t c memo united_states tax_court jeff r taylor petitioner v commissioner of internal revenue respondent docket no filed date john c meaney for petitioner shirley m francis for respondent memorandum opinion parr judge respondent moves for partial summary_judgment under rule arguing that petitioner's plea of guilty to criminal_fraud under sec_7201 collaterally estops him from all section references are to the internal_revenue_code in effect for the taxable_year in issue and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated all dollar amounts are rounded to the nearest dollar rebutting her determination for the taxable_year that he is liable for civil_fraud under sec_6653 for filing a false and fraudulent income_tax return with the intent to evade income_tax respondent further maintains that the deficiency in income_tax and the additions to tax due from petitioner for may be assessed at any time under sec_6501 respondent supports her motion with two exhibits namely a grand jury indictment indictment of petitioner and petitioner's plea agreement plea agreement petitioner asserts that the doctrine_of collateral_estoppel does not apply for because he pleaded guilty under duress and that the 3-year limitation period under sec_6501 bars the assessment and collection of the deficiency and additions to tax for the respondent's motion for partial summary_judgment is based on the pleadings filed in this case we must decide whether petitioner is collaterally estopped from contesting that the deficiency in his income_tax for was due to fraud within the meaning of sec_6653 on account of his plea of guilty to a violation of sec_7201 we hold he is background respondent determined a deficiency in and additions to petitioner's federal_income_tax for the taxable_year as follows additions to tax_year deficiency sec_6653 sec_6653 sec_6661 dollar_figure percent of the dollar_figure dollar_figure interest due on dollar_figure petitioner resided in tigard oregon at the time he petitioned this court to redetermine respondent's determination_of_a_deficiency in his income_tax and additions to tax as set out above for respondent determined that petitioner had dollar_figure of unreported income the petitioner herein was the defendant in the criminal case of united_states v taylor which was docketed in the u s district_court for the district of oregon petitioner was indicted on date with respect to the criminal matter the indictment charged that petitioner knowingly and willfully attempted to evade federal_income_tax for by filing a false and fraudulent joint federal_income_tax return in violation of sec_7201 the indictment charged that petitioner and janet taylor reported taxable_income of dollar_figure and a tax due and owing of dollar_figure on their joint federal_income_tax return form_1040 knowing that their taxable_income for was substantially in excess of such amount respondent's motion is for partial summary_judgment with respect to the issue of civil_fraud pursuant to sec_6653 the amount of the underlying deficiency for remains to be adjudicated in connection with the criminal case petitioner who was represented by counsel pleaded guilty on date to tax_evasion for in violation of sec_7201 in return for a recommendation of a lenient sentence prior to sentencing petitioner moved to withdraw his guilty plea and requested that the court grant him a jury trial on the ground that his guilty plea was coerced and involuntary thus violating both his first and fifth_amendment rights the district_court denied petitioner's motion the court_of_appeals affirmed the conviction and the united_states supreme court denied review petitioner ultimately served years' probation with months of home detention while attending graduate school in phoenix arizona discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials 90_tc_678 rule a provides that either party may move for summary_judgment upon any or all parts of the legal issues in controversy when either party makes such a motion the opposing party must file an opposing written response with or without supporting affidavits within such period as the court may direct rule b a decision on the merits of a party's claim will be rendered by way of summary_judgment if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law id 98_tc_518 affd 17_f3d_965 7th cir the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences are viewed in the light most favorable to the nonmoving party 369_us_654 95_tc_594 the existence of any reasonable doubt as to the facts will result in denial of the motion for summary_judgment 63_tc_18 the instant case is ripe for partial summary_judgment it is well established that petitioner's conviction of criminal_tax_evasion under sec_7201 collaterally estops him from denying that the deficiency in his income_tax for the year in issue was due to fraud for purposes of sec_6653 96_tc_858 affd 959_f2d_16 2d cir the elements of criminal_tax_evasion under sec_7201 are not dissimilar to the elements of civil tax_fraud under sec_6653 and a guilty plea is equivalent to a conviction after trial for the purpose of collateral_estoppel see eg 47_f3d_716 5th cir 708_f2d_243 6th cir affg tcmemo_1981_1 82_tc_413 affd without published opinion 772_f2d_910 9th cir 43_tc_50 affd 360_f2d_358 4th cir moreover it is generally assumed that a guilty plea is made voluntarily huff v commissioner tcmemo_1988_564 in the case at bar it is uncontroverted that the petitioner a college graduate with several years of experience in business who was represented by counsel pleaded guilty to a charge of tax_evasion under sec_7201 for petitioner asserts however that the supreme court in 440_us_147 expressly states that prior to invoking collateral_estoppel a court should inquire into any special circumstances which would warrant an exception to the normal rules of issue preclusion it is petitioner's position that his allegedly coerced and involuntary plea of guilty to fraud for is such an exceptional circumstance we disagree petitioner raised the issue of coercion on appeal and failed to persuade the court_of_appeals which affirmed his conviction and the supreme court denied review the judgment in his criminal case is final we caution petitioner's counsel that his objection to respondent's motion borders on the behavior proscribed by sec_6673 in regard to multiplying the proceedings unreasonably and rule b in regard to signing a pleading not well grounded in fact nor warranted by existing law and interposed for an improper purpose and may invite sanctions we thus hold that petitioner is estopped from denying for purposes of this case that he filed a false and fraudulent federal_income_tax return with the intent to evade income_tax for finally because petitioner's fraudulent intent for purposes of the additions to tax under sec_6653 and b has been established for it follows that the assessment and collection of the deficiency in income_tax and the additions to tax are not barred by the expiration of the statutory limitation period sec_6501 respondent's motion for partial summary_judgment will be granted to reflect the foregoing an appropriate order will be issued


significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jun terra ax re dear this letter constitutes notice that the company's requests for waivers of the minimum_funding_standard for the above-named plans for the plan years ending december - have been denied this decision was conveyed to the company's chief financial officer by this office by telephone on the company is a private non-profit corporation which owns and operates three thoroughbred racetracks within the state the company's primary sources of revenue are on-track wagering and the sale of its simulcast signal to various off-track betting organizations a secondary source of revenue is the use of the company's facilities for parties corporate meetings flea markets and the storage of cars from local automobile dealerships the company's revenues beyond the amounts necessary to conduct its operations are transferred to the state - 20u738019 based on the financial information provided by the company it is clear that the company has suffered a substantial business hardship the thoroughbred horse racing industry has suffered an industry-wide decline in revenue from on- and off-track wagering many racetracks are turning to revenue from slot machines to ensure their business viability the company's highest margin business is on-track wagering each wager yields of revenue however the trend has been toward off-track wagering which only yields all sources has increased the company's net revenue has declined or remained flat over the last years during that period the fixed costs in running the racetracks such as labor real_estate tax and fuel costs have risen dramatically the company has reported losses for each of its fiscal years since of revenue although the total dollars in wagering from bailout and the completion of its the company was basing its financial recovery primarily on the approved by the however the company has subsequently filed for reorganization under chapter of the u s bankruptcy code while the company has indicated that this was merely a bailout formality to force the subsequent news reports indicate that the state is in the process of awarding the thoroughbred racing franchise to another entity while the company has sued to keep control of the racetracks that it owns and operates the company's financial future is in peril if it loses the franchise furthermore the company's financing partner in a proposed - arrangement it had with the company these factors call in to question whether the company's -waivers of the minimum_funding_standard for the plans for the plan years ending business hardship is temporary hence the company's requests for facility backed out of the tentative financing to make good on the have been denied you should note that excise_taxes under sec_4971 of the internal_revenue_code are currently due on each of the accumulated funding deficiencies in the plans for the plan years ending plans as soon as possible to report and pay the taxes you should file forms for each of the this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent we have sent a copy of this letter to the manager and to your authorized representatives pursuant to a power_of_attorney on file in this office to the manager if you require further assistance in this matter please contact sincerely yours coro bh hs joseph h grant director employee_plans


internal_revenue_service number release date index number - --------------------- ------------- ----------------------------------------- --------------------------- ----------------------------------- department of the treasury washington dc person to contact ------------------------------- -------- ------------- ----------------------------------------------------- telephone number --------------------- refer reply to cc psi - plr-100591-05 date date ------------------ ------------------- ---------------------------------------- legend x --------------------------------------------------- a ----------------------------------------------------- b ----------------------------------------------------- d1 dear ----------------- by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code b x’s secretary represent that they intended that x elect to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable this letter responds to a letter dated date submitted on behalf of x the information submitted states that x incorporated on d1 a x’s president and sec_1362 provides that if -- a an election under sec_1362 is made for ------------------- except as specifically set forth above no opinion is expressed concerning the this ruling is directed only to the taxpayer who requested it sec_6110 based solely on the facts and the representations submitted we conclude that x plr-100591-05 year has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective d1 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for d1 federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code provides that it may not be used or cited as precedent being forwarded to x's authorized representative enclosures audrey ellis reviewer branch associate chief_counsel passthroughs and special industries pursuant to a power_of_attorney on file with this office a copy of this letter is copy of this letter copy for sec_6110 purposes sincerely yours


id office uilc cca_2008102808552637 ------------ number release date from ------------------- sent tuesday date am to ----------------- cc ------------------------------------------------------------ subject re aar the only problem with the closing_agreement by the partnership through the tmp is that it would be a legal nullity you might as well get the janitor to sign it so you would need settlement agreements with the partners themselves or an fpaa in order to have a final_determination forms 870-pt qualify as closing agreements for this purpose under sec_1313 since they are executed under authority of sec_7121 as reflected in the forms themselves


tax_exempt_and_government_entities_division number release date date date department of the treasury internal_revenue_service washington d c contact person identification_number contact number employer_identification_number form required to be filed tax years se t eo ra t uniform issue list dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final because you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file instructions and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance with their we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you agree with our deletions you do not need to take any further action in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your sincerely robert choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date contact person identification_number contact number fax number employer_identification_number xxxxkx xxxxxk xxkxxx xxxxx uniform issue list legend a b c db e xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx j k m n xxx xxx xxx xxx xxx xxx xxx xxx c s t u voee w xx y we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below you are a nonprofit organization incorporated in a on j your articles of incorporation state that your purpose is to obtain build repair maintain and or renovate housing for low income dear xxkxxxx persons in areas located within the state of a to the extent that such purpose is within the meaning of sec_501 of the internal_revenue_code you have five uncompensated directors two of these directors b and c are husband and wife b and c are also the sole owners of d a for-profit general contracting and investment business you are the successor to an unincorporated organization of the same name that started in a in k you have indicated that your predecessor mostly conducted seminars led by b which taught low income citizens how to apply for loans and mortgages and how to care for and maintain a home you will continue to use virtually the same name as your predecessor you plan to focus your activities on the provision of housing to low income persons you state in schedule f of your form_1023 application that the project will consist of approximately r units with a total of approximately s residents later in that same schedule you state that the project will consist of approximately t duplexes subsequently you indicated in an answer to a development letter that you would be concentrating on property development of between u and v units to start this project you propose to obtain a loan from the a department of housing and community affairs in your name and a donation of realty from the local_government you originally stated that your intention was to develop this project in e however in your correspondence dated you wrote that a t present no community has been identified for your development you plan to hire a general contractor to handle the construction aspect of your project in your form_1023 application you state that you anticipate entering into a joint_venture with d for the construction in which you are the majority partner with income from the project to be distributed pro_rata between the partners after loan obligations are satisfied you state that d is selected because b began working on this project in his individual capacity as well as in his capacity as president of d in m additionally you state that b and d have already invested a considerable amount of time and expense in this project later in correspondence dated n you state that you have no final or preliminary draft of a joint_venture agreement that such a draft will be made if you obtain tax exempt status and that d and other non-related entities will be considered for the general contractor position in your correspondence dated you state that purchasing of services including development projects will almost always be done using a three bid process you also acknowledge that sole source purchasing may be used and deny the existence of any joint_venture arrangement or plan to enter into any joint_venture arrangement upon completion of construction you plan to manage or oversee management of the property you may engage another entity to provide on-site management of the property you have stated that any outside management provider will have no business or family relationship to any persons associated with you in your form_1023 materials you state that you anticipate owning at least a majority of any housing facilities in subsequent correspondence you listed only yourself when asked to identify the owners of your facilities xxkxxxx you state in correspondence dated n that you plan to meet all federal state and local_government standards and requirements concerning the qualification of residents for your low- income housing project however in your correspondence dated you indicate that only w-x of the units in your project will meet local state and federal affordable housing guidelines you state that you will ensure that at least of the units in your project are occupied by residents whose income does not exceed the low-income limits set by hud for the county in which your project lies by complying with these standards additionally you state that you will ensure that either at least of the units in your project will be occupied by residents whose income does not exceed the very low-income limits set by hud for the county in which your project lies or at least of the units in your project will be occupied by residents whose income does not exceed of the very low-income limits set by hud for the county in which your project lies by complying with these same standards however you also state that you will strive to have at least y of the units be occupied by residents whose income is at or below of the area’s very low-income limits set by hud for the county in which your project lies in addition you indicate that you are uncertain of the exact percentage of residents who will have income levels at or below of the area’s very low-income limit you have no application form for potential residents you have no residency or homeownership contracts or agreements you state that you cannot provide a copy of any affordability covenants or restrictions running with the property until after the property is transferred to you you indicate that social services will be provided on-site to promote aging in place for the elderly subsequently you state that no aging in place policy has been established for your project in addition you state that while your housing will be open to elderly persons and will be made handicap accessible as required_by_law you will not be designing units for those persons who can not live independent of direct services often required for elderly persons such as those offered in retirement centers or nursing homes you plan to provide a home training course that will be free to the public every two to three months you also plan to provide services to your residents depending on organizational resources and resident interest which may include programs such as ged classes computer classes senior activities financial literacy training food and clothing banks job training and placement counseling and referral services english as a second language classes health care services nutrition activities tutoring meals on wheels and neighborhood watch you plan to apply all income received from this project to the fulfillment of your loan obligations associated with the project and after such obligations are satisfied then to your own account and the accounts of any partners involved in the project pro_rata all funds distributed to your account will be used to develop other housing projects and or provide homebuyer homeowner or resident educational programs for low-income persons you will not fundraise or apply for grants unless you are first given tax exempt status sec_501 of the internal_revenue_code provides an exemption from taxation for organizations organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual xxxxxk sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 of the code the organization must be one that is both organized and operated for one or more of the purposes specified in that section thus an organization that fails to meet either the organizational or operational_test is not exempt sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt_activities specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the regulations provides that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_a_-1 of the regulations defines private_shareholder_or_individual as a person having a personal and private interest in the activities of the organization sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest therefore to meet the requirement of this subsection it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests sec_1_501_c_3_-1 of the regulations defines the term charitable as including the relief of the poor and distressed or of the underprivileged and the promotion of social welfare by organizations designed to lessen neighborhood tensions to eliminate prejudice and discrimination or to combat community deterioration revproc_96_32 1996_1_cb_717 sets forth a safe_harbor under which organizations that provide low-income_housing will be considered charitable for relief of the poor and distressed and described the facts_and_circumstances_test that will apply to determine whether organizations that fall outside the safe_harbor relieve the poor and distressed it also clarified that housing organizations may rely on other charitable purposes to qualify for recognition of exemption the safe_harbor identifies those low-income_housing organizations that will with certainty be considered to relieve the poor and distressed by requiring occupancy by significant percentages of both very low-income and low-income persons the facts and circumstances that demonstrate relief of the poor by organizations falling outside of the safe_harbor may include but are not limited to the following a substantially greater percentage of residents than required by the safe_harbor with incomes up to percent of the area's very low-income limit limited degree of deviation from the safe_harbor percentages limitation of a resident's portion of rent or mortgage payment to ensure that the housing is affordable to low-income and very low-income residents xxxxxk participation in a government housing program designed to provide affordable housing operation through a community-based board_of directors particularly if the selection process demonstrates that community groups have input into the organization's operations the provision of additional social services affordable to the poor residents relationship with an existing 501_c_3_organization active in low-income_housing for at least five years if the existing organization demonstrates control acceptance of residents who when considered individually have unusual burdens such as extremely high medical costs which cause them to be in a condition similar to persons within the qualifying_income limits in spite of their higher incomes participation in a homeownership program designed to provide homeownership opportunities for families that cannot otherwise afford to purchase safe and decent housing existence of affordability covenants or restrictions running with the property revproc_2008_9 r b provides that exempt status may be granted in advance of the organization's operations if the proposed activities are described in sufficient detail to permit a conclusion that the organization will clearly meet the particular requirements for exemption pursuant to the section of the internal_revenue_code under which exemption is claimed the organization must fully describe all of the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures a mere restatement of exempt purposes or a statement that proposed activities will be in furtherance of such purposes will not satisfy this requirement revrul_67_138 1967_1_cb_129 holds that a nonprofit organization created to provide instruction and guidance to low-income families in need of adequate housing and interested in building their own homes is exempt under sec_501 of the code the organization's training of low-income families on various aspects of house building and homeownership was educational the activities related to assisting families find adequate housing was charitable as it provided relief to the underprivileged lessened the burdens of government and was a means of combating community deterioration revrul_79_18 1979_1_cb_194 holds that an organization that provides specially designed housing to elderly persons at the lowest feasible cost and maintains the residence for those tenants subsequently unable to pay its monthly fees is an organization exempt from tax under sec_501 the organization in the ruling was formed to meet the housing needs of the elderly by building and operating an apartment rental complex designed especially for them it was formed under the sponsorship of community leaders to meet a community need for such a facility its board_of directors consists of civic leaders and other individuals with a particular xxxxx interest in the problems of the elderly the ruling holds that an organization operating in such a manner is relieving the major forms of distress to which the elderly are susceptible rev ruls and 1985_1_cb_178 provide a two-part test to determine whether an organization lessens the burdens of the government the first part of the test requires that the organization establish that its activities are actually burdens of the government the second part of the test requires that the organization actually lessen the burdens of the government revrul_68_655 1968_2_cb_213 holds that an organization operating to assist certain families purchase homes for the purpose of stabilizing an integrated neighborhood and to educate the public regarding integrated housing is charitable in part because it operates to eliminate discrimination and prejudice in 326_us_279 the court held that an organization was not organized and operated exclusively for charitable purposes the court reasoned that the presence of a single nonexempt purpose if substantial in nature would destroy the exemption regardless of the number or importance of truly exempt purposes in kj’s fund raisers inc v commissioner 74_tcm_669 the court held that a nonprofit organization which sold lottery tickets on the premises of a for-profit business had a substantial non-exempt purpose to enhance the profits of the for-profit business the owners of the for-profit business to purportedly raise funds for distribution to charitable causes formed the nonprofit organization the nonprofit’s lottery tickets were sold during the regular business hours by the owners and employees of the for-profit business the owners of the for-profit initially controlled the board and later indicated that it would vest control in unrelated parties the nonprofit opined that the organization would fold without the original founders of the organization as officers in finding that the nonprofit had a substantial nonexempt purpose which was promoting the for-profit the court reasoned that the identity of the for-profit owners and the officers of the nonprofit placed the owners of the for-profit in a position to control the nonprofit additionally the court found that the publicity received by the for-profit was a significant benefit in 113_tc_47 aff'd 242_f3d_904 9th cir the appellate court affirmed the holding of the tax_court and found that a nonprofit organization was not operated exclusively for exempt purposes under sec_501 of the code where its sole activity was participating as co-general partner with a for-profit corporation in a partnership that was general_partner of an operating partnership that owned and operated an ambulatory surgery center the tax_court reasoned that an organization's purposes might be inferred from its operations to the extent that an organization cedes control_over its sole activity to for-profit parties having an independent economic_interest in the same activity and having no obligation to put charitable purposes ahead of profit-making objectives the organization cannot be assured that the partnerships will in fact be operated in furtherance of charitable purposes based on the facts presented the court determined that the nonprofit organization had ceded effective_control over the operations of the partnerships and the surgery center to the for-profit partners and the management company this the court found was an impermissible benefit to private interests the management_contract between the operating partnership and the management company an affiliate of the for-profit partner gave the management company broad powers to contract negotiate with third-party payors and set xxxxx patient charges as the fees were a percentage of gross revenues there was an incentive for the management company to maximize profits additionally the partnership agreements restricted the partners and their affiliates from establishing competing centers or providing certain services to patients thus detracting from community health to the benefit of the for-profit partners you have not proven that your operations will further a charitable purpose and that you will not be operated for a substantial nonexempt private purpose you have not proven that your operations will be charitable through relief of the poor and distressed while you may deal exclusively with persons who are considered low-income you have not proven that you will meet the safe_harbor of revproc_96_32 for dealing with low- income persons you claim that you meet the requirements set forth in revproc_96_32 but when asked for specifics explaining how you will meet those requirements your answers were either vague contradictory or lacking moreover you failed to provide evidence of many favorable factors set forth in the facts-and-circumstances test such as serving excess very-low- income persons a limited degree of deviation from the safe_harbor percentages limitation of a resident's portion of rent to ensure affordability to low-income and very low-income individuals a community-based board and relationship with an existing 501_c_3_organization housing organizations may also be charitable through combating community deterioration however the mere redevelopment of blighted areas is not necessarily a charitable activity as for-profit organizations often engage in such activity you have not clearly provided facts and circumstances demonstrating a charitable endeavor here such as the existence of any community participation and control of your board in fact you have not decided in which community you will locate your project see eg revrul_70_585 1970_2_cb_115 you have not proven that you provide specially designed housing to elderly persons at the lowest feasible cost in fact you have stated that you will not specially design your housing for elderly persons you have also failed to show that you operate to lessen the burdens of the government specifically you have provided no information that suggests that the government has made an objective manifestation declaring that your activities are its burden additionally you have not proven that you operate to eliminate discrimination and prejudice you have provided no information that suggests the area in which you plan to operate suffers from prejudice and discrimination or racial tensions again you have not selected a community in which to operate furthermore it is not clear that you will not be operated for the private benefit of b c and d it is not clear that d will in fact be required to participate in an impartial bidding process before it is selected as the contractor for your project your responses to various questions posed by the internal_revenue_service also suggest that you are dependent on the actions and expertise of b in fact you have stated that b has already made a personal investment of time and money in your proposed project in addition while you have indicated that you have no joint ventures at the present time you have also stated that you anticipate entering into a joint_venture in which you would be a majority partner with d for an indefinite period of time these facts make your xxxxx situation similar to those in kj’s fund raisers inc and redlands surgical services the identity of the owners of d and your directors your dependence on b and his previous work on this project in his capacity as president of d and your plans for a joint_venture will allow the owners of d to exercise constructive control_over your operations it is also unclear that you are not being operated to give d indirect access to government land and money that it would not otherwise be able to obtain since b and c are both members of your board_of directors and owners of d this situation constitutes inurement to the benefit of private individuals as well as a more than incidental amount of private benefit to d as a for-profit entity as revproc_2008_9 2008_2_irb_258 states that an organization must fully describe all of the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures exempt status may only be granted in advance of the organization's operations if all of these activities are described in sufficient detail if all of the organization’s proposed activities are not described in sufficient detail the service will generally issue a proposed adverse determination_letter or ruling the descriptions that you provided of your housing activities were not sufficiently detailed enough to warrant a grant of tax exempt status accordingly you do not qualify for exemption as an organization described in sec_501 of the code and you must file federal_income_tax returns contributions to you are not deductible under sec_170 of the code you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to protest as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax xxxxxk court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert choi director exempt_organizations rulings agreements


t c summary opinion united_states tax_court robert and cheryl mckeown petitioners v commissioner of internal revenue respondent docket no 21967-05s filed date robert and cheryl mckeown pro sese david l zoss for respondent kroupa judge this case was heard pursuant to the provisions of section of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any 1all section references are to the internal_revenue_code in effect for and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated other court and this opinion shall not be treated as precedent for any other case respondent determined a dollar_figure deficiency in petitioners’ federal_income_tax for after concessions we are asked to decide two issues first we are asked to decide whether petitioner robert mckeown mr mckeown was away from home when he worked as an airline mechanic for northwest airlines nwa in detroit newark and new york to determine whether petitioners are entitled to deduct expenses for his vehicle meals_and_lodging while mr mckeown was away from monticello minnesota in the minneapolis area where he normally lived we conclude that he was not away from home second we are asked to decide whether petitioners substantiated various other expenses we conclude that petitioners have substantiated and are entitled to deduct some of these other expenses background some of the facts have been stipulated and are so found petitioners resided in mcdonough georgia at the time they filed the petition mr mckeown’s employment with nwa mr mckeown began working as a mechanic for nwa in although he was originally employed in atlanta georgia mr 2see infra note for the concessions each party made mckeown and his family decided to relocate to the minneapolis area so mr mckeown could work for nwa in minneapolis nwa sent layoff notices to some of its employees when it experienced financial difficulties the employees receiving the notices could either choose to accept the layoff or exercise their seniority seniority depended on the length of time an employee had worked for nwa regardless of where the airline facility was located an employee with higher seniority could exercise his or her seniority to bump an employee with less seniority and take that employee’s position the employee with less seniority could then take the layoff or find another employee with less seniority to bump this seniority bumping arrangement was in place across the country so that an nwa mechanic looking to keep his or her job at nwa had to look at several different cities to find a less senior employee to bump most employees exercised their seniority in the way that would give them positions in cities as close as possible to their families mr mckeown received a bump notice in date mr mckeown chose to exercise his seniority and bump another employee rather than accept the layoff mr mckeown was first bumped to detroit michigan effective on date mr mckeown was then bumped again and took a position in newark new jersey effective on date mr mckeown was bumped again and took a position at john f kennedy international airport in new york effective on date mr mckeown received another bump notice on date and was laid off because he had no one else to bump mr mckeown spoke to a manager in newark who told him he would attempt to recall mr mckeown to newark mr mckeown was indeed recalled to newark and began working there later in date mr mckeown worked in newark for the rest of the year once mr mckeown was bumped or displaced from minneapolis there was no job available for him to return to in minneapolis mr mckeown hoped to be able to return to minneapolis as soon as there was an nwa job there that he had enough seniority to obtain the timing of a return to minneapolis would depend on nwa’s needs for mechanics in that city as well as the choices of other mechanics also subject_to the seniority system mr mckeown and petitioner cheryl mckeown mrs mckeown decided that she and petitioners’ teenage daughter would remain in the minneapolis area while mr mckeown went to detroit newark and new york petitioners did not want to uproot the family and thus mr mckeown incurred additional travel lodging and meal expenses in those cities rather than have the entire family move to his job locations mr mckeown stayed in a travel trailer in newark and new york mr mckeown traveled back to see his family in minnesota periodically all three family members had cellular phones during mr mckeown wore a uniform while he worked for nwa petitioners claimed they contributed some items to charity in petitioners’ return petitioners claimed certain expenses on schedule a itemized_deductions on the joint_return for respondent examined the return for and issued petitioners a deficiency_notice in which he disallowed many of the expenses of the expenses still in dispute petitioners assert they are entitled to deduct claimed noncash charitable_contributions as well as unreimbursed employee business_expenses the unreimbursed employee business_expenses petitioners claimed include expenses for mr mckeown’s vehicle transportation travel including expenses related to car rentals airline pass travel and lodging and meals while in detroit newark and new york as well as expenses for uniform cleaning and depreciation petitioners timely filed a petition 3respondent concedes that petitioners are entitled to deduct a portion of personal_property_taxes a portion of cash charitable_contributions a portion of certain amounts for tools a portion of union dues and a portion of tax preparation fees petitioners concede they are not entitled to deduct a portion of personal_property_taxes a portion of cash charitable_contributions internet expenses a portion of certain amounts for tools certain amounts for uniforms a portion of union dues and a portion of tax_return preparation fees discussion the parties resolved many of the disputed expenses before trial we are asked to determine whether petitioners are entitled to deduct the remaining expenses we begin by considering whether mr mckeown was away from home when he incurred expenses for his vehicle transportation and meals in detroit newark and new york travel_expenses while away from home we begin by briefly outlining the rules for deducting travel_expenses a taxpayer may deduct reasonable and necessary travel_expenses such as those for vehicles meals_and_lodging incurred while away from home in the pursuit of a trade_or_business sec_162 sec_262 a taxpayer must show that he or she was away from home when he or she incurred the expense that the expense is reasonable and necessary and that the expense was incurred in pursuit of a trade_or_business 326_us_465 the determination of whether the taxpayer has satisfied these requirements is a question of fact id the purpose of the deduction for expenses_incurred away from home is to alleviate the burden on the taxpayer whose business needs require him or her to maintain two homes and therefore incur duplicate living_expenses 49_tc_557 the duplicate costs are not deductible where the taxpayer maintains two homes for personal reasons sec_262 commissioner v flowers supra pincite a taxpayer may deduct the expenses he or she incurred while away from home sec_162 the word home for purposes of sec_162 has a special meaning it generally refers to the area of a taxpayer’s principal place of employment not the taxpayer’s personal_residence 72_tc_190 affd 662_f2d_253 4th cir kroll v commissioner supra pincite there is an exception to the general_rule that a taxpayer’s tax_home is his or her principal place of employment 358_us_59 the taxpayer’s tax_home may be the taxpayer’s personal_residence if the taxpayer’s employment away from home is temporary id mitchell v commissioner tcmemo_1999_283 on the other hand the exception does not apply and the taxpayer’s tax_home remains the principal place of employment if the employment away from home is indefinite kroll v commissioner supra pincite it is presumed that a taxpayer will generally choose to live near his or her place of employment 603_f2d_1292 8th cir a taxpayer must however have a principal place of employment and accept temporary work in another location to be away from home kroll v commissioner supra a person who has no principal_place_of_business nor a place he or she resides permanently is an itinerant and has no tax_home from which he or she can be away 752_f2d_337 8th cir affg tcmemo_1984_63 edwards v commissioner tcmemo_1987_396 all the facts and circumstances are considered in determining whether a taxpayer has a tax_home see revrul_73_ 1973_2_cb_37 describing objective factors the commissioner considers in determining whether a taxpayer has a tax_home the taxpayer must generally have some business justification to maintain the first residence beyond purely personal reasons to be entitled to deduct expenses_incurred while temporarily away from that home 638_f2d_248 1st cir 67_tc_824 55_tc_783 where a taxpayer has no business connections with the primary residence there is no compelling reason to maintain that residence and incur substantial continuous and duplicative expenses elsewhere see 143_f3d_497 9th cir affg tcmemo_1995_559 deamer v commissioner supra hantzis v commissioner supra in that situation the expenses_incurred while temporarily away from that residence are not deductible hantzis v commissioner supra bochner v commissioner supra tucker v commissioner supra see mcneill v commissioner tcmemo_2003_65 aldea v commissioner tcmemo_2000_136 once mr mckeown was bumped from minneapolis he had no job to return to there his choices were to be laid off and have no work or to bump other employees and move to different cities to continue working nwa no longer required mr mckeown to perform any services whatsoever in the minneapolis area once he was bumped although mrs mckeown and petitioners’ daughter remained in the family residence with occasional visits from mr mckeown while he worked in detroit newark and new york this fact alone does not dictate that mr mckeown’s tax_home was in monticello minnesota where the family residence was located unlike traveling salespersons who may be required to return to the home city occasionally between business trips mr mckeown’s business ties to the minneapolis area ceased when he was bumped the court understands that the nwa mechanics’ lives were unsettled and disrupted mechanics did not know how long they would have a job in one specific location they only knew the system was based on seniority they could bump less senior employees and they could be bumped by more senior employees while we acknowledge that mr mckeown would have liked to return to the minneapolis area to work for nwa mr mckeown did not know when such a return would be possible due to the seniority system the likelihood of mr mckeown’s return to a position in minneapolis depended on nwa’s needs for mechanics there as well as the choices of more senior mechanics mr mckeown did not know how long he would be in detroit newark or new york or where he might go next it was not foreseeable that he would be able to return to minneapolis at any time due to the seniority system thus we conclude there was no business reason for petitioners to maintain a home in the minneapolis area petitioners kept the family residence in the minneapolis area for purely personal reasons petitioners have failed to prove that mr mckeown had a tax_home in accordingly mr mckeown was not away from home in detroit newark and new york and the expenses he incurred while there are not deductible substantiation of expenses we next turn to the substantiation issues to determine whether petitioners are entitled to deduct any remaining expenses we begin by noting the fundamental principle that the commissioner’s determinations are generally presumed correct and the taxpayer bears the burden of proving that these determinations are erroneous rule a 503_us_79 290_us_111 moreover deductions are a matter of 4petitioners do not claim the burden_of_proof shifts to respondent under sec_7491 petitioners also did not establish they satisfy the requirements of sec_7491 we therefore find that the burden_of_proof remains with petitioners legislative grace and the taxpayer has the burden to prove he or she is entitled to any deduction claimed rule a 308_us_488 292_us_435 welch v helvering supra this includes the burden of substantiation 65_tc_87 affd per curiam 540_f2d_821 5th cir a taxpayer must substantiate amounts claimed as deductions by maintaining the records necessary to establish he or she is entitled to the deductions sec_6001 hradesky v commissioner supra the taxpayer shall keep such permanent records or books of account as are sufficient to establish the amounts of deductions claimed on the return sec_6001 sec_1_6001-1 e income_tax regs the court need not accept a taxpayer’s self-serving testimony when the taxpayer fails to present corroborative evidence beam v commissioner tcmemo_1990_ citing 87_tc_74 affd without published opinion 956_f2d_1166 9th cir unreimbursed employee business_expenses we shall now consider whether petitioners are entitled to deduct the claimed expenses beginning with the unreimbursed employee business_expenses petitioners claimed on schedule a in general all ordinary and necessary expenses paid_or_incurred in carrying_on_a_trade_or_business during the taxable_year are deductible but personal living or family_expenses are not deductible sec_162 sec_262 services performed by an employee constitute a trade_or_business 91_tc_352 sec_1_162-17 income_tax regs if a taxpayer establishes that he or she paid_or_incurred a deductible business_expense but does not establish the amount of the deduction we may approximate the amount of the allowable deduction bearing heavily against the taxpayer whose inexactitude is of his or her own making 39_f2d_540 2d cir for the cohan_rule to apply however a basis must exist on which this court can make an approximation 85_tc_731 without such a basis any allowance would amount to unguided largesse 245_f2d_559 5th cir certain business_expenses may not be estimated because of the strict substantiation requirements of sec_274 see sec_280f 50_tc_823 affd per curiam 412_f2d_201 2d cir for such expenses only certain types of documentary_evidence will suffice cleaning expenses for uniforms we now examine those expenses not subject_to the strict substantiation requirements petitioners claimed dollar_figure for cleaning expenses for mr mckeown’s nwa uniforms expenses for uniforms are deductible if the uniforms are of a type specifically required as a condition_of_employment the uniforms are not adaptable to general use as ordinary clothing and the uniforms are not worn as ordinary clothing 30_tc_757 beckey v commissioner tcmemo_1994_514 we are satisfied that petitioners incurred deductible expenses to clean mr mckeown’s uniforms petitioners each attempted to explain how the cleaning costs were calculated but gave unclear testimony petitioners introduced a document on the letterhead of their certified_public_accountant that purports to indicate how the sum was calculated but it suggests an excessive_amount cleanings for shirts and pants per month roughly corresponding to the number of days per month mr mckeown worked we may estimate the amount of deductible cleaning expenses under the cohan_rule we adopt the unit cost of dollar_figure listed on petitioners’ exhibit as the cost to wash or dry one load of laundry we find that approximately eight loads of laundry per month is a reasonable number to yield clean shirts and pairs of pants per month petitioners are therefore entitled to deduct dollar_figure for cleaning expenses for mr mckeown’s uniforms in depreciation expenses petitioners deducted dollar_figure for depreciation of the tools he used at his job at nwa the costs of tools with useful lives greater than a year are recoverable by depreciation sec_167 sec_168 117_tc_294 clemons v commissioner tcmemo_1979_273 petitioners introduced a list and photographs of mr mckeown’s tools as well as a depreciation schedule indicating that he purchased his tools on date petitioners did not introduce any documentary_evidence regarding the tools however such as receipts that would show their purchase_price or the purchase date petitioners also did not introduce evidence supporting the tools’ expected useful lives petitioners have not substantiated that they are entitled to a depreciation deduction further we are unable to estimate any amount for depreciation under the cohan_rule because the evidence petitioners introduced is inadequate petitioners are therefore not entitled to deduct any amount for depreciation cellular phone expenses petitioners claimed dollar_figure of cellular phone expenses for cellular phones are included in the definition of listed_property for purposes of sec_274 and are thus subject_to the strict substantiation requirements sec_280f gaylord v commissioner tcmemo_2003_273 a taxpayer must establish the amount of business use and the amount of total use for the property to substantiate the amount of expenses for listed_property nitschke v commissioner tcmemo_2000_230 sec_1_274-5t temporary income_tax regs fed reg date expenses subject_to strict substantiation may not be estimated under the cohan_rule sanford v commissioner supra pincite petitioners did not prove that nwa required mr mckeown to have a cellular phone petitioners introduced evidence that nwa required employees to have a telephone but not necessarily a cellular phone petitioners introduced copies of checks made out to cellular phone providers totaling approximately dollar_figure but admitted at trial that they could not explain how they calculated the dollar_figure they claimed moreover the amounts petitioners paid for cellular telephones for included charges for the cellular phones used by mrs mckeown and petitioners’ daughter petitioners did not offer any evidence of how much of the cellular phone expenses was for mr mckeown’s business use and how much for personal_use petitioners are therefore not entitled to deduct any cellular phone expenses for charitable_contributions we finally consider petitioners’ charitable_contributions petitioners claimed they contributed_property worth dollar_figure to charitable organizations in charitable_contributions are generally deductible under sec_170 no deduction is allowed however for any contribution of dollar_figure or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by a qualified donee organization sec_170 the deduction for a contribution of property equals its fair_market_value on the date contributed sec_1_170a-1 income_tax regs petitioners provided no documentation substantiation or testimony concerning their contributions of property for petitioners are therefore not entitled to deduct any amount for charitable_contributions of property 5there are now stricter requirements for contributions of money sec_170 no deduction for a contribution of money in any amount is allowed unless the donor maintains a bank record or written communication from the donee showing the name of the donee organization the date of the contribution and the amount of the contribution id this new provision is effective for contributions made in tax years beginning after date pension_protection_act of publaw_109_280 sec 120_stat_1080 to reflect the foregoing and the concessions of the parties decision will be entered under rule


internal_revenue_service number release date index number -------------------- ------------------------------ ----------------------------------- in re -------------------------------------------- -------------------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ------------------------------ id no ------------ --------- telephone number ---------------------- refer reply to cc psi b04 plr-106904-15 date june legend ----------------------------------------------- ----------------------- --------------------------------------------------------------------------------------- grantor spouse trust ----------------------------------------------------- trustees accountant accounting firm law firm date year year ------------------------------------------------------ ---------------------- ---------------------------- ------------------------------ -------------------------- ------- ------- dear --------------- this responds to your personal representative's letter of date requesting an extension of time under sec_301 of the procedure and administration regulations and sec_2642 of the internal_revenue_code to allocate generation-skipping_transfer gst_exemption to a_trust plr-106904-15 facts the facts and representations submitted are summarized as follows grantor established trust an irrevocable_trust on date in year trust was created for the benefit of spouse and grantor’s descendants trust was funded with stock no additional transfers have been made to trust sec_3 of trust provides in part that during spouse’s lifetime the independent_trustee in his sole discretion may distribute so much of the net_income of trust as the trustee may deem appropriate upon the written request of spouse the trustee will pay to spouse or use for spouse’s benefit so much of the principal of trust as spouse may request not to exceed five percent of the value of the principal of trust valued at the end of the calendar_year in addition trustee may in his sole discretion pay so much of the principal as is necessary for spouse’s maintenance support and health at spouse’s death trust is to be divided into equal shares to provide one share for each living child of grantor and one equal share for the then living descendants of a deceased child of grantor until the 10th anniversary of spouse’s death trustee in trustee’s sole and absolute discretion may pay to each child so much of the net_income and principal as trustee deems appropriate for the child’s maintenance in reasonable comfort support health and for other purposes as trustee deems appropriate after the 10th anniversary of spouse’s death trustee may distribute to or for the benefit of the child so much of the net_income as trustee in its sole discretion deems appropriate upon the written request of the child the trustee will pay to the child or use for the child’s benefit so much of the principal of trust as the child may request not to exceed five percent of the value of the principal of trust valued at the end of the calendar_year in addition trustee in its sole discretion may pay so much of the principal as is necessary for the child’s maintenance support and health in addition after the 10th anniversary of spouse’s death and for the life of the child each child has a limited power to appoint the principal and income of their trust to any of grantor’s descendants other than such child as the child designates in writing accountant prepared the form_709 united_states gift and generation-skipping_transfer_tax return for year grantor’s year form_709 reflected the gift to trust however grantor failed to allocate any of her gst_exemption to trust the error was discovered in year when law firm discovered that no gst_exemption had been allocated to the year transfer on grantor’s form_709 grantor signed an affidavit stating that she intended that trust be a generation- skipping trust and that she relied on accountant to make the election in order for trust to pass without triggering the gst tax accountant signed an affidavit stating that plr-106904-15 accounting firm prepared grantor’s form_709 but did not allocate any of grantor’s gst_exemption to trust you have requested an extension of time under sec_2642and sec_301_9100-3 to allow grantor to allocate her gst_exemption to the transfer to trust in year law and analysis 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 provides that for purposes of determining the gst tax every individual shall be allowed a gst_exemption amount 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_26_2632-1 of the generation-skipping_transfer_tax regulations 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 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 and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph 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 notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers is to be treated as if not expressly plr-106904-15 prescribed by statute and taxpayers may seek an extension of time to make an allocation described in sec_2642 or b under the provisions of sec_301_9100-3 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 code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c 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 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 based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore grantor is granted an extension of time of days from the date of this letter to allocate her available gst_exemption to the year transfer to trust the allocation will be effective as of the respective date of the transfer to trust and the value of the transfer to trust as determined for federal gift_tax purposes will be used in determining the amount of grantor’s gst_exemption to be allocated to trust this allocation should be made on a supplemental form_709 and 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 supplemental form sec_709 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 plr-106904-15 except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs special industries by ________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


internal_revenue_service department of the treasury uniform issue list no maspington de q contact person telephone number in reference to t-ep-ra tg date jun atten legend state a employer m plan n statute x resolution y dear this is in response to a request for a private_letter_ruling submitted on behalf of employer m on date and supplemented by additional correspondence submitted on date concerning the federal_income_tax treatment of certain contributions to plan n under sec_414 of the internal_revenue_code code the following facts and representations have been submitted employer m is a municipality of state a state a has expressly provided for the creation of a police pension fund by a municipality as defined in article of statute x employer m makes contributions to plan n subject_to the requirements of article of statute x police officer contributions are mandatory police officer mandatory_contributions are made to plan n through a reduction in salary it is represented that plan n is a qualified_plan under sec_401 of the code article of statute x authorizes a municipality to pick up the police officers’ required contributions to plan n if contributions are picked up they shall be treated as employer contributions in determining tax treatment under the code the municipality may pick up these contributions by a reduction in cash salary of the police officer or by an offset against future salary increases or by a combination of a reduction in salary and offset against a future salary increase if contributions are picked up they shall be considered for all purposes of article of statute x as police officers’ contributions made prior to the time - that the contributions wéfe picked up pursuant to statute x employer m adopted resolution y on date authorizing the pick up of its police officers’ required contributions the resolution provides in part that employer m shall pick up police officers’ contributions and that police officers will not be given the option to receive cash directly in lieu of contributions to plan n based on the foregoing the following rulings are requested the mandatory employee contributions picked up by employer m shall be excluded from the current gross_income of employer m’s police officers until distributed or otherwise made available the picked up contributions paid_by employer m are not wages for federal_income_tax withholding purposes and federal income taxes need not be withheld on the picked up contributions - sec_414 of the code provides that contributions otherwise designated as employee contributions shall be treated as employer contributions if such contributions are made to a plan determined to be qualified under sec_401 of the code the plan is established by a state government or political_subdivision thereof and the contributions are picked up by the governmental employer - the federal_income_tax treatment to be accorded contributions which are picked up by the employer within the meaning of sec_414 of the code 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 revrul_77_462 concluded that the school district’s picked-up contributions to the plan are excluded from the employees’ income until such time as they are distributed to the employees the revenue_ruling held further that under provisions of sec_3401 of the code the school district’s contributions to the plan are excluded from wages for purposes of the collection of income_tax at the source of wages therefore no withholding is required from the employees’ salaries with respect to such picked-up contributions the issue of whether contributions have been picked up by an employer within the meaning of sec_414 of the code is addressed in revrul_81_35 1981_1_cb_255 and revrul_81_36 1981_1_cb_255 these revenue rulings established that the following two criteria must be met the employer 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 employees must not be given the option of choosing to receive amounts directly instead of having them paid_by the employer to the pension_plan furthermore it is immaterial whether an employer picks up contributions through a reduction in salary an offset against future salary increases or a combination of both we in order to satisfy rev ruls and with respect to particular contributions revrul_87_10 1987_1_cb_136 provides that the required specification of designated employee contributions must be completed before the period to which such contributions relate if not the designated employee contributions being paid_by the employer are actually employee contributions paid_by the employee and recharacterized at a later date thus the retroactive specification of designated employee contributions as paid_by the employing unit ie the retroactive pick-up of designated employee contributions by a governmental employer is not permitted under sec_414 of the code resolution y executed by employer m satisfies the criteria set forth in revenue rulings and because it specifies that the police officers’ required contributions are to be picked up by employer m for its police officers and that the police officers may not elect to receive such contribution amounts directly accordingly we conclude that in regard to ruling_request number one the police officer contributions picked up by employer m and contributed to plan n on behalf of its police officers will not be includible in the police officers’ gross_income for federal_income_tax purposes in the taxable_year in which such amounts are contributed in regard to ruling_request number two because we have determined that the picked- up police officer contributions are to be treated as employer contributions they are excepted from wages as defined in sec_3401 of the code for federal_income_tax withholding purposes in the taxable_year in which they are contributed to plan n these rulings apply only if the effective date for the commencement of any proposed pick-up as specified in resolution y cannot be any earlier than the later of the date resolution y is executed or the date it is put into effect the above rulings are based on the assumption that plan n will be qualified under sec_401 of the code at the time of the proposed contributions and distributions no opinion is expressed as to whether the amounts in question are subject_to tax under the federal_insurance_contribution_act no opinion is expressed as to whether the amounts in question are being paid pursuant to a salary reduction agreement within the meaning of sec_3121 of the code this ruling is directed only to the taxpayer that requested it and applies only with respect to plan n sec_6110 of the code provides that this private_letter_ruling may not be used or cited by others as precedent a copy of this letter has been sent to your authorized representative in accordance with a power of attqmey on file in this office sincerely yours richard wickersham manager employee_plans technical guidance tax_exempt_and_government_entities_division enclosures deleted copy of letter notice of intention to disclose


t c memo united_states tax_court robert b keenan petitioner v commissioner of internal revenue respondent docket no filed date robert b keenan pro_se linette b angelastro for respondent memorandum findings_of_fact and opinion haines judge respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure for the taxable_year further respondent determined that petitioner is liable for additions to tax of dollar_figure dollar_figure and dollar_figure under sec_6651 and and respectively also relating to after concessions the issues for decision are whether respondent must prepare a substitute for return compliant with sec_6020 as a prerequisite to issuing a notice_of_deficiency whether petitioner received social_security payments of dollar_figure whether petitioner is entitled to certain deductions and whether petitioner is liable for additions to tax under sec_6651 and sec_6654 findings_of_fact at the time the petition was filed petitioner resided in camarillo california petitioner is a retired airline pilot during petitioner received pension distributions of dollar_figure from the northern trust co social_security payments of at least dollar_figure and interest_income of dollar_figure from camarillo community bank petitioner did not file a federal_income_tax return for nor did he make estimated_tax payments during the year respondent reconstructed petitioner’s income for using all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure amounts are rounded to the nearest dollar respondent concedes that petitioner did not receive interest_income of dollar_figure from the state controller’s office of the state of california and petitioner is not liable for an addition_to_tax under sec_6651 in his posttrial brief respondent also concedes that only dollar_figure of dollar_figure in royalties petitioner received as executor of his father’s estate is taxable to petitioner petitioner does not contest this amount third-party payor statements the third-party payor statements reflect the pension distributions and interest_income outlined above however the statement from the social_security administration indicates that petitioner received dollar_figure instead of dollar_figure on date respondent prepared a substitute for return for petitioner respondent sent petitioner a notice_of_deficiency on date as reflected in the notice respondent determined that petitioner received total income of dollar_figure during allowing petitioner a personal_exemption of dollar_figure and a standard_deduction of dollar_figure respondent determined that petitioner had taxable_income of dollar_figure and an outstanding federal_income_tax liability of dollar_figure further respondent determined that petitioner was liable for additions to tax of dollar_figure dollar_figure and dollar_figure under sec_6651 and and respectively because respondent conceded that petitioner is not liable for the sec_6651 addition_to_tax respondent increased the sec_6651 addition_to_tax to dollar_figure in response to the notice_of_deficiency petitioner filed a petition with this court on date this figure does not take into account respondent’s concessions see supra note opinion a the substitute for return and the notice_of_deficiency petitioner contends that this court lacks jurisdiction because the notice_of_deficiency is invalid it appears the foundation of petitioner’s argument is that respondent’s substitute for return does not meet requirements of sec_6020 and therefore the notice_of_deficiency cannot be based on that return we do not need to consider whether the substitute for return meets the requirements of sec_6020 the preparation of a return on a taxpayer’s behalf is not a prerequisite to the commissioner’s determining and issuing a notice_of_deficiency 847_f2d_1379 9th cir 65_tc_542 stewart v commissioner tcmemo_2005_212 robinson v commissioner tcmemo_2002_316 affd 73_fedappx_624 4th cir burnett v commissioner tcmemo_2002_181 affd 67_fedappx_248 5th cir therefore we find that petitioner’s argument is without merit sec_6020 provides that if any person fails to make any return required by an internal revenue law or regulation made thereunder at the time prescribed therefor the secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise b social_security payments respondent determined that petitioner received social_security payments totaling dollar_figure in petitioner contends that he received only dollar_figure petitioner bears the burden of proving that respondent’s determination is incorrect see rule a respondent’s determination was based on a third-party payor statement from the social_security administration indicating that petitioner received payments totaling dollar_figure in petitioner testified that his social_security_benefits increased after the first quarter of he claims that the dollar_figure was arrived at by multiplying the increased monthly benefit by which did not take into account the lower monthly benefit received in the first months of the year petitioner did not provide any bank statements social_security statements or other documentation to support his argument accordingly we find that petitioner has not met his burden of proving respondent’s determination is incorrect we hold that petitioner received social_security payments totaling dollar_figure in c certain deductions claimed by petitioner next we must consider whether petitioner is entitled to certain deductions deductions are a matter of legislative grace and the taxpayer bears the burden of proving he is entitled to the deductions 503_us_79 308_us_488 292_us_435 see also rule a the taxpayer has the burden of substantiating any deduction 65_tc_87 affd per curiam 540_f2d_821 5th cir see also rule a at trial petitioner introduced into evidence a one-page handwritten check record for y2k listing a series of purported deductions for charitable_contributions health care costs state and local_taxes and bad_debts at trial petitioner went through the list briefly explaining each item however petitioner did not present underlying checks bank statements receipts statements from third parties or other documentation to support the alleged expenses petitioner has failed to substantiate any of his purported deductible expenses therefore we find that petitioner has not met his burden of proving that he is entitled to deductions for the claimed expenses however petitioner argues that under 39_f2d_540 2d cir the court should approximate his allowable deductions under the cohan_rule if a claimed expense is deductible but the taxpayer is unable to fully substantiate the amount the court is permitted to make an approximation of an allowable_amount id pincite however the taxpayer must provide at least some reasonable evidence from which to estimate a deductible amount 85_tc_731 other than the handwritten check log and petitioner’s unsupported testimony there is nothing in the record to show that the alleged expenses were actually incurred the record is insufficient to provide the court with a reasonable evidentiary basis for estimating the deductible amount therefore we find that we may not use the cohan_rule to estimate petitioner’s allowable expenses we hold that petitioner is not entitled to any deductions beyond the personal_exemption and the standard_deduction already allowed by respondent as a result except to the extent conceded respondent’s determination that petitioner has a federal_income_tax deficiency of dollar_figure in is sustained d additions to tax under sec_6651 and sec_6654 finally we must determine whether petitioner is liable for additions to tax under sec_6651 and sec_6654 respondent bears the burden of production with respect to petitioner’s liability for the additions to tax sec_7491 116_tc_438 to meet his burden of production respondent must come forward with sufficient evidence indicating that it is appropriate to impose the additions to tax higbee v commissioner supra pincite once respondent meets his burden of production petitioner must come forward with evidence sufficient to persuade the court that respondent’s determination is incorrect id sec_6651 imposes an addition_to_tax for failure_to_file a return on the date prescribed determined with regard to any extension of time for filing unless petitioner can establish that his failure is due to reasonable_cause and not due to willful neglect the parties stipulated and petitioner testified that he did not file a federal_income_tax return for we find that respondent has met his burden of production to show reasonable_cause petitioner must demonstrate that he exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time sec_301_6651-1 proced admin regs petitioner argues that he had reasonable_cause for failing to file because the income_tax system is voluntary and the self- incrimination provision of the fifth_amendment protects him from being required to file a tax_return arguments relating to the voluntary nature of the income_tax system have been repeatedly rejected as frivolous or without merit see eg 119_tc_285 rinn v commissioner tcmemo_2004_246 hodge v commissioner tcmemo_1998_242 hicks v commissioner tcmemo_1992_80 furthermore petitioner was previously informed by this court that he is required to file federal_income_tax returns and was found liable for additions to tax under sec_6651 for failure_to_file see keenan v commissioner tcmemo_1998_388 petitioner was required to file federal_income_tax returns he failed to do so and offered no satisfactory explanation therefore we find petitioner’s argument that the income_tax system is voluntary cannot serve as a reasonable basis for his failure_to_file petitioner’s belief that the fifth amendment’s self- incrimination provision protected him from filing a tax_return is not a reasonable basis for failure_to_file under sec_6651 see 91_tc_88 78_tc_558 petitioner testified that he is not currently under criminal investigation nevertheless petitioner believes the fifth_amendment protects him because there is always the potential that he may be subject_to a criminal investigation at a later date we find that petitioner’s belief cannot serve as a reasonable basis for failure_to_file we hold that petitioner is liable for the addition_to_tax under sec_6651 sec_6654 imposes an addition_to_tax on an underpayment of estimated_tax unless one of the statutory exceptions applies respondent’s certificate_of_official_record indicates that petitioner did not make estimated_tax payments in we find that respondent has met his burden of production sec_6654 provides exceptions whereby no addition_to_tax will be imposed under sec_6654 petitioner did not argue and we do not find that any of the exceptions applies therefore we hold that petitioner is liable for the addition_to_tax under sec_6654 sec_6673 authorizes the court to require a taxpayer to pay the united_states a penalty in an amount not to exceed dollar_figure whenever it appears to the court the taxpayer’s position is frivolous or groundless sec_6673 respondent has not asked the court to impose a penalty under sec_6673 against petitioner the court however may sua sponte impose a penalty 115_tc_576 jensen v commissioner tcmemo_2004_120 frey v commissioner tcmemo_2004_87 petitioner has previously been a litigant in this court see keenan v commissioner supra while his previous case dealt predominantly with issues different from those in the present case petitioner similarly failed to file tax returns for and through id petitioner was not warned in the previous opinion or during the course of the current litigation that a penalty might be imposed under sec_6673 for this reason only we decline to impose a penalty under sec_6673 however we strongly admonish petitioner that if he persists in failing to file his tax returns and in pursuing tax_protester arguments eg that the notice_of_deficiency is invalid or that he need not file a return because of the fifth_amendment or the voluntary nature of the income_tax system we may not be so favorably inclined in the future in reaching our holdings we have considered all arguments made and to the extent not mentioned we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered under rule


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi br 1-plr-124962-00 date date legend x country trust1 trust2 a d1 d2 this letter responds to your date request for a private_letter_ruling along with subsequent correspondence submitted on behalf of x requesting a time extension under sec_301_9100-3 of the procedure and administration regulations facts according to the information submitted x was validly formed under country law on d1 with a a united_states citizen as sole owner on d2 a transferred all of a’s ownership_interest in x to trust1 and trust2 x represents that both trust1 and trust2 qualify as grantor trusts and that a is treated as the owner of both trust1 and trust2 x and x’s owner a intended from x’s inception to elect to classify x as an entity disregarded from its owner for federal tax purposes however form_8832 entity classification election was not timely filed law and analysis sec_301_7701-3 classifies eligible foreign entities for federal tax purposes this section classifies any foreign eligible_entity whose members all have limited_liability as an association unless the entity elects otherwise sec_301_7701-3 allows an entity to elect to change its classification by filing form_8832 entity classification election with the service_center designated on that form sec_301_7701-3 provides that all such elections become plr-124962-00 effective on the date specified by the entity on form_8832 or on the date filed if no effective date is specified the specified effective date must not be earlier than days prior to the filing_date of form_8832 nor later than twelve months after that filing_date sec_301_9100-1 gives the commissioner discretion to grant reasonable extensions of time to make regulatory elections under the rules of sec_301_9100-2 and sec_301_9100-3 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register or a notice published in the internal_revenue_bulletin sec_301_9100-3 sets forth the standards which the commissioner uses to determine whether to grant a discretionary time extension under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence proving 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 conclusion based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 as a result x is granted an extension of time for making the election to be treated as an entity disregarded from its owner for federal tax purposes effective d1 until days following the date of this letter x should make the election by filing form_8832 a copy of this letter should be attached to that form 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 s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer and to the taxpayer’s second authorized representative sincerely paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes