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 corp plr-120932-15 date march legend distributing --------------------------------------------------------------------------------- --------------------------------------------------------------------- ----------------------------------------------------- distributing ---------------------------------------------------------------------------- --------------------------------------------------------------------- ------------------------- distributing ------------------------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ -------------------------------------------- --------------------------------------------------------------------- corp ---------------------------------------------------------------------------- --------------------------------------------------------------------- --------------------- llc ------------------------ ------------------------------------------------------------------------ ----------------------------------------------------------------- --------------------------------------------------------------------- prs ------------------------------------------------------------------------------------------- --------------------------------------------------------------------- ---------------------- plr-120932-15 dre 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------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ---------------------------------------------------------- ------------------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ provision own regulation agreement regulatory constraint advisor event plr-120932-15 ------------------------------------------------------------------------ ----------------------------------------------------------------------- ------------------------------------------------------------------------ -------------------------------------------------------------- --------- ------------------------------------------------------------------------ ---------------------------- --- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------- ------ ------ -- ------ --- --- ------ ------ --- --------------------- --------------------------- ----------------------- ------------------------------------------------------------------------ -------------- governing document a b c d e f g h i m k date date date date dear ---------------- plr-120932-15 this letter responds to your letter dated date submitted by your authorized representatives requesting rulings under sec_355 and sec_361 of the internal_revenue_code code and related regulations with respect to the proposed transaction described below the information provided in that request and in later correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process this letter is issued pursuant to section dollar_figure of revproc_2016_1 2016_1_irb_1 regarding one or more significant issues under sec_332 sec_351 sec_355 sec_368 or sec_1036 the rulings contained in this letter only address one or more discrete legal issues involved in the transaction this office expresses no opinion as to the overall tax consequences of the transactions described in this letter or as to any issue not specifically addressed by the rulings below summary of facts distributing is a widely held publicly traded corporation and the common parent of an affiliated_group_of_corporations that files a consolidated u s federal_income_tax return the distributing group distributing owns all the stock of distributing a corporation distributing owns all the common_stock of distributing a corporation distributing owns all the preferred_stock of distributing the value of which is less than a percent of the aggregate value of distributing 1’s outstanding_stock as of date distributing owned b more than percent of the stock of corp a corporation distributing owns i the sole interest in dre a limited_liability_company that is disregarded for u s federal_income_tax purposes ii a c-percent interest in llc a limited_liability_company that is a partnership for u s federal_income_tax purposes and iii a d-percent limited_partnership_interest in prs a partnership llc owns an e- percent general_partnership interest in prs the remaining interests in llc and prs are held by entities that are unrelated to any member of the distributing group distributing directly and through dre will have been engaged in the active_conduct of the business throughout the five-year period ending on the date of the initial exchange defined below as of date with respect to the business and date with respect to distributing 2’s stock of corp the aggregate gross fair_market_value of the business was approximately m or more percent of the fair_market_value of the stock of corp owned by distributing plr-120932-15 corp distributing and distributing have entered into the agreement which obligates distributing to transfer to corp a certain number of shares of corp stock to partially fund awards to officers and employees as part of a long-term stock incentive plan that permits corp to among other things attract and retain employees of outstanding ability because of recently imposed regulatory constraint which restricts distributing 3’s ability to acquire assets related to its core businesses such as asset type and asset type distributing proposes to carry out the proposed transaction described below proposed transaction the proposed transaction will include the following steps each a step to the extent the order of the steps is neither relevant to any requested ruling nor otherwise explicitly stated as between specific steps or a series of steps steps may occur in an order different from the order set forth below distributing will form a new corporation holdco distributing will contribute to holdco i its c-percent interest in llc and ii its d-percent limited_partnership_interest in prs in actual or constructive exchange for all the stock of holdco distributing will distribute all the stock of holdco to distributing distributing will form a new entity that will be a corporation for u s federal_income_tax purposes splitco splitco will incorporate into its governing document provision and provision distributing will contribute to splitco i its stock of corp and ii all the stock of holdco in actual or constructive exchange for all the stock of splitco splitco will agree to satisfy distributing 2’s obligations under the agreement distributing directly and through dre will sell to splitco all the assets of the business or the sole interest in a limited_liability_company to be formed that will be disregarded for u s federal_income_tax purposes that will own all such assets and all personnel of the business in exchange for an amount of cash equal to the fair_market_value of the business which will be funded through a borrowing from one or more third-party lenders distributing will distribute all the stock of splitco to distributing the splitco distribution plr-120932-15 distributing will distribute no less than f more than percent of the stock of splitco to the distributing shareholders through an initial exchange of shares of splitco for shares of distributing the initial exchange in the event distributing does not distribute all the stock of splitco in the initial exchange distributing will dispose_of any remaining shares of splitco stock remaining splitco shares during the g months following the initial exchange as follows i distributing would expect to undertake one or more offers to exchange all the remaining splitco shares for shares of distributing each a subsequent exchange and collectively with the initial exchange the external split-off ii if the external split-off is undersubscribed any remaining splitco shares that are not disposed of will be a transferred to one or more third-party creditors of distributing each a stock-for-debt exchange b disposed of through one or more sales or exchanges and or c distributed to distributing 3’s shareholders a clean-up spin-off steps and collectively the separation representations distributing makes the following representations with regard to the proposed transaction a b distributing expects to distribute all the stock of splitco to the distributing shareholders in the initial exchange based in part upon the shareholder composition of distributing substantial relevant market data for tender offers comparable to the external split-off and the existence of a minimum condition for the tender offer that distributing will distribute no less than f percent of the stock of splitco to the distributing shareholders in the initial exchange distributing believes and expects that in accordance with the written opinion of advisor at least k percent of the stock of splitco will be represented by the sum of the shares i distributed in the external split- off to distributing shareholders who as a result of their tenders in the external split-off would be entitled to sale_or_exchange treatment if sec_355 were not applicable to the external split-off ii distributed in the separation to distributing shareholders that are exempt from taxation under the code iii transferred in a stock-for-debt exchange and iv sold by distributing in a taxable transaction plr-120932-15 c d e f g h i as long as distributing owns any remaining splitco shares none of distributing 3's or its affiliates’ directors or officers will serve as directors or officers of splitco or its affiliates distributing will vote any remaining splitco shares in proportion to the votes cast by splitco’s other shareholders until date corp will not own as such term is used in the regulation h percent or more of splitco’s aggregate outstanding_stock until date splitco will not own as such term is used in the regulation i percent or more of corp’s aggregate outstanding_stock corp prohibited stock interest until date splitco will not enter into any transaction arrangement or understanding pursuant to which corp directly or to splitco’s knowledge indirectly will acquire any of splitco’s assets or any splitco stock for this purpose i sales or issuances in the open market ii transfers pursuant to the agreement and iii the event will not be taken into account until date splitco will not enter into any transaction arrangement or understanding pursuant to which splitco will i merge or combine with corp ii directly or indirectly acquire any of corp’s assets provided that for purposes of this clause ii neither the event nor an acquisition of assets on the open market will be taken into account iii directly or indirectly acquire any additional corp stock or any interest in corp stock provided that for purposes of this clause iii the event will not be taken into account or iv directly or indirectly acquire a corp prohibited stock interest at the time of the initial exchange and in the event there are remaining splitco shares through the date that distributing disposes of the last of the remaining splitco shares pursuant to the separation neither distributing nor splitco will have any plan or intent for splitco to i own as such term is used in the regulation at any time in the future a corp prohibited stock interest or ii be a party at any time in the future to any transaction arrangement or understanding described in representation g or h rulings plr-120932-15 based solely on the information submitted and representations made we rule as follows with regard to the proposed transaction the relative fair_market_value of the gross assets of the business as compared to the fair_market_value of splitco will not prevent the business from qualifying as an active trade_or_business for purposes of sec_355 with respect to each of the splitco distribution and the external split-off distributing 3’s continuing ownership of any remaining splitco shares until their disposition described in step will not be in pursuance of a plan having as one of its principal purposes the avoidance of u s federal_income_tax for purposes of sec_355 provided the initial exchange otherwise meets the requirements of sec_355 any subsequent exchange stock-for-debt exchange or clean-up spin-off will be treated as a distribution in pursuance of the same plan as the initial exchange and will qualify for nonrecognition treatment under sec_355 and or sec_361 to the same extent such stock transfer would have qualified had it occurred on the same date as the initial exchange caveats except as expressly provided herein no opinion is expressed or implied concerning the tax treatment of the proposed transaction under any provision of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the proposed transaction that is not specifically covered by the above rulings procedural statements this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to any 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 this ruling letter plr-120932-15 in accordance with the power_of_attorney on file in this office a copy of this ruling letter is being sent to your authorized representatives sincerely stephanie d floyd assistant to branch chief branch office of associate chief_counsel corporate cc


internal_revenue_service number release date index number ------------------------------- -------------------------------------------------- -------------------- ------------------------ - department of the treasury washington dc person to contact -------------------------- id no ------------ telephone number -------------------- refer reply to cc psi b03 - plr-143629-03 plr-143632-03 date date -------------------- ------------------------------------------------- legend parent ------------------------------------------------------------- subsidiary ----------------------- ------------------------------------------------------------- arrangement ------------------------------------------------------------- foreign_country date date dear ------------------ correspondence requesting extensions of time under sec_301_9100-1 through of the procedure and administration regulations to file elections for subsidiary and arrangement to be treated as disregarded entities for federal tax purposes this letter responds to a letter dated date and subsequent -------------------------- ---------------- ----- according to the information submitted subsidiary is wholly-owned by parent subsidiary was formed in foreign_country on date and provides parent with limited_liability pursuant to the laws of foreign_country parent intended subsidiary to be facts plr-143629-03 plr-143632-03 treated as a disregarded_entity for federal tax purposes effective date but subsidiary did not file a timely form_8832 entity classification election according to the information submitted subsidiary created arrangement in foreign_country on date it is represented that parent has consistently treated arrangement as wholly-owned for federal tax purposes and that under the laws of foreign_country parent has limited_liability with respect to its interest in arrangement parent intended for arrangement to be treated as a disregarded_entity for federal tax purposes effective date but arrangement did not file a timely form_8832 law and application sec_301_7701-2 generally provides that a business_entity is any entity sec_301_7701-3 provides that so long as a business_entity is not classified 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 further provides that a business_entity with only one owner is classified as a corporation or is disregarded if it is disregarded then the entity’s activities are treated in the same manner as a sole_proprietorship branch or division of the owner as a corporation under sec_301_7701-2 or it may elect its classification for federal tax purposes sec_301_7701-3 provides that 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 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 this determination is based solely on the statute or law pursuant to which the entity is organized except that if the underlying statute or law allows the entity to specify in its organizational documents whether the members will have limited_liability the organizational documents may also be relevant classified other than as provided under sec_301_7701-3 by filing a form_8832 with the appropriate service_center under sec_301_7701-3 this election 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 date specified on form_8832 cannot 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_7701-3 provides that for purposes of sec_301_7701-3 a sec_301_7701-3 provides that an eligible_entity may elect to be sec_301_9100-1 provides that an extension of time is available for under sec_301_9100-1 the commissioner has discretion to grant a reasonable plr-143629-03 plr-143632-03 elections that a taxpayer is otherwise eligible to make 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 taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that requests for relief will be granted when the conclusion accordingly neither subsidiary nor arrangement has satisfied its burden for relief based solely on the facts and representations submitted we conclude that although the standards for relief under sec_301_9100-3 have been satisfied there is insufficient information to establish that either subsidiary or arrangement or both subsidiary and arrangement are foreign eligible entities and accordingly otherwise eligible to make entity classification elections under sec_301_7701-3 as provided under sec_301_9100-1 as a result subsidiary and arrangement are denied extensions of time to make entity classification elections under sec_301_7701-3 concerning the federal tax consequences of the facts of this case under any other provision of the internal_revenue_code specifically we express or imply no opinion concerning whether either subsidiary or arrangement or both subsidiary and arrangement are foreign eligible entities qualified to make the elections subsidiary or arrangement or both subsidiary and arrangement are foreign eligible entities for federal tax purposes neither subsidiary nor arrangement nor both subsidiary and arrangement are precluded from submitting another request for relief under sec_301_9100-1 through assuming parent consistently treats subsidiary and arrangement as disregarded for federal tax purposes except for the specific ruling above no opinion is expressed or implied however in the event that the internal_revenue_service determines that either plr-143629-03 plr-143632-03 provides that it may not be used or cited as precedent being sent to the taxpayer's representatives this ruling is directed only to the taxpayer requesting it sec_6110 pursuant to a power_of_attorney on file with this office copies of this letter are sincerely s heather c maloy 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 ------------------ ---------------------------------- ---------------------------------------- in re 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 b04 plr-123335-06 date april re ---------------------------------------------- legend husband --------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- ---------------------- ------------------ ----------------------------------------------------------------------- wife trust - - - date year year x -------------------------- ------- ------- ----------------------------------------------------------------------- - - - - ----------------------------------------------------------------------------- ------------------------------------------ y cpa state - - - ----------- ------------------------------ --------- dear -------------- this is in response to a letter dated date submitted by your authorized representative requesting rulings under sec_2642 and sec_2632 of the internal_revenue_code and sec_301 of the procedure and administration regulations with respect to trust husband and wife reside in state on date husband established an irrevocable_trust trust for the primary benefit of his children and descendants on date husband contributed_property x to trust plr-123335-06 cpa prepared form sec_709 united_states gift and generation-skipping_transfer_tax return for the transfer and husband and wife elected to split_gifts under sec_2513 however in the preparation of the form sec_709 cpa inadvertently failed to allocate any of husband’s and wife’s gst_exemption to trust on their respective form sec_709 the errors were discovered in a recent review of husband’s and wife’s estate plan in year husband transferred y to trust and a gift-split election was made the transfer to trust was reported on schedule a part gifts subject only to gift_tax and no allocation of husband’s and wife’s gst_exemption was made to trust wife requests i an extension of time to allocate her gst_exemption to the year transfer to trust ii such allocation is to be based on the value of the property transferred to trust on the date of the transfer and iii that the year transfer to trust is subject_to the automatic allocation rules under sec_2632 sec_2601 imposes a tax on every generation-skipping_transfer a generation- skipping transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 as in effect for the tax years at issue provided that for purposes of determining the gst tax every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 effective for transfers subject_to the gift and estate_tax after date provides in part that if any individual makes an indirect_skip during such individual’s lifetime any unused portion of such individual’s gst_exemption shall be allocated to the property transferred to the extent necessary to make the inclusion ration for such property zero sec_2632 provides that the term indirect_skip means any transfer of property other than a direct_skip subject_to the gift_tax made to a gst_trust sec_2632 provides in part that the term gst_trust means a_trust that could have a generation-skipping_transfer with respect to the transferor unless the trust falls within any of six enumerated exceptions sec_2632 provides that an individual may elect to have this subsection not apply to an indirect_skip or any or all transfers made by such individual to a particular trust plr-123335-06 sec_2652 and sec_26_2652-1 of the generation-skipping_transfer_tax regulations provide that if under sec_2513 one-half of a gift is treated as made by an individual and one-half is treated as made by the spouse of the individual then for purposes of the gst tax each spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor spouse regardless of the interest the electing spouse is actually deemed to have transferred under sec_2513 sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_26_2632-1 provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime other than in a direct_skip is made on form_709 sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 and such allocation shall be effective on the date of such transfer sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute see notice_2001_50 2001_2_cb_189 sec_301_9100-1 provides that the commissioner has discretion to 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 no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i plr-123335-06 sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 under the provisions of sec_301_9100-3 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 that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted based on the facts submitted and the representations made we conclude that reasonably and in good_faith if the taxpayer 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 the requirements of sec_301_9100-3 have been satisfied under sec_26_2652-1 wife is treated for gst purposes as the transferor of one-half of the entire value of the property transferred by husband regardless of the interest wife is actually deemed to have transferred under sec_2513 for gst purposes husband and wife are each treated as the transferor of one-half of the value of the entire property transferred to trust therefore wife is granted an extension of time of days from the date of this letter to make an allocation of wife’s available gst_exemption with respect to wife’s transfer to trust in year the allocation will be effective as of the respective date of the transfer and the value of the transferred assets to trust as of the respective date of the original transfer to trust will be used in determining the amount of wife’s gst_exemption to be allocated to trust trust’s inclusion_ratio will be determined under sec_2642 and sec_2642 a gst_trust is defined in sec_2632 in general any trust that could have a generation-skipping_transfer is a gst_trust unless it meets one of the exceptions described in sec_2632 through vi where a sufficient possibility exists based on the statutory criteria that the trust corpus will not be distributed to lower generations based upon the facts submitted and representations made none of the exceptions in sec_2632 apply to trust and accordingly trust is a gst_trust for purposes of sec_2632 therefore we conclude that the automatic allocation rules under sec_2632 apply to the year transfer to trust plr-123335-06 wife should make the allocation on a supplemental form_709 for year the form should be filed with the cincinnati service_center at the following address internal_revenue_service cincinnati service_center - stop cincinnati oh a copy of this letter should be attached to the forms 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 tax consequences of the transaction under the cited provisions or under any other provisions of the code except as specifically ruled herein we express or imply no opinion on the federal this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely enclosures copy for sec_6110 purposes copy of this letter william o’shea associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-157972-02 date date grantor grantor child child child trust trust trust trust grandchild grandchild grandchild grandchild grandchild grandchild grandchild plr-157972-02 d1 d2 d3 d4 year year year corporation bank trust company state county dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of grandchild by grandchild 4's authorized representative requesting certain rulings under the internal_revenue_code the information submitted states that grantor and grantor collectively the grantors husband and wife both died prior to date survived by child child and child on d1 grantors established three separate irrevocable individual trusts trust trust and trust collectively the d1 trusts for the benefit of their three children the trust agreements have identical terms except that each trust designates a different child as beneficiary the current trustee of the d1 trusts is bank under article i a of each d1 trust the beneficiary shall receive all of the income of his or her trust during his or her lifetime if the beneficiary becomes disabled then the income distributions will be discretionary based on the general comfort well-being education and support of said beneficiary plr-157972-02 article i b of the d1 trusts provides that upon the death of a beneficiary the trustee is to pay the net_income from the trust estate to his or her descendants per stirpes each d1 trust will terminate twenty years after the death of the last to die of child child and child at which time the trustee will distribute the trust corpus to the beneficiary’s then living issue per stirpes article iii a of the d1 trusts provides that the trustee may hold any shares of corporate stock comprising any part of the trust estate in its own name as trustee or in the name of its nominee or nominees it may give proxies to any person it may select to vote such stock at any stockholders’ meeting of any such corporation but shall during the life of grantor nominate grantor as such proxy in all instances except where grantor shall be unable to serve or be disqualified and following grantor 1's death so long as it shall continue to hold any stock of corporation in the trusts therein created it shall nominate as proxy for the voting of all such shares child article iv of the d1 trusts provides that in the case of a vacancy in the office of trustee resulting from resignation or disqualification for any cause then the trustors or the survivor of them or after their deaths a majority of their living children may nominate a successor trustee but if a majority of the children of the trustors are unable to agree upon a successor trustee within thirty days after such resignation or disqualification then any one of them may apply to any court of original general jurisdiction in the county and state for the appointment of a new trustee on such notice as shall be in accordance with the rules and practice of that court on d2 grantor established an inter_vivos revocable_trust trust pursuant to article viii of the trust agreement on grantor 1's death in year the trust corpus was divided into two equal parts the deceased spouse’s share and the surviving spouse’s share under article xii the surviving spouse’s share was held for the exclusive benefit of grantor grantor had the power during her lifetime to invade trust corpus for any amount or for any purpose on her death a portion of the trust was to be distributed to a private_foundation and the balance pursuant to grantor 2's exercise of a general power to appoint the trust corpus in default of exercise the trust corpus was to be added to the deceased spouse’s share in general under article xi the deceased spouse’s share was administered for the benefit of grantor and the grantors’ children pursuant to article xiii on grantor 2's death in year the remaining balance of the deceased spouse’s share and additions from the surviving spouse’s share was divided into three parts each part constituting a separate trust share for the benefit of each of the grantors’ three children child child and child and their descendants the current trustee of trust is bank article xiv paragraph b of the trust agreement defines beneficiary to include each named child if he or she is living at the death of grantor sec_1 or whichever event occurs later and all the descendants of the named child born prior to the termination of trust plr-157972-02 under article xv paragraph a of the trust agreement the trustee shall distribute the net_income of each separate trust among its beneficiaries in such proportion equal or unequal as the trustee shall determine article xv paragraph b of the trust agreement provides that the trustee may in its sole discretion invade the principal of each trust for the support education and emergency needs of any beneficiary of such trust article xv paragraph c of the trust agreement provides that trust will terminate by the exhaustion of all the principal or one day before the twenty-first anniversary of the date of death of the last survivor of grantor sec_1 and and all descendants of grantor living at the time of execution of this amendment but not later than such earlier termination_date as is required to prevent violation of the rule_against_perpetuities or any applicable rule against remoteness upon termination the entire balance of the principal and any accumulated income of each separate trust share shall be distributed outright free of trust per stirpes among the beneficiaries of such trust share then living article xvii paragraph b subparagraph of the trust agreement provides that upon the death of grantor or during any period of his incapacity the trustee shall appoint as proxies of all corporation stock grantor child and child upon the death resignation or incapacity of any of these proxies the named spouse of child shall be appointed proxy when all of the previously named proxies are no longer able or willing to serve as proxies then the trustee shall appoint child to serve as proxy if child is able and willing to serve article xviii of the trust agreement provides that in the event of the resignation or disqualification of the trustee then the trustor or after the trustor’s death any two of the trustor’s three children may appoint a successor if no two children of the trustor’s are then living or if living but are unable to agree upon a successor trustee then a successor trustee shall be chosen by the court of the state for the county in the manner provided for in the state trust act any successor trustee shall be a national bank or trust company authorized to do trust business in the state and having an unimpaired capital stock of at least dollar_figure as noted above grantor died in year and grantor died in year child died in year and child and child are currently living there are also grandchildren grandchildren through currently living the d1 trusts and trust are funded with common_stock of corporation a state corporation pursuant to article iiia of the d1 trusts child holds a proxy to vote any corporation stock held by the d1 trusts in addition pursuant to article xviib of the trust agreement child holds a proxy to vote the corporation stock held by trust plr-157972-02 on d3 the trust company a state nonprofit corporation was formed by the filing of the articles of incorporation and bylaws of the trust company with the secretary of state of state one of the purposes of the trust company as stated in article iii of the articles of incorporation is to serve as the successor trustee of the d1 trusts and trust article iv of the articles of incorporation provides that trust company has three members of a single class each member is a lineal descendant of the grantors the relative rights and responsibilities of each member are identical to those of every other member the three initial members were child child and child each a founding member should a founding member be unwilling or unable to serve or after the death of a founding member a successor member successor must be selected by and from among the adult lineal_descendants the family of that founding member lineal_descendants include adopted children each family determines for itself the term of any successor from that family and the procedure by which the successor will be selected and must designate the successor to the secretary of the corporation article x of the articles of incorporation provides in part that trust company has seven directors and no founding member may be a director each member is entitled to appoint two directors each of whom must be from the family of that appointing member all members are entitled to vote for the election of a seventh director who may or may not be a member of any family the number of directors constituting the board_of directors may be increased or decreased only by an amendment to the articles of incorporation any director may be removed with or without cause by the vote of two-thirds of the board_of directors provided however in the case of a director from the family of a founding member at least one vote for removal must be made by a director from the same family as the director to be removed the initial directors of trust company are grandchildren through article iv paragraph of the bylaws provides in part that the management of all the affairs property and interests of trust company is vested in a board_of directors consisting of seven persons appointed and elected as provided in the articles directors need not be members no founding member may be a director subject_to the limitations and requirements of article xii with respect to discretionary distributions from the d1 trusts and trust the board_of directors as a whole has the authority to make any and all decisions regarding trust company’s actions as trustee of the d1 trusts and trust the affirmative vote or written consent of not less than five directors is required to sell assets of the d1 trusts and trust on d4 the members of trust company consented to amendment to the bylaws adding new article xii under new article xii a special discretionary distribution committee will make all decisions regarding discretionary distributions to any beneficiary under the d1 trusts and trust and will have no other purpose or function plr-157972-02 the discretionary distribution committee is subject in part to the following requirements and limitations the committee will consist solely of not less than one and not more than three member s the board_of directors will appoint each member of the committee for a term of two years subject_to removal only for malfeasance or bad faith conduct no member of the committee may be a grantor or have any beneficial_interest in the d1 trusts or trust no member of the committee may be an employee of the trust company or corporation or any subsidiary or affiliate of either entity and no member of the committee may be a_related_or_subordinate_party within the meaning of sec_672 as to any grantor of any of the d1 trusts or trust or any beneficiary of the d1 trusts or trust bank has filed a petition in the appropriate court of state and county stating that it no longer desires to serve as trustee and asking the court for directions regarding the appointment of a successor trustee after the filing of bank’s petition bank trust company current and remainder adult beneficiaries and the special representative appointed by the court to represent all minor and unborn remainder beneficiaries of the d1 trusts and trust entered into a settlement agreement the settlement agreement will be effective upon the confirmation by the court and the issuance of a favorable private_letter_ruling by the internal_revenue_service paragraph of settlement agreement provides in part that the parties intend that trust company replace bank as trustee of the d1 trusts and trust all parties waive certain requirements of trust that the trustee be a corporate trustee with capitalization of dollar_figure million or more the settlement agreement has been signed by all parties and confirmed by order of the court the d1 trusts and trust were irrevocable prior to date and no additions to the d1 trusts and trust have been made since that date ruling sec_671 of the internal_revenue_code 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-157972-02 sec_678 provides in general 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 sec_671 to inclusive subject a grantor of a_trust to treatment as the owner thereof based on the facts and representations submitted none of grandchildren through will have the power to vest the corpus or income from the d1 trusts or trust in themselves therefore we conclude that grandchildren through will not be treated as the owners of any portion of the d1 trusts or trust under sec_671 and sec_678 ruling 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_of_appointment by a disposition that 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 sec_2041 provides that a general_power_of_appointment is a power that is exercisable in favor of the decedent the decedent's_estate the decedent's creditors or the creditors of the decedent's_estate however a power to consume invade or appropriate property for the benefit of the decedent that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent shall not be deemed a general_power_of_appointment sec_20_2041-1 of the estate_tax regulations provides that a power in a donee to remove or discharge a trustee and appoint himself may be a power_of_appointment for example if under the terms of a_trust instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and the decedent has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself the decedent is considered as having a power_of_appointment sec_2514 and the regulations promulgated under that section provide similar rules regarding the application of the gift_tax in the case of the release exercise or lapse of a general_power_of_appointment revrul_95_58 1995_2_cb_191 revoking revrul_79_353 1979_2_cb_325 holds that a decedent-settlor's reservation of an unqualified power to remove a trustee plr-157972-02 and appoint an individual or corporate successor trustee that is not related or subordinate to the decedent within the meaning of sec_672 is not considered a reservation of the trustee's discretionary powers of distribution over the property transferred by the decedent-settlor to the trust for purposes of sec_2036 and sec_2038 sec_672 defines the term related_or_subordinate_party to mean any nonadverse_party who is the grantor's spouse if living with the grantor or any one of the following the grantor's father mother issue brother or sister an employee of the grantor a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control a subordinate employee of a corporation in which the grantor is an executive for purposes of sec_672 sec_674 and sec_675 a_related_or_subordinate_party shall be presumed to be subservient to the grantor in respect of the exercise or nonexercise of the powers conferred on him unless such party is shown not to be subservient by a preponderance_of_the_evidence in this case under article xii of the bylaws no beneficiary under the d1 trusts or trust can participate directly or indirectly in any decisions regarding discretionary distributions to any beneficiary under the trusts furthermore any decisions regarding discretionary distributions are made by the distributions committee which must consist of individual s who are not related or subordinate within the meaning of sec_672 to any grantor or to any beneficiary the distributions committee cannot include any employee of trust company corporation or any affiliate accordingly based on the facts presented the directors of trust company will not be deemed to possess a general_power_of_appointment under sec_2041 and sec_2514 with respect to the d1 trusts or trust ruling sec_2601 imposes a tax on each generation-skipping_transfer made by a transferor to a skip_person under sec_2611 and sec_26_2611-1 of the generation-skipping_transfer_tax regulations a generation-skipping_transfer is an event that is either a direct_skip a taxable_distribution or a taxable_termination the determination as to whether an event is a generation-skipping_transfer is made by reference to the most recent transfer subject_to the estate or gift_tax under a of the tax_reform_act_of_1986 the generation-skipping_transfer_tax is generally applicable to generation-skipping transfers made after date however under b a of the tax reform act and sec_26_2601-1 of the regulations the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date plr-157972-02 sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification that does not result in an increase in the amount of a gst transfer or the creation of a new gst transfer will not cause the trust to lose its exempt status under the facts presented the replacement of bank as trustee with trust company will not shift a beneficial_interest in the d1 trusts or trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trusts beyond the period provided for in the original trusts accordingly we conclude that the replacement of bank as trustee with trust company will not cause the d1 trusts or trust to lose exempt status for generation- skipping transfer_tax purposes under sec_2601 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 pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to grandchild 4's authorized representative sincerely j thomas hines chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court donald thomas salzer petitioner v commissioner of internal revenue respondent docket no 5676-13s filed date donald thomas salzer pro_se rebecca m clark for respondent summary opinion armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined the following deficiencies in and additions to petitioner’s federal_income_tax for and additions to tax_year deficiency sec_6651 sec_6651 sec_6654 dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure after concessions by the parties the issues for decision are as follows unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for and the taxable years in issue all rule references are to the tax_court rules_of_practice and procedure petitioner concedes or is deemed to concede all income adjustments in the notices of deficiency see rule b any issue not raised in the assignments of error shall be deemed to be conceded see also mcneil v commissioner tcmemo_2011_150 wl at n issues not raised at trial or on brief are deemed conceded aff’d per curiam 451_fedappx_622 8th cir in addition petitioner does not claim any itemized_deductions respondent concedes that for each of the years in issue petitioner is entitled to an exemption for his wife dependency_exemptions for two qualifying children and a child_tax_credit for those children subject_to the income limitation and credit phaseout prescribed by sec_24 also respondent acknowledges consistent with the notices of deficiency that petitioner is entitled to withholding credits of dollar_figure for and dollar_figure for as offsets against the determined deficiencies see sec_6211 whether petitioner is entitled to joint filing_status we hold that he is not and whether petitioner is liable for additions to tax for failure to timely file for failure to timely pay and for failure to pay estimated_tax we hold that he is subject_to and in amounts to be determined by the parties’ rule_155_computations background none of the facts were stipulated petitioner resided in the state of michigan at the time that the petition was filed with the court petitioner and his wife were married in and remained married through the date of trial during and the taxable years in issue petitioner and his wife together with their two minor children lived together as a family petitioner was employed in and and earned dollar_figure and dollar_figure respectively in petitioner also received a taxable refund of state or local income_tax of dollar_figure petitioner’s wife was not employed in and nor did she have any gross_income in either of those years petitioner and his wife filed a joint income_tax return for each of the years from through however for and petitioner’s wife refused to sign any return because in petitioner’s words m y wife would not sign any forms from the federal government starting in that year because she has had issues with the federal government ever since the activity that happened in the summer of with president bush and she refuses to sign any forms however related to the government petitioner did not file a separate_return for or nor did he pay any_tax other than through withholding or any estimated_tax for either of those years upon examination respondent prepared substitutes for return sfrs for petitioner for and and subsequently determined deficiencies and additions to tax on the basis of the sfrs in so doing respondent assigned petitioner the filing_status of married_filing_separately and allowed the standard_deduction corresponding to that filing_status and one personal_exemption on their return petitioner and his wife reported a tax_liability of dollar_figure and claimed withholding of dollar_figure petitioner’s wife also refused to file joint returns for years after those in issue discussion i petitioner’s filing_status petitioner is a married individual who lived with his wife and minor children at all relevant times see sec_7703 regarding determination of marital status accordingly petitioner was obliged to compute his tax for and using either the rates applicable to married individuals filing jointly see sec_1 or the rates applicable to married individuals filing separately see sec_1 joint_return rates are much more advantageous joint_return rates apply only if a married individual files a return jointly with his or her spouse under sec_6013 sec_1 with exceptions not applicable herein sec_6013 provides that a husband and wife may file a return jointly even though one of the spouses has neither gross_income nor deductions see sec_1_6013-1 income_tax regs to file jointly however both spouses must intend to do so e g harrington v commissioner tcmemo_2012_285 at petitioner did not file a return for either or necessarily therefore he did not file a joint_return petitioner contends that he would have filed joint returns for the years in issue had it not been for his wife’s refusal to do so petitioner also contends that it would be illogical to pay tax as a married_person filing separately given his history of filing joint returns from through however as the u s supreme court instructs we give effect to what actually happened and not what might have happened 429_us_569 quoting 417_us_134 however much one might sympathize with petitioner who faces much higher tax_liabilities than those that would otherwise be required the fact remains that joint filing_status cannot be imputed taxpayers can secure such status only by filing a joint_return respondent’s determination is therefore sustained ii additions to tax for each of the two years in issue respondent prepared an sfr that satisfied the requirements of sec_6020 see 127_tc_200 aff’d 521_f3d_1289 10th cir and subsequently determined on the basis of the sfrs additions to tax under sec_6651 for failure to timely file under sec_6651 for failure to timely pay tax and under sec_6654 for failure to pay estimated_tax at trial respondent introduced evidence demonstrating that each addition_to_tax was appropriate see sec_7491 116_tc_438 either because petitioner was obliged to file income_tax returns for and see sec_6012 but failed to do so or because he paid no tax other than through withholding or because he paid no estimated income_tax despite having an apparent obligation to do so see sec_6654 petitioner is therefore obliged to adduce evidence sufficient to show that respondent erred in these determinations see higbee v commissioner t c pincite petitioner did not address the additions to tax at trial other than inferentially by alleging that correctly calculated tax would be a refund if joint filing_status were allowed for the years in issue however as discussed above we have sustained respondent’s determination that petitioner’s filing_status for and is married_filing_separately in addition petitioner’s wife’s refusal to file joint returns does not constitute reasonable_cause for his failure to timely file or his failure to timely pay or otherwise excuse him from liability notwithstanding the foregoing respondent’s concessions see supra note will at the very least serve to reduce the amount of each addition_to_tax and may the additions to tax under sec_6651 and do not apply if the failure to timely file and the failure to timely pay were due to reasonable_cause and not due to willful neglect exceptions to the sec_6654 addition_to_tax are more restrictive see eg sec_6654 at trial petitioner did not show that any exception under sec_6654 applies or that the addition_to_tax is otherwise inapplicable possibly provide a basis for an exception see eg sec_6654 providing that there shall be no addition under sec_6654 if the tax for the year reduced by the taxpayer’s withholding is less than dollar_figure accordingly the parties shall determine these matters as part of their rule_155_computations conclusion to give effect to our disposition of the foregoing issues as well as the parties’ concessions see supra note decision will be entered under rule