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 b05 plr-112851-16 date date ty ------- legend parent date date company official ---------------- ------------------------ -------------------------------- --------------------------- ---------------------------- ------------------- ------------------------------------ ------------------------------------------------ tax professional -------------------------------- ------------ ------------------------------------------------- dear -------------- this responds to your letter dated date as modified by your letter dated date requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election the extension is being requested for parent and the members of its affiliated_group to make an election to file a consolidated federal_income_tax return with parent as the common parent under sec_1_1502-75 of the income_tax regulations for the taxable_year ending date hereinafter referred to as the election the material information submitted for consideration is summarized below plr-112851-16 parent was the common parent of an affiliated_group consisting of parent and multiple subsidiaries the parent group an election for the parent group to file a consolidated_return with parent as the common parent for parent’s taxable_year ending date was due on the last day prescribed by law including extensions of time for filing parent’s return but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 of the internal_revenue_code the code for parent and any member of the parent group for their taxable years ending date and for any subsequent year will not expire prior to date parent has represented that it does not seek to alter a return position for which an accuracy related penalty has been or could be imposed under sec_6662 of the code sec_1_1502-75 provides in part that an affiliated_group_of_corporations which did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation which has been a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents in accordance with sec_1 b of the regulations to the regulations under sec_1502 if a group wishes to exercise its privilege of filing a consolidated_return such consolidated_return must be filed not later than the last day prescribed by law including extensions of time for the filing of the common parent's return under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections 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 the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file the election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make a valid election and that the plr-112851-16 request for relief was filed before the failure to make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly provided that parent group qualifies substantively to file a consolidated_return for the applicable tax_year we grant an extension of time under sec_301_9100-3 until days from the date on this letter for parent to file the election by filing a consolidated_return with parent as the common parent and attaching a form_1122 for each member of parent group for the taxable_year ending date parent group must attach a copy of this ruling letter to such return or if parent group files the return electronically a statement must be attached to the return that provides the date and the control number of this ruling letter the above extension of time is conditioned on parent group's tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to parent group's tax_liability for the years involved a determination thereof will be made by the applicable director's office upon audit of the federal_income_tax returns involved we express no opinion with respect to whether parent group qualifies substantively to file a consolidated_return in addition we express no opinion as to the tax effects or consequences of filing the return or the election late under the provisions of any other section of the code or regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the return or the election late that are not specifically set forth in the above ruling for the purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by parent company official and tax professional however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply 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 plr-112851-16 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 _ken cohen______________ ken cohen chief branch office of associate chief_counsel corporate cc


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-101130-03 date date a b c trust1 trust2 d1 d2 d3 d4 dear this letter responds to a letter dated date submitted on behalf of x by its authorized representative requesting relief under sec_1362 of the internal_revenue_code a the president of x represents that x elected to be an s_corporation effective d1 a further represents that b and c shareholders of x created trust1 a wholly-owned grantor_trust and permitted shareholder of x on d2 b and c his wife transferred their shares of x stock to trust1 at the formation of the trust or shortly plr-101130-03 thereafter following the death of b trust1 divided into three separate trusts on d3 stock of x was transferred from trust1 to two of the three new trusts created upon the death of b a represents that one of these trusts qualified as a wholly-owned grantor_trust and a permitted shareholder of x the other trust trust2 was intended to qualify as a qualified_subchapter_s_trust qsst however c the beneficiary of the trust2 did not know and the accountants and attorneys advising c did not inform c of the need to file the election required under sec_1361 on d4 all the shareholders of x were advised of the failure_to_file the qsst election for trust2 and the resultant termination of x’s s_corporation_election the shareholders advised the accounting firm to prepare the request for relief this request for relief under sec_1362 was subsequently submitted a represents that the failure_to_file the qsst election was not motivated by tax_avoidance or retroactive tax planning c represents that c has filed c’s federal_income_tax return consistent with the treatment of trust2 as a qsst the shareholders of x represent that they have filed their federal_income_tax returns consistent with the treatment of x as an s_corporation since d1 the shareholders of x also represent that they had no control_over or knowledge of the events that led to the termination of x’s election to be an s_corporation x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate and other than a_trust described in sec_1361 who is not an individual sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder sec_1361 provides that in the case of a qsst for which a beneficiary makes an election under sec_1361 the trust is treated as a_trust described in sec_1361 and for purposes of sec_678 the beneficiary of the trust shall be treated as the owner of that portion of the trust that consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1361 provides that a beneficiary of a qsst may elect to have that section apply sec_1_1361-1 of the income_tax regulations provides that the current income_beneficiary of the trust must make the election under sec_1361 by signing and filing with the service_center with which the corporation files its income_tax returns plr-101130-03 the applicable form or a statement including the information listed in sec_1_1361-1 sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election terminated on d3 when trust2 an ineligible s_corporation shareholder acquired x stock we also conclude that the termination was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d3 and thereafter provided x's s_corporation_election was otherwise valid and provided that the election was not terminated under sec_1362 trust2 will be treated as a_trust described in sec_1361 and c will be treated for purposes of sec_678 as the owner of the portion of the trust which consists of x stock the shareholders of x must include their pro_rata share of the separately_stated and nonseparately computed items of x as provided in sec_1366 make any adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 if x or its shareholders fail to treat themselves as described above this ruling is null and void this ruling is conditioned upon c filing an appropriately completed qsst election effective d3 with the appropriate service_center within days following the date of this letter a copy of this letter should be attached to the election except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code in particular we express no opinion on whether trust2 is or ever was a qsst within the meaning of sec_1361 plr-101130-03 this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x's authorized representative sincerely yours 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


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number release date cc pa apjp b03 uilc internal_revenue_service national_office field_service_advice memorandum for associate area_counsel -st paul cc sb stp from subject assistant chief_counsel administrative provisions judicial practice cc pa apjp compliance with rule_6_e_order this chief_counsel_advice responds to your facsimile transmittal form dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend x y date a date b date c issues v w whether the preparation of a notice_of_deficiency based upon materials collected and prepared by the criminal_investigation_division during a grand jury investigation violated the restriction on the disclosure of grand jury matters in rule e whether the internal_revenue_service service should obtain an order authorizing the further release of grand jury materials before using the materials for the preparation and trial of a tax_court case conclusion the service properly relied upon the materials forwarded from the criminal_investigation_division agents who had worked on the grand jury investigation of the taxpayers to prepare the notice_of_deficiency because the turnover of materials was not a disclosure of matters_occurring_before_the_grand_jury further if it is determined that the release of such materials did result in the disclosure of matters_occurring_before_the_grand_jury the service should nevertheless defend the use of the materials in the civil investigation because the government had properly obtained an order pursuant to rule e of the federal rules of criminal procedure authorizing the release of such materials for use in the civil determination of the tax_liabilities of the defendants in the criminal cases and relied upon that order in good_faith if you determine that the release of the materials did result in the disclosure of matters_occurring_before_the_grand_jury you should ask the local united_states attorney to obtain another order authorizing the further dissemination of grand jury materials before using the information in a tax_court trial since the order previously obtained by the service authorizes the use of the specified grand jury materials only for the determination of the civil liability further disclosures may be necessary in the preparation and trial of the tax_court case facts during date a x and y pled guilty in a federal district_court to a violation of sec_7201 attempting to evade or defeat tax following the conclusion of a grand jury investigation as part of the terms of written plea agreements x and y authorized the criminal_investigation_division of the service to disclose its tax calculations backup documentation and other work products to the civil tax authorities further at a sentencing hearing on date b the assistant united_states attorney prosecuting the cases for the government filed a motion for entry of an order under federal rules of criminal procedure e on date b the presiding district_court judge entered an order providing that it would give its imprimatur to the disclosure of the personal and business records of the defendants that was obtained by way of a grand jury subpoena by authorizing the agents of the grand jury to provide the civil authorities of the service with any_tax calculations back-up documentation and work product gathered during the criminal grand jury investigation of the defendants and their businesses shortly thereafter the criminal_investigation_division turned over its records of the criminal investigation including a special agent’s report and the exhibits to the report to civil investigators in the service’s examination_division on date c in response to an inquiry from the civil investigators in the examination_division the local chief_counsel office advised the investigators that they could use the materials provided by the criminal_investigation_division in their investigation of x and y’s civil tax_liabilities eventually the service issued notices of deficiency to x and x’s spouse v and y and y’s spouse w petitions were filed with the tax_court to contest the deficiencies you have received the materials used to prepare the notices of deficiency but are waiting for this advice before reviewing those materials law and analysi sec_1 in preparing a notice_of_deficiency that determined the civil tax_liability of the taxpayers the service properly relied upon the tax calculations back-up documentation and work product of the criminal_investigation_division agents who had served as agents of the grand jury in a criminal investigation rule e of the federal rules of criminal procedure provides a prohibition on the disclosure of matters_occurring_before_the_grand_jury as follows general_rule of secrecy a grand juror an interpreter a stenographer an operator of a recording device a typist who transcribes recorded testimony an attorney for the government or any person to whom disclosure is made under paragraph a ii of this subdivision shall not disclose matters_occurring_before_the_grand_jury except as otherwise provided for in these rules no obligation of secrecy may be imposed on any person except in accordance with this rule a knowing violation of rule may be punished as a contempt of court rule e provides the limited exceptions under which matters_occurring_before_the_grand_jury may be disclosed in addition to authorizing disclosures to the government attorneys working on the criminal case that is the subject of the grand jury investigation and to other government personnel assisting in the criminal investigation rule e c provides that disclosures otherwise prohibited may also be made i when so directed by a court preliminarily to or in connection with a judicial proceeding the supreme court decisions in united_states v baggot 436_us_476 and united_states v sells engineering inc 436_us_418 narrowly interpreted the conditions under which district courts may authorize the disclosure of grand_jury_material to the service for use in determining the civil tax_liabilities of taxpayers in sells the supreme court held that rule e orders are available to the service only preliminarily to or in connection with a judicial proceeding and only upon a showing of particularized need in baggot the court held that a civil tax audit is not preliminary to or in connection with litigation but is intended for the assessment of tax_liability through administrative channels as a result of these rulings it is generally necessary to wait until after a taxpayer has initiated litigation to request disclosure of matters occurring before a grand jury unless the material is sought preliminarily to the government’s initiation of court action the government may however rely upon documentation that does not result in the disclosure of matters_occurring_before_the_grand_jury in its civil investigation a the tax calculations back-up documentation and work product disclosed to the service’s civil investigators did not result in the disclosure of matters_occurring_before_the_grand_jury the restriction on disclosure in rule e applies only to matters_occurring_before_the_grand_jury in applying rule e courts have generally limited such matters_occurring_before_the_grand_jury to those materials that could disclose what happened before the grand jury the touchstone of rule e 's applicability is whether the disclosed materials would 'elucidate the inner workings of the grand jury ' 852_f2d_413 9th cir vacated and remanded 490_us_1043 remanded on grounds that circuit_court lacked jurisdiction to consider interlocutory appeal of motion to dismiss case based upon an alleged rule e violation under the inner workings approach the rule encompasses evidence which would tend to reveal the identities of witnesses or jurors the substance of testimony the strategy or direction of the investigation the deliberations or questions of the jurors and the like 656_f2d_856 d c cir see also 30_f3d_224 1st cir 6_f3d_1407 9th cir 757_f2d_1085 10th cir citing 280_f2d_52 2d cir the rule does not provide a shield of secrecy for books_and_records created for purposes independent of the grand jury that are provided to the grand jury in the course of its investigation 628_f2d_1368 d c cir thus in considering whether materials collected or prepared for use in connection with a grand jury investigation may be disclosed without disclosing a matter occurring before the grand jury it is necessary to separately study each item or collection of items some items such as recorded transcripts of the grand jury proceedings are obviously protected under rule e see 441_us_211 disclosure of grand jury transcript is subject_to rule e c i 682_f2d_61 3d cir rule e applies not only to information drawn from a transcript of grand jury proceedings but also to anything which may reveal what occurred before the grand jury 656_f2d_856 d c cir rule e encompasses direct revelations of grand jury transcripts 995_f2d_56 5th cir to obtain grand jury transcripts party seeking disclosure must demonstrate that material is needed to avoid possible injustice in another proceeding that need for disclosure is greater than need for continued secrecy and that the request is structured to cover only material so needed 30_f3d_224 1st cir rule e encompasses the direct revelation of grand jury transcripts and documents identified as grand jury exhibits whose contents are testimonial in nature or otherwise directly associated with the grand jury process the rationale for keeping grand jury matters secret disappears if the information is or subsequently becomes a matter of public knowledge typically the source of such evidence will be the transcript of the criminal trial proceedings such proceedings may be the actual criminal trial or a sentencing hearing see 662_f2d_1232 ndollar_figure 7th cir aff’d sub nom 463_us_476 if the tax evidence had been publicly disclosed in open court to provide the basis for the acceptance of a guilty plea or otherwise received at trial no disclosure problem would have arisen 791_f2d_58 6th cir neither sells nor baggot prohibits the use of evidence which is presented at a criminal trial in determining civil tax_liability as such evidence is a matter of public record 773_f2d_1463 4th cir prosecutor did not have to obtain a rule_6_e_order prior to disclosing grand_jury_material during a guilty plea hearing but the government cannot vitiate grand jury secrecy by dumping grand jury records into evidence at a sentencing hearing 860_f2d_508 2d cir the consensus of the courts however is that rule e has no application to matters obtained prior to the referral of a case for grand jury proceedings for example books records documents witness statements special agent’s reports counsel reports service fact sheets and similar items which were obtained or prepared prior to a referral do not constitute matters_occurring_before_the_grand_jury see 99_tc_342 it is also fairly clear that the presentation of evidence to a grand jury does not change the nature of that evidence so as to become rule e matters see 770_f2d_959 11th cir government’s disclosure of evidence obtained from a source independent of a grand jury does not violate rule e united_states ex rel woodard v tynan f 2d pincite rule e only protects against disclosure of what occurs in the grand jury room 682_f2d_61 3d cir evidence acquired during an fbi investigation including tape recordings transcripts of consensually monitored conversations documents and a summary memorandum were the product of an independent investigation and the disclosure of those items does not violate rule e 662_f2d_1232 7th cir aff’d sub nom 463_us_476 portions of a special agent’s report which could be clearly divorced from the grand jury proceedings were not subject_to rule e in re grand jury investigation 610_f2d_202 5th cir disclosure of a recommendation that an indictment be sought and of the potential criminal liability of an individual did not violate rule e as disclosure was the result of a prior investigation in re grand jury subpoena 920_f2d_235 4th cir service’s supervisory intelligence agent did not violate grand jury secrecy rule by making available to service civil agents material obtained from criminal investigation targets through search warrants that were obtained during a grand jury investigation disclosure of evidence that was obtained after a case had been referred to a grand jury or was obtained by means of the grand jury process is not automatically a disclosure of matters_occurring_before_the_grand_jury although the sixth circuit in in re grand jury proceedings 861_f2d_860 6th cir concluded that such matters presumptively involved matters_occurring_before_the_grand_jury it allowed the government to rebut the presumption by showing that the materials would otherwise be available in civil discovery and would not reveal the nature scope or direction of the grand jury see also united_states v alpha medical management inc u s app lexis u s t c cch big_number 6th cir date unpublished opinion any link between the documents produced in response to a grand jury subpoena seeking all of a taxpayer’s business records to determining the nature or direction of the grand jury inquiry was tenuous at best other appellate courts have reached similar conclusions see eg in re grand jury proceed838_f2d_304 8th cir unless a document reveals something about the intricate workings of the grand jury itself documents are not intrinsically secret just because they were examined by the grand jury in re grand jury investigation 610_f2d_202 5th cir information developed by the government investigatory agency with an eye toward ultimate use in a grand jury proceeding does not become protected by rule e if it exists separately and independently of the grand jury process in contrast information concerning whether evidence regardless of how and when it was obtained by the investigators was presented to the grand jury is protected from disclosure by rule e 815_f2d_1373 10th cir the resolution consistently turns on whether revelation in the particular context would in fact reveal what was before the grand jury 6_f3d_1407 9th cir 656_f2d_856 the service and the justice_department both take the position that evidence which existed without regard to the inner workings of a grand jury and the existence of which is known without resort to grand jury leads may be used for civil purposes see sec_7602 service summons authority i r m which requires that service employees acting as agents of a grand jury segregate and mark as non grand jury any information obtained prior to the agents’ involvement in the grand jury investigation and any independently obtained information since you have not yet reviewed the records used to prepare the notice_of_deficiency we do not know what documents provided by the grand jury agents have been included in the civil investigation file or whether any of these documents would tend to disclose what happened before the grand jury in view of the service’s policy of segregating and documenting the independent source of materials that are not subject_to the secrecy requirement of rule e and the caution used by the grand jury agents before disclosing any investigative materials to the civil authorities in this case we would presume that only materials that are not subject_to rule e have been included b if any matters_occurring_before_the_grand_jury have been disclosed to the service civil investigators and were used in the preparation of the notice_of_deficiency such disclosures were made in good_faith and should not form the basis for any punitive action by the tax_court in the pending cases even if the service inadvertently and in good_faith uses grand jury information in making deficiency determinations courts do not routinely suppress that information and declare the notices invalid see 83_tc_309 good-faith exception to exclusionary rule set forth in 468_us_897 makes suppression inappropriate 770_f2d_381 3d cir good-faith reliance on facially valid disclosure order makes suppression inappropriate 787_f2d_109 3d cir same the supreme court made it clear in united_states v leon that suppression of evidence in any judicial proceeding is permissible only to vindicate a constitutional right or to deter governmental violation of a statute designed to secure a constitutional right or to implement a fundamental right arising from the criminal process leon u s pincite citing 354_us_449 suppression is inappropriate in a situation where the service inadvertently and in good_faith improperly uses grand jury information in making deficiency determinations or in good_faith relies on a facially valid disclosure further district courts have broad discretion to determine whether disclosure is warranted in granting rule e orders district courts consider whether the public interest in efficient effective and fair enforcement of federal statutes which is often best served by permitting disclosure outweighs the threat to the grand jury system caused by disclosure 441_us_211 the concerns underlying grand jury secrecy are implicated to a much lesser extent when the disclosure is limited to government agents who have incentives such as other disclosure laws in preventing further dissemination 481_us_102 the tax_court will respect an order issued by a district_court in 91_tc_947 for example the taxpayer asserted that the service failed to demonstrate particularized need when it obtained the rule_6_e_order from the district_court and that the testimony of witnesses before the tax_court who also testified before the grand jury should be suppressed the tax_court held that comity and judicial economy dictate that it not review the order of another court likewise in 91_tc_969 the tax_court decided that a deficiency_notice issued after baggot and sells and based on a pre-baggot and sells rule_6_e_order was valid it found that the district_court in issuing the rule_6_e_order implicitly sanctioned the use of grand jury materials in preparing the notice_of_deficiency thus even if the service inadvertently relied upon materials that could disclose the workings of the grand jury the tax_court is unlikely to find that the notice_of_deficiency is invalid or suppress the evidentiary materials from the civil examination at the trial in this case seek a rule_6_e_order if you determine that the materials used by the service’s agents to prepare the notice_of_deficiency include materials that would tend to disclose matters_occurring_before_the_grand_jury and that you may need to make further disclosures of those materials to prepare the civil cases for trial although the tax_court will not generally undo actions previously taken by the service in good_faith in preparing the notice_of_deficiency the court will follow district_court orders governing the use of grand jury materials or if no order has been issued will itself disallow the use of protected grand jury materials in the cases before it in 91_tc_969 the tax_court followed the instructions in a district_court by requiring the service to establish a particularized need for the further disclosure of protected grand jury materials in trial preparation and at the trial since the district_counsel attorney was privy to the grand jury materials and proceedings the court permitted him to review the materials to gather proof of particularized need so long as he did not disclose either what occurred before the grand jury or any specific documents in his investigation likewise in in the matter of grand jury proceed877_f2d_632 7th cir after a series of battles over the use of grand jury materials under a pre-baggot and sells rule_6_e_order the seventh held that an order it had issued was adequate to permit the service’s further disclosure of grand jury materials in the tax_court case see also 889_f2d_1466 5th cir government filed a second rule e motion showing a particularized need for using the documents in tax litigation if you determine upon review of the materials relied upon by the service in issuing the notice_of_deficiency that the materials tend to disclose the nature of the grand jury proceedings or if you decide that you need additional grand jury materials that are protected by rule e consider whether to request a new order under rule e i for the disclosure of grand jury materials in connection with the judicial proceeding in the tax_court we would not rely upon the existing order inasmuch as it covers only some documents and permits their disclosure to civil authorities for use in the determination of the defendant’s tax_liability although we might argue that the tax_court case furthers the determination of tax_liability preparation and trial of the case could necessitate disclosures beyond the civil authorities make the request in writing to the prosecuting assistant united_states attorney to obtain a disclosure order and be prepared to provide an affidavit that sets forth particularized need in any motion for a rule_6_e_order the government will need to address the requirement of particularized need which is derived from the supreme court's decision in 356_us_677 to establish particularized need the moving party must show that the material sought is needed to avoid a possible injustice in another judicial proceeding the need for disclosure is greater than the need for continued secrecy and the request is structured to cover only the material so needed 441_us_211 although the particularized need standard applies to the government's disclosure requests as well as to those of private litigants the special interests of the public that are served by disclosure to the government must be considered by a district_court 460_us_557 structure any request to cover only material that is needed in departing from the general requirement of secrecy a court should require that the showing of need be made with particularity so that the secrecy of the proceedings may be lifted discretely and limitedly 860_f2d_508 2d cir the request should also specify for what purposes they will be used and who else besides the service attorney will be using or receiving this information if it is contemplated that the evidence will be used in the tax_court that should be specified as set forth in the rule a motion for a disclosure order may be requested and granted ex_parte when the moving party is the government whether to proceed ex_parte should be determined on a case by case basis the motion for the order should specifically seek permission to use the materials in all phases of the litigation including further discovery and any later collection litigation case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views please call if you have any further questions


t c memo united_states tax_court james anthony ransom petitioner v commissioner of internal revenue respondent docket no 22420-17l filed date james anthony ransom pro_se william j gregg and bartholomew cirenza for respondent memorandum opinion lauber judge in this collection_due_process cdp case petitioner seeks review pursuant to sec_6330 of the determination by the internal_revenue_service irs or respondent to uphold a notice_of_intent_to_levy respon- 1all statutory references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure we round all monetary amounts to the nearest dollar dent has moved for summary_judgment under rule contending that there are no disputed issues of material fact and that his determination to sustain the proposed collection action was proper as a matter of law we agree and accordingly will grant the motion background the following facts are based on the parties’ pleadings and motion papers including the attached declarations and exhibits petitioner resided in the district of columbia when he filed his petition petitioner is a contractor for nonprofit_organizations frequently working abroad in such remote locations as south sudan he filed federal_income_tax re- turns for and for and the irs issued him notices of deficiency when he did not petition this court within days of those notices the irs assessed his tax_liabilities for those years including interest and where applicable additions to tax for the irs assessed the tax shown on petition- er’s return which he has not paid in full as of date petitioner’s aggregate outstanding liability was dollar_figure 2this amount included accuracy-related_penalties under sec_6662 for and respondent represents that the irs will abate those penalties be- cause he lacks evidence that the penalties received supervisory approval as re- quired by sec_6751 on date in an effort to collect these unpaid liabilities the irs mailed petitioner a letter notice_of_intent_to_levy and notice of your right to a hearing he timely requested a cdp hearing checking the box for installment_agreement he also checked the box for lien withdrawal but the irs had not filed an nftl for any relevant year petitioner stated that he did not owe the full amount for and that he had filed modifications to that return with no acknowledgment or review by the irs after receiving petitioner’s case a settlement officer so from the irs ap- peals office confirmed that the tax_liabilities had been properly assessed and that all other requirements of applicable law and administrative procedure had been met on date the so sent petitioner a letter acknowledging receipt of his hearing request and scheduled a telephone cdp hearing for date the so informed petitioner that he could not challenge hi sec_2012 and sec_2013 tax_liabilities because he had had a prior opportunity to do so when he received notices of deficiency for those years the so explained that petitioner needed to submit form 433-a collection information statement for wage earners and self- 3this statement appears to refer to a form 1040x amended u s individual_income_tax_return for which petitioner filed in date at the time this case was assigned to a settlement officer the irs had not yet processed that return employed individuals with supporting financial information if he wished the so to consider a collection alternative the so ascertained upon review of petitioner’s account that he was earning self-employment_income in but had made no estimated_tax payments the so informed petitioner that to be eligible for a collection alternative he would need to pay dollar_figure towards his account immediately the so requested that he submit this payment and the requested financial information by date petitioner did not submit the information or the payment before the hearing the telephone conference was held as scheduled on date petitioner stated that he wished to reinstate a previous installment_agreement that had been terminated on date the so replied that this might be possible but that petitioner would first need to submit the required financial information and be- come current on his estimated_tax liability in light of petitioner’s travel schedule the so agreed to extend for one month to date the deadline for submitting the payment and the form 433-a documentation on date the so received petitioner’s form 433-a and support- ing information on date petitioner made a partial payment of dollar_figure towards his estimated_tax liability leaving a balance due of dollar_figure as of date petitioner made no further payments towards that balance due because petitioner had failed to come into compliance with his esti- mated tax obligation the so determined that he was not eligible for a collection alternative at that time the so accordingly closed the case and on date issued a notice_of_determination sustaining the proposed levy following petitioner’s timely petition to this court respondent filed a motion for summary_judgment to which petitioner has responded discussion i summary_judgment standard the purpose of summary_judgment is to expedite litigation and avoid costly time-consuming and unnecessary trials fla peach corp v commissioner 90_tc_678 under rule b we may grant summary_judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law 98_tc_518 aff’d 17_f3d_965 7th cir in deciding whether to grant summary judg- ment we construe factual materials and inferences drawn from them in the light 4another quarter had passed since the so had initially communicated with petitioner bringing his total estimated_tax liability to dollar_figure after he paid dollar_figure there remained a balance of dollar_figure most favorable to the nonmoving party ibid however the nonmoving party may not rest upon the mere allegations or denials in his pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial rule d see sundstrand corp t c pincite we conclude that there are no material facts in dispute and that this case is appropriate for summary adjudication ii standard of review neither sec_6320 nor sec_6330 prescribes the standard of review this court should apply in reviewing an irs administrative determination in a cdp case but our case law tells us what standard to adopt where the valid- ity of the taxpayer’s underlying tax_liability is properly at issue we review the irs’ determination de novo 114_tc_176 where the taxpayer’s underlying liability is not before us we review the irs’ decision for abuse_of_discretion only see id pincite a taxpayer may dispute his underlying liability in a cdp case if he did not receive a valid notice_of_deficiency or otherwise have a prior opportunity to con- test his liability sec_6330 a notice_of_deficiency is valid if it was properly mailed to the taxpayer at his last_known_address sec_6212 131_tc_197 supplemented by 136_tc_463 a taxpayer’s last_known_address is generally the address appearing on his most recently filed and properly processed federal tax_return sec_301_6212-2 proced admin regs even if improperly addressed a notice_of_deficiency is valid if it is actually received by the taxpayer in time to file a petition to this court see bongam v commissioner 146_tc_52 petitioner at the cdp hearing did not challenge his underlying liability for or and is thus precluded from challenging those liabilities now see sec_6330 129_tc_107 114_tc_604 sec_301_6330-1 q a-e2 pro- ced admin regs in his response to the motion for summary_judgment peti- tioner appears to advance a challenge to his underlying tax_liability for by as- serting that the notice_of_deficiency for that year was incorrectly addressed but the address appearing on that notice is identical to the address appearing on peti- tioner’ sec_2013 tax_return his most recently filed tax_return as of the date that notice was mailed the irs has supplied a copy of a completed u s postal service form_3877 showing that the notice_of_deficiency for was sent to the address appearing on petitioner’ sec_2013 return this notice was thus properly mailed to him at his last_known_address see crain v commissioner tcmemo_2012_97 103_tcm_1533 he did not allege in his cdp hearing request during the cdp hearing or in his petition to this court that he did not receive this notice he was therefore precluded from challenging hi sec_2012 tax_liability at the cdp hearing and in this court see sec_6330 giamelli t c pincite because petitioner’s underlying tax_liabilities are not properly before us we review the so’s action for abuse_of_discretion only goza t c pincite sec_301_6330-1 q a-f3 proced admin regs abuse_of_discretion exists when a determination is arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir iii analysis in deciding whether the so abused his discretion in sustaining the proposed levy we consider whether he properly verified that the requirements of any applicable law or administrative procedure have been met considered any rele- vant issues petitioner raised and determined whether any proposed collection 5petitioner appears to have filed in date an amended return with an irs service_center the irs had not processed this return at the time of the cdp hearing and petitioner does not allege that he supplied a copy of the amended_return to the so but whether he did or not would be irrelevant because his receipt of a notice_of_deficiency precluded him from challenging his underlying liability if petitioner believes he is entitled to a refund for he must litigate that claim through a refund_suit see 138_tc_348 action balances the need for the efficient collection_of_taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary see sec_6330 our review of the record establishes that the so properly discharged all of his responsibilities under sec_6330 in concluding that petitioner was not eligible for a collection alternative the so relied on petitioner’s failure to pay in full his estimated_tax liability for the so clearly informed petitioner of the need to make that payment but he paid only dollar_figure toward his liability of dollar_figure petitioner contends that he was un- able to discharge this liability in full because one of his consulting contracts termi- nated on date but the termination of that contract postdated the cdp hearing by two weeks petitioner has not shown that he was incapable of making the required estimated_tax payments during the previous eight months we have consistently held that an so does not abuse his discretion when he declines to consider collection alternatives for a taxpayer who fails to comply with current estimated_tax obligations see giamelli t c pincite starkman v commissioner tcmemo_2012_236 internal_revenue_manual pt date compliance with filing and paying estimated_taxes must be current from the date the installment_agreement begins a lthough an so could accept an installment_agreement that included petitioner’s current estimated_tax liabilities she acted within her discretion in declining to do so boulware v commissioner tcmemo_2014_80 107_tcm_1419 aff’d 816_f3d_133 d c cir the requirement of current compliance as a condition of executing an installment_agreement ensures that current taxes are paid and avoids ‘the risk of pyramiding liability ’ hull v commissioner tcmemo_2015_86 109_tcm_1438 quoting schwartz v commissioner t c memo see 412_f3d_819 7th cir aff’g 123_tc_1 finding no abuse_of_discretion in any respect we will grant summary judg- ment for respondent and affirm the proposed collection action an appropriate order and decision will be entered


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc intl plr-126009-00 date date taxpayer entities individual a entity x dear legend this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file the agreements and annual certifications required under sec_1_1503-2 for the entities and tax years listed on appendix a which is attached to this ruling letter additional information was included in letters dated date date date and date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process individual a was employed as a tax accountant in the tax department of entity x the parent of taxpayer individual a’s responsibilities included the preparation of the dual_consolidated_loss elections and certifications required under sec_1_1503-2 with respect to the federal_income_tax returns of entities the affidavit of individual a describes the circumstances under which the annual certifications were inadvertently omitted from the tax returns and for that reason the agreements required under sec_1_1503-2 were also inadvertently not filed sec_301 -1 b defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except in re plr-126009-00 subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation sec_1_1503-2 fixes the time to file the agreement and sec_1_1503-2 fixes the time to file the annual certification therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards set forth in sec_301_9100-3 based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to file the agreements and annual certifications required under sec_1_1503-2 for the entities and tax years listed on appendix a which is attached to this ruling letter as provided in sec_301_9100-1 the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the agreements and annual certifications this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter should be associated with the agreements and annual certifications no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to taxpayer and the other authorized representative sincerely allen goldstein reviewer office of the associate chief_counsel international attachment appendix a in re plr-126009-00 appendix a subsidiary year of loss amount of loss certification year s agreement years in re plr-126009-00


department of the treasury employer_identification_number contact person - 1d number contact telephone number uil internal_revenue_service p o box cincinnati oh’ release number release date date date legend c scholarship program d scholarship program e scholarship program f scholarship program g scholarship program h scholarship program j scholarship program x a student center y a university x amount y amount z number dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 letter cataiog number 58263t description of your request your letter indicates you will operate scholarship programs called c d e f g h and j you indicate that the purposes of c d e f g h and j are to provide an annual scholarship to current students who are also active at x used for study at an educational_institution y scholarship amounts range from x to y depending on the applicant’s established need and your available_resources at least z scholarship awards will be granted annually all scholarship funds are to be the applicant must meet the following criteria for c d e f and g a must be a full-time y student in good standing and b be active at x for h a must be a junior or senior full-time y student b be active at x c receive at least credits from y d have a gpa of at least a and e major in one of the natural science for j a must be a junior or senior fulltime y student b be active at x c receive at least credits from y d have a gpa of at least a and e major in either business or one the application must be completed and emailed to you by april of the sciences the application should include a personal information b an involvement with x c college income and expenses d how scholarship money will assist in his her education in addition the applicants are asked to attend a meeting with the scholarship committee prior to being awarded a scholarship grant only active voting members are eligible to serve on the selection committee the selection committee members are appointed by your president any student who is active at x is eligible to apply the announcement of the scholarships is published in the sunday x's bulletin for several weeks prior to the application deadline the application will be available through your email address if an applicant is a relative of a board member or substantial donor the affected committed member would be expected to recuse himself or herself from that application the scholarships are non-renewable however the previous recipients are eligible to reapply but must complete a new application and go through the same process again if the terms of the scholarship are violated you will notify y’s financial aid office to have any previously issued funds rescinded and to assist with any collection if any funds have already been spent the selection committee will use its discretion and may take one of three actions as to the returned funds hold the funds until the next round of scholarships and add to those funds distribute the fund proportionally to the remaining awardees or select an alternate awardee from the applications already submitted letter catalog number 58263t basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 a ii e other conditions that apply to this determination e e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request the effective date of our approval is date which is the date your request was submitted this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 b you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary letter catalog number 58263t please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely jeffrey cooper director exempt_organizations rulings and agreements letter catalog number 58263t


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh number release date date date legend x program name s quantity t quantity v dollars amount y quantity w quantity z quantity dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request you were organized for charitable purposes and in furtherance of such purposes you carry out a variety of charitable activities with to primarily focused on global health global development expanding opportunities for americans to have meaningful educational experiences at all levels your letter indicates that you have operated x an educational grant program for several years x was previously only available to organizations but you have decided to expand x to award grants to individuals you developed x with the goal of engaging new ideas and innovations in solving scientific and technological problems essential for high impact global health solutions through x you award s rounds of grants each year against a specific set of topics in the past you have run about t topics in each round in general you choose the topics according to three major criteria which are the topic fits within your goals and disease priorities the topic contains a roadblock where radical new thinking is needed for discovery of an effective health solution and or potential projects within the topic are likely to be well suited for the phased structure of the initiative you also will consider whether a topic will engage participation from scientists outside traditional global health disciplines as well as researchers working in the developing world x has also included topics related to global development and in an upcoming round you will include a communications topic which supports your programmic strategies initially you anticipate you will award y individual grants of v dollars per round with a project term of w months you will likely increase the number of individual grants and possibly the amount of funding depending on the number of qualified individuals and the availability of funds or as circumstances reasonably dictates the individual program of x will be open to any person s from any discipline from student to tenured professor and from any organization colleges and universities government laboratories research institutions non-profit organizations and for-profit companies including individuals not affiliated with any organization you will select applicants that have demonstrated experience against one of the x topics and be exceptionally well-qualified to carry out the charitable purposes of the grant you will expect individual grantees to produce at least one annual progress report and one final report in each w grant period describing the individual's accomplishments with respect to the charitable project and delineating how the funds were spent in furtherance of such charitable objectives you will award the individual grants to each recipient as reimbursement for their time spent on the charitable purpose of the project and to assist the recipient with travel related supplies and expenses_incurred during the term of the project specifics of individual grant program a eligible recipients grants will be awarded on an objective and nondiscriminatory basis you will choose recipients from among eligible_candidates who have submitted a proposal in the form requested by you and all required supporting materials initially to be eligible for a grant applicants must only select one topic of x and may submit only one proposal letter catalog number 58222y b ineligible recipients no disqualified_person as defined in a with respect to you including your substantial contributors your officers and trustees members of the selection committee and family members of the foregoing persons will be eligible to receive an individual in addition you will not award any grant to an individual for a purpose inconsistent your c purpose c selection criteria and scoring your criteria will be appropriate to accomplish the underlying charitable purpose of the grant initially you will require individual grant applicants to meet the following criteria evidence of the applicant's commitment to the topic the applicant's training completed or proposed and or laboratory experience in related areas evidence of the applicant's original research and or success in the relevant areas importance of the topic in the field originality of the project proposed appropriateness of the scope of the topic of the project appropriateness of the methodology and resources available to the applicant you may use other criteria to select recipients such as professional ability or achievement recommendations and letters of support from others familiar with the applicant's work recommendations as to the applicant's motivation character ability or potential evidence of other special talent or geographic area covered by the applicant you will not consider the applicant's race color creed religion sexual orientation age disability citizenship or national origin in selecting an individual grant recipient you may use additional reasonable criteria and restrictions on the group of potential applicants where such restrictions are particularly calculated to effectuate the charitable purpose of the grant rather than to benefit particular persons or a particular class of persons examples of such restrictions include a particular area of study or vocation a particular educational institute or program or certain geographical restrictions the selection committee will rate applicants under selection criteria applicable to a particular topic using a rating system and will select applicants with the highest value under this system d individual grant applications proposals you will require individual applicants to submit a proposal and supporting material as you may deem appropriate to screen and review such applicants recipients will be required to provide you with at least one progress report and one final report within an w month period that reports on achievements against the specific charitable objective of the grants you anticipate individual grant recipients will be required to submit the following supporting materials a current resume or curriculum vitae cv and a description of the proposed project you will disqualify for consideration applicants who fail to submit completed applications and all supporting materials by the applicable deadline you will require applicants to disclose any familial either legal or blood relationship they have to any disqualified_person as defined in sec_4946 with respect to you or any member of the selection committee applicants having a familial relationship to any of the foregoing individuals will be disqualified from further consideration e selection committee authority of the administration of the individual grant program will be vested in members of your leadership selection of grantees will be vested in your staff as well as a panel of external reviewers collectively those who review and letter catalog number 58222y in any aspect of the selection process relating select grantees are referred to as the selection committee or committee the external panel will consist of approximately z reviewers who have been selected by your staff based on their subject matter expertise you will require selection committee members to disclose any familial or other eg business or financial relationship with any applicant if a committee member has a familial relationship with an applicant that applicant will not be eligible to receive a grant from you if a committee member has other than a familial relationship with an applicant eg a business or financial relationship the committee member will not be permitted to to that applicant participate notwithstanding anything herein to the contrary you will not award any grants to any applicant who is a disqualified_person within the meaning of sec_4946 with respect to you as noted above your staff dedicated to the x program will be responsible for establishing applicable terms eligibility requirements selection criteria and application forms for all individual grants awarded under y your staff will also be responsible for determining the number and amount of individual grants available for a particular round your selection committee will be responsible for reviewing rating applicants and making recommendations for individual grant awards to your leadership for approval you will ultimately be responsible for ensuring that x is consistent with the requirements of sec_4945 in coordination with your selection committee one or more of your staff members will have responsibility for reviewing supporting materials individual grant applications publicizing the availability eligibility requirements and selection criteria for the your x program through your website under the rules guidelines for the x program and elsewhere as deemed appropriate by the x program making application information available on your website notifying recipients of the nature and amount of each award and the requirements to claim the award a use and supervision of grants disbursement and use of individual grant funds you will pay the grant funds directly to the individual recipient and you will generally award individual grants for an w month period once the grant agreement is fully executed you will pay the individual half of the awarded amount with the remaining funds being paid to the individual on a reimbursement basis or in arrears the terms and conditions of each individual grant will be set forth in writing by way of a written grant agreement the terms of the grant agreement will limit a recipient's use of his or her funds for professional fees research and travel and other related expenses_incurred by the recipient in furtherance of the charitable purposes of the project the terms and conditions of each individual grant will include the following information specify the responsibilities of you and the grantee obligate the grantee to use the grant funds only for the charitable purposes for which the grant is made letter catalog number 58222y provide for periodic progress reports at least annually concerning the results achieved and the use of the funds and requires a final written report with an accounting of how the grant funds were used the grant agreement will also authorize you to recover and or withhold grant funds in the event you determine that such funds are misused the agreement will authorize you to recover and or withhold grant funds if you determine that such funds are misused you will normally pay one half of grant upon full execution of the grant agreement and require the recipient to provide you a reconciliation of his expenses against this amount once exceeded he would be able to invoice you for up to the remaining amount under the terms of the grant agreement these invoices will serve as the financial progress reports b progress and final reports from the recipients you will require each individual to submit an annual report detailing the use of the grant funds and the progress he she has made toward completing the charitable project as well as a final report at the end of the project both reports will require a description of the recipient's accomplishments with respect to the individual grant and accounting for all funds received under the grant one of your staff members will have the responsibility to follow the progress of each individual grant award and shall review progress and final reports received from individual recipients to determine whether the charitable purposes are being or have been fulfilled or whether further scrutiny or investigation is warranted c investigation and recovery_of diverted funds where the progress reports received by you or other information including the failure of a recipient to submit progress reports indicate that all or any part of an individual grant is not being used in furtherance of the charitable purposes of the grant you will take appropriate steps to investigate the matter while conducting your investigation you will withhold further payments to the extent possible until any delinquent progress reports required under the foregoing provisions of these procedures have been submitted if you learn that all or any part of an individual grant is not being used in furtherance of the charitable purposes of the grant you will take all reasonable and appropriate steps to recover the funds and or ensure restoration of the diverted funds to the purposes of the x program if such a diversion occurs and the recipient has not previously diverted funds to any use not in furtherance of the purposes of the grant you will withhold any further payments to the recipient until it has received the recipient's assurance that future diversions shall not occur and you will require the recipient to take extraordinary precautions to prevent future diversions from occurring where a recipient has previously diverted funds received from you and you determine that any part of an individual grant has again been used for improper purposes you will take all reasonable and appropriate steps to recover the funds and or to ensure restoration of the diverted funds to the purposes of the grant in such cases then you will withhold further payments until the diverted funds are in fact recovered or restored you have received the recipient's assurances that future diversions will not occur and you letter catalog number 58222y require the recipient to take extraordinary precautions to prevent future diversions from occurring the phrase all reasonable and appropriate steps as used above shall include legal action where appropriate but would not include legal action if such action would in all probability not result in the satisfaction of execution on a judgment record keeping requirements you will retain the following records in connection with all individual grants all information obtained by you to evaluate the qualifications of potential individual recipients the identification of individual recipients and any relationship of a potential recipient to members of the selection committee member a family_member of the foregoing or any disqualified_person with respect to the foundation the purpose and amount of each individual grant any additional information you obtain in complying with your grant-making procedures records pertaining to any individual grants made pursuant to y shall be kept for no less than three years after the filing of the your annual information_return for the period in which the last installment of such individual grant was paid basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - a scholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or - a prize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or - to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show letter catalog number 58222y the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 b you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely director exempt_organizations letter catalog number 58222y


internal_revenue_service number release date index number ------------------------- ----------------------------- ---------------------------------------- ----------------------------------------- ------------ ---------------------------- in re ---------------------------------------- department of the treasury washington dc person to contact -------------------------------------- telephone number --------------------- refer reply to cc corp - plr-131904-03 date date - company company company company company l m n o date ------------------------------------------ ------------------------------------ ------------------------------------- ----------------------------------- ---------------------------------- ----------------------------------- ------------------- ---------------------------- ------------------- ---------------------------- ----- ---- -------- ---- --------------------------- dear -------------- this letter responds to a request dated date for supplemental rulings with respect to a private_letter_ruling dated date plr-124344-01 the aprior letter_ruling involving the federal_income_tax consequences of a proposed transaction the aproposed transaction additional information was submitted in letters dated october october october and date except as modified herein the facts and representations set forth in the prior ruling are still valid the taxpayers consummated the proposed transaction on date the legend abbreviations factual summary and representations appearing in the prior letter_ruling are hereby incorporated by reference unless otherwise indicated the prior letter_ruling involved a series of merger transactions under sec_368 of the internal_revenue_code acode and a liquidation under sec_332 of the code a number of the corporations involved in the proposed transaction are controlled_foreign_corporations that are owned directly indirectly or both by u s_corporations the taxpayer advised the internal_revenue_service aservice that the following additional transactions the aadditional transactions occurred prior or subsequent to date i prior to date sub sold its entire_interest in sub l of the total outstanding shares to sub for cash ii for u s tax purposes shareholder made a check-the-box election to be treated as a disregarded_entity for u s tax purposes which was effective prior to date iii prior to date shareholder sold its entire_interest in sub to company an unrelated country z corporation iv prior to date company a county y corporation sold its m shareholder interest in shareholder an indirect shareholder of sub to company for cash company and shareholder are disregarded entities for u s tax purposes v as an additional step to the proposed transaction which occurred on date sub merged into sub vi subsequent to date the following transactions occurred company acquired of company a country y corporation for cash on the same date company made a check-the-box election to be treated as disregarded_entity for u s tax purposes company acquired the remaining n stock interest in company a country z corporation for cash resulting in ownership finally company and company merged into company vii subsequent to date company sold its interest in shareholder to its parent company a country u corporation viii in a proposed transaction company will transfer its o interest in company to its parent company in exchange for cash or a note based solely on the information and representations submitted in the prior letter_ruling and the supplemental request we rule that the additional transactions do not effect the rulings contained in the prior letter_ruling and those rulings remain in full force and effect additionally the transfer of company stock described in subparagraph viii above will be disregarded for purposes of sec_1_368-1 no opinion is expressed about the tax treatment of the proposed transaction and the additional transactions under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction and the additional transactions that are not directly covered by the above rulings specifically with respect to the sale by sub of its interest in sub no opinion is expressed regarding the application of sec_951 to the u s shareholders defined in sec_951 of sub see also sec_954 in addition no opinion is expressed regarding the application of sec_367 to the deemed liquidation of shareholder into shareholder pursuant to shareholder 3's election to be a disregarded_entity see sec_1_367_b_-3 no opinion is expressed regarding the application of sec_367 to i the merger of sub into sub ii the deemed liquidation of company into company pursuant to company 7's election to be a disregarded_entity iii the merger of company into company see sec_1_367_e_-2 finally no opinion is expressed regarding the application of sec_897 and sec_884 if sec_897 applies to the sale of stock of shareholder a domestic_corporation by company this ruling 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 should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated the rulings contained in this letter are predicated upon the facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as part of the audit process pursuant to the power_of_attorney on file in this office a copy of this letter has been sent to your authorized representative sincerely yours associate chief_counsel corporate by lisa fuller lisa a fuller assistant to chief branch cc