t c no united_states tax_court kevin b kimberlin and joni r steele et al petitioners v commissioner of internal revenue respondent docket nos filed date x and y entered into a private_placement agreement pursuant to which x would serve as the placement agent for the sale of y’s preferred_stock y did not adhere to the agreement a dispute ensued and was later settled pursuant to the settlement agreement in y issued to x warrants to purchase shares of y preferred_stock in the warrants were exercised r in his notices of deficiency determined that the warrants were transferred in_connection_with_the_performance_of_services and the income from the warrants is taxable in pursuant to sec_83 sec_1 cases of the following petitioners are consolidated herewith kevin kimberlin partners ltd partnership kevin b kimberlin tax_matters_partner docket no and spencer trask co and subsidiary f k a spencer trask holdings inc and subsidiary docket no held r’s determination is in error because the warrants were not transferred in_connection_with_the_performance_of_services held further the warrants had an ascertainable fair_market_value on the date of grant in and are therefore taxable in that year solomon leo warhaftig david lederkramer specially recognized peter adebanjo specially recognized and andre castaybert specially recognized for petitioners lydia branch shawna early and fredrick mutter for respondent opinion foley judge the issues for decision in these cases are whether warrants issued to petitioners in accordance with a settlement and release agreement were transferred in_connection_with_the_performance_of_services and therefore constitute taxable_income pursuant to sec_83 the warrants had a readily_ascertainable_fair_market_value in on the date of grant or in the year of exercise and the payment to kevin unless otherwise indicated all section references are to the internal_revenue_code for the years in issue and all rule references are to the tax_court rules_of_practice and procedure kimberlin ie the warrants transferred to him by spencer trask is a constructive_dividend return_of_capital or capital_gain background kevin kimberlin mr kimberlin is an investment banker and an 87-percent shareholder of spencer trask co spencer trask kevin kimberlin ltd partners kimberlin partners is a tefra partnership that was established on date mr kimberlin is the sole general_partner with a 1-percent interest the remaining interests in kimberlin partners are held by entities partly or wholly owned by mr kimberlin ciena corp ciena a delaware corporation was formed in to develop and market dense wavelength division multiplexing systems for long-distance fiberoptic telecommunications networks ciena in need of financing planned several private stock offerings and a subsequent initial public stock offering the relationship between mr kimberlin and ciena began in when mr kimberlin through inno co a new york-based investment_company that is wholly owned by mr kimberlin provided ciena with dollar_figure in seed capital and a dollar_figure letter_of_credit pursuant to a stock subscription agreement on date ciena entered into an exclusive private_placement agreement ppa with spencer trask ventures ventures ventures a new york-based investment banking firm that specializes in obtaining early-stage financing for technology companies is a wholly owned subsidiary of spencer trask the terms of the ppa provided that ventures would attempt to raise dollar_figure million to dollar_figure million through a private_placement offering of ciena stock in exchange for such services ciena agreed to pay ventures a cash commission equal to percent of the amount raised and issue ventures warrant sec_3 to purchase a number of shares ie based on the number of shares sold in the offering the warrants were exercisable for a period of years at dollar_figure per share on date ciena and ventures amended the ppa to allow another investment banking firm to serve as the placement agent for the offering of ciena series a convertible preferred_stock these changes were memorialized by an amended private_placement agreement ppa the ppa provided that following ciena’s series a convertible preferred_stock offering ventures would serve as the placement agent in the offering of warrants also referred to as stock warrants are similar to stock_options they are certificates that allow the owner to purchase a specified number of shares at a specified time for a specified price whereas stock_options are normally granted to employees warrants are granted to the general_public they are typically options to purchase stock over a long period and are freely transferable instruments black’s law dictionary 8th ed ciena series b convertible preferred_stock series b offering pursuant to the ppa ciena was obligated to pay ventures a cash commission and warrants to purchase a number of shares ie based on the number of shares sold in the offering of series b convertible preferred_stock in addition the agreement provided in the event ciena does not at its option proceed with the offering on the terms set forth herein ciena will issue to ventures a warrant exercisable for a period equal to the earlier of x three years or y the occurrence of an initial_public_offering to purchase up to big_number shares of series a preferred at a price of dollar_figure per share ciena subsequently decided not to use ventures as the placement agent for its series b offering instead it sold its series b stock through direct sales methods to institutional and noninstitutional investors in date ciena sold big_number shares of series b stock for dollar_figure per share and received a subscription for another million shares and in january and date sold an additional big_number shares of series b stock for dollar_figure per share ciena did not adhere to the ppa and as a result ventures did not have the opportunity to and did not perform any services for ciena ciena asserted that the only redress available to ventures for ciena’s failure to use ventures as the placement agent for the series b offering was the damages determined pursuant to the liquidated_damages clause in the ppa on date ciena sent a letter to ventures terminating the ppa and enclosed a warrant for big_number shares of ciena series a convertible preferred_stock following ciena’s termination of the ppa a dispute arose between ciena and ventures ventures asserted that as a result of ciena’s breach of the ppa ciena was liable for full compensatory_damages rather than the liquidated_damages delineated in the agreement on date ciena and ventures settled their dispute pursuant to a settlement and release agreement sra the sra provided ciena and each of spencer trask and affiliates agree that as of the date of this agreement the placement agreement as amended to date is hereby terminated and of no further force and effect thus terminating the ppa the sra also provided for the issuance of warrants to ventures exercisable for an aggregate of big_number shares of convertible preferred_stock series b of ciena corporation at dollar_figure per share the exercise period for the sra warrants was the earliest to occur of years from the date of the sra the consummation of any public offering of the company’s stock or the sale of all or substantially_all of the company’s assets the sra further provided for ciena to pay dollar_figure of legal fees ventures incurred in preparation of documents relating to the ppa and the ppa in addition spencer trask ventures and each of its affiliates agreed to forever release acquit and discharge ciena of and from the spencer trask claims and from any and all causes of action following the execution of the sra ventures designated mr kimberlin to receive warrants to purchase big_number shares of ciena stock spencer trask to receive warrants to purchase big_number shares and laura mcnamara to receive warrants to purchase big_number shares on date upon mr kimberlin’s request ciena reissued to kimberlin partners the warrants to purchase big_number shares following a 5-for-1 stock split in date the warrants to purchase big_number shares at dollar_figure per share were converted into warrants to purchase big_number shares at an exercise price of cents per share on date spencer trask and kimberlin partners exercised all of the warrants and purchased big_number shares of ciena series b convertible preferred_stock checks totaling dollar_figure were paid to ciena on the date of exercise the mean selling_price per share of ciena preferred_stock was dollar_figure on date ciena held its initial_public_offering the mean selling_price per share of ciena common_stock on that date was dollar_figure spencer trask did not report on its originally filed return income from the receipt of warrants nor did it report income from the exercise of the warrants on its return in date spencer trask filed an amended_return relating to and reported dollar_figure of income relating to the receipt of the warrants on date respondent mailed a notice_of_deficiency to spencer trask the notice_of_deficiency determined that pursuant to sec_83 and sec_61 the warrants received by spencer trask resulted in dollar_figure of taxable_income in ie the year the warrants were exercised mr and mrs kimberlin did not report income from the receipt of warrants on their originally filed return nor did they report on their return income from the exercise of the warrants in date mr and mrs kimberlin filed an amended tax_return relating to in which they reported dollar_figure of income relating to the receipt of the warrants on date respondent mailed separate notices of deficiency to mr and mrs kimberlin the notices of deficiency determined that in mr kimberlin received a dividend from spencer trask of dollar_figure relating to the exercise of warrants after mr kimberlin received warrants pursuant to the terms of the sra the warrants were reissued in accordance with mr kimberlin’s request to kimberlin partners kimberlin partners exercised those warrants on date for big_number ciena shares and in sold the shares kimberlin partners reported the sale of the ciena stock on schedule d of its form_1065 u s return of partnership income on date respondent mailed to the tax_matters_partner of kimberlin partners and to each partner a notice of final_partnership_administrative_adjustment fpaa the fpaa determined that in the partnership was entitled to an increased basis for the big_number shares of ciena stock purchased with the warrants issued to kimberlin partners in on date mr and mrs kimberlin while residing in greenwich connecticut filed their petition with the court seeking review of the notice_of_deficiency that same day kevin kimberlin tax_matters_partner for kimberlin partners ltd partnership filed a petition seeking review of respondent’s fpaa at the time of the petition the partnership maintained its principal_place_of_business in greenwich connecticut on date spencer trask whose principal_place_of_business was new york new york filed its petition with the court seeking review of the notice_of_deficiency on date the court granted the parties’ joint motion to consolidate these cases discussion i applicable law pursuant to sec_83 the warrants are taxable as income if they were issued to ventures in_connection_with_the_performance_of_services sec_83 whether property is transferred in_connection_with_the_performance_of_services is essentially a question of fact 85_tc_663 affd 806_f2d_169 8th cir sec_1_83-3 income_tax regs provides property transferred to an employee or an independent_contractor in recognition of the performance of or the refraining from performance of services is considered transferred in_connection_with_the_performance_of_services within the meaning of sec_83 the transfer of property is subject_to sec_83 whether such transfer is in respect of past present or future services ventures was prevented by virtue of ciena’s breach from performing services it very much wished to perform the warrants were issued to ventures pursuant to the sra and not in recognition of the performance of or the refraining from the performance of ventures’ past present or future services indeed respondent stipulated that ventures never performed any services for ciena in short the requisite connection between the issuance of the warrants and the performance of services does not exist thus sec_83 is inapplicable respondent’s contentions throughout the course of the litigation were inconsistent confusing and unconvincing initially at trial respondent contended that the payments made pursuant to the sra were payments for ventures to refrain from the performance of services but he later contended that the payments were made pursuant to an employment contract in his opening brief respondent changed his position and contended that although spencer trask received a warrant to purchase big_number shares of ciena series b stock rather than the big_number shares of series a stock specified in the liquidated_damages clause the warrants were granted as a result of the triggering of the liquidated_damages clause emphasis added none of these positions however are supported by the facts in his reply brief respondent continued his quest for a plausible contention he first suggested that the parties renegotiated a larger liquidated_damages amount rather than settle a breach of contract claim a contention squarely at odds with the plain language of the sra ultimately respondent formed a coherent yet flimsy contention asserting that the warrants were transferred in connection with ventures’ performance rather than its refraining from performance of services in his reply brief respondent states the essential facts in this case which support a finding that the warrants were transferred in_connection_with_the_performance_of_services are there was an employment contract the ppa that required ventures to perform underwriting services and required ciena to transfer cash and warrants to ventures for the performance of such services the sole consideration to be furnished by ventures was investment banking services ciena’s intent was to secure the services of ventures ventures was available to perform the services as a placement agent at the time ciena opted not to use its services ventures at least engaged in preparatory work and was reimbursed dollar_figure for preparation of documents related to the ppa and the warrants at issue were granted to ventures as a result of the triggering of the liquidated_damages clause contained in the employment contract these essential facts simply fail to support respondent’s position number sec_1 through merely state that a contract existed and describe the intent of the parties in performing the contract in support of number ie respondent’s recitation of the fact that ventures was available to perform the services respondent cites sec_1_280g-1 income_tax regs inapplicable regulations relating to parachute payments number emphasizing legal fees ventures incurred relating to the ppas is not a pertinent fact finally number returns to the specious contention respondent presented in his opening brief that the warrants were issued as a result of the liquidated_damages clause even if a connection was established by virtue of the warrants in the liquidated_damages clauses of the ppas all such connections were severed by the sra which superseded the ppas ii determination of the warrants’ ascertainable fair_market_value because sec_83 is not applicable the transferred warrants are taxable in the year of grant if they had an ascertainable fair_market_value at that time see sec_61 sec_1_1001-1 income_tax regs the fair_market_value of property is a question of fact and only in rare and extraordinary cases will property be considered to have no fair_market_value 93_tc_623 sec_1 a income_tax regs respondent’s expert testified that the warrants for ciena stock had no ascertainable fair_market_value on the date of grant he was not credible once the court qualified him as an expert the performance of respondent’s expert a former ski instructor went downhill fast he inaccurately stated his credentials repeatedly contradicted himself inappropriately relied on a colleague not disclosed in his report and insisted that multiple errors in his report were the fault of his editor his lack of analytical rigor is exemplified by the fact that he did not realize until cross-examination that the entirety of the supporting text he relied on in the fourth edition of a particular textbook had been deleted from the sixth and current edition indeed he conceded that two of the textbooks upon which he relied were years old and two editions out of date in his analysis of whether ciena stock had an ascertainable fair_market_value respondent’s expert inexplicably insisted that contemporaneous arm’s-length sales of ciena series b stock ie the big_number shares ciena sold in and for dollar_figure per share were not pertinent in determining the stock’s fair_market_value he stated i don’t know if the relevant facts can show a value of dollar_figure to be prudent and reasonable it’s just unclear there’s no fact pattern to suggest the dollar_figure is reasonable other than there’s unrelated parties transacting a negotiated price emphasis added when the court later questioned whether he was trying to determine fair_market_value respondent’s expert stated that fair_market_value could not be determined as a certified financial analyst he was obligated to follow a higher standard and he attempted to determine the intrinsic value of the warrants in sum we find respondent’s expert’s report and testimony of no value see 86_tc_547 opinion testimony must be weighed in the light of the pursuant to sec_7491 petitioners have the burden_of_proof unless they introduce credible_evidence relating to the issue that would shift the burden to respondent see rule a our conclusions however are based on a preponderance_of_the_evidence and thus the allocation of the burden_of_proof is immaterial see 110_tc_189 ndollar_figure demonstrated qualifications of the expert and all other evidence of value petitioners’ expert founder of an economic consulting company was credible consistent and highly qualified in determining a fair_market_value for the warrants he began his analysis with a consideration of the big_number shares of series b stock ciena sold in and for dollar_figure per share he then applied prudent valuation techniques ie focusing on venture capitalist benchmark rates of return to arrive at a fair_market_value on the date of grant of cents per share accordingly we find that there was an ascertainable fair_market_value for the warrants on the date of grant the value of the warrants was includable in and respondent erred in determining a deficiency when the warrants were exercised in iii warrants as dividend income to mr kimberlin pursuant to sec_61 gross_income includes dividends the term dividend is defined in sec_316 as a distribution_of_property by a corporation to its shareholders out of its earnings_and_profits there is no requirement that the dividend be formally declared or even intended by the corporation 89_tc_1010 affd 914_f2d_396 3d cir any portion of a distribution which is not a dividend is applied to the adjusted_basis of the shareholder’s stock and to the extent it exceeds the adjusted_basis of the stock is treated as gain from the sale_or_exchange of property sec_301 - a mr kimberlin received the warrants as a distribution from spencer trask in when a distribution is a distribution other than cash the fair_market_value of the property is determined as of the date of distribution sec_1_301-1 income_tax regs see 84_tc_1192 thus the warrants mr kimberlin received should be valued at the time of receipt ie see sec_1_301-1 income_tax regs we previously determined that the warrants had an ascertainable fair_market_value at the time of distribution and thus they were taxable_income to mr kimberlin upon their receipt in contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing decisions will be entered for petitioners


t c memo united_states tax_court robert m battle petitioner v commissioner of internal revenue respondent docket no 5016-08l filed date robert m battle pro_se gordon p sanz for respondent memorandum opinion haines judge this matter is before the court on respondent’s motion for summary_judgment and to impose a penalty under sec_6673 and petitioner’s motion for judgment on the pleadings respondent made the determination to proceed to collect by lien petitioner’s outstanding income_tax liabilities for and years at issue respondent also made the decision to collect by levy petitioner’s outstanding income_tax liabilities for and petitioner under sec_6330 seeks review of respondent’s determinations the parties’ controversy poses the following issues for our consideration whether respondent abused his discretion in determining to proceed with collection and whether petitioner is liable for the penalty under sec_6673 background petitioner is a licensed physician at the time he filed the petition he resided in texas on date the internal_revenue_service irs issued summonses to petitioner individually and as trustee of hsh investments ktw group ktw investments and ktw consultants two of the summonses were issued because of petitioner’s failure_to_file his individual income_tax returns for the years and upon petitioner’s failure to comply the u s filed a petition to enforce the irs summonses in the u s district_court for the southern district of texas houston division district_court united_states v battle no 05-mc-00520 s d tex date order to enforce 1all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code amounts are rounded to the nearest dollar 2ktw consultants and hsh investments were parties previously before this court and petitioner acted as trustee in ktw consultants trust v commissioner docket no date summonses affd 213_fedappx_307 5th cir after the court issued an order of coercive contempt ordering petitioner to be held in the marshal’s custody until he disclosed the documents sought by the summonses petitioner released the requested data and subsequently filed a notice of appeal petitioner then filed an opening brief for appellant in the u s court_of_appeals for the fifth circuit raising many of the same issues he raised later at the sec_6330 hearing and now asks this court to consider however the court_of_appeals affirmed the judgment of the district_court 213_fedappx_307 5th cir in petitioner filed form sec_1040 u s individual_income_tax_return for all the years at issue but did not pay the reported tax the amounts reported on petitioner’s delinquent returns were assessed along with additions to tax and interest on date respondent sent petitioner a statutory notice of balance due for and on date respondent sent petitioner a statutory notice of balance due for and on date respondent sent petitioner a statutory notice of balance due for on date respondent sent petitioner a letter final notice - notice_of_intent_to_levy and notice of your right to a hearing notice_of_intent_to_levy with respect to petitioner’s unpaid and tax_liabilities on date respondent sent petitioner a letter notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 notice_of_federal_tax_lien with respect to petitioner’s unpaid tax_liabilities for all the years at issue on date in response to the notice_of_intent_to_levy petitioner mailed a request for a hearing with respect to the years and on date in response to the notice_of_federal_tax_lien filing petitioner mailed a request for a hearing with respect to all the years at issue on date respondent’s appeals_office informed petitioner it had received the request for a hearing and provided information relating to the collection_due_process procedure on date appeals officer bart a hill mr hill informed petitioner of the hearing procedures and encouraged petitioner to visit the irs web site the truth about frivolous tax arguments and to review the list of frivolous and groundless arguments mr hill requested that petitioner within days describe the legitimate issues he wanted to discuss and scheduled a telephone conference for date pincite a m mr hill referred petitioner to 115_tc_576 and mailed petitioner copies of the following documents form 433-a collection information statement for wage earners and self-employed individuals form 433-b collection information statement for businesses transcripts for the years at issue publication why do i have to pay taxes and publication introduction to collection_due_process hearings petitioner responded on date by stating his objections and requesting form_4340 certificate of assessments payments and other specified matters which mr hill sent to petitioner on date mr hill conducted the hearing with petitioner on date petitioner failed to submit a completed form 433-a or form 433-b or to discuss any collection alternative during the hearing consequently on date respondent’s appeals_office issued a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination which stated the irs followed proper procedures in filing the tax_lien the lien filing was necessary to protect the government’s interest in the taxpayer’s assets the taxpayer would not abandon his frivolous theories of taxation during this appeal the taxpayer’s failure to furnish a financial statement bars appeals from exploring whether a less intrusive collection alternative such as an installment_agreement or offer_in_compromise might have been appropriate the proposed levy action although intrusive is necessary to collect the valid unpaid tax_liability it is the determination of appeals that the proposed levy action balances the need for efficient collection_of_taxes with the taxpayer’s legitimate concern the action is no more intrusive than necessary on date petitioner filed a petition with the court on date respondent filed a motion for summary_judgment seeking a decision that collection can proceed and to impose a penalty pursuant to sec_6673 on date petitioner filed a motion for judgment on the pleadings and on date filed a response to respondent’s motion for summary_judgment discussion a decision granting summary_judgment may be rendered if the pleadings and other materials in the record show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir we have considered the pleadings and other materials in the record and conclude that there is no genuine issue of any material fact and that a decision may be rendered as a matter of law i the collection action sec_6321 provides that if any person liable to pay any_tax neglects or refuses to pay after demand the secretary can collect such tax by placing a lien on the person’s property or rights to property sec_6331 provides that if any person liable to pay any_tax neglects or refuses to do so within days after notice_and_demand the secretary can collect such tax by levy upon property belonging to such person however the secretary is required to give the taxpayer written notice of his intent to file a lien or to levy and must describe the administrative review available to the taxpayer before proceeding sec_6320 sec_6330 sec_6330 describes the administrative review process providing that a taxpayer can request a hearing with the appeals_office with regard to a levy notice at the hearing the taxpayer may raise certain matters set forth in sec_6330 which include appropriate spousal defenses challenges to the appropriateness of collection actions and offers of collection alternatives further a taxpayer may dispute the underlying tax_liability for any_tax period if the taxpayer did not receive a notice_of_deficiency for the tax_liability or did not otherwise have an opportunity to dispute the tax_liability sec_6330 frivolous arguments however are not relevant issues in a hearing pierson v commissioner supra a taxpayer's position is frivolous or groundless if it is contrary to established law and unsupported by a reasoned colorable argument for change in the law smith v commissioner tcmemo_2000_290 following a hearing the appeals_office must make a determination whether the proposed lien or levy action may proceed in so doing the appeals_office is required to take into consideration the verification presented by the secretary that the requirements of applicable law and administrative procedure have been met the issues raised by the taxpayer and whether the proposed levy action appropriately balances the need for efficient collection_of_taxes with a taxpayer’s concerns regarding the intrusiveness of the proposed collection action sec_6330 in complying with sec_6330 an appeals officer may rely on a computer transcript or form_4340 to verify that a valid assessment was made and that a notice_and_demand for payment was sent to the taxpayer in accordance with sec_6303 118_tc_162 absent a showing of irregularity a transcript that shows such information is sufficient to establish that the procedural requirements of sec_6330 have been met id pincite pursuant to sec_6330 within days of the issuance of the notice_of_determination the taxpayer may appeal that determination to this court although sec_6330 does not prescribe the standard of review that we are to apply in reviewing the commissioner’s administrative determinations we have stated that where the validity of the underlying tax_liability is properly at issue we will review the matter de novo 114_tc_604 114_tc_176 where the validity of the underlying tax_liability is not properly at issue however we will review the commissioner’s administrative determination for abuse_of_discretion sego v commissioner supra pincite goza v commissioner supra pincite petitioner during his hearing asserted the same groundless and frivolous arguments as he did in his later petition and failed to raise any issues relating to the underlying liability by not raising any issues with respect to the amount of the underlying liabilities with appeals petitioner waived his right to challenge the underlying liability in this proceeding see 129_tc_107 118_tc_488 consequently the validity of the underlying tax_liabilities is not at issue see eg hathaway v commissioner tcmemo_2004_15 horton v commissioner tcmemo_2003_197 kemper v commissioner tcmemo_2003_195 widner v commissioner tcmemo_2003_114 the undisputed facts set forth in respondent’s motion declarations in support of the motion and attached exhibits establish that respondent has satisfied the requirements of sec_6330 mr hill who had no prior involvement with respect to the unpaid taxes before the sec_6330 hearing and thus met the requirement of sec_6330 verified that proper assessments were made as reflected on computer transcripts attached to the motion for summary_judgment and in the notice_of_determination and that the requisite notices had been sent to petitioner mr hill also considered petitioner’s arguments and rejected them as frivolous and irrelevant following the hearing mr hill upheld the lien and levy actions concluding that they appropriately balanced the need for efficient collection_of_taxes with petitioner’s concerns regarding the intrusiveness of those actions see sec_6330 upon receiving mr hill’s decision petitioner filed a petition asserting the following arguments in support of his contention that respondent’s determinations were erroneous a legal and proper notice_of_deficiency was not issued to petitioner for the years at issue respondent failed to legally and properly assess the income_tax of petitioner respondent did not timely assess the taxes respondent failed to prepare and execute a form_4340 during the 3-year period following the filing of petitioner’s returns respondent did not provide a legal and proper 60-day notice that petitioner was liable for any_tax assessments the district court’s order on date enforced only two of eight summonses the subpoena issued by the district_court was improper because of a lack of jurisdiction and the special assistant u s attorney scott shieldes who represented the government in petitioner’s summons case refused to receive a duress and protest notice and receipt a notice_of_deficiency assessment and statute_of_limitations petitioner contends in his first two arguments that the irs cannot assess the tax shown on the form sec_1040 he submitted without first issuing a notice_of_deficiency with respect to the third argument it is unclear whether petitioner refers to the statute_of_limitations regarding assessment or the statute_of_limitations regarding collection both of which are addressed below following a summons enforcement proceeding petitioner submitted signed form sec_1040 for the years at issue but failed to date them however the form sec_1040 from through were signed by petitioner's return preparer and dated date the form_1040 was signed and dated by petitioner's return preparer on date sec_6201 authorizes the secretary to assess all taxes reported by a taxpayer on his return richmond v commissioner tcmemo_2005_238 a deficiency_notice is not required to assess taxes where there is no deficiency for example the secretary may assess without a deficiency_notice the amount of tax shown due on a return 126_tc_195 n petitioner submitted form sec_1040 for the years at issue reflecting the tax due there is no statutory provision under sec_6201 which requires the commissioner to issue a notice_of_deficiency with respect to a return before assessing the amount reported on that return in regard to the statute_of_limitations on assessment sec_6501 generally requires that the commissioner assess income_tax within years after the taxpayer files a return wagenknecht v commissioner tcmemo_2008_179 martin v commissioner tcmemo_2003_288 affd 436_f3d_1216 10th cir petitioner filed all returns in and the forms reflect that the irs assessed the amounts petitioner reported on the form sec_1040 within the same year thus meeting the 3-year statute_of_limitations in regard to collection of assessed federal_income_tax the period of limitations begins on the date taxes are assessed and ends years thereafter see sec_6502 129_tc_160 the taxes for the years at issue were assessed during and the collection notices were sent to petitioner in well within the 10-year period of limitations found in sec_6502 b forms federal tax assessments are formally recorded on a record of assessment sec_6203 the summary record of assessment must provide identification of the taxpayer the character of the liability assessed the taxable_period if applicable and the amount of the assessment sec_301_6203-1 proced admin regs mr hill reviewed respondent’s transcripts of account and determined that respondent had properly assessed petitioner’s tax_liabilities in response to a taxpayer’s request under sec_6203 and the regulation for a copy of the record of assessment the commissioner is not required to provide any particular form or document and may choose among documents so long as the form used identifies the taxpayer states the character of the liabilities assessed the tax period giving rise to the assessment the amount of the assessment and the date of assessment sec_301_6203-1 proced admin regs see also 329_f3d_1224 11th cir affg 118_tc_365 furthermore sec_6330 does not mandate that the appeals officer rely on a particular document in satisfying the verification requirement or that the appeals officer actually give the taxpayer a copy of the verification upon which he or she relied 119_tc_252 nestor v commissioner pincite mr hill provided petitioner with forms for the years at issue we have specifically held in nestor v commissioner supra pincite that it is not an abuse_of_discretion for an appeals officer in complying with sec_6330 to rely on form_4340 or a computer transcript of account schroeder v commissioner tcmemo_2002_190 mann v commissioner tcmemo_2002_48 furthermore a form_4340 constitutes presumptive evidence that a tax has been validly assessed pursuant to sec_6203 115_tc_35 because petitioner failed to show some irregularity in the assessment procedure that would raise a question regarding its validity we conclude that the forms reflecting that tax_liabilities were assessed and remain unpaid are sufficient to support a collection action under sec_6320 and sec_6330 davis v commissioner supra pincite petitioner also argues that a form_4340 must be prepared within years from the filing of a tax_return however a form_4340 is simply a literal transcript generated on a specific date containing tax data from an irs master_file associated with a particular taxpayer hazel v commissioner tcmemo_2008_ bowman v commissioner tcmemo_2007_114 affd 285_fedappx_309 8th cir see also armstrong v commissioner tcmemo_2002_224 there is no rule requiring that a form_4340 be prepared within years from the filing of a return c notice_and_demand petitioner’s fifth claim is that the irs failed to give him legal and proper 60-day notice that he was liable for the unpaid tax for the tax years at issue sec_6303 requires that petitioner be given notice_and_demand for payment within days of the making of an assessment a form_4340 which petitioner received is presumptive evidence that a tax has been validly assessed davis v commissioner supra pincite furthermore the forms for the years at issue show that the irs sent petitioner a notice of balance due which constitutes a notice_and_demand for payment as required by sec_6303 for each of the years involved craig v commissioner supra pincite- coleman v commissioner tcmemo_2002_132 proof that notice_and_demand was issued to petitioner’s last_known_address is sufficient to satisfy the requirements of sec_6303 and there is no requirement that respondent prove receipt of such notice 871_f2d_1015 11th cir 849_fsupp_597 s d ohio affd 19_f3d_19 6th cir as petitioner has failed to present any evidence that the notice_and_demand was not issued as reflected on the forms and has failed to show error or irregularity in the forms with respect to the issuance of a statutory notice of balance due we hold that proper notice was received and this argument is without merit d summonses subpoena and duress and protest notice the issues raised relate to the irs summonses a subpoena and an alleged refusal by the special assistant u s attorney to accept a duress and protest notice and receipt the first two issues were raised in and addressed by the court_of_appeals for the fifth circuit see 213_fedappx_307 5th cir under sec_6330 a taxpayer may raise any relevant issue which relates to the unpaid tax however frivolous arguments are not relevant issues in a sec_6330 hearing 115_tc_576 the issues regarding the summonses subpoena and duress and protest notice are immaterial and do not relate to this hearing nor are they relevant issues which may be raised under sec_6330 in addition petitioner is precluded pursuant to sec_6330 from raising the first two of these issues before the appeals officer and this court sec_6330 expressly provides that taxpayers at collection hearings before the commissioner’s appeals_office may not raise issues that were previously raised by taxpayers and considered in any other administrative or judicial proceeding in which the taxpayers meaningfully participated see sec_301_6320-1 sec_301 e proced admin regs 118_tc_488 richmond v commissioner tcmemo_2008_59 wooten v commissioner tcmemo_2003_113 these statutory and regulatory prohibitions are directly applicable to the summons and subpoena issues that petitioner previously litigated in united_states v battle supra accordingly we conclude that petitioner is precluded from raising these issues in this proceeding the last issue petitioner raises is the alleged refusal by the special assistant u s attorney of accepting a duress and protest notice and receipt we are unaware of any statute which requires that a special assistant u s attorney accept such a document or any statute authorizing such a document e abuse_of_discretion and verification where the validity of the underlying tax_liability is not at issue the court will review the determination of the appeals officer for abuse_of_discretion sego v commissioner t c pincite goza v commissioner t c pincite nonliability determinations include appeals’ determination of the appropriateness of the collection action as well as a determination as to matters involving collection alternatives such as an installment_agreement or offer-in-compromise see sec_6330 under an abuse_of_discretion standard the court must determine whether the appeal officer’s exercise of discretion was arbitrary capricious or without sound basis in law or fact 112_tc_19 citing 91_tc_1079 pursuant to sec_6330 the determination of an appeals officer as to a proposed collection action must take into consideration the verification that the requirements of applicable law and administrative procedures have been met the issues raised by the taxpayer and whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary as stated in the notice_of_determination and as shown by the record mr hill considered all three of these matters as part of the hearing process the appeals officer must obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met sec_6330 nonetheless the code does not require the appeals officer in a hearing to rely on a particular document or to provide the taxpayer copies of the documents the appeals officer obtained or reviewed to verify that the requirements of any applicable law or administrative procedure were met the notice_of_determination and the record demonstrate that mr hill complied with sec_6330 by reviewing the administrative files and account transcripts and verifying that all legal and procedural requirements had been met furthermore mr hill addressed the relevant issues raised by petitioner and did not abuse his discretion see craig v commissioner pincite nestor v commissioner t c pincite ii penalty pursuant to sec_6673 sec_6673 authorizes this court to require a taxpayer to pay a penalty not to exceed dollar_figure if it appears that the taxpayer has instituted or maintained a proceeding primarily for delay or that the taxpayer’s position is frivolous or groundless sec_6673 applies to proceedings under sec_6330 pierson v commissioner supra pincite in proceedings under sec_6330 we have imposed the penalty on taxpayers who have raised frivolous and groundless arguments with respect to the legality of the federal tax laws see eg roberts v commissioner t c pincite eiselstein v commissioner tcmemo_2003_22 yacksyzn v commissioner tcmemo_2002_99 the record clearly establishes that the only arguments petitioner made during the administrative processing of this case were frivolous and or groundless moreover petitioner is aware of the frivolity of his arguments as evidenced by a letter petitioner provided to special assistant u s attorney shieldes on date which explains that petitioner was misled by various tax patriot or protest groups that openly challenge the income_tax system furthermore petitioner raised these same frivolous arguments in a prior action before this court in our order and decision entered date in that action we concluded that imposition of the sec_6673 penalty was not appropriate but we cautioned petitioners against raising frivolous contentions in the future petitioner received from the appeals officer publication and was warned that any further pursuit of these arguments could result in penalties under sec_6673 in spite of these warnings petitioner has continued to raise issues which the court has found to be frivolous groundless or lacking in merit petitioner’s conduct demonstrates that this proceeding was instituted and maintained primarily for delay moreover every argument made by petitioner during the administrative appeal and in this court was frivolous and or groundless consequently we find that a penalty under sec_6673 is warranted on the basis of the above we shall impose a penalty on petitioner pursuant to sec_6673 of dollar_figure 3petitioner presented many of the same arguments in ktw consultants trust v commissioner docket no in reaching our holdings herein we have considered all arguments made and to the extent not mentioned above we conclude they are moot irrelevant or without merit to reflect the foregoing an appropriate order and decision will be entered granting respondent’s motion for summary_judgment and for a penalty and denying petitioner’s motion for judgment on the pleadings


office_of_chief_counsel internal_revenue_service memorandum number release date cc ita dhkim plr-148169-07 uilc date february third party communication none date of communication not applicable to industry director financial services lm f from chief branch office of associate chief_counsel income_tax and accounting cc ita subject withdrawal of letter_ruling request in accordance with section a of revproc_2008_1 2008_1_irb_1 this chief_counsel_advice advises you that a taxpayer within your operating division has withdrawn a request for a letter_ruling this advice may not be used or cited as precedent legend a ----------------------------------------------------------------------------------------------------------- ------------------------- b ------------------ c -------------------------- d -------------------------- e -------------------------- f ----------------------- this memorandum advises you that a letter_ruling request dated f submitted on behalf of a is withdrawn pursuant to sec_1_168_k_-1 of the income_tax regulations a requested to revoke its elections not to deduct the additional first year depreciation under sec_168 and sec_168 of the internal_revenue_code for property placed_in_service during the taxable years ended b c d and e a provided no reason for withdrawing its request a is a leasing company with a wide array and large number of assets held in its leasing business during the years in issue a represents that it lacked the internal tax plr-148169-07 resources to properly compute the additional first year depreciation for the assets qualifying for this deduction therefore a was unable to claim the additional first year depreciation and instead made the election not to deduct the additional first year depreciation under sec_168 and sec_168 for qualified_property and percent bonus_depreciation property placed_in_service during the taxable years ended b c d and e pursuant to sec_168 and sec_1_168_k_-1 a taxpayer may elect not to deduct additional first year depreciation for all classes of qualified_property or percent bonus_depreciation property placed_in_service during the taxable_year sec_1_168_k_-1 provides that an election not to deduct the additional first year depreciation made under sec_1_168_k_-1 once made may be revoked only with the written consent of the commissioner of internal revenue to seek the commissioner’s consent the taxpayer must submit a request for a letter_ruling further pursuant to sec_1_446-1 a taxpayer’s request to revoke its election not to deduct the additional first year depreciation is not a change in method_of_accounting and therefore cannot be made through a request under sec_446 to change the taxpayer’s method_of_accounting in this case at the time a notified our office of its intent to withdraw its request we made no decision whether we were or were not adverse to a’s request further a’s election not to deduct the additional first year depreciation for property placed_in_service during the taxable years ended b c d and e remains in effect this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions george blaine associate chief_counsel income_tax accounting by kathleen reed kathleen reed chief branch income_tax accounting


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp 2-plr-109440-03 date date legend distributing controlled shareholder a shareholder b shareholder c shareholder d shareholder e business a percent percent percent percent state a plr-109440-03 dear this is in response to your letter dated date requesting rulings under sec_355 of the internal_revenue_code the code with respect to a proposed transaction additional information was received in letters dated march may and date the material information submitted is summarized below distributing is a state a corporation that files its federal_income_tax return on a calendar_year basis using the accrual_method of accounting distributing has a single class of stock and no securities outstanding the stock of distributing is owned by shareholder a and by shareholder b among others distributing is engaged in business a financial information has been received indicating that business a has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the last five years in an attempt to minimize disputes between shareholder a and shareholder b that were adversely affecting distributing’s business and achieve differing business growth objectives of shareholder a and shareholder b distributing proposes the following steps to implement a corporate_division of business a distributing will form a subsidiary controlled and will contribute to controlled certain assets of business a in exchange for all of the stock of controlled and the assumption by controlled of certain distributing liabilities distributing will distribute of the stock of controlled to shareholder b in exchange for all of shareholder b’s distributing stock and each for each of shareholders c d and e in exchange for all of their stock of distributing the distribution distributing has made the following representations with respect to the proposed series of transactions a the fair_market_value of the controlled stock and other consideration to be received by each shareholder of distributing will be approximately equal to the fair_market_value of the distributing stock surrendered by the shareholder in the exchange b no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation c following the transaction distributing and controlled will each continue independently and with its separate employee s the active_conduct of its share of all the integrated activities of the business conducted by distributing prior thereto plr-109440-03 d the distribution of the stock of controlled is carried out for the following corporate business purposes to eliminate disputes between the two principal shareholders over management goals and practices to eliminate disagreement that could result in the shareholders being unable to pursue these business operations the distribution of the stock of controlled is motivated in whole or substantial part by one or more of the corporate business purposes e there is no plan or intention by the shareholders or security holders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in or securities of either distributing or controlled after the transaction f there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 g the five years of financial information submitted on behalf of distributing is representative of distributing’s present operations and with regard thereto there have been no substantial operational changes since the date of the last financial statement submitted h there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business i the total adjusted bases and fair_market_value of the assets transferred to controlled by distributing each equals or exceeds the sum of the liabilities assumed by controlled plus any liabilities to which the transferred assets are subject j the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred k no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution of controlled stock l payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length m no two parties to the transaction are investment companies as defined in sec_368 and iv n no distributing shareholder or shareholders will hold immediately after the distribution disqualified_stock within the meaning of sec_355 which constitutes a or greater interest in distributing or controlled plr-109440-03 o the distribution is not a part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing fifty percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing fifty percent or more of the total value of all classes of stock of either distributing or controlled p distributing neither accumulated its receivables nor made extraordinary payments of its payables in anticipation of the transaction q distributing is not an s_corporation within the meaning of sec_1361 and there is no plan or intention by it or controlled to make an s_corporation_election pursuant to sec_1362 r distributing and controlled will each pay its own expenses of the proposed transaction s following the proposed transaction neither distributing nor controlled will guarantee collateralize or accommodate in any way any debt of the other corporation based solely on the information provided and the representations made we conclude as follows the transfer of certain business a assets by distributing to controlled in exchange for all the stock of controlled and the assumption of certain distributing liabilities described above followed by the distribution of all of the controlled stock to shareholders b c d and e in exchange for all of the distributing stock owned by these shareholders will be a reorganization within the meaning of sec_368 distributing and controlled will each be a party to the reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing upon the transfer of certain business a assets to controlled in exchange for the controlled stock and assumption of certain distributing liabilities as described above sec_361 and sec_357 no gain_or_loss will be recognized by distributing upon the distribution of all the stock of controlled sec_361 no gain_or_loss will be recognized by controlled upon the receipt of the assets and liabilities of business a in exchange for all the shares of the controlled stock sec_1032 the basis of each of the assets to be received by controlled in the transaction will equal the basis of such asset in the hands of distributing immediately prior to the transaction sec_362 the holding_period of each of the assets to be received by controlled will include the period during which distributing held such assets sec_1223 plr-109440-03 no gain_or_loss will be recognized by and no amount will be included in the income of shareholders b c d and e upon the receipt of controlled stock in exchange for their distributing stock respectively sec_355 the basis of the controlled stock to be received by shareholders b c d and e will be the same as the basis of the distributing stock surrendered in exchange therefore sec_358 the holding_period of the controlled stock to be received by shareholders b c d and e will include the holding_period of the distributing stock surrendered by such shareholders in exchange therefor provided that the distributing stock is held as a capital_asset on the date of the exchange sec_1223 as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 no opinion is expressed as to the tax treatment of the transaction under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above ruling in accordance with a power_of_attorney on file in this office copies of this letter are being sent to the authorized party a copy of this letter must be attached to the federal_income_tax return of the taxpayers involved for the taxable_year in which the transaction is consummated this ruling is directed only to the taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely alison burns acting assistant branch chief branch office of associate chief_counsel corporate cc


internal_revenue_service number release date index number ------------------------------- -------------------------------------------------------- ---------------------------- ------------------------ department of the treasury washington dc person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc psi b1 - plr-159224-03 date jan ----------------------- ------------------------------ legend legend x ----------------------------------------- d1 dear -------------------- this responds to your letter dated date in which you requested relief under sec_1362 of the internal_revenue_code facts x was incorporated on d1 the shareholders of x intended it to be treated as an s_corporation effective on d1 however the election to be treated as an s_corporation was not timely filed law and analysis s_corporation effective sec_1362 states in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 allows a small_business_corporation to elect to be treated as an sec_1362 provides the rules as to when such an election will become x did not timely file an election to be treated as an s_corporation under except as expressly provided herein no opinion is expressed or implied sec_1362 b provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that year sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d1 within days from the date of the letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter provides that it may not be used or cited as precedent letter is being sent to your authorized representative enclosures copy of this letter copy for sec_6110 purposes dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries in accordance with the power_of_attorney on file with this office a copy of this this ruling is directed only to the taxpayer requesting it sec_6110 sincerely


department of the treasury o3i government entities division internal_revenue_service washington d c aug uniform issue list ter rasts legend taxpayer a ira x amount a account b company a dear this is in response to your request dated supplemented by letters dated rollover requirement contained in sec_408 of the internal_revenue_code the code in which you request a waiver of the 60-day and the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age maintained ira x with company a taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to her reliance on incorrect information from an employee of company a which led to amount a being placed into a account b which was a non ira account taxpayer a further represent that amount a has not been used for any other purpose taxpayer a was concerned with the investment of her ira account and decided to transfer her retirement_funds into an ira account with a higher yield she discussed this with a representative of company a she transferred amounts a to another account with company a taxpayer a was advised that the transfer would be tax free however these amounts were mistakenly placed in account b a non-ira account 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 a in this instance page 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 partial rollovers sec_408 of the code provides that sec_408 does not sec_408 of the code provides that the rollover provisions of section sec_408 of the code provides a similar 60-day rollover period for d do not apply to any amount required to be distributed under sec_408 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 sec_408 of the code provides that the secretary may waive the 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 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 revproc_2003_16 2003_4_irb_359 date provides that in page 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 her assertion that her failure to accomplish a timely rollover was caused by her reliance upon a representative of company a taxpayer a wishing to get a higher yield on her ira discussed other investment possibilities with a representative of company a she was advised that her transfer would be tax-free therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount a from ira x taxpayer a are granted a period of days from the issuance of this ruling letter to contribute amount a 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 contributions said contributions of amount a into an ira will be considered rollover_contributions within the meaning of sec_408 of the code please address all correspondence to distributed by sec_401 of the code if you wish to inquire about this ruling please contact of the code provides that it may not be used or cited as precedent no opinion is expressed as to the tax treatment of the transaction described this ruling does not authorize the rollover of amounts that are required to be this letter is directed only to the taxpayer who requested it sec_6110 herein under the provisions of any other section of either the code or regulations which may be applicable thereto fone ufo deleted copy of ruling letter notice of intention to disclose employee_plans technical group sincerely yours enclosures at


internal_revenue_service number release date index number ---------------------------------------------------- -------------------------------------- ------------------------- -------------- ------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b1 plr-136031-07 date date ----------------------------------------------------- this letter responds to a letter dated date submitted on behalf of x legend x ----------------------------------------- country ----------- date -------------------------- dear ---- ------ requesting that the internal_revenue_service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an entity classification election facts country x represents that x is a foreign_entity eligible to elect to be treated as an association_taxable_as_a_corporation x intended to be treated as an association_taxable_as_a_corporation effective date due to inadvertence x failed to file a timely form_8832 entity classification election electing to treat x as an association_taxable_as_a_corporation effective date law and analysis corporation under sec_301_7701-2 or an eligible_entity the information submitted states that x was formed on date under the laws of sec_301_7701-3 provides that a business_entity that is not classified as a sec_301_7701-3 provides that except as provided in sec_301 sec_301_9100-1 provides that the commissioner may grant a reasonable plr-136031-07 can elect its classification for federal tax purposes a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability or b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin commissioner will use to determine whether to grant an extension of time to make the election making certain elections determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief 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 granting relief will not prejudice the interests of the government conclusion conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is sec_301_9100-2 provides the rules governing automatic extensions of time for based solely on the information submitted and the representations made we sec_301_9100-3 provides the standards the commissioner will use to sec_301_9100-1 through provide the standards the except as specifically set forth above no opinion is expressed concerning the plr-136031-07 granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as an association_taxable_as_a_corporation effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact a corporation for federal tax purposes provides that it may not be used or cited as precedent being sent to x's authorized representatives pursuant to a power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer requesting it sec_6110 sincerely s william p o'shea associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc