internal_revenue_service number release date index number --------------------------------- ---------------------------- --------------------------------------- ----------------------------------- in re --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ---------------- telephone number -------------------- refer reply to cc intl b06 plr-100819-15 date july legend taxpayer law firm accounting firm corporation shareholder a shareholder b shareholder c shareholder d year date date date --------------------------------- ---------------------------------------------- -------------------------------- --------------------- -------------------------- --------------------- --------------------- ---------------------- ------ ----------------------- --------------------- ------------------ dear ---------- this responds to a letter dated date supplemented by letters dated date and date submitted by law firm requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc for taxpayer’s first taxable_year the rulings contained in this letter are based upon information and representations submitted by taxpayer and law firm and accompanied by affidavits and penalty of perjury statements executed by appropriate parties this office has not verified any of the materials submitted in support of the request for rulings it is subject_to verification on examination plr-100819-15 facts taxpayer is a domestic_corporation and was formed on date for the sole purpose of qualifying and operating as an interest charge domestic_international_sales_corporation ic-disc taxpayer operates under a commission arrangement with corporation taxpayer is wholly owned by shareholder a and corporation is owned by shareholders b c and d the beneficial owners of shareholder a are beneficial owners of at least half of the stock of corporation in year law firm and accounting firm advised the beneficial owners of shareholder a of the benefits associated with operating an ic-disc after deciding to form taxpayer as an ic-disc corporation retained law firm to organize taxpayer as an ic-disc and prepare the required incorporation documents taxpayer relied on accounting firm and law firm to organize and to prepare all documents and filings needed to establish taxpayer as an ic-disc due to a miscommunication accounting firm believed that law firm filed the form 4876-a on taxpayer’s behalf however law firm believed that accounting firm filed the form 4876-a as a result a form 4876-a for taxpayer was not filed believing all the requirements to conduct business and be treated as an ic-disc for its first taxable_year were satisfied taxpayer began operating as an ic-disc on date on date which occurred before taxpayer’s tax_return for its first taxable_year was due accounting firm and law firm discovered that a form 4876-a for taxpayer had not been filed upon discovery of this error and in order to operate as an ic-disc beginning on date taxpayer requested a ruling granting an extension of time to file form 4876-a for its first taxable_year law and analysis sec_992 of the internal_revenue_code the code provides that an election by a corporation to be treated as a disc2 shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate sec_992 of the code provides that such election shall be made in such manner as the secretary shall prescribe and shall be valid only if all persons who are taxpayer and corporation are owned or controlled directly or indirectly by the same interests within the meaning of sec_1_482-1 as used in this letter the terms ic-disc and disc have the same meaning plr-100819-15 shareholders in such corporation on such first day of the first taxable_year for which such election is effective consent to such election temporary sec_1_921-1t provides in part that a corporation electing ic-disc status must file form 4876-a and that a corporation electing to be treated as an ic-disc for its first taxable_year shall make its election within days after the beginning of that year sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that a regulatory election is 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 for this purpose an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 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 that the grant of relief will not prejudice the interests of the government based on the facts and representations submitted with taxpayer’s ruling_request we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file form 4876-a such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year the granting of an extension in this ruling letter is not a determination that taxpayer is otherwise eligible to make the election or to claim ic-disc status or benefits see sec_301_9100-1 in addition we express no opinion as to whether the commissions or portions thereof paid to taxpayer by corporation may constitute taxable_gifts see eg revrul_81_54 1981_1_cb_476 taxpayer should attach a copy of this ruling letter to its federal_income_tax return for the taxable years to which this letter applies 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 except as expressly provided plr-100819-15 herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter pursuant to a power_of_attorney on file in this office copies of this ruling letter are being furnished to your authorized representatives sincerely _____________________________________ joseph dewald senior technical reviewer branch office of associate chief_counsel international enclosures copy of this letter copy for sec_6110 purposes cc


ng a sree tax_exempt_and_government_entities_division 201u1504 department of the treasury internal_revenue_service washington d c jan seit zf ra tf uniform issue list legend taxpayer a account b financial_institution c policy d financial_institution e financial_institution f financial_institution g amount dear - this is in response to your submission dated date as modified and supplemented by additional correspondence dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ taxpayer asserts that the failure to accomplish the rollover within the 60-day period described by sec_408 of the code was due to the distribution of amount from account b being taken without his knowledge or consent taxpayer further represents that amount has not been used for any other purpose eviv1 the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer was an individual_retirement_arrangement ira established and maintained at financial_institution c at the time of the distribution of amount from account b to july and then transferred to a long-term health facility where he resided from to taxpayer represents that he was hospitalized from june july through date he returned home on december _ convalesce with home care during his residence in the long-term health facility taxpayer a decided to cancel his long-term care insurance_policy policy d administered by financial_institution e taxpayer a represents that he requested his power_of_attorney for financial affairs power_of_attorney to cancel policy d because his medical conditions were excluded under the policy and his care was not being covered taxpayer a further represents that the power_of_attorney requested the surrender of account b rather than policy d the distribution check for amount was issued on december taxpayer a’s home address when he discovered that he had received amount on january account at financial_institution f taxpayer a was not aware that amount was a distribution from account b until the power_of_attorney met with taxpayer a’s accountant on march the power_of_attorney deposited amount into an ira account for taxpayer a at financial_institution g on april where it remains he directed the power_of_attorney to deposit it into his and delivered to based on the above facts and representations taxpayer requests a ruling that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount from account b sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred sec_401 of the code provides the rules for required minimum distributions from a qualified_plan sec_401 provides in pertinent part that a_trust shall not constitute a qualified_trust unless the plan provides that the entire_interest of each employee will be distributed or commence to be distributed to such employee not later than the required_beginning_date sec_401 defines the term required_beginning_date as april of the calendar_year following the later of the calendar_year in which the employee attains age 70’ or the calendar_year in which the employee retires ‘ evivi oudsd the information presented and documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a timely rollover was caused by the unexpected distribution from his ira which occurred without his knowledge or consent therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from account b provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such distribution amount will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by code sec_401 no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact xxkxkxk kkxkkkkk phone at xxx xxx-xxxx or by fax at xxx xxx-xxxx please address all correspondence to sincerely culler whiley carlton a watkins manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc


internal_revenue_service number release date index number -------------------------------------- ------------------------------------------- ----------------------- ---------------------- ----------------------------- in re --------------------------------------------------- ----------------------------------------------------------- ------------------- department of the treasury washington dc person to contact --------------------- id no ------------ telephone number -------------------- refer reply to cc fip - plr-121704-04 date date -------------------------- ----------------------------------------------- legend trustee trust annuity_contract -------------------------------------------------------------------------------------------------------------- ------------------------------------------------------- ---------------------- ----------------------- ----------------------------------------------------------------------- -------------------------- ---------------------------- ------------------------------- ------------------------ settlor beneficiary life insurer --------------------------------------------------------------------------------------------------------------- life insurer dear ---------------- ---------------------------------------------------- ------------------------------------------------------------------------ this is in reply to the letters dated date and date submitted on your behalf requesting a ruling concerning the taxability of the annuity_contract held by trustee on behalf of trust under sec_72 of the internal_revenue_code plr-121704-04 the information submitted states that on october -------- the settlor established trust for the sole benefit of his grandchild beneficiary the settlor made a single gift of dollar_figure------ ------------ to trust upon its creation as represented below the settlor is not considered the owner of trust for purposes of sec_672 through of the code on october ------- trustee invested the entire dollar_figure----------- that the settlor contributed to trust in a single premium annuity issued by life insurer on december ------ trustee in a sec_1035 transaction exchanged the life insurer annuity for an annuity_contract issued by life insurer the annuity_contract names trust as the owner of the annuity_contract and names beneficiary as the annuitant hereunder the annuity_contract is the only asset that trust owns the terms of trust provide further that if beneficiary attains age beneficiary may request that trustee distribute percent of the principal of trust to beneficiary outright when beneficiary attains the ages of and beneficiary may request that trustee distribute percent and percent respectively of the principal of trust to beneficiary outright the terms of trust provide further that if beneficiary elects not to request any of the distributions of principal mentioned above from trust upon attaining a designated age or trustee is required to hold the portion of the principal over which beneficiary has a power_of_withdrawal in a separate trust for the sole benefit of beneficiary beneficiary may direct trustee to distribute any portion of the principal of such separate trust to beneficiary outright and such separate trust may continue beyond the date on which beneficiary attains age any distributions from trust to beneficiary or to a separate trust for beneficiary will be in the form of distributions of an annuity_contract or annuity_contracts in_kind trust will not receive any consideration from beneficiary or any other individual or entity in exchange for any distributions of the annuity_contract sec_72 of the code provides that if an annuity_contract is held by a person who is not a natural_person then such contract shall not be treated as an annuity_contract for purposes of subtitle a other than subchapter_l and the income_on_the_contract for any taxable_year of the policyholder shall be treated as ordinary_income received or accrued by the owner during such taxable_year sec_72 further provides that if an annuity_contract is held by a_trust or other entity as an agent for a natural_person then sec_72 shall not apply the legislative_history to sec_72 of the code states that if an annuity_contract is held by a person who is not a natural_person such as a corporation then the contract is not treated as an annuity_contract for federal_income_tax purposes and the income on the plr-121704-04 contract for any taxable_year is treated as ordinary_income received or accrued by the owner of the contract during the taxable_year however the legislative_history further provides that in the case of an annuity_contract the nominal owner of which is not a natural_person eg a corporation or a_trust but the beneficial_owner of which is a natural_person the contract is treated as held by a natural_person h_r conf_rep no 99th cong 2d sess vol ii vol c b although trustee is the contract owner of the annuity its ownership_interest is nominal beneficiary is the beneficial_owner of the annuity_contract the following representations were made in connection with this ruling_request a beneficiary is a natural_person as that term is defined in sec_72 of the code b settlor as the grantor of trust will not be considered the owner of trust for purposes of of the code c beneficiary is not employed by trust d any annuity_contracts involved satisfy the terms of sec_72 e under no circumstance will trust distribute any of the annuity_contracts described in this request to anyone other than beneficiary or other than to the separate trust described above for beneficiary's sole benefit if beneficiary is living if beneficiary dies prior to attaining age the distribution will be made to beneficiary's issue or if beneficiary dies without issue the distribution will be made to or for the benefit of persons related to beneficiary accordingly based solely on the information submitted and the representations made we conclude as follows the annuity_contract is considered owned by a natural_person for purposes of sec_72of the code except as specifically set forth above no opinion is expressed as to the tax treatment of the annuity_contract or trust under the provisions of any other section of the code or the income_tax regulations specifically no opinion is expressed as to whether or not the annuity_contract is in fact an annuity_contract under sec_72 of the code no opinion is expressed as to whether the annuity_contract meets the requirements of sec_72 furthermore no opinion is expressed as to any_tax consequences under sec_72 if any distributions from trust are cash this ruling letter is directed only to the taxpayer who requested it sec_6110 j of the code provides that it may not be used or cited as precedent temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling will be modified or revoked by the adoption of temporary or plr-121704-04 final regulations to the extent the regulations are inconsistent with any conclusion in the ruling a copy of this letter should be attached to any federal_income_tax return to which it is relevant in accordance with the power_of_attorney on file in this office we are sending a copy of this letter to your authorized representative sincerely yours s donald j drees jr senior technician reviewer branch office of associate chief_counsel financial institutions products


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 b03 plr-112680-07 date date legend ---------------------------------------------------------------------------------------------- ------------------------- ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ------------------------ --------------------- ------------------------- ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ------------------------ a b c d e f g h company ---------------------------------------------------------------------------------------------- ------------------------ company ---------------------------------------------------------------------------------------------- plr-112680-07 ------------------------ company ---------------------------------------------------------------------------------------------- ------------------------ company ---------------------------------------------------------------------------------------------- ------------------------ company ---------------------------------------------------------------------------------------------- ------------------------ company ---------------------------------------------------------------------------------------------- ------------------------ company ---------------------------------------------------------------------------------------------- ------------------------ company ---------------------------------------------------------------------------------------------- ------------------------ company ---------------------------------------------------------------------------------------------- ------------------------ company company company company company lp property ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------- ----------------------------------- plr-112680-07 property property property property property property ---------------------------------------------------------------------------------------------- ------------------------------------ ---------------------------------------------------------------------------------------------- ------------------------------------ ---------------------------------------------------------------------------------------------- ------------------------------------ ---------------------------------------------------------------------------------------------- ------------------------------------ ---------------------------------------------------------------------------------------------- ------------------------------------ ---------------------------------------------------------------------------------------------- ------------------------------------ year year ------- ------- x y a b c ---- --------- -------- dear -------------- this letter responds to a letter dated date and subsequent correspondence requesting on behalf of a b and c a ruling that undivided fractional interests in property property property property property property and property together the properties are not interests in business entities under sec_301_7701-2 of the procedure and administration regulations for purposes of qualification of the undivided fractional interests as eligible replacement_property under sec_1031 of the internal_revenue_code plr-112680-07 facts according to the information submitted company and company are unrelated business entities that have held title to property as tenants in common and operated property in accordance with a tenants-in-common agreement since year company and company are unrelated business entities that have held title to property as tenants in common and operated property in accordance with a tenants-in-common agreement since year company and lp are unrelated business entities that have held title to property as tenants in common and operated property in accordance with a tenants-in-common agreement since year company and company are unrelated business entities that have held title to property as tenants in common and operated property in accordance with a tenants-in-common agreement since year company and company are unrelated business entities that have held title to property as tenants in common and operated property in accordance with a tenants-in-common agreement since year company company and company are business entities that together with company have held title to property as tenants in common and operated property in accordance with a tenants-in-common agreement since year company and c are unrelated business entities that have held title to property as tenants in common and operated property in accordance with a tenants-in-common agreement since year together company company company company company company company company company company company company company company and lp together with c are referred to as the co-owners individually property property property property property property and property are referred to as the property and together they are referred to as the properties each of the properties is governed by a tenants-in-common agreement the co- ownership agreement under which terms an affiliate or affiliates jointly in the case of property of a owns an undivided percent interest in the properties and an affiliate of b or c owns an undivided percent interest in the properties company company company company company company company company and company together the a co-owners are affiliates of a and company company lp company company and company an affiliate of c together with c the b co-owners are affiliates of b each co-ownership agreement between the respective a co-owner and b co- owner and the other agreements between them are virtually identical for each of the properties these agreements provide that the a co-owner and the b co-owner each have a right to percent of all income and an obligation to pay percent of all expenses under the terms of the agreements each of the co-owners retains the right to approve the hiring of any manager the sale_or_other_disposition of the property the leasing of all or a portion of the property the creation or modification of any blanket lien the hiring of a property manager the resolution of any claims lawsuits or demands of plr-112680-07 any type or nature whatsoever potentially affecting the property and the encumbering or pledging as collateral an interest in the property if either co-owner advances funds necessary to pay expenses associated with the property the other co-owner must repay such advance within days of the date the expense obligation or liability was paid each co-owner has the right to sell an interest in the property but if the sale would result in a change in control of the property a specified buy-sell procedure must be followed a change in control is deemed to occur if any person or entity other than d or d’s descendants as to the a co-owner or e or e’s descendants as to the b co- owner becomes the owner of securities or of membership interests in a co-owner representing percent or more of the combined voting power of the co-owners’ then outstanding ownership interests the buy-sell procedure is as follows the co-owner desiring to transfer or sell the initiating co-owner must give the other co-owner the responding co-owner a pre-offer notice that includes an initial due diligence disclosure including but not limited to the most recent physical inspection report of the physical condition of the property prepared by a professional building inspector not affiliated with the initiating co-owner the most recently prepared environmental report on the property a current rent roll and a current profit and loss statement for its interest in the property and shall provide written notice of the initiating co-owner's intent to sell its interest in the property a pre-offer notice for a period of days the pre-offer period the parties are to negotiate in good_faith the terms of the sale or transfer and to obtain certain other inspections of the physical condition of the property if the co- owners do not reach agreement during the pre-offer period the initiating co-owner may serve a formal offering notice on the responding co-owner at a stated dollar amount the purchase_price shall be the stated dollar amount less that portion corresponding to the seller's percentage interest in the property of the principal balance and accrued interest outstanding on the closing date of any loan secured_by the property which is assumed by the purchaser the responding co-owner ha sec_90 days to elect to sell its interest or to purchase the offering co-owner's interest in the property for the purchase_price in the offering notice if the responding co-owner does not exercise either option within the option period then the responding co-owner is conclusively deemed to have elected to sell his interest in the property in accordance with the terms of the offering notice closing will occur days after the date of the offering notice because a and b own a number of properties together the first time a pre-offer notice is submitted the 30-day period for negotiating is extended to days in addition the a co-owners and the b co-owners have agreed to limit to two the number of properties that can be subject_to a pre-offer notice within any 180-day period moreover certain events are stipulated to extend the time periods by a specified period the co-owners retain the right to partition the property but agree to invoke the buy-sell procedures described above prior to exercising that right moreover the co- owners agree that the property may be partitioned through arbitration each property is subject_to a non-recourse loan extended by an unrelated lender certain provisions of plr-112680-07 which are guaranteed by a and b and in the case of property f jointly and severally with b if any co-owner or affiliate pays more than the co-owner' sec_50 percent share of the amount due under the loan agreement pursuant to a guaranty or otherwise that co-owner has a right to be indemnified by the other co-owner for the amount in excess of a percent share of the expense a and b entered into agreements with g an affiliate of a to manage each property for a market-rate fee equal to a of certain gross_receipts from the respective property the agreements with g must be renewed annually by consent of the respective a co-owners and b co-owners and g a and b together with h an affiliate of a are also parties to verbal agreements pursuant to which the a co-owners and b co-owners authorize h to negotiate and modify leases with tenants subject_to the approval of the respective a co-owners and b co-owners the agreements with h are terminable by either co-owner at any time the market-rate lease commissions paid_by tenants are passed through in total to an independent broker who works closely with h but is not an employee of or related to h it is represented that the a co-owners and b co-owners have made repairs and capital maintenance to the properties but there have been no major expansions over the last x years or since year with regard to property it is further represented that with y isolated exceptions there have been no sales of any fractional interest in the properties each property is leased to several lessees one of whom is f an affiliate of b f leases between b and c of each property and conducts a business that is unrelated to the management and leasing of the property all other lessees are unrelated to the a co-owners and the b co-owners the rent payable under each lease is not dependent on the profits derived by any person from the property leased other than an amount based on a fixed percentage or percentages of receipts or sales the lessees are required to repair maintain and insure their premises and pay all utilities and taxes related to the premises g collects rents offsets expenses and distributes the proceeds pro_rata to the respective a co-owner and b co-owner while h negotiates and modifies leases subject_to approval by the a co-owner and b co-owner the a co-owner and b co-owner through g perform only those activities customarily performed in connection with the maintenance and repair of rental real_property see revrul_75_374 1975_2_cb_261 plr-112680-07 law and analysis sec_301_7701-1 provides that whether an organization is an entity separate from its owners for federal tax purposes is a matter of federal tax law and does not depend on whether the organization is recognized as an entity under local law sec_301_7701-1 provides that a joint_venture or other contractual arrangement may create a separate_entity for federal tax purposes if the participants carry on a trade business financial operation or venture and divide the profits therefrom but the mere co-ownership_of_property that is maintained kept in repair and rented or leased does not constitute a separate_entity for federal tax purposes sec_301_7701-2 provides that a business_entity is any entity recognized for federal tax purposes including an entity with a single owner that may be disregarded as an entity separate from its owner under sec_301_7701-3 that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code a business_entity with two or more members is classified for federal tax purposes as either a corporation or a partnership sec_761 provides that the term partnership includes a syndicate group pool joint_venture or other unincorporated organization through or by means of which any business financial operation or venture is carried on and which is not a corporation or a_trust or estate sec_1_761-1 of the income_tax regulations provides that the term partnership means a partnership as determined under sec_301_7701-1 sec_301_7701-2 and sec_301_7701-3 of the procedure and administration regulations in revrul_75_374 1975_2_cb_261 the service concludes that a two-person co-ownership of an apartment building that was rented to tenants did not constitute a partnership for federal tax purposes in the ruling the co-owners employed an agent to manage the apartments on their behalf the agent collected rents paid property taxes insurance premiums repair and maintenance_expenses and provided the tenants with customary services such as heat air conditioning trash removal unattended parking and maintenance of public areas the ruling concludes that the agent's activities in providing customary services to the tenants although imputed to the co-owners were not sufficiently extensive to cause the co-ownership to be characterized as a partnership in addition in revrul_79_77 1979_1_cb_448 the service concluded that the transfer of a commercial office building subject_to a net_lease to a_trust having three individuals as beneficiaries was a_trust for federal tax purposes and not a business_entity in revproc_2002_22 2002_1_cb_733 the service provided certain conditions under which it would consider a request for a ruling that an undivided fractional interest in rental real_property is not an interest in a business_entity for federal tax purposes plr-112680-07 the conditions relate to tenancy-in-common ownership of the property number of co-owners no treatment of the co-ownership as an entity co-ownership agreements voting by co-owners restrictions on alienation sharing of proceeds and liabilities upon sale of the property proportionate sharing of profits and losses proportionate sharing of debt options no business activities by the co-owners management and brokerage agreements leasing agreements loan agreements and payments to sponsors in addition the revenue_procedure sets forth a list of documents supplementary materials and general information required for a ruling the co-ownership agreements satisfy all of the conditions set forth in revproc_2002_22 specifically regarding voting dollar_figure of revproc_2002_22 provides in part that the co-owners must retain the right to approve the hiring of any manager the sale_or_other_disposition of the property any leases of a portion or all of the property or the creation or modification of a blanket lien any sale lease or re-lease of a portion or all of the property any negotiation or renegotiation of indebtedness secured_by a blanket lien the hiring of any manager or the negotiation of any management_contract or any extension or renewal of such contract must be by unanimous approval of the co- owners relating to hiring a manager dollar_figure of revproc_2002_22 provides in part that the co-owners may enter into management or brokerage agreements which must be renewable no less frequently than annually with an agent who may be the sponsor or a co-owner or any person related to the sponsor or a co-owner but who may not be a lessee the co-ownership agreements provide that any sale lease or re-lease of a portion or all the property any creation or modification of a blanket lien and the hiring of a manager requires the approval of the respective a co-owners and b co-owners g is required to seek the approval of both co-owners for any matter outside day-to-day operational activities specifically regarding business activities dollar_figure of revproc_2002_22 provides that the co-owners' activities must be limited to those customarily performed in connection with the maintenance and repair of rental real_property customary activities see revrul_75_374 activities will be treated as customary activities for this purpose if the activities would not prevent an amount received by an organization described in sec_511 from qualifying as rent under sec_512 and the regulations thereunder in determining the co-owners' activities all activities of the co-owners their agents and any persons related to the co-owners with respect to the property will be taken into account whether or not those activities are performed by the co-owners in their capacities as co-owners for example if the sponsor or a lessee is a co-owner then all of the activities of the sponsor or lessee or any person related to the sponsor or lessee with respect to the property will be taken into account in determining whether the co-owners' activities are customary activities however activities of a co-owner or a related_person with respect to the property other than in the co-owner's capacity as a co-owner will not be taken into account if the co-owner owns an undivided_interest in plr-112680-07 the property for less than months under these facts the activities of the a co- owners and b co-owners with respect to the properties conducted directly and through g and h are limited to customary activities section dollar_figure of revproc_2002_22 provides that the co-owners may agree that a co-owner must offer the co-ownership interest for sale to the other co-owner s the sponsor or lessee at fair_market_value determined as of the time the partition right is exercised section dollar_figure provides that while each co-owner must have the right to transfer partition and encumber the co-owner's interest in the property without the agreement or approval of any person restrictions on the right to transfer partition or encumber interests in the property that are required by a lender and that are consistent with customary commercial lending practices are not prohibited in this situation in which the a co-owners and b co-owners each own a interest in each property the restrictions on such co-owners’ right to engage in activities that could diminish significantly the value of the other interest in the property such as pledging the interest in the property as collateral or otherwise encumbering the interest without the approval of the other co-owner is consistent with the requirement that each respective a co-owner and b co-owner has the right to approve an arrangement that will create a lien on the property moreover the buy-sell procedure under these facts in which the co-owners are unrelated and are dealing at arms' length is consistent with establishing a right to acquire percent of the property at fair_market_value conclusion based on the facts submitted and representations made we conclude that an undivided fractional interest in the properties will not constitute an interest in a business_entity under sec_301_7701-2 for purposes of qualification of the undivided fractional interest as eligible replacement_property under sec_1031 except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically we express or imply no opinion concerning whether an undivided fractional interest in a property otherwise qualifies as eligible replacement_property under sec_1031 for federal tax purposes plr-112680-07 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely s leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------------- ----------------------------------- ---------------------- ------------------------------------------- ---------------------------- department of the treasury washington dc person to contact ------------------ id no ------------- telephone number --------------------- refer reply to cc psi b04 - plr-103715-10 date june re --------------------------------------- legend decedent --------------------------------------------- spouse -------------------- date ----------------------- trust --------------------------- x ----------- y ----------- accountant ---------------------------------------------------------------- dear ----- this letter responds to a letter from your authorized representative dated date and subsequent correspondence requesting an extension of time under ' and of the procedure and administration regulations to allocate decedent’s available generation-skipping_transfer gst_exemption facts decedent died testate on date survived by spouse item vi of decedent’s will provides for a marital trust for spouse and a division of such trust into an exempt marital trust and a non-exempt marital trust if sufficient gst_exemption is available to allocate to the marital trust and warrant the division item vii of decedent’s will directs that the remainder of decedent’s estate be distributed to a family_trust trust and that trust be divided into a family exempt trust and a family non-exempt trust based upon the amount of decedent’s gst_exemption allocated to trust item xii specifically plr-103715-10 prohibits the allocation of any of decedent’s gst_exemption to the marital trust unless trust and certain other bequests are fully exempt from gst tax and additional gst_exemption remains available for allocation to the marital trust in preparing decedent’s form_706 united_states estate and generation- skipping transfer_tax return accountant mistakenly allocated x of decedent’s available gst_exemption to the marital trust so that the marital trust was fully exempt from gst tax accountant allocated decedent’s remaining available gst_exemption y to trust you request an extension of time under sec_301_9100-1 and sec_301_9100-3 to allocate decedent’s gst_exemption to trust as provided in decedent’s will to date no taxable_distributions taxable terminations or any other events have occurred with respect to the trust that would give rise to a gst tax_liability law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2056 provides that for purposes of the tax imposed by sec_2001 the value of the taxable_estate shall except as limited by sec_2056 be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property which passes or has passed_from_the_decedent to the surviving_spouse but only to the extent that such interest is included in determining the value of the gross_estate sec_2056 provides that in the case of qualified_terminable_interest_property for purposes of sec_2056 such property shall be treated as passing to the surviving_spouse and for purposes of sec_2056 no part of such property shall be treated as passing to any person other than the surviving_spouse sec_2601 imposes a tax on every generation-skipping_transfer within the meaning of subchapter_b a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines the term applicable_rate with respect to any gst as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer plr-103715-10 sec_2642 provides that generally the inclusion_ratio with respect to any property transferred in a gst is the excess of over the applicable_fraction with respect to a gst that is not a direct_skip sec_2642 provides that in general the applicable_fraction is a fraction the numerator of which is the amount of the gst_exemption under sec_2631 allocated to the trust and the denominator of which is the value of the property transferred to the trust sec_2631 as in effect for decedents dying and generation-skipping transfers before date provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2642 provides that the secretary shall prescribe by regulation such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-2 provides that an automatic_extension of months from the due_date of a return excluding extensions is granted to make regulatory or statutory plr-103715-10 elections whose due dates are the due_date of the return or the due_date of the return including extensions provided the taxpayer timely filed its return for the year the election should have been made and the taxpayer takes corrective action as defined in sec_301_9100-2 within that 6-month extension period requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 are satisfied therefore decedent’s estate is granted an extension of time of days from the date of this letter to allocate decedent’s available gst_exemption to trust the allocation will be effective as of the date of decedent’s death and will be based on the fair_market_value for federal estate_tax purposes on the date of death the allocation of decedent’s gst_exemption should be made on a supplemental form_706 and filed with the internal_revenue_service center in cincinnati a copy of this letter should be forwarded to the internal_revenue_service cincinnati service_center - stop cincinnati oh for association with the form_706 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code plr-103715-10 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries by __________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes copy of this letter


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 2-plr-123144-01 date date legend trust trust trust n x a d1 d2 d3 dear this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts the represented facts are as follows x was incorporated and elected to be an s_corporation effective d1 on d2 a a shareholder of x established trust trust and trust the trusts for the benefit of a’s minor children and transferred n shares of x’s nonvoting common_stock to each of the trusts on d3 a transferred another n shares of x’s nonvoting common_stock to each of the trusts x represents that trust trust and trust are eligible to be qualified subchapter_s trusts qssts however due to inadvertence neither a’s attorneys or accountants filed an election for trust trust or trust under sec_1361 to qualify the trusts as qssts plr-123144-01 since d2 all of the shareholders have reported their shares of x’s income as though x were an s_corporation x and its shareholders have agreed to make any adjustments that are deemed necessary to be consistent with the treatment of x as an s_corporation since d2 x represents that there was no intent to terminate x’s s election and that the failure_to_file timely qsst elections was not motivated by tax_avoidance or retroactive tax planning the trustee for trust trust and trust intends to file qsst elections for each of the trusts to be effective d2 once x receives this letter_ruling from the service these elections however will not be timely filed law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 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 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate and other than a_trust described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that in the case of a qualified_subchapter_s_trust qsst with respect to which a beneficiary makes an election under sec_1361 such trust shall be treated as a_trust described in sec_1361 and for purposes of sec_678 the beneficiary of such trust shall be treated as the owner of that portion of the trust which 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 or his legal_representative may elect to have sec_1361 apply sec_1361 provides that an election under sec_1361 shall be effective up to days and months before the date of the election 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 return the applicable form or a statement including the information listed in sec_1_1361-1 sec_1361 defines the term qsst as a_trust whose terms require that i during the life of the current income_beneficiary there will be only one income_beneficiary of the trust ii any corpus distributed during the life of the current income plr-123144-01 beneficiary may be distributed only to that beneficiary iii the income_interest of the current income_beneficiary in the trust will terminate on the earlier of the beneficiary’s death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust will distribute all of its assets to the beneficiary sec_1361 further defines a qsst as a_trust all of the income of which is distributed or required to be distributed currently to one individual who is a citizen or resident_of_the_united_states sec_1362 of the code provides that an election under sec_1362 shall be terminated whenever at any time on or after the first day of the first taxable_year for which a corporation is an s_corporation such corporation ceases to be a small_business_corporation a termination of an s_corporation_election under sec_1362 is effective on and after the date of cessation 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 paragraph or of sec_1362 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken- a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder in 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 such ineffectiveness or termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election terminated on d2 when a transferred x stock to trust trust and trust we also conclude that the termination was inadvertent within the meaning of sec_1362 pursuant to sec_1362 x will be treated as continuing to be an s_corporation on d2 and thereafter provided that x's subchapter_s_election is not otherwise terminated under sec_1362 this ruling is contingent on x and all of its shareholders treating x as having been an s_corporation for the period beginning d2 and thereafter accordingly all of the shareholders in x in determining their respective income_tax liabilities for the period beginning d2 and thereafter must include their pro_rata share of the separately and nonseparately computed items of x as provided in sec_1366 make adjustments to stock basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 this ruling shall be null and void if the requirements of this plr-123144-01 paragraph are not met furthermore this ruling is contingent on trust trust and trust making qsst elections effective d2 with the appropriate service_center within days of the date of this letter and attaching a copy of this letter to each election except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the above-described facts under any other provision of the code specifically no opinion is expressed on whether x is otherwise eligible to be treated as an s_corporation or whether trust trust and trust are eligible to be qssts this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x sincerely yours matthew lay senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes