internal_revenue_service department of the treasury significant index number washington dc person to contact sec_1 telephone number refer reply to ob te ep t room date oct legend p w a c taxpayer taxpayer taxpayer taxpayer taxpayer trust d sep ira x state y dear this letter is in response to a ruling_request dated date submitted by your authorized representative concerning the division and distribution of an individual_retirement_arrangement ira the facts on which the ruling requests are based are as follows on date taxpayer a established sep ira x and c and taxpayer trust d as his designated the taxpayer attained age on april designated his two sons and a_trust for his daughter taxpayers b beneficiaries and when he died on date taxpayer a received distributions from sep ira x totalling dollar_figure big_number dollar_figure and dollar_figure respectively balance of approximately dollar_figure at the time of his death sep ira x had a in years through thus had not reached his required_beginning_date taxpayer a decided that sep ira x be divided equally and one-third to taxpayer as the designated beneficiaries of sep ira x one-third to taxpayer b born date one-third to taxpayer c born july a_trust for taxpayer a’s daughter born july trust d in addition taxpayer a appointed taxpayers b and c as co- trustees of taxpayer trust d continuing for the life of the daughter and then for the daughter’s descendants with distributions to such descendents at age only after the death of taxpayer d designated beneficiaries after taxpayer a’s death no one has the power to change the taxpayer trust d is valid in state y taxpayer a’s to provide for the the entire principal may be distributed to the will provides the purpose of the trust is health support and maintenance of his daughter during her lifetime daughter if required for trust purposes several children d older than taxpayer a’s daughter irrevocable on the date of taxpayer a’s death represents that a copy of the trust instrument was provided to the sponsor of sep ira x before taxpayer a’s death and again on or about september there is no beneficiary of taxpayer trust taxpayer trust d became the taxpayer the daughter has it c and d in order to accommodate the long-term financial goals is proposed that sep ira x be of taxpayers b equally divided into three separate ira accounts minimum distributions to taxpayers b d will be made from the subaccount for him or it but with distributions to be made from all three subaccounts based upon the life expectancy of taxpayer b the oldest and with each distribution from each subaccount to be based upon only the value of that subaccount beneficiary may withdraw more than the minimum amount at any time required and taxpayer trust is possible that a it c the business reason for the transaction is to permit the orderly administration of the taxpayer trust d allow taxpayers b and c to properly file their tax returns and to allow a sep ira x payout as provided by the internal_revenue_code and regulations and to an initial distribution of sep ira x based upon the life expectancy of the oldest designated_beneficiary taxpayer b will be made prior to date will be paid equally to the three taxpayers and will be reported on form_1040 for each of the two individual beneficiaries and on form_1041 for the trust for based on the foregoing facts and representations you request the following rulings that the creation of three equal subaccounts at the of taxpayer a‘s date of death will not effect the tax- direction of taxpayers b as deferred status of sep ira x and will not be treated as a taxable_distribution to taxpayers b_trust d and taxpayer trust d effective c and taxpayer c that minimum distributions from each and every of the three separate subaccounts based upon the life expectancy of the designated_beneficiary of the ira having the shortest life expectancy taxpayer b who is the oldest and based upon only the value of the separate subaccount for each particular beneficiary as beneficiary will satisfy the minimum distribution_requirements of sec_408 code code with such distributions beginning no later than date to distributions to that of the internal revenue that the beneficiary of the taxpayer trust d is identifiable from the trust instrument within the meaning of sec_1 a -1d-5 q a a q a a of the proposed income_tax regulations and a -1d- that taxpayers b and c and the daughter of the deceased who is the beneficiary of taxpayer trust d are beneficiaries of sep ira x for purposes of determining the distribution period under code sec_401 b iii such distribution period is based upon the life expectancy of the oldest ie ruled the designated_beneficiary as herein and that the initial beneficiary of the taxpayer trust d and upon her death her descendants are treated as beneficiaries of the decedent and the distribution period shall be determined under code sec_401 a b iii based upon the life expectancy of the designated_beneficiary of sep ira x having the shortest life expectancy taxpayer b who is the oldest thus the designated_beneficiary that sporadic distributions to the deceased participant while living before the required_beginning_date are irrelevant to the required distributions code sec_402 provides that distributions from a plan such as sep ira x are subject_to the rules for ira_distributions contained in code sec_408 sec_408 provides in general that any amount_paid or distributed from an ira shall be includible in gross_income by the payee or distributee as the case may be the manner provided under code sec_72 code in code sec_408 a i provides in part that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the account is maintained if the entire amount is paid into an ira for the benefit of such individual not later than days after the date on which that individual received the distribution code sec_408 b provides that section a i if d a does not apply to any transfer described in sec_408 period ending on the day of such receipt such individual received any other amount described in such subparagraph from an ira which was not includible in his her gross_income because of the application of sec_408 a at any time during the one-year code sec_408 e provides generally that sec_408 shall not apply to any amount to the extent such amount is required to be distributed under either subsection a or b sec_408 d c i of the code provides in part that in the case of an inherited ira sec_408 shall not apply to any amount received by an individual from such account and no amount transferred from such account shall be excluded from income by reason of such transfer and such inherited account shall not be treated as an ira for purposes of determining whether any other amount is a rollover_contribution code sec_408 c ii states that an ira shall an inherited ira if the individual for whose be treated as benefit the ira is maintained acquired the ira by reason of the death of another individual and such individual was not the surviving_spouse of such other individual revrul_78_406 1978_2_cb_157 provides that the direct transfer of funds from one ira trustee to another ira trustee does not result in such funds being paid or distributed to the participant and it contribution conclusion would apply whether the bank trustee initiates or the ira participant directs the transfer of funds the revenue_ruling states that this is not a rollover therefore with respect to ruling requests sec_1 and at the request of the we conclude the mere segregation into subaccounts of the interest of multiple beneficiaries to sep ira x by the trustee custodian of such ira beneficiaries does not affect the character or qualifications of the trustee or of sep ira x the act of segregation of multiple interests in sep ira x does not affect its tax-deferred status and will not be treated as taxpayer trust d trustee transfer of sep ira x or a continuation of sep ira x in subaccounts at the same financial_institution as opposed to a rollover is proposed and meets the description of an inherited ira there is no prohibition against a non-spousal beneficiary having the ira moved from one ira in which taxpayer’s b_trust d participate to three subaccounts with the same trustee or custodian with each subaccount to adopt a a taxable_distribution to taxpayer’s b in the present case a direct trustee to thus although sep ira x c and taxpayer in addition or c e different investment plan and with distributions to be made from each subaccount based upon the life expectancy of taxpayer b but with the amount_paid to each beneficiary based upon the value of only his her account code sec_408 states that under regulations and the incidental death_benefit prescribed by the secretary rules similar to the rules of sec_401 requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the ira is maintained a a ii provides that a_trust shall not constitute a qualified_trust under that subsection unless the plan provides that the entire_interest of each employee will be distributed beginning not later than the required_beginning_date employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary in accordance with regulations over the life of such code section code sec_401 b iii provides an exception to the five-year rule for certain amounts payable over the life of a beneficiary if interest is payable to beneficiary accordance with regulations over the life of such designated_beneficiary or over a period not extending beyond the life expectancy of such beneficiary and distributions begin not later than one year after the date of the employee's death any portion of the employee’s or for the benefit of such portion will be distributed in a designated such to proposed regulation a -1c-3 q a a provides a non-spouse beneficiary that in order to satisfy the as rule in code sec_401 b iii five year rule for non-spouse beneficiaries if the designated_beneficiary is not the employee’s surviving_spouse distributions must commence on or before december year in which the employee died of the calendar_year immediately following the calendar the exception to the proposed regulation sec_1 a -1e-5 q a a and big_number a -1f-1 q a d provide that if more than one individual is designated as employee as of the employee’s date of death the designated_beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the distribution period a beneficiary with respect to an with regard to ruling requests three four and five a beneficiary by the employee a beneficiary of an employee all the term designated_beneficiary means any code sec_401 e provides for the purposes of sec_401 individual designated as proposed regulation sec_1 a -1d-5 q a a and a -1d-6 q a a provide that in the case in which a_trust is named as beneficiaries of the trust with respect to the trust’s interest in the employee’s benefits are treated as having been designated as beneficiaries of the employee under the plan for purposes of determining the distribution period under sec_401 of the employee's b iii date of death on which the trust is named as a beneficiary of the employee or the employee’s required_beginning_date and as of all subsequent periods during which the trust is named as but for the fact that there is no corpus irrevocable beneficiaries with respect to the trust interest in the employee’s benefit are identifiable from the trust instrument within the meaning of proposed regulation a instrument is provided by the plan of beneficiaries capable of expansion or contraction will be treated as being identifiable if applicable time to identify the class member with the shortest life expectancy a beneficiary the following requirements are met or would be the trust is a valid trust under state law the beneficiaries of the trust are -1d-2 q a a and a copy of the trust is possible at the the members of the trust is a class if as it taxpayer trust d has been ruled to be a valid trust by a superior court in state y on the date of taxpayer a’s death which was before his required_beginning_date trust d are identifiable from the trust instrument within all the beneficiaries of taxpayer the trust became irrevocable a1 the meaning of proposed regulation a -1d- q a a because during the life of taxpayer d the only beneficiary of taxpayer trust d the beneficiaries of taxpayer trust d are her then surviving descendants until they attain the age specified in the trust at which time final distribution will be made the taxpayer represents that a copy of the trust instrument was provided to the sponsor of sep ira x before taxpayer a’s death and again on or about september the date of death she is after her death within nine months of a of the taxpayers b and c and the and a -1d-2 a of the deceased who is the beneficiary therefore with respect to ruling requests sec_4 we conclude that the beneficiaries of the taxpayer and trust d and her descendants are identifiable from the trust instrument within the meaning of sec_1 a -1d- q a a proposed income_tax regulations daughter taxpayer d of taxpayer trust d are designated beneficiaries of sep ira x within the meaning of proposed regulation a -1d- q a a for purposes of determining the distribution period under sec_401 is based upon the life expectancy of the oldest designated_beneficiary as herein ruled taxpayer trust d’s descendants are treated as designated beneficiaries and the distribution period shall be determined under code sec_401 the life expectancy of the designated_beneficiary of sep ira x having the shortest life expectancy taxpayer b who is the oldest designated_beneficiary and such distribution period finally we conclude that b iii based upon proposed regulation a -1b-5 q a a provides that except as provided for annuities distributions are treated as having begun to the employee in accordance with code sec_401 beginning date made before that date requests deceased participant while living before the required_beginning_date are irrelevant to the required distributions we conclude that sporadic distributions to the even though payments may actually have been a ii on the employee’s required therefore with respect to ruling these rulings are contingent on the valid status of sep ira x at the time the subaccounts were created and that the minimum distribution_requirements of code sec_401 a b iii with respect to sep ira x and its subaccounts are satisfied at all times a copy of this letter has been sent to your authorized representative in accordance with the power_of_attorney on file in this office sincerely yours chief technical branch employee_plans enclosures deleted copy of letter notice of intention to disclose ec


internal_revenue_service number release date index number ------------------------ -------------------------------- ------------------------ --------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------ id no ---------------- telephone number -------------------- refer reply to cc ita b02 plr-115871-15 date november ty ------------------------------------------------------ legend taxpayer chief accounting officer x y z ltd corp1 corp2 consultants law firm cpa firm tax preparer date1 date2 date3 date4 date5 date6 city1 city2 state a b c -------------------------------------------------- ------------------------ ----------------------- ---------------------------------------------------------------- ---------------------------- --------------------------- ----------------------- ----------------------------------------- ---------------------------------------------------------------------- ------------------------ ------------------------------------------------- ------------------------ ---------------- --------------------- --------------------------- --------------------------- -------------------------- -------------------------- ---------------------- ---------------- ------------------ ------- ----- -- plr-115871-15 dear ------------ this is in response to a letter dated date1 requesting an extension of time to make a safe-harbor election under revproc_2011_29 2011_1_cb_746 to allocate success- based fees between facilitative and non-facilitative amounts for taxpayer’s transaction during the taxable_year ending date3 this request is made in accordance with sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations facts and representations taxpayer represents the following taxpayer is a corporation also known as x and provides y to its customers taxpayer is headquartered in city1 and state prior to date2 the date of the transaction described below taxpayer was owned a by ltd with the remaining percentage held by minority shareholders taxpayer is currently a wholly-owned subsidiary of corp2 on date2 corp1 acquired b of the shares of taxpayer from its prior owners the transaction subsequent to the transaction on date3 corp1 contributed b of taxpayer’s stock to corp2 upon being contributed to corp2 taxpayer became a member of corp2’s consolidated_group taxpayer filed its final stand-alone form_1120 with a taxable_year ending date3 and now reports on form_851 filed with corp2’s form_1120 taxpayer engaged consultants for financial advisory and z services as well as negotiation support relating to the transaction based on the engagement letter consultants were to receive a fee of c of any excess of the initial proposal made by corp1 an initial payment was due to consultants upon execution of the consulting agreement taxpayer also engaged law firm to provide advice on and to perform a due diligence review of the transaction during the review law firm identified certain transaction costs associated with z and characterized these costs as success-based fees eligible for the safe_harbor treatment under revproc_2011_29 subsequent to corp1’s acquisition of taxpayer corp1 engaged tax preparer a tax partner in cpa firm’s city2 office tax preparer assisted with the preparation of taxpayer’s form_1120 for its taxable_year ending date3 the return on which the safe_harbor election under revproc_2011_29 should have been made at the time the tax_return was prepared tax preparer understood that there were consulting fees associated with the purchase of taxpayer by corp1 however cpa plr-115871-15 firm and tax preparer had previously been told by taxpayer that the fees related to general consulting services with no indication that any portion of the consulting fees was a success-based_fee contingent on the execution of the sale of the business law firm’s characterization of certain transaction costs associated with z as success-based fees during its due diligence review of the transaction was not identified to cpa firm or to tax preparer during the course of the return preparation the finalized return was presented to chief accounting officer for taxpayer for review and signature chief accounting officer did not identify that the consulting fees that were capitalized on the return were eligible for the safe-harbor treatment under revproc_2011_29 and in reliance on cpa firm chief accounting officer of taxpayer signed form_1120 consequently at the time the return was filed the entire amount of the consulting fees was capitalized on taxpayer’s return for taxable_year ending date3 taxpayer’s return for the taxable_year ending date3 was timely filed pursuant to extension on date4 after taxpayer’s form_1120 for taxable_year ending date3 had been filed law firm contacted cpa firm on behalf of taxpayer’s former shareholders law firm inquired about the treatment of the transaction costs and identified the success-based fees that had been capitalized on the tax_return it was only at this point on date5 that the transaction cost analysis conducted by law firm during its due diligence review of the transaction was brought to tax preparer’s and cpa firm’s attention subsequently cpa firm contacted its own transaction costs professionals to evaluate whether law firm had correctly characterized the consulting fees as success-based fees cpa firm concluded on date6 that a portion of the z fee was success-based and thus eligible for the safe-harbor election under revproc_2011_29 tax preparer immediately informed taxpayer’s chief accounting officer that taxpayer qualified to elect the safe_harbor treatment of allocating success-based fees pursuant to revproc_2011_29 cpa firm informed taxpayer of the need to file a request for an extension of time to make a safe_harbor election accordingly taxpayer is requesting an extension of time to make a safe-harbor election under revproc_2011_29 for taxpayer’s taxable_year ending date3 this request is made in accordance with sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations taxpayer received no notification from the internal_revenue_service that its form_1120 for the taxable_year ending date3 is under examination taxpayer filed this request before the failure to make the election was discovered by the internal_revenue_service law and analysis sec_263 of the internal_revenue_code and sec_1_263_a_-2 of the income_tax regulations generally provide that no deduction shall be allowed for any amount_paid out for property having a useful_life substantially beyond the taxable_year in the case of an acquisition or reorganization of a business_entity costs that are incurred in the plr-115871-15 process of acquisition and that produce significant long-term benefits must be capitalized 503_us_79 397_us_572 under sec_1_263_a_-5 a taxpayer must capitalize an amount_paid to facilitate a business acquisition or reorganization transaction described in sec_1_263_a_-5 an amount is paid to facilitate a transaction described in sec_1_263_a_-5 if the amount is paid in the process of investigating or otherwise pursuing the transaction whether an amount is paid in the process of investigating or otherwise pursuing the transaction is determined based on all of the facts and circumstances see sec_1_263_a_-5 sec_1_263_a_-5 provides that an amount that is contingent on the successful closing of a transaction described in sec_1_263_a_-5 success-based_fee is presumed to facilitate the transaction and thus must be capitalized a taxpayer may rebut the presumption by maintaining sufficient documentation to establish that a portion of the fee is allocable to activities that do not facilitate the transaction and thus may be deductible a taxpayer’s method for determining the portion of a success-based_fee that facilitates a transaction and the portion that does not facilitate the transaction is a method_of_accounting under sec_446 because the treatment of success-based fees was a continuing subject of controversy between taxpayers and the service the service published revproc_2011_29 revproc_2011_29 provides a safe_harbor method_of_accounting for allocating success- based fees paid in business_acquisitions or reorganizations described in sec_1 a - e in lieu of maintaining the documentation required by sec_1_263_a_-5 this safe_harbor permits electing taxpayers to treat percent of the success-based_fee as an amount that does not facilitate the transaction ie an amount that can be deducted the remaining portion of the fee must be capitalized as an amount that facilitates the transaction section dollar_figure of revproc_2011_29 allows a taxpayer to make a safe_harbor election with respect to success-based fees section dollar_figure provides that the service will not challenge a taxpayer’s allocation of success-based fees between activities that facilitate a transaction described in sec_1_263_a_-5 costs that must be capitalized and activities that do not facilitate the transaction costs that may be deducted if the taxpayer does three things first the taxpayer must treat percent of the amount of the success-based_fee as an amount that does not facilitate the transaction and thus may be deducted second the taxpayer must capitalize the remaining amount of the success-based_fee as an amount which does facilitate the transaction third the taxpayer must attach a statement to its original federal_income_tax return for the taxable_year the success-based_fee is paid_or_incurred stating that the taxpayer is electing the plr-115871-15 safe_harbor identifying the transaction and stating the success-based_fee amounts that are deducted treated as not facilitating the transaction and capitalized treated as facilitating the transaction sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 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 certain regulatory elections sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides 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 the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment sec_301_9100-3 provides special rules for accounting_method regulatory elections sec_301_9100-3 provides that the interests of the government are deemed prejudiced except in unusual or compelling circumstances if the accounting_method regulatory election for which relief is requested is subject_to the advance consent procedures for method changes requires a sec_481 adjustment would permit a change from an impermissible method_of_accounting that is an issue under consideration by examination or any other setting or provides a more favorable method_of_accounting if the election is made by a certain date or taxable_year plr-115871-15 conclusion based upon our analysis of the facts and representations provided taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government therefore the requirements of sec_301_9100-1 and sec_301_9100-3 have been met taxpayer is granted an extension of days from the date of this ruling to file a safe_harbor election for success-based fees under revproc_2011_29 with respect to the transaction for its taxable_year ending date3 the rulings contained in this letter are based on information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination 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 in particular no opinion is expressed as to whether taxpayer properly included the correct costs as its success-based fees subject_to the retroactive election or whether taxpayer’s transaction is within the scope of revproc_2011_29 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively a taxpayer filing its return electronically may satisfy this requirement by attaching a statement to its return that provides the date and control number of the letter_ruling in accordance with the provisions of the power_of_attorney currently on file with this office a copy of this letter is being sent to your authorized representatives we are also sending a copy of this letter to the appropriate operating division director enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed plr-115871-15 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely norma c rottuno _________________________ norma c rotunno senior technician reviewer branch office of associate chief_counsel income_tax accounting enc copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact willard w yates id 50-15178r telephone number refer reply to cc intl br1-plr-113537-00 date date ty a country b year l year dear this is in response to a letter from your authorized representative dated date requesting a ruling that a’s surrender of his u s alien registration card green card did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code the information submitted for consideration is substantially as set forth below the ruling contained in this letter is 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 a was born in country b in year in year a came to the united_states for employment and obtained a green card a has now retired and returned to country b a will surrender his green card upon the receipt of a favorable ruling a will be subject_to country b tax on his worldwide income on the date of a’s expatriation his net_worth exceeded the amount set forth in sec_877 sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be subject_to the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s plr-113537-00 taxes sec_2107 and sec_2501 a provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former u s citizen or former u s long-term_resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 a if the individual’s average income_tax_liability or the individual’s net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 under notice_98_34 1998_27_irb_30 modifying notice_97_19 1997_1_cb_394 a former long-term_resident whose net_worth or average tax_liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax_avoidance if that former resident is described within certain categories and submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes notice_98_34 requires that certain information be submitted with a request for a ruling that an individual’s expatriation did not have for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_98_34 because he is a resident of country b and his worldwide income is subject_to country b tax the country in which he was born a submitted all of the information required to be submitted by notice_97_19 as modified by notice_98_34 including additional information requested by the service after review of the submission accordingly based solely on the facts submitted and the representations made we conclude that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 therefore a will not be presumed under sec_877 to have as one of his principal purposes for expatriating the avoidance of u s taxes we further conclude that a will not be treated under sec_877 as having as one of his principal purposes for expatriating the avoidance of u s taxes because the information submitted clearly establishes the lack of a principal purpose to avoid taxes under subtitle a or b of the code plr-113537-00 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 in addition no opinion is expressed as to a’s u s tax_liability for the taxable years prior to or after his expatriation under sections of the code other than sec_877 sec_2107 and sec_2501 a copy of this letter must be attached to a’s u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely w edward williams senior technical reviewer cc intl br1


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date contact person identification_number date date telephone number uniform issue list employer_identification_number legend m dear this is in response to your request for a ruling that certain proposed contractual agreements will not generate unrelated_business_taxable_income to you under sec_512 m is exempt under sec_501 as an organization described in r c sec_501 and has been classified as an educational_organization under sec_509 and sec_170 m is the trustee of trusts including you and as trustee m is the legal owner of the trusts’ assets m does not assess a trustee’s fee or any other fee for the administrative services it provides to the trusts in addition m has a sole charitable_remainder interest in of of the trusts as a result of the relationship with the trusts as both trustee and beneficiary m has a substantial interest in the value of each trust moreover the donors to the trusts have funded the trusts with the intention that m benefit substantially from the remainder value of the trusts and that the trusts’ assets will be managed to achieve the greatest possible return on investment m’s endowment is invested in a diversified manner with investments in nontraditional assets such as private equity real_estate and natural_resources and other marketable alternatives as well as more standard asset classes including u s and international stocks and bonds real_estate_assets and certain other alternative investments are undertaken primarily through partnership structures much of the income earned by the endowment consists of passive_income including dividends interest and long and short-term_capital_gains but some income is debt-financed or otherwise is treated as unrelated_business_taxable_income m proposes to create a contractual obligation pursuant to which it would issue a contract right to each of the trusts for a proportionate share or unit of m’s endowment the value of the units would equal the value of the endowment units held by m's various restricted and unrestricted funds the contract right would entitle the trusts to receive periodic_payments based on the number of units owned the trusts would thereby be able to receive an investment return equal to that of the endowment m determines a distribution rate on the endowment each year based in part on the endowment's investment performance m calculates the market_value of each endowment unit on a monthly basis the market_value of each endowment unit initially equals the total value of the endowment investments divided by the number of outstanding units and is subsequently adjusted in accordance with the market_value of the endowment each fund is entitled to an amount equal to the distribution rate multiplied by the number of units it holds m seeks to enable the trusts to invest in the endowment in a manner identical to m’s restricted and unrestricted funds a_trust would acquire a unit in the endowment which would give it a contractual right against m but no interest whatsoever in the underlying investment_assets of the endowment the contract between the trusts and m would provide that the price of the units would equal their value at the time of acquisition the units would have the same value that m uses for internal accounting purposes m will not charge a fee for internal management costs of the trusts’ assets although m may recover its actual costs of management of the endowment as a charge against total return the contract would provide that each trust would receive payments on the units held by it based on the distribution rate m establishes for the endowment with payouts made monthly a_trust could choose either to reinvest part of the payout or redeem additional units depending on its cash requirements the trusts will treat payouts as ordinary_income regardless of the character of the underlying income of the endowment whether capital_gain ordinary_income or return_of_capital and regardless of whether the payout is made entirely by distributions of income or in part by redemptions of units the trusts will treat redemptions of units over and above receipt of the distribution amount as generating long or short-term_capital_gain or loss depending on the holding_period of the redeemed units under the contract a_trust would not have any ownership_interest in the underlying assets of the endowment or any contract rights with respect to the other trusts the trusts would have no power or right of any kind to control direct supervise recommend or review m's business activities operations or decisions with respect to the endowment except the right to review the payout computations they would not have the right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of units m is neither a partner nor an agent of the trusts the trusts would never be liable for any cost expense or payment incurred by m or for which it is liable or responsible relating to the endowment or the underlying endowment assets and m would indemnify and hold the trusts harmless from and against any liability arising out of any_action or inaction by m with respect to the endowment or the underlying endowment assets you have requested the following ruling the issuance of units by m to the trusts the making or receipt of payments with respect to the units and the holding and redemption of the units will not generate unrelated_business_taxable_income to you law sec_511 in part imposes a tax on the unrelated_business_taxable_income of organizations described in sec_501 sec_512 defines the term unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions which are directly connected with the carrying on of such trade_or_business both computed with the modifications provided in r c sec_512 sec_512 sets forth so-called modifications which are excluded from the computation of unrelated_business_taxable_income these modifications include dividends interest royalties rent from real_property and gain from the sale of property r c sec_513 defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_purpose or function sec_513 provides that the term trade_or_business includes any activity which is carried on for the production_of_income from the sale_of_goods or the performance of services sec_1_512_b_-1 provides that dividends interest payments_with_respect_to_securities_loans annuities income from notional_principal_contracts other substantially_similar income from ordinary and routine investments to the extent determined by the commissioner and all deductions directly connected with any of the foregoing items of income shall be excluded in computing unrelated_business_taxable_income sec_1_513-1 provides that gross_income of an exempt_organization subject_to the tax imposed by sec_511 is includible in the computation of unrelated_business_taxable_income if it is income from a trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the production of funds to the organization's performance of its exempt functions sec_1_513-1 provides that for purposes of r c sec_513 the term trade_or_business has the same meaning it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services sec_1_513-1 provides that in determining whether trade_or_business from which a particular amount of gross_income derives is regularly carried on within the meaning of r c sec_512 regard must be had to the frequency and continuity with which the activities productive of the income are conducted and the manner in which they are pursued for example specific business activities of an exempt_organization will ordinarily be deemed to be regularly carried on if they manifest a frequency and continuity and are pursued in a manner generally similar to comparable commercial activities of non-exempt organizations sec_1_513-1 provides that in general gross_income derives from unrelated_trade_or_business within the meaning of r c sec_513 if the conduct of the trade_or_business which produces the income is not substantially related other than through the production of funds to the purposes for which exemption is granted the presence of this requirement necessitates an examination of the relationship between the business activities which generate the particular income in question -- the activities that is of producing or distributing the goods or performing the services involved -- and the accomplishment of the organization's exempt purposes sec_1_513-1 provides that trade_or_business is related to exempt purposes in the relevant sense only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes and is substantially related for purposes of sec_513 only if the causal relationship is a substantial one thus for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes where the production or distribution of the goods or the performance of the services does not contribute importantly to the accomplishment of the exempt purposes of an organization the income from the sale of the goods or the performance of the services does not derive from the conduct of related trade_or_business whether activities productive of gross_income contribute importantly to the accomplishment of any purpose for which an organization is granted exemption depends in each case upon the facts and circumstances involved as noted previously organizations described in sec_501 are subject_to tax on their unrelated_business_income under sec_511 in order for such an organization's income to be subject_to the unrelated_business_income_tax three requirements must be met the income must be from a trade_or_business the trade_or_business must be regularly carried on and the conduct of the trade_or_business must not be substantially related to the organization's exempt_purpose or function see sec_1_513-1 analysis m proposes to enter into a contractual relationship with certain trusts that are charitable_remainder trusts in which m has an interest as a beneficiary and serves as trustee of the trusts under such a contractual relationship each trust would receive payments on the units held by it based on the distribution rate m establishes for its endowment with payouts made monthly each trust would acquire units from m’s endowment which would give the trusts a contractual right against m but no interest whatsoever in the underlying investments assets of the endowment the contract between the trusts and m would provide that the price of the units would equal their value at the time of acquisition the units would have the same value that m uses for internal accounting purposes consequently a_trust could choose either to reinvest part of the payout or redeem a portion of the units depending on its cash requirements thus under the contractual relationship with m the trusts would have a right to the payout declared by m plus the right to redeem the units at the value that m uses for internal accounting purposes as stated above under the contract a_trust would not have any ownership_interest in the underlying assets of the endowment or any contract rights with respect to the other trusts the trusts would have no power or right of any kind to control direct supervise recommend or review m’s business activities operations or decisions with respect to the endowment except the right to review the payout computations they would not have the right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of units m is neither a partner nor an agent of the trusts the trusts would never be liable for any cost expense or payment incurred by m or for which it is liable or responsible relating to the endowment or the underlying endowment assets and m would indemnify and hold the trusts harmless from and against any liability arising out of any_action or inaction by m with respect to the endowment or the underlying endowment assets the trusts do not have a position of ownership in the underlying assets of m’s endowment since the contractual relationship between the trusts and m is not in the nature of a partnership or agency the income earned by the trusts from the payout m establishes for the units reflects ordinary_income and does not take on the character of the income of the underlying assets or debt-financed or unrelated_business_taxable_income m’s endowment would pay any_tax owed on unrelated_business_taxable_income earned by the endowment portfolio in view of the foregoing we rule as follows the issuance of units from m to you the making or receipt of payments with respect to the units and the holding and redemption of the units will not generate unrelated_business_taxable_income to you a charitable_remainder_trust this ruling is based on the understanding that there will be no material changes in the facts upon which it is based we express no opinion as to the tax consequences of the proposed transaction under any other section of the code pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives a copy of this letter should be kept in your permanent records this ruling is directed only to the organization that requested it that it may not be used or cited by others as precedent r c sec_6110 provides if there are any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely manager exempt_organizations technical group enclosure notice cc


tax_exempt_and_government_entities_division release number release date uil code department of the treasury internal_revenue_service commerce street mc dallas tx date may ay ‘taxpayer identification_number tax penod ended persea to contacn identification_number contact informauon telephone fax certified mail - return receipt requested dear a ginal determination that you do not qualify for exemption from federal_income_tax under as an organization described m code sechon this is internal_revenue_code the code sec_30 a s01 c for the tax penod’s above your exempt status is hercby-revoked effective january qur adverse derermination as to your exempt s‘atus was made for the following reason s you have not demonstrated that vou are operaied exclusively for exempt purposes within the meaning of laternal revenue code sec_5u1 c and sec_1 -1 exempt clubs ave organized for pleasure recreation and ot her nonprofitable purposes ‘the exemption extends to social aud recreation clubs chat ave supported soleiy by membership tees dues ard your activities are ner in furdaersnee or operated exclusively for pleasure assessments recrestion or other similar nonprofit purposes and are not exempt under sec_501 a organizations that are not exempt under section sot generally are requused to tile federal_income_tax returns acd pay tax where applicable www lts zov lor further instructions forms and ieformation please visit if you decide to contest this determination you may file aa acuon for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united srates ‘tax court the united srates court of federal claims or the united_states district_court for the district of columbia a petition or complaint ia onc of these three courts must be filed within days from the date this determination_letter was mailed to vou please contact the clerk of the appropriate court for rules and the appropriate forms for filing peations for declaratory_judgment by referring to the enclosed publication you may write to the courts at the following addresses united stares ‘tax court second sureet nw washingron d c ls court of federal claims madison place nw washington d c ls district_court for the distnct of columbia constitution ave nw washington d c processing of income_tax returns and assessments of any taxes due will not be delayed if you ale a petition for declaratory pudgment under sec_7428 of the internal_revenue_code the ‘taxpayer advocate service tas is an independent organization withia the irs that can help protect you taxpayer nghts we can offer vou help if your tax problem is causing a hardship or you’ve uncd but haven’t been able to resolve your problem wath the irs if you qualify for our assistance which is always free we will do everything possible to help you visit taxpayeradvocate s gov or call if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours maria d hooke director eo exarninations eaclosure publication yi department of the treasury internal_revenue_service tax exempt and government entities irs exempt_organizations examinations commerce street ms dal dallas tx date date taxpayer_identification_number form tax_year s ended person to contact d number employee id contact numbers telephone fax manager’s name 1d number employee id manager’s contact number response due_date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren’t an organization described in sec_501 if we don't hear from you if you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also letter rev catalog number 34809f may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn’t a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely maria hooke director eo examinations enclosures report of examination form_6018 publication publication letter rev catalog number 34809f form 886a name of taxpayer schedule no or exhibit explanation of items department of the treasury - internal_revenue_service issue whether __ qualifies for exemption under internal_revenue_code irc sec_501 due to exceeding the non-member use of the facilities and services facts the was incorporated on july 19xx in the state of operates an 0-hole golf course a swimming pool bar and pro shop which are open to members the income received by includes membership dues greens fees cart rentals bar sales pro shop sales and gaming income the members pay monthly dues the pool is available to the general_public for rent during off hours as well as the hall filed the state of _ quarterly report for the year ending december 20xx reporting total income from gaming activities with non- members on line reporting the following e e e e e quarter as dollar_figure quarter as dollar_figure quarter as dollar_figure quarter as dollar_figure total income of dollar_figure reported gross_income on the form_990 for the december 20xx as dollar_figure reported on page part viii statement of revenue as but actual total income was dollar_figure part viii statement of revenue line description column a column b total revenue related revenue column c unrelated revenue column d revenue excluded under 1b lf th 2a dollar_figure membership dues assess all other contributions dollar_figure dollar_figure total program service g revenue fundraising gross_income from dollar_figure dollar_figure dollar_figure 8a 9a gaming insurance proceeds total income lla dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure note total revenue is less direct expenses of gaming income as reported on line 9b of form 886-a rev department of the treasury - internal_revenue_service page -1- form_88 a name of taxpayer schedule no or exhibit explanation of items department of the treasury - internal_revenue_service dollar_figure and less the difference of dollar_figure reported to the state of and line 9a form 990-t was viewed but not audited for the year ending december 20xx reported unrelated_trade_or_business income on the form 990-t as dollar_figure reported on page part as column a column b column c part unrelated_trade_or_business income line description ic income expenses net gross_receipts or sales balance cost_of_goods_sold gross_profit dollar_figure total line sec_3 through dollar_figure dollar_figure dollar_figure dollar_figure revenue attributable to non-members is dollar_figure or of total revenue received for the year non-member revenue doesn’t include the fundraising income that wasn’t reported on the form 990-t filed the state of report for the year ending december 20xx reporting total income from gaming activities with non- members on line reporting the following e quarter as dollar_figure 2np quarter as dollar_figure quarter as dollar_figure quarter as dollar_figure total income of dollar_figure reported gross_income on the form_990 for the december 20xx as dollar_figure reported on page part viii statement of revenue as but actual revenue was dollar_figure part viii statement of revenue column a column b line description related revenue total revenue column c column d unrelated - revenue revenue excluded under 1b membership dues asse sec_1f all other contributions lh total 2a program service 8a fundraising revenue dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure form 886-a rev department of the treasury - internal_revenue_service page -2- form_886 a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit gross_income from gaming 9a total income dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure note total revenue is less direct expenses of gaming income as reported on line 9b of dollar_figure and less the difference of dollar_figure reported to the state of and line 9a form 990-t was viewed but not audited for the year ending december 20xx reported unrelated_trade_or_business income on the form 990-t as dollar_figure reported on page part i as column a column b column c part unrelated_trade_or_business income line description ic gross_receipts or sales balance _ dollar_figure cost_of_goods_sold gross_profit total line sec_3 through dollar_figure dollar_figure dollar_figure dollar_figure _ income expenses net revenue attributable to non-members is dollar_figure or of total revenue received for the year non-member revenue doesn’t include the fundraising income that wasn’t reported on the form 990-t of gross member gross non-member member of non-member year gross_income income 20xx 20xx so so so so so so income income income law internal_revenue_code sec_501 provides exemption from income taxes for clubs organized for pleasure recreation and other nonprofitable purposes substantially_all of the activities of which are for such purposes and no part of the net_earnings of which inures to the benefit of any private shareholder prior to its amendment in sec_501 required that social clubs be operated exclusively for pleasure recreation and other nonprofitable purposes public law amended the exclusive provision to read substantially in order to allow an sec_501 organization to receive up to percent of its gross_receipts including investment_income from sources outside form 886-a rev department of the treasury - internal_revenue_service page -3- form_886 a department of the treasury - internal_revenue_service name of taxpayer explanation of items schedule no or exhibit its membership without losing its tax-exempt status the committee reports for public law senate report no 2d session c b further states a within the percent amount not more than percent of the gross_receipts should be derived from the use of a social club’s facilities or services by the general_public this means that an exempt social_club may receive up to percent of its gross_receipts from a combination of investment_income and receipts from non-members so long as the latter do not represent more than percent of total receipts b thus a social_club may receive investment_income up to the full percent of its gross_receipts if no income is derived from non-members’ use of club facilities in addition the committee report states that where a club receives unusual amounts c of income such as from the sale of its clubhouse or similar facilities that income is not to be included in the percent formula treasury regulations sec_1_501_c_7_-1 further provides that in general this exemption extends to social and recreation clubs which are supported solely by membership fees dues and assessments however a club otherwise entitled to exemption will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities a social_club that opens its facilities to the public is deemed to be not organized and operated exclusively for pleasure recreation and other nonprofitable purposes and is not exempt under sec_501 solicitation by advertisement or otherwise for public patronage of its facilities is prima facie evidence that the club is engaging in business and is not being operated exclusively for pleasure recreation or social purposes however an incidental sale of property will not deprive a club of its exemption reg sec_1_501_c_7_-1 sec_1_501_c_7_-1 has not been updated to reflect p l which changed exclusively to substantially_all revenue rulings revrul_58_589 1958-2cb examines the criteria for determining whether an organization qualifies for exemption under sec_501 as an organization described in sec_501 of the code this ruling states it is clear under the foregoing regulations that a club which engages in business such as making its social and recreational facilities available to the general_public or by selling real_estate etc may not be considered as being organized and operated exclusively for pleasure recreation or social purposes it is equally clear that the solicitation by advertisements form 886-a rev department of the treasury - internal_revenue_service page -4- form 886a name of taxpayer explanation of items department of the aree schedule no or exhibit - internal_revenue_service or otherwise of public patronage of its facilities may be adverse to the establishment of an exempt status revrul_66_149 holds a social_club as not exempt as an organization described in sec_501 where it derives a substantial part of its income from non-member sources revrul_60_324 states by making its social facilities available to the general_public the club cannot be treated as being operated exclusively for pleasure recreation or other non- profitable purposes revenue procedures revproc_71_17 wl 1971_1_cb_683 sets forth guidelines for determining the effect gross_receipts derived from use of a social club's facilities by the general_public have on the club's exemption from federal_income_tax under sec_501 of the code the club must maintain books_and_records of each such use and the amount derived therefrom this requirement applies even though the member pays initially for such use in each instance the record must contain the following information e_p e s s p s the date the total number in the party the number of nonmembers in the party the total charges the charges attributable to nonmembers the charges paid_by nonmembers where a member pays all or part of the charges attributable to nonmembers a statement signed by the member indicating whether he has been or will be reimbursed for such nonmember use and if so the amount of the reimbursement where the member's employer reimburses the member or makes direct payment to the club for the charges attributable to nonmembers a statement signed by the member indicating the name of his employer the amount of the payment attributable to the nonmember use the nonmember's name and business or other relationship to the member and the business personal or social purpose of the member served by the nonmember use where a nonmember other than the employer of the member makes payment to the club or reimburses a member and a claim is made that the amount was paid gratuitously for the benefit of a member a statement signed by the member indicating the donor's name and relationship to the member and containing information to substantiate the gratuitous nature of the payments or reimbursement exceptions to the record keeping requirements are form 886-a cev department of the treasury - internal_revenue_service page -5- pow 886a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit where a group of eight or fewer individuals at least one of whom is a member uses club facilities it will be assumed for audit purposes that the nonmembers are the guests of the member provided payment for such use is received by the club directly from the member or the member's employer where percent or more of a group using the club’s facilities are members it will likewise be assumed for audit purposes that the nonmembers in the group are guests of members provided payment for such use is received by the club directly from one or more of the members or the member's employer solely for purposes of and above payment by a member's employer will be assumed to be for a use that serves a direct business objective of the employee- member where a club makes its facilities available to the general_public to a substantial degree the club is not operated exclusively for pleasure recreation or other non-profitable purposes court cases 536_f2d_572 while the reports mandate the application of a facts_and_circumstances_test in the event that gross_receipts from nonmember and or investment_income reach the prohibited levels they do not specify any of the relevant facts and circumstances that should be considered however the court_of_appeals in this case has indicated some factors to consider in determining exempt status factors to consider in applying this test include e e e e e the actual percentage of nonmember receipts and or investment_income the frequency of nonmember use of club facilities an unusual or single event that is non-recurrent on a year to year basis that generates all the nonmember income should be viewed more favorably than nonmember income arising from frequent use by nonmembers the number of years the percentage has been exceeded the record over a period of years is also relevant the high percentage in one year with the other years being within the permitted levels should be viewed more favorably to the organization than a consistent pattern of exceeding the limits even by relatively small amounts the purposes for which the club’s facilities were made available to nonmembers whether the nonmember income generates net profits for the organization profits derived from result in inurement within the meaning of sec_501 nonmembers unless set_aside subsidize the club’s activities for members and government’s position form 886-a rrev department of the treasury - internal_revenue_service page -6- pom 886a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit doesn’t qualify for exemption under sec_501 as a social_club due to the extensive non-member use of the facilities and services provided to the non-members the non-member usage annually exceeds of the total revenue received by form_990 reported income in the 20xx tax_year as follows total reportable income member income of income from members non-member income of income from non- member use dollar_figure dollar_figure dollar_figure form_990 reported income in the 20xx tax_year as follows total reportable income member income of income from members non-member income of income from non- member use dollar_figure dollar_figure dollar_figure permits unrestricted use of its gaming activities by the general_public year over year receives more than the insubstantial part of its gross_receipts allowed by the irc from outside its membership the amount received for public’s use of facilities averaged for the 20xx and 20xx tax years this is considerably higher than the allowed under p l and shows a pattern of frequency and reoccurring use by the public the facts of the case show that it is operating in a manner consistent with a for-profit business total expenses exceed the total revenue that they received for the tax years ending december 20xx and december 20xx taxpayer’s position position is that they agree that non-member usage is above the annually agrees that they don’t meet the requirements under sec_501 conclusion form 886-a crev department of the treasury - internal_revenue_service page -7- r form 886a department of the treasury - internal_revenue_service explanation of items schedule no or exhibit name of taxpayer the organization doesn’t qualify for exemption from federal_income_tax under sec_501 the proposed date of the revocation is january 20xx form 886-acrev department of the treasury - internal_revenue_service page -8-


department of the treasury_department of the treasury internal_revenue_service internal_revenue_service washington d c washington d c u i l dollar_figure number release date cc dom p si spr-113277-98 date memorandum for from cc dom p si subject sec_38 limitation spr-113277-98 this memo is in response to your request dated for assistance regarding an interpretation problem with sec_38 of the internal_revenue_code as amended by the technical corrections act of and before the repeal by the revenue reconciliation act of the above matter concerns two conflicting interpretations of sec_38 and the interpretations taken in the the first interpretation holds that only the regular investment_tax_credit itc component of the general_business_credit gbc may be claimed as a result of the increased limitation under sec_38 you represent that this interpretation is used in however in the memo from a copy of which you have concluded that after comparing both programs subscribes to the second interpretation of sec_38 the second interpretation which is followed in holds that in addition to regular itc other components of the gbc may be claimed as a result of the increased limitation although the are not in conflict the issue remains as to which interpretation of sec_38 is supported by the statute law and analysis sec_38 provides that there shall be allowed as a credit against tax imposed for the taxable_year an amount equal to the sum of the business_credit carryforwards carried to such taxable_year the amount of the current_year_business_credit plus the business_credit carrybacks carried to such taxable_year the amount of the current_year_business_credit pursuant to sec_38 is the sum of the investment_credit the targeted_jobs_credit the alcohol fuels credit the research_credit and the low-income_housing_credit sec_38 imposes a limitation on the amount of credits allowed under sec_38 for any taxable_year sec_38 limits the gbc to the excess of the taxpayer’s net_income_tax over the tmt for the taxable_year sec_38 which applies only to c corporations modifies the limitation by reducing the amount determined under sec_38 by the portion of regular itc not used against the sec_38 limitation up to percent of tmt the effect of this modification is to increase the amount of the gbc allowable provided the requirements are met however a question has arisen as to which components of the gbc may be claimed as a result of the increased limitation the heading of sec_38 implies that only the remaining regular itc available after the application of the sec_38 limitation may be claimed if sec_38 is interpreted as suggested in the heading sec_38 would change the usual ordering rules of sec_38 sec_38 provides that the gbc operates on a first-in_first-out basis sec_38 provides that in general the order in which the components of the gbc are used shall be determined on the basis of the order in which they are listed in subsection b as of the close of the taxable_year in which the credit is used we believe that notwithstanding the heading of sec_38 congress did not intend for this subsection to alter the usual ordering rules of sec_38 sec_38 only modifies the amount described in sec_38 the text of sec_38 does not address which of the individual components of the gbc are to be claimed as a result of the increased limitation absent a special rule in the statute the usual rules applicable for determining which credits are used in a taxable_year apply this view is supported by a statement in the senate_finance_committee report on the technical corrections act of which states that sec_38 affects only the determination of the amount of the gbc allowable in a taxable_year and does not change the usual ordering rules of sec_38 therefore we conclude that the interpretation of sec_38 followed in is correct sec_38 modifies sec_38 by increasing the amount of the gbc allowable without any restriction as to which of the components of the gbc may be claimed in a recent meeting with representatives from forms and publications they agreed with the recommended interpretation of sec_38 and will revise the form_3800 and its related worksheet accordingly beginning with the taxable_year if you have any questions please contact at


department of the treasury internal_revenue_service washington d c number info release date dear cc psi cor-111890-00 index number date this letter is in response to your letter dated date and subsequent correspondence to paul f kugler in which you ask for guidance regarding the potential disposition of your interest in a limited_partnership you have asked whether the internal_revenue_service has authority to direct the partnership to provide you with written confirmation of the existence or nonexistence of a market for your partnership_interest under sec_6031 of the internal_revenue_code a partnership is required to provide you with information necessary to determine your tax_liability while we appreciate your wish to obtain information that would assist with your planned disposition it does not appear that the written confirmation you are contemplating is within the scope of sec_6031 and temporary sec_1_6031_b_-1t thus it is not the place of the internal_revenue_service to direct the partnership to provide you with such a statement you have also asked for guidance on the proper reporting of the suspended passive losses attributable to your partnership_interest and the anticipated disposition gain if you were to sell your interest in the partnership sec_469 does not alter the reporting of gains and losses for instance if your prior losses would have been reported on schedule e form_1040 when incurred you will report them on schedule e when they become allowable by reason of the disposition if your gain on disposition is a capital_gain then you will report the gain on schedule d form_1040 the instructions to the form_8582 contain examples illustrating the proper reporting of disposition gain and prior suspended losses on pages six and seven we have enclosed form_8582 and its instructions to assist you with any future reporting cor-108381-00 if you wish to discuss this further please contact at sincerely william p o’shea branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures form_8582 instructions for form_8582


department of the treasury internal_revenue_service washington d c aug tax_exempt_and_government_entities_division uniform issue list tep rat legend taxpayer a ira b bank c bank d account e bank f amount dear this is in response to your request for a private_letter_ruling dated date as supplemented by correspondence dated date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he received a distribution equal to amount from ira b which was maintained by bank d taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to a miscommunication with bank f which led to amount page being placed in a non-ira account taxpayer a further represents that amount has not been used for any other purpose taxpayer a maintained ira b with bank c the funds were invested in an ira certificate of deposit cd on date bank c failed and was taken over by bank d under the supervision of the federal deposit insurance corporation on date when the cd matured taxpayer a closed ira b with the intention to invest amount in another ira cd with bank f taxpayer a went to bank f on date to complete a rollover but instead amount was placed in account e a non-ira cd account taxpayer a was unaware account e was a non-ira cd until he received a form 1099-r from bank f in on the earnings based on the facts and representations you request a ruling that the internal_revenue_service waive the day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 page 3_ 201547u08 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a timely rollover of amount was due to a miscommunication with bank f which led to amount being placed in a non- ra cd account therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b taxpayer a is granted a period of days from the issuance of this letter_ruling to transfer an amount not to exceed amount into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto page a ces this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please contact or i d if you wish to inquire about at sincerely yours bt a wellund manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose ce


internal_revenue_service number release date index number ---------------------------------------------- --------------------------------------- ----------------------------- ------------------------------------------------------------- -------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------- telephone number --------------------- refer reply to cc corp b01 plr-131553-11 date january ------------- ------------- legend taxpayer date1 date2 date3 date4 dear --------------- ------------------------------------------------------ ------------------- ------------------------ ----------------------- ----------------------- this ruling responds to your letter dated date submitted on behalf of taxpayer requesting rulings under internal_revenue_code the code sec_305 the ruling_request additional information was received subsequently the rulings contained in this letter are based upon facts that were submitted on behalf of taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information and other data may be required as part of the audit process plr-131553-11 summary of facts on date1 taxpayer engaged in an exchange which under sec_1_368-2 and sec_1_305-7 is treated under sec_305 as a deemed_distribution to which sec_305 and sec_301 apply on date2 taxpayer issued shares of taxpayer common_stock in exchange for outstanding shares of certain of its preferred_stock which was convertible into taxpayer common_stock as well as other of its preferred_stock on date3 taxpayer distributed warrants to purchase common_stock of taxpayer the ywarrants to its common shareholders of record on date4 the recipients of the ywarrants had a greater interest in taxpayer than if they had not received the ywarrants ruling the distribution of the ywarrants is a distribution_of_property to which sec_301 applies sec_305 and sec_305 caveats 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 procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling pursuant to the power_of_attorney on file in this office a copy of this ruling letter will be sent to your authorized representative sincerely _isaac w zimbalist______ isaac w zimbalist senior technical reviewer branch office of associate chief_counsel plr-131553-11 corporate


internal_revenue_service department of the treasury number release date index number x washington dc person to contact telephone number refer reply to cc psi 2-plr-143867-01 date date a date year dear this letter responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on date of year a is the president and a shareholder of x a represents and minutes of the first shareholder meeting indicate that the shareholders always intended for x to be an s_corporation a represents that a form_2553 election by a small_business_corporation effective for date of year was prepared and timely mailed however the service has no record of the filing of a form_2553 by x x believing that form_2553 had been filed prepared and filed a form_1120s u s income_tax return for an s_corporation the service subsequently informed x that it could not process x’s form_1120s because the service center’s records indicated that no form_2553 had been received sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's first taxable_year accordingly provided that x makes an election to plr-143867-01 be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely j thomas hines chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number info release date date cc psi b01 cor-115122-00-00 uilc this letter responds to your correspondence requesting subchapter_s_corporation status effective for date under the relief provisions provided by sec_1362 of the internal_revenue_code in revproc_97_48 copy attached the internal_revenue_service provides special procedures that permit taxpayers in certain situations to obtain automatic late s_corporation relief instead of applying for a private_letter_ruling the facts presented in your situation appear to be covered by section dollar_figure of revproc_97_48 to receive relief under the provisions of this revenue_procedure normally one must follow the procedural requirements described in sec_4 however we have intervened on your behalf and asked the service_center staff to update your records to reflect an effective date as you requested if you fail to receive a letter confirming the account update within days from the date of this letter you may contact the ogden taxpayer_advocate please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries


cca_2013053112270046 id -------------- office uilc number release date from --------------- sent friday date pm to ---------------- cc ---------------------------------------------------------------- subject question regarding form sec_872 hi ----------- on the facts provided we conclude that the form sec_872 at issue are invalid and cannot be revived or ratified if the assessment_period is already expired let me know if you have any questions -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------


internal_revenue_service department of the treasury number release date index number u i l no washington dc person to contact telephone number refer reply to cc psi plr-124895-03 date date legend coop dear this is in response to your request for a ruling dated date submitted on behalf of coop by its authorized representative coop is a federated cooperative subject_to taxation under subchapter_t of the internal_revenue_code coop is in the business of processing and marketing member and patron products as well as providing members and patrons with necessary supplies throughout the years coop recognized significant margins on its patronage sourced business with its members and patrons in accordance with coop’s bylaws coop was required to distribute its patronage sourced margins to its patrons coop’s bylaws authorize coop to net patronage income and loss from its various allocation pools subject_to and in accordance with sec_1388of the code coop issued patronage_dividends to its members associate members and patrons in the form of common_stock associate member common_stock or capital credits coop issued the patronage equity predominantly as qualified written notices of allocation within the meaning of sec_1388 although a portion was issued as nonqualified written notices of allocation as of coop had approximately dollar_figure million of qualified written notices of allocation outstanding and approximately dollar_figure million of nonqualified written notices of allocation outstanding during the current economic downturn coop realized significant economic losses and incurred significant net operating losses under sec_172 of the code a substantial portion of such losses are attributable to business done by coop with or for its members patrons the patronage losses and the remainder are attributable to other coop business the non-patronage losses as a result of these losses and a resulting lack of liquidity to finance its continued operations coop filed for bankruptcy on in the federal bankruptcy court in court coop is presently preparing its reorganization plan plan and anticipates filing the plan with the court in the near future implementation of the plan or any element thereof is subject_to the approval of the court a significant element of the plan involves the sale of substantially_all of the assets of coop’s supply business the court recently approved the sale of substantially_all of the assets of coop’s division and purchasers for other assets are actively being sought in addition a significant portion and potentially substantially_all of the assets of its processing and marketing will also be sold following the implementation of the plan coop may not continue to operate and if it continues to operate it shall do so as a substantially smaller enterprise involved solely in the processing and marketing of products if coop continues to operate it will not operate on a cooperative basis coop believes that there is little or no chance that the proceeds of the sales of assets anticipated under the plan will be sufficient to satisfy the claims of its various creditors accordingly coop does not anticipate that there will be further distributions made with respect to its patronage equity either as part of the plan or otherwise coop believes that such equity has little or no current value and will not likely have value in the future section of the article of coop’s bylaws grants coop’s board_of directors broad discretion in the handling and disposition of patronage sourced losses this section provides that the board_of directors of this association shall have complete discretion to determine the handling and ultimate disposition of the association’s patronage sourced net losses including allocation unit losses and the form priority and manner in which such losses or portions thereof shall be taken into account retained and ultimately disposed of or recovered the board may retain such losses of the association and subsequently i dispose_of them by offset against the net_earnings of the association of subsequent years ii apply such losses to prior years’ patronage allocations at any time in order to dispose_of them by means of offset and cancellation against members’ and patrons’ equity account balances iii select and use any other method of disposition of such losses as the board_of directors in its sole and absolute discretion shall from time to time determine under the plan coop will seek approval of the court to utilize its patronage sourced net operating losses through the cancellation of a significant portion of its patronage equity the proposed cancellation of the qualified written notices of allocation will be effected by the coop board_of directors pursuant to clause ii above subject_to the approval and consent of the court in accordance with section article of coop’s bylaws coop’s board_of directors will dispose_of coop’s current_year patronage sourced losses and patronage sourced net_operating_loss carryforwards by allocating such losses to offset a portion of the qualified written notices of allocation subject_to such action being approved by the court coop is organized and operates as a cooperative as a cooperative coop conducts its operations with the purpose of operating at cost with respect to the business coop conducts with or for its members when coop realizes a profit on the business it does with or for its members coop is required by its bylaws to distribute such profit to its members through the payment of a patronage_dividend coop claimed a patronage_dividend deduction for federal_income_tax purposes upon the issuance of its patronage equity in the form of qualified written notices of allocation as stated above coop realized significant losses with respect to the business that coop does with or for its members in accordance with section of article of its bylaws coop is authorized to recover these patronage sourced losses through coop’s cancellation of previously issued patronage equity the service recognized this procedure in revrul_70_407 1970_2_cb_52 in that ruling a cooperative cancelled member patronage equities to offset a net patronage sourced loss accordingly based solely on the forgoing we rule that coop may utilize its patronage sourced loss by canceling an equal amount of currently outstanding qualified notices of allocation coop will not otherwise recognize any taxable_income upon the cancellation of such patronage equity this ruling is directed solely to the taxpayer that requested it sec_6110 k of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office a copy of the letter is being sent to your authorized representative cc sincerely yours walter woo senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries