date of this subsection have the option of receiving the picked-up member contributions in cash instead of having it paid into the retirement systems the member does not employer a requests three rulings as follows that no part of the mandatory contribution picked up by employer a be constituted as gross_income to employees c for federal_income_tax treatment for the taxable_year in which the pick-up is made that the contribution whether picked up by salary reduction offset against future salary increases or both and though designated as employee contributions will be treated as employer contributions for federal_income_tax purposes that the contribution picked up by employer a will not constitute wages from which federal_income_tax will be withheld code sec_414 h provides that contributions otherwise designated as employee contributions shall be treated as employer contributions if such contributions are made toa plan described in code sec_401 established by a state government or a political_subdivision thereof or any agency_or_instrumentality of any one of the foregoing and are picked up by the employing unit a the federal_income_tax treatment to be accorded revrul_77_462 concluded that the school contributions which are picked up by the employer within the meaning of code sec_414 is specified in revrul_77_462 1977_2_cb_358 in that revenue_ruling the employer school district agreed to assume and pay the amounts employees were required by state law to contribute to a state pension_plan district's picked-up contributions to the plan are excluded from the employees' gross_income until such time as they are distributed to the employees revenue_ruling held further that under the provisions of code sec_3401 a a the school district's contributions to the plan are excluded from wages for purposes of the collection of income_tax at source on wages therefore no withholding is required from the employees' salaries with respect to such picked-up contributions the the issue of whether contributions have been is addressed in revrul_81_35 and revrul_81_36 c b these revenue rulings established that the picked up by an employer within the meaning of code sec_414 1981_1_cb_255 following two criteria must be met must specify that the contributions although designated as employee contributions are being paid_by the employer in lieu of contributions by the employee and the employee must not be given the option of choosing to receive the contributed amounts directly instead of having them paid_by the employer to the pension_plan furthermore it purposes of the applicability of code sec_414 whether an employer picks up contributions through a reduction in salary an offset against future salary increases or a combination of both is immaterial for the employer in revrul_87_10 1987_1_cb_136 the internal_revenue_service considered whether contributions designated as employee contributions to a governmental_plan are excludable from the gross_income aa of the employee the service concluded that to satisfy the criteria set forth in revenue rulings and with respect to particular contributions the required specification of designated employee contributions must be completed before the period to which such contributions relate employer a’s ordinance p satisfies the criteria set forth in revrul_81_35 and revrul_81_36 by providing that employer a will pick up and make contributions to plan x in lieu of contributions by electing employees and that no such employee will have the option of receiving the contribution in cash instead of having such contribution paid to plan xx accordingly we conclude that no part of the mandatory contribution picked up by employer a will be constituted as gross_income to employees c for federal_income_tax treatment for the taxable_year in which the pick-up is made picked up by salary reduction offset against future salary increases or both and though designated as employee contributions will be treated as employer contributions for federal_income_tax purposes and that the contribution picked up by the employer will not constitute wages from which federal_income_tax will be withheld that the contribution whether no opinion is expressed as to whether the amounts in question are subject_to tax under the federal_insurance_contributions_act as to whether the amounts in question are being paid pursuant to a salary reduction agreement within the meaning of sec_3121 b no opinion is expressed of the code this ruling is directed only to the taxpayer who of the code provides requested it that it may not be used or cited by others as precedent sec_6110 o u55 these rulings express no opinion as to the impact of these proposed transactions upon the qualified nor the continuing qualified status of the plan involved these rulings are based on the assumption that plan x will be qualified under sec_401 of the code at all relevant times in accordance with revrul_87_10 this ruling does not apply to any contribution before january d authorization the effective date of the city charter a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours oo zu rman manager andrew e employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of letter_ruling form_437


department of the treasury internal_revenue_service washington d c nov conex-152605-04 uilc office_of_chief_counsel number info release date ------------------------------------ dear ---------- this letter responds to the inquiry dated date from you and senator ---- --------------on behalf of the ----------------------------------------and the ------------------------------- ---------------- you wrote about the service’s guidance priority plan plan you asked us to reexamine and clarify the rules determining whether certain agent-drivers and commission drivers of ------------ are statutory employees sec_3121 of the internal_revenue_code the code you also asked us to reconsider the position we took in general counsel memorandum gcm date which concludes that route ownership is not an investment in facilities that exempts a worker from statutory_employee status if the investment is substantial the ----------------------------requested that we put reconsideration of the gcm on the irs’s plan the department of treasury office of tax policy and the irs released the plan on date we received many suggestions for items to be included in the plan consideration of items for the plan was made at the highest levels of the irs although the reexamination and clarification of the rules for determining whether certain agent-drivers and commission drivers of ------------ are statutory employees was not included projects can be added through the course of the year we will make note of your suggestion and keep it in mind when we are asked to propose projects that could be added to the plan thank you for your letter if you have further questions please contact me at ------------- ------------- -------------------------- of my staff at --------------------- sincerely catherine e livingston associate chief_counsel tax exempt and government entities


washington dc department of the treasury internal_revenue_service number release date index number person to contact telephone number refer reply to cc psi - plr-119795-02 date date legend a b c d e f g h i j k l m n o p plr-119795-02 q r s t u v w x y z country1 country2 country3 d1 d2 d3 d4 d5 dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of b c d e f g h i j k l m n o p q r s t u v w x y and z by their authorized representatives requesting a ruling that b c d e f g h i j k l m n o p q r s t u v w x y and z each be given an extension of time to elect under sec_301_7701-3 of the procedure and plr-119795-02 administration regulations to be classified as a disregarded_entity for federal tax purposes facts the information submitted states that a is a us partnership owned by us investors b a wholly owned subsidiary of a was formed on d1 pursuant to the laws of country1 c a wholly owned subsidiary of b was formed on d2 pursuant to the laws of country2 d a wholly owned subsidiary of c was formed on d3 pursuant to the laws of country3 e a corporation formed under the laws of country3 became a wholly owned subsidiary of d as of d4 on d4 c and d purchased f g h i j k l m n o p q r s t u v w x y and z immediately after the purchase the properties owned by the subsidiaries were transferred to e e owns f and g f owns h h owns i j k l m n o and p j owns q r s t u v w x and y p owns z b represents that pursuant to sec_301_7701-3 b is a foreign eligible_entity that is not required to be classified as a corporation for federal tax purposes b has a single owner that has limited_liability as defined in sec_301_7701-3 b intended to be disregarded for federal tax purposes effective on d1 however b inadvertently failed to timely file a form_8832 entity classification election c represents that pursuant to sec_301_7701-3 c is a foreign eligible_entity that is not required to be classified as a corporation for federal tax purposes c has a single owner that has limited_liability as defined in sec_301_7701-3 c intended to be disregarded for federal tax purposes effective on d2 however c inadvertently failed to timely file a form_8832 entity classification election d represents that pursuant to sec_301_7701-3 d is a foreign eligible_entity that is not required to be classified as a corporation for federal tax purposes d has a single owner that has limited_liability as defined in sec_301_7701-3 d intended to be disregarded for federal tax purposes effective on d3 however d inadvertently failed to timely file a form_8832 entity classification election e f g h i j k l m n o p q r s t u v w x y and z represent that pursuant to sec_301_7701-3 e f g h i j k l m n o p q r s t u v w x y and z are each a foreign eligible_entity that is not required to be classified as a corporation for federal tax purposes e f g h i j k l m n o p q r s t u v w x y and z each has a single owner that has limited_liability as defined in sec_301_7701-3 e f g h i j k l m n o p q r s t u v w x y and z each intended to be disregarded for federal tax purposes effective on d5 however e f g h i j k l m n o p q r s t u v w x y and z each inadvertently failed to timely file a form_8832 entity classification election plr-119795-02 law and analysis sec_301_7701-3 provides 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 a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-2 sec_301_7701-3 provides that unless a foreign eligible_entity elects otherwise the 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 owners if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides that when elections under sec_301 c i for a series of tiered entities are effective on the same date the eligible entities may specify the order of elections on form_8832 sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center sec_301_7701-3 provides that an election will be effective on the date specified on the form_8832 or on the date filed if no such date is specified the effective date specified on the form_8832 cannot be more than days prior to the date the election is filed under c the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or an announcement published in the internal_revenue_bulletin sec_301_9100-1 and sec_301_9100-3 provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-119795-02 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer 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 conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result b is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes effective for d1 c is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes effective for d2 d is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes effective for d3 e f g h i j k l m n o p q r s t u v w x y and z each is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes effective for d5 additionally in accordance with sec_301_7701-3 the entities may specify that the order of the elections of e f g h i j k l m n o p q r s t u v w x y and z be deemed made in order from the bottom subsidiary to the top subsidiary on form_8832 a copy of this letter should be attached to each form_8832 a copy is included for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent plr-119795-02 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index numbers ----------------------------- ---------------------------------- ------------------------------- -------------------------------- 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-138624-09 date date legend x a ------------------------------------------------------------------------------------------------------ ---------------------- ----------------------------- state ----------- date ------------------------- dear --------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting relief under sec_1362 of the internal_revenue_code facts x incorporated under the laws of state on date a the sole shareholder of x intended that x elect to be treated as an s_corporation effective date however x’s form_2553 election by a small_business_corporation was not filed timely x represents that both x and a have reported their income consistent with x’s intended status as an s_corporation x requests a ruling that it will be recognized as an s_corporation effective date law and analysis plr-138624-09 sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a a small_business_corporation makes an election under sec_1362 for any taxable_year and b the election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then the election is treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply conclusion based solely on the facts submitted and representations made we conclude that x has established reasonable_cause for failing to make an s_corporation_election thus we conclude that x is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 effective date within days following the date of this letter we rule that the election shall be treated as timely made a copy of this letter should be attached to form_2553 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 specifically no opinion is expressed or implied as to whether x is otherwise eligible to be an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative plr-138624-09 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 leslie h finlow senior technician reviewer branch passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes cc


tcmemo_2010_243 united_states tax_court assured source inc a michigan corporation petitioner v commissioner of internal revenue respondent docket no 4658-09l filed date joseph falcone for petitioner rebecca m clark for respondent memorandum opinion paris judge on date respondent mailed to petitioner a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination which sustained respondent’s proposed levy to collect petitioner’s assessed liabilities for trust fund recovery penalties for tax periods ending march june and date the parties stipulate that the only issue for decision is whether respondent abused his discretion by refusing to consider collection alternatives during a collection_due_process cdp hearing when petitioner was not in compliance with all of its tax_return filing_requirements on the date of the cdp hearing background this case has been submitted under rule the facts and exhibits have been stipulated and are incorporated herein by reference at the time the petition was filed petitioner’s mailing address was in troy michigan petitioner a holding_company of several limited_liability companies that engaged in employee_leasing and the responsible_party in this case is a delaware corporation with its principal_place_of_business in michigan on date respondent sent to petitioner a letter trust funds recovery penalty letter informing petitioner of his intent to assess against it trust fund recovery penalties under sec_6672 because of its failure to withhold and pay employment_taxes of one of its subsidiaries assured source national l l c asn for the 1unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure 2the court notes that asn was the employer in this case petitioner is the responsible_party for asn first three quarters of the letter gave petitioner days to file a protest of the proposed assessments of the penalties petitioner failed to file a protest and the penalties were assessed on date respondent sent to petitioner a final notice--notice of intent to levy and notice of your right to a hearing with respect to the assessed penalties on date petitioner timely filed a form request for a collection_due_process or equivalent_hearing in which it stated that its liabilities for the penalties had been paid through voluntary payments it had submitted a request for abatement on form_843 claim_for_refund and request for abatement and the collection activity had been stayed on date the settlement officer so sent to petitioner a letter which scheduled a telephone cdp hearing and also informed petitioner that it had to provide a form 433-b collection information statement for businesses if it wanted to be considered for any collection alternatives petitioner was also given an opportunity to identify and substantiate any 3the record reflects that during or before september of petitioner voluntarily sent to the irs checks for dollar_figure each in partial payment of its outstanding trust fund liabilities however as of date when the case was submitted to the court the balance of the trust fund liability for the tax period ending date was dollar_figure plus interest for the tax period ending date was dollar_figure plus interest and for the tax period ending date was dollar_figure plus interest payments of the penalty assessments and was offered a face-to- face hearing petitioner submitted to the internal_revenue_service irs a form_843 claim_for_refund and request for abatement however petitioner failed to submit the required bond with that form consequently respondent did not process the claim on date petitioner requested a postponement of the cdp hearing as it was working on an installment_agreement with a revenue_officer ro the so sent petitioner a letter by facsimile rescheduling the hearing for date and confirming her conversation with petitioner that if it could work out an arrangement with the ro petitioner would withdraw the request for a cdp hearing the letter also informed petitioner that in order for the so to consider any collection alternatives she needed before the hearing a copy of petitioner’s form_1120 u s_corporation income_tax return for tax_year and form 433-b with all the required attachments such as bank and loan statements on date petitioner contacted the so to request another postponement of the cdp hearing because it was still working with the ro on an installment_agreement the so reminded petitioner that by date the date on which the hearing was to take place it had to provide the requested financial information and a form_1120 for tax_year otherwise it would not be considered for collection alternatives on date a telephone cdp hearing was held between the parties however petitioner had submitted neither the requested financial information nor a form 433-b to the so by that date in addition petitioner had yet to file a form_1120 for tax_year on date respondent mailed to petitioner the notice_of_determination upholding the proposed levy to collect the penalty assessments for the tax periods at issue petitioner timely filed a petition with this court on date a standard of review discussion under sec_6331 if a person liable to pay any_tax neglects or refuses to pay the same within days after notice_and_demand it shall be lawful for the secretary to collect such tax by levy upon all property and rights to property belonging to such person a taxpayer may appeal the proposed levy to the irs under sec_6330 by requesting an administrative hearing if the hearing culminates in an adverse determination the taxpayer 4while petitioner’s form_1120 for tax_year was originally due on date petitioner was granted an extension to file it on or before date on date petitioner faxed an unsigned copy of the form_1120 for tax_year to the so petitioner did not file its form_1120 for tax_year which showed no income_tax due until date is afforded the opportunity for judicial review of the determination in the tax_court pursuant to sec_6330 petitioner seeks review of respondent’s determination where the validity of the underlying tax_liability is properly at issue the court will review the matter de novo 115_tc_35 where the underlying tax_liability is not properly at issue the court will review the commissioner’s administrative determination for abuse_of_discretion 114_tc_604 114_tc_176 the court has described review for abuse_of_discretion as entailing an inquiry whether the determination is arbitrary capricious clearly unlawful or without sound basis in fact or law see 112_tc_19 b abuse_of_discretion petitioner contends that respondent’s refusal to consider a collection alternative because petitioner had not filed its income_tax return was unreasonable and an abuse_of_discretion the irs’ decision not to process an offer-in-compromise or other proposed collection alternative from a taxpayer who has not filed all required tax returns is generally not an abuse_of_discretion see 129_tc_107 collier v commissioner tcmemo_2004_171 the parties stipulated that the basis for denying the collection alternatives was petitioner’s failure to comply with the filing_requirements the parties further stipulated that petitioner failed to become compliant with its filings during the cdp hearing the record reflects that during the course of the hearing the so repeatedly advised petitioner that in order for collection alternatives to be considered it had to file its overdue corporate_income_tax return for tax_year which was due_date and submit on form 433-b sufficient financial information to permit its ability to pay the trust fund penalty assessment to be evaluated petitioner however failed to submit the form_1120 for tax_year until date--more than days after the issuance of the notice_of_determination see 125_tc_301 the dilatory submission of a tax_return in no respect supports petitioner’s claim that the so abused her discretion affd 469_f3d_27 1st cir nor did petitioner submit the requisite financial information to the so consequently this court finds that respondent did not abuse his discretion by declining to entertain a collection alternative during the hearing c balancing test under sec_6330 on brief petitioner also contends that respondent abused his discretion because the so failed to engage in an analysis of whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary under sec_6330 irs guidelines require a taxpayer to be current with filing and payment requirements to qualify for an installment_agreement internal_revenue_manual pt f date the court has many times upheld as within his discretion the commissioner’s decisions not to process offers-in-compromise or other proposed collection alternatives from taxpayers who have not filed all required tax returns see eg collier v commissioner supra londono v commissioner tcmemo_2003_99 ashley v commissioner tcmemo_2002_286 petitioner has offered no explanation for its delinquent filing of its corporation income_tax return for despite being provided with opportunities to do so petitioner did not comply with the so’s requests to file that return and to submit the financial information needed for the so to entertain a reasonable collection alternative because petitioner was not in compliance with its filing_requirements and submitted no financial information this court finds that respondent did not abuse his discretion in declining to consider collection alternatives nor in determining to proceed with the levy to collect petitioner’s outstanding liabilities for trust fund assessments to reflect the foregoing decision will be entered for respondent


t c summary opinion united_states tax_court richard alan saunders and shelia candy saunders petitioners commissioner of internal revenue respondent v docket no 13352-15s filed date richard alan saunders and shelia candy saunders pro sese john w sheffield iii and shannon craft for respondent summary opinion wells judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed all other section references are to the internal_revenue_code code in effect for the year in issue and all rules references are to the tax_court rules of continued pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a dollar_figure deficiency and an dollar_figure sec_6662 penalty in relation to petitioners’ federal_income_tax the issues we must decide are whether petitioners are entitled to the child tax_credits for the three children listed on their return entitled to dependency_exemption deductions for the three children and one adult listed on their return and liable for a sec_6662 accuracy-related_penalty background some of the facts and certain exhibits have been stipulated the parties’ stipulated facts are incorporated in this opinion by reference and are found accordingly at all relevant times petitioners lived with petitioner wife’s father in their home in georgia during petitioner wife worked at medtech college and petitioner husband worked at the u s postal service petitioners are also pastors of their own ministry sometime before petitioner wife met lykeithia thomas a prospective medtech college student who had fallen on hard times petitioner continued practice and procedure unless otherwise indicated all numbers are rounded to the nearest dollar wife helped ms thomas finish her general equivalence degree and enroll at medtech college ms thomas then also joined petitioners’ church which she attended with her grandmother and three children in late ms thomas and her three children became homeless when they had to move out of her mother’s home ms thomas moved in with a friend but turned to petitioners to house her young children petitioner wife had experience as a foster parent and she and petitioner husband agreed to house the three children in the three children were all younger than ie preschool and elementary-school aged they would spend the night in petitioners’ home and in the morning ms thomas would pick them up and take them to school in the afternoon ms thomas would return them to petitioners petitioners fed and clothed them and provided them with certain incidentals such as school supplies with the exception of their rides to school petitioners provided all of the transportation for the children and they referred to petitioner wife as auntie or grandma petitioner wife’s father mr steed has lived with petitioners for a long time mr steed suffers from kidney failure liver problems and dementia because of his health problems he has been unable to work for many years and during received dollar_figure per month in supplemental_security_income ssi mr steed has his own bedroom and bathroom in petitioners’ home with a handicap bathtub and a handicap toilet during petitioner wife routinely drove her father across town to seek medical treatment and took care of certain basic needs such as clothes shopping mr steed appointed petitioner wife as his attorney-in-fact and petitioner husband as his alternate attorney-in-fact in summary during petitioners provided most if not all housing utilities food clothing and transportation for mr steed and the three children aside from mr steed’s ssi all of the income used to support the household came from petitioners the household expenses for included a dollar_figure mortgage payment dollar_figure in groceries and dollar_figure in utilitie sec_2 for a total monthly expense of dollar_figure aside from incidentals such as clothing and school supplies petitioner wife estimates that she spent a further dollar_figure per month transporting her father for medical treatment at the end of the year ms thomas asked petitioner wife to list the children as petitioners’ dependents and share any resulting tax_refund with her ms thomas told petitioner wife that her mother had listed the children as her petitioner wife testified that their utilities expense increased by roughly dollar_figure per month after the children’s arrival changed their three-person household into a six-person household dependents when they all previously lived together petitioner wife agreed but instead of sharing the child_tax_credit she offered to give the amount in its entirety to ms thomas ms thomas provided petitioners with several documents including some showing the children’s social_security numbers so that petitioners could list the children as dependents the record does not reflect whether ms thomas received any income in or whether she filed her own tax_return listing her children as dependents petitioners timely filed their federal_income_tax return with the help of speedway tax service petitioners claimed mr steed as a dependent and listed parent under the column titled dependent’s relationship to you as agreed with ms thomas petitioners also listed the children as dependents after telling petitioner wife that she could not list pastor in the relationship column the individual who assisted with the tax_return preparation listed nephew or niece the return shows dollar_figure claimed in child tax_credits the return also shows a refund due of dollar_figure although petitioners’ bank statement shows a refund deposit of dollar_figure petitioners paid ms thomas a total of dollar_figure in two payments the first cash payment dollar_figure was made on date ms thomas asked petitioners to hold on to the rest of the money until she needed it ms thomas used the first payment to secure housing for herself and her children and she collected the children and they left petitioners’ home in late date petitioners gave ms thomas the second cash payment dollar_figure ms thomas stopped attending petitioners’ church and they have since been unable to reach her discussion deductions and credits are a matter of legislative grace and the taxpayer bears the burden of proving that he or she is entitled to any deduction or credit claimed see rule a 290_us_111 for tax_year a taxpayer may claim a dependency_exemption deduction with respect to an individual who is either a qualifying_child or a qualifying_relative sec_151 sec_152 if the dependency_exemption deduction is claimed on the basis that the individual is a qualifying_child the taxpayer may also claim a dollar_figure tax_credit per qualifying_child sec_24 to be a taxpayer’s qualifying_child an individual must a bear a qualifying relationship defined in sec_152 to the taxpayer b have the same principal_place_of_abode as the taxpayer for more than one-half of such taxable_year c meet certain age petitioners have not alleged or shown that sec_7491 applies to shift the burden_of_proof to respondent requirements and d have not provided more than one-half of his or her own support for the year sec_152 the children do not bear a qualifying relationship to petitioners as defined in sec_152 the children are neither a child of petitioners or a descendant of such a child nor a brother sister stepbrother or stepsister of petitioners or a descendant of any such relative sec_152 because none of the children meets the definition of a qualifying_child petitioners are not entitled to the claimed child tax_credits sec_24 an individual who is not a qualifying_child may still under certain conditions qualify as a dependent if he or she is a qualifying_relative sec_152 pursuant to sec_152 the term qualifying_relative means an individual a who bears a qualifying relationship defined in sec_152 to the taxpayer b whose gross_income is less than the exemption_amount defined in sec_151 c for whom the taxpayer has provided more than one-half of the this result does not change even if ms thomas did not in fact file her own return and claim her children as dependents the code provides that if the parents of an individual may claim the individual as a qualifying_child but no parent does so the individual may be claimed as the qualifying_child of another taxpayer sec_152 that other taxpayer however must still meet the requirements of sec_152 in other words this provision would allow the children’s grandmother to claim them as qualifying children if they also met the residency age and financial support requirements but not petitioners individual’s support and d who is not a qualifying_child of the taxpayer or any other taxpayer for the exemption_amount pursuant to sec_151 was dollar_figure revproc_2011_52 sec_3 2011_45_irb_701 the three children had no gross_income and petitioners provided all of their support with the exception of transportation to and from school petitioners testified that the children spent every night in their home and that they provided all of the financial support to feed and maintain them this would suggest that the children meet the qualifying relationship definition of sec_152 ie having the same principal_place_of_abode and being members of the same household the statute also requires that the children not be a qualifying_child of any other taxpayer sec_152 petitioners could have shown that they meet this requirement if they had corroborated that ms thomas in fact released her claim to the dependency_exemption deductions for her children for tax_year see brooks v commissioner tcmemo_2013_141 at petitioners however did not present evidence beyond their testimony it is petitioners’ burden to show that they are entitled to the deductions that they claimed they we note that although petitioners provided social_security and medical records of the children showing a different address we find their testimony regarding the children’s residency to be credible have not met that burden and consequently are not entitled to dependency_exemption deductions with respect to the three children petitioners also claimed mr steed petitioner wife’s father as a dependent mr steed certainly bears a qualifying relationship to petitioner wife as defined in sec_152 and is not a qualifying_child of any taxpayer mr steed nevertheless fails to meet the definition of a qualifying_relative see sec_152 the statute requires that petitioners have provided over one-half of the individual’s support for the calendar_year in which such taxable_year begins id during mr steed received dollar_figure per month in ssi petitioners failed to provide evidence regarding the fair_market_value of mr steed’s lodging see daya v commissioner tcmemo_2000_360 slip op pincite petitioners also failed to provide an estimate of or supporting documentation for the amount of total support mr steed received per month based on petitioners’ rough estimate of monthly household expenses totaling dollar_figure we estimate that they provided mr steed monthly with dollar_figure in housing and dollar_figure in transportation this amount of dollar_figure is less than the dollar_figure in ssi and therefore less than half of mr steed’s support accordingly mr steed does not meet the definition of a qualifying_relative see sec_152 thus petitioners are not entitled to a dependency_exemption deduction with respect to mr steed sec_6662 imposes an accuracy-related_penalty if any part of an underpayment_of_tax required to be shown on a return is due to among other things negligence or disregard of rules and regulations sec_6662 and b respondent bears the burden of production on the applicability of the accuracy- related penalty see sec_7491 see also 116_tc_438 pursuant to sec_6664 the accuracy-related_penalty under sec_6662 does not apply to any portion of an underpayment for which a taxpayer establishes that he or she had reasonable_cause and acted in good_faith whether the taxpayer acted with reasonable_cause and in good_faith is decided on a case-by-case basis taking into account the pertinent facts and circumstances including the taxpayer’s knowledge education and experience as well as the taxpayer’s reliance on professional advice see thomas v commissioner tcmemo_2013_60 at see also 115_tc_43 aff’d 229_f3d_221 3d cir sec_1_6664-4 income_tax regs assuming arguendo that respondent has met his burden of production we nevertheless conclude that petitioners carried their burden with respect to reasonable_cause and good_faith it is clear from the record that petitioners are not tax experts or experienced in tax matters petitioners sincerely believed that they were entitled to claim deductions and credits for the children with ms thomas’ permission as the children’s grandmother had done before petitioner wife credibly testified that the children and mr steed depended on petitioners for most or at the very least a substantial amount of their support moreover we find that petitioners relied reasonably and in good_faith on their commercial return preparer to whom they fully disclosed their relationship with the children see thomas v commissioner at see also neonatology assocs p a v commissioner t c pincite sec_1_6664-4 income_tax regs therefore we hold that petitioners are not liable for the accuracy-related_penalty under sec_6662 on the basis of the foregoing we hold that petitioners are not entitled to dependency_exemption deductions or child tax_credits and that they are not liable for the sec_6662 accuracy-related_penalty accordingly decision will be entered for respondent as to the deficiency and for petitioners as to the sec_6662 accuracy- related penalty


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 intl b02 plr-134523-12 date september ty ------- legend taxpayer fc state year year date date date director of tax law firm accounting firm a accounting firm b dear ------------- ------------------------------------------------------- ------------------------------------ -------------- ------- ------- ------------------ ---------------------------- ---------------------------- ----------------------- ------------ --------- --------------------- this is in response to a letter dated date submitted by taxpayer’s authorized representatives that requested the consent of the commissioner of the internal_revenue_service commissioner to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code the code and sec_1_1295-3 with respect to taxpayer’s investment in fc the ruling contained in this letter is based upon information and representations submitted on behalf of taxpayer by its authorized representatives 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 this request_for_ruling such material is subject_to verification on examination the information submitted in the request is substantially as set forth below plr-134523-12 facts taxpayer is a corporation organized under the laws of state it is classified as an association_taxable_as_a_corporation for u s federal_income_tax purposes taxpayer is a publicly traded company taxpayer is currently taxed as a corporation and pays federal and applicable state corporate taxes on its taxable_income ---------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -------------------------------------------- taxpayer invested in fc on date fc has been a pfic with respect to taxpayer since date taxpayer submitted an affidavit under penalties of perjury which describes the events that led to its failure to make a qef election with respect to fc by the election due_date including the roles of law firm accounting firm a accounting firm b and taxpayer’s director of tax at that time taxpayer represents that as of the date of this request_for_ruling the pfic status of fc has not been raised by the irs on audit for any of the taxable years at issue ruling requested taxpayer requests the consent of the commissioner to make a retroactive qef election with respect to fc for year under sec_1_1295-3 law sec_1295 provides that a pfic will be treated as a qef with respect to a shareholder if an election by the shareholder under sec_1295 applies to the pfic for the taxable_year and the pfic complies with the requirements prescribed by the secretary for purposes of determining the ordinary_earnings and net capital_gains of the company under sec_1295 a qef election may be made for a taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for the taxable_year to the extent provided in regulations the election may be made after plr-134523-12 the due_date if the shareholder failed to make an election by the due_date because the shareholder reasonably believed the company was not a pfic under sec_1_1295-3 a shareholder may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united state sec_3 government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the company for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe the events that led to the failure to make a qef election by the election due_date the discovery of the failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on the professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made with taxpayer’s ruling_request we conclude that taxpayer has satisfied sec_1_1295-3 accordingly consent is granted to taxpayer to make a retroactive qef election with respect to fc for year provided that taxpayer complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election 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 private_letter_ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-134523-12 in accordance with the power_of_attorney on file with this office copies of this letter_ruling are being sent to your authorized representatives a copy of this letter_ruling must be attached to any federal_income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely jeffery g mitchell chief branch office of the associate chief_counsel international cc


internal_revenue_service number info release date date cc psi 1-genin-165314-01 uilc we are responding to correspondence forwarded to our office by the atlanta service_center staff apparently this material was originally submitted to the internal_revenue_service on your behalf by information provided it appears that you are requesting that the irs treat cpa based on the as an s_corporation from the taxable_year forward however you are ineligible for automatic late s_corporation relief under revproc_97_48 because irs records reflect that your form_1120s tax_return was received late on date and had no extension on file further the irs notified you of the lack of an election on your account within six months of the time that the return was received although we are unable to respond to your request as submitted this letter provides useful information about rectifying your situation announcement copy enclosed provides guidance on seeking relief for late s_corporation elections generally to request relief for a late or invalid s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a ruling are set out in revproc_2002_1 copy enclosed in addition a proper user_fee must be submitted along with your request the fee for a ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million for the last 12-month taxable_period qualify for a reduced user_fee in the amount of dollar_figure if your business qualifies for the reduced fee your request must include a statement certifying gross_income otherwise you will be billed the higher fee please format your ruling_request as shown in appendix b of revproc_2002_1 if you decide to submit a ruling_request please provide documents supporting your intention to be an s_corporation and include the proper user_fee please refer your package to our office by adding the following to the address attn cc pa t p o box ben franklin station washington dc direct to cc psi b1 room if you have internet access you may wish to visit www irs gov smallbiz for specialized tax information products and forms relating to small businesses please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2002_1 copy of submission material