office_of_chief_counsel internal_revenue_service memorandum number release date cc pa br --------------- gl-101310-08 uilc date date to charles m berlau senior counsel small_business self-employed from peter j devlin chief branch procedure administration subject llc and letter this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent issue sec_1 is a final notice_of_intent_to_levy and right to a hearing letter or lt-11 cdp_notice a legally sufficient notice in respect to the collection of tax_liabilities from a disregarded single-owner limited_liability_company llc where the notice lists only the name of the llc’s owner omitting his social_security_number does the single owner of a disregarded llc make a valid request for a collection_due_process cdp hearing upon submitting to the service a request for a collection_due_process_hearing form and on it listing the single owner’s name and the ein of the llc conclusion sec_1 yes gl-101310-08 no assuming that the llc’s owner is the taxpayer for the particular tax at issue the regulations require the taxpayer’s identification_number the regulations however provide flexibility in that a taxpayer will be given a reasonable_time period to make corrections to a timely written cdp hearing request that does not satisfy all of the requirements in such regulation sec_301_6320-1 q-c1 and a-c1 iii and c q-c1 and a-c1 iii facts the office of appeals has questioned the validity of cdp notices and cdp hearing request forms in the context of collection actions involving single-owner disregarded llcs one person observed that a new irm provision states that the single- owner’s name should be used on the cdp_notice along with the ein associated with the assessment irm the social_security_number of the llc’s single-owner who is the taxpayer is not listed in the cdp_notice the inquiry also states c onfusion in this area results from the fact that the desk reference guide - llc for revenue officers rev indicates that if employment_taxes were reported in the name and ein of the disregarded llc then the llc is the taxpayer on ics they are to then create a new name line using the procedures earlier in the chapter and to select it when generating the cdp_notice to the single member owner with the ein of the assessment thus the cdp_notice is sent to the single member owner but uses the ein of the llc as opposed to the ssn of the single member owner law and analysis identification of the person in cdp notices the starting point in addressing the validity of cdp_notice whether furnished to a taxpayer in connection with the filing of a notice_of_federal_tax_lien nftl or proposed levy is the statute and implementing regulations neither the statute nor regulations require a taxpayer_identification_number whether a social_security_number or employer_identification_number to be included on a cdp_notice this states letter must be sent to the taxpayer prior to levy generate it through ics selecting the correct name line according to above include the ein of the assessment so proper transaction codes are generated this refers to a training guide known as the desk reference guide limited_liability companies for revenue officers trng rev gl-101310-08 sec_6330 states that no levy may be initiated to collect outstanding tax unless the service first notifies the person in writing of his right to a cdp hearing before such levy is made subsection a requires that the cdp_notice include i the amount of the unpaid tax ii a statement informing the taxpayer of his right to request a hearing during the 30-day period beginning on the date shown on the cdp_notice iii the proposed levy action by the secretary and the rights of the taxpayer including brief statements identifying the i r c provisions relating to levy and sale the procedures applicable to levy and sale administrative appeals available to the taxpayer regarding a levy and sale and applicable procedures alternatives available to taxpayer to prevent levy and the i r c provisions relating to the redemption of property and release of liens on property sec_6330 the courts have not addressed whether a cdp_notice is invalid for the service’s failure to include a single-owner’s social_security_number in connection with the collection of tax from a disregarded llc the courts have addressed this issue in considering other service notices when the service makes an assessment pursuant to sec_6203 it must identify the taxpayer but need not include an identifying number 61_fsupp2d_836 n s d ind aff’d 224_f3d_627 7th cir cert_denied 531_us_112 121_sct_851 ein not required on records supporting assessment gongware v internal_revenue_service u s tax cas cch pbig_number 3d cir assessments against responsible corporate officer for trust fund recovery penalty valid even though they contained wrong address of taxpayer and transposed his social_security_number with that of other corporate officer moore v united_states u s t c cch pbig_number e d cal assessment valid even though service used social_security_number of the taxpayer’s son where taxpayer was properly identified by name and address see also 116_fsupp2d_1007 s d ind assessment against marvin l and barbara j barnes ptr and which listed ein valid irrespective of whether business was operated as sole_proprietorship or partnership where record showed that taxpayers were aware of potential tax_liability and did not demonstrate confusion caused by parties listed in assessment moreover deficiency notices issued pursuant to sec_6212 with a variety of defects or shortcomings have been held valid 40_tc_770 in regard to the filing of a nftl sec_6320 requires the cdp_notice to include the amount of the unpaid tax a statement informing the taxpayer of his right to request a hearing within the calendar day period commencing on the day after the 5th business_day following the filing of the nftl the administrative appeals available to the taxpayer and procedures related to such appeals and the i r c provisions and procedures governing releases of liens on property the implementing regulations basically mirror the statue in describing what must be included in cdp notices relating to nftls and levies sec_301_6320-1 q-a10 and a-a10 and a q-a6 and a-a6 gl-101310-08 ninety-day_letter valid even though it listed deficiencies different than ones in agent’s proposed report attached to 30-day_letter 472_f2d_867 6th cir notice listing one incorrect period valid when it correctly covered taxpayer’s final period 961_f2d_1 1st cir cert_denied 506_us_891 113_sct_261 failure to include i r c section and factual basis for deficiency did not deprive taxpayer of information necessary to contest deficiency in court byk v commissioner t c memo because date of mailing of deficiency_notice was established fact that notice contained erroneous date did not make it invalid a deficiency_notice is sufficient if it advises the person who is to pay the deficiency that the commissioner intends to assess him and gives him the opportunity to contest it in court 88_f2d_650 2d cir in our opinion the courts will uphold a cdp_notice which names the single-owner of a disregarded llc and the ein of such llc in connection with tax_liabilities owed by the single owner as noted above the relevant treasury regulations sec_301 a q-a10 and a-a10 and a q-a6 and a-a6 don’t require any identification_number of the taxpayer in a cdp_notice rather parroting sec_6330 these state that the service must notify the person of the amount of unpaid tax his or her right to request a cdp hearing and brief descriptions of the code sections authorizing levies alternatives that could prevent levy available administrative appeals and in the case of nftls a description of release of lien provisions and property redemptions so long as the cdp_notice accurately lists the person from whom the service seeks to collect the tax in this case the single-owner of an llc the amount of unpaid tax and other information required by the regulation and the statute it will be difficult for such person to argue that he was prejudiced or mislead by the inclusion of the llc’s ein on the notice indianapolis baptist temple supra assessment made against unincorporated religious society valid notwithstanding that assessment used ein of defunct predecessor_corporation in the absence of a legal requirement the courts have uniformly refused to require the service to include social_security numbers in its notices gongaware supra moore supra noting that sec_6109 which requires the social_security_number as the identifying number of an individual applies only when a taxpayer is required by statute or regulation to submit a return or statement and not to the service’s identification of a taxpayer for assessment purposes see also spearing tool and manufacturing co inc v crestmark bank 412_f3d_653 6th cir cert_denied 127_sct_41 166_led_18 service not required to perfectly identify taxpayer in lien notice finally you noted that the irm requires the name and social_security_number of the single-member owner not the ein of the llc in respect to a notice_of_levy irm initially we note that neither sec_6331 nor the implementing regulation requires that the taxpayer’s identification_number be included on a notice of neither sec_6212 nor the implementing regulation sec_301_6212-1 require a taxpayer’s identification_number on a notice_of_deficiency gl-101310-08 levy sec_301_6331-1 even though the irm expressly states that the owner’s name and identification_number and not the ein of the llc must be included in a notice_of_levy this gives the taxpayer no rights and does not impact the requirements for a cdp_notice issued pursuant to sec_6320 or sec_6330 366_fsupp2d_284 d md the irs service manual is not binding authority on the court or the irs miller v commissioner t c memo service’s procedural rules contained in irm were directory not mandatory is a written request for a collection_due_process_hearing form which includes the single-owner’s name and ein of the llc but not the social_security_number of the single-owner valid sec_6320 and b and a and b provide the person against whom the service intends to collect tax_liabilities with the right to request a cdp hearing but do not specify what information must be included in the hearing request the implementing regulations for both liens and levies require the taxpayer to include his identifying number in the written cdp hearing request sec_301_6320-1 q-c1 and a-c1 governs hearing requests when the service files a nftl this states in part q-c1 what must a taxpayer do to obtain a cdp hearing a-c1 i the taxpayer must make a request in writing for a cdp hearing the request for a cdp hearing shall include the information and signature specified in a-c1 ii of this paragraph c see a-d7 and a-d8 of paragraph d ii the written request for a cdp hearing must be dated and must include the following a the taxpayer’s name address daytime telephone number if any and taxpayer_identification_number eg ssn itin or ein b the type of tax involved c the tax period at issue iii if the irs receives a timely written request for a cdp hearing that does not satisfy the requirements set forth in a-c1 ii of this paragraph c the irs will make a reasonable attempt to contact the taxpayer and request that the taxpayer comply with the unsatisfied requirements the taxpayer must perfect any timely request for a cdp hearing that does not satisfy the gl-101310-08 requirements set forth in a-c1 ii of this paragraph c within a reasonable period of time after a request from the irs sec_301_6320-1 q-c1 and a-c1 i - iii emphasis added under these provisions if a single owner of a disregarded llc makes a written request for a cdp hearing he is required to include his identifying number which for a natural_person is his social_security_number if he fails to include this and lists only the ein of the llc under the regulations the cdp hearing request is invalid unless the taxpayer corrects the deficiency in such request within a reasonable_time period after being contacted by the service sec_6109 expressly provides that a person must include his identifying number in returns statements or other documents when required by regulation in order to properly identify such person thus the regulatory provisions requiring the identification_number of the taxpayer in a written cdp hearing request have the support of the i r c case development hazards and other considerations --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------- this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call --------------------- if you have any further questions the regulatory provision stating the requirements for making a request for a cdp hearing in connection with a proposed levy is essentially the same as that for liens sec_301_6330-1 q-c1 and a-c1


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 te_ge eo2 plr-136190-04 date date --------- legend trust ----------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -- ------------------------------------------------ city plan date x city council state dear ------------------------ ---------------------------------------------------------------------- --------------------------------------- ---------------------- ------------------- ------------- plr-136190-04 this is in reply to a letter dated date and subsequent correspondence requesting a ruling that the income of trust is excluded from gross_income under sec_115 of the internal_revenue_code facts city proposes to establish a medical reimbursement plan plan plan provides reimbursement for health insurance premiums and out of pocket medical_expenses incurred by certain retired employees and their spouses employees eligible to participate in plan include employees employed by city on date and certain former employees of city no other employee is or will become eligible to participate in plan plan benefits are provided in accordance with city’s employee handbook a city sponsored state law trust trust will be established pursuant to plan to fund the plan benefits city will make an initial contribution to trust of dollar_figurex no contributions will be made by employees or retirees after the initial contribution no further contributions will be made by city city may elect to serve as the administrator of plan alternately city council may choose to appoint a third party or a committee to serve as administrator if the city council appoints a committee the committee shall consist of not less than three members the administrator will interpret plan and make all decisions regarding eligibility to participate in plan and eligibility for plan benefits the committee may delegate to others all or part of its duties which do not involve the management of the trust funds the administrator appoints and removes the trustee it directs the trustee with respect to investment sale reinvestment and management of trust funds the administrator may also appoint one or more investment managers the trustee will invest and reinvest trust funds upon instructions from the administrator of plan or the investment manager the initial contribution to trust and the income derived from it will be used for the exclusive purposes of providing benefits to participants under plan and defraying reasonable expenses of administering plan and trust the plan documents require the trustee to confirm that all investments of trust are lawful for a state municipality city may not terminate plan until the trust funds are exhausted all possible benefits claims have been paid or there are no longer any employee participants retiree participants or eligible spouses upon termination of trust trust funds shall be applied to pay any remaining debts liabilities and approved claims of plan any amount remaining shall be distributed to city law analysis in revrul_77_261 1977_2_cb_45 income from an investment fund plr-136190-04 sec_115 of the code provides that gross_income does not include income derived from any public_utility or the exercise of any essential government function and accruing to a state or any political_subdivision thereof established under a written declaration of trust by a state for the temporary investment of cash balances of the state and its participating political subdivisions was excludable from gross_income for federal_income_tax purposes under sec_115 the ruling indicated that the statutory exclusion was intended to extend not to the income of a state or municipality resulting from its own participation in activities but rather to the income of a corporation or other entity engaged in the operation of a public_utilities or the performance of some governmental function that accrued to either a state or municipality the ruling points out that it may be assumed that congress did not desire in any way to restrict a state’s participation in enterprises that might be useful in carrying out projects that are desirable from the standpoint of a state government and which are within the ambit of a sovereign to properly conduct in revrul_90_74 1990_2_cb_34 the service determined that the income of an organization formed funded and operated by political subdivisions to pool various risks casualty public liability workers’ compensation and employees’ health is excludable from gross_income under sec_115 of the code in revrul_90_74 private interests neither materially participate in the organization nor benefit more than incidentally from the organization subdivision of state providing health benefits to current or former employees constitutes the performance of an essential government function based upon revrul_90_74 and revrul_77_261 trust performs an essential_governmental_function within the meaning of sec_115 of the code plan no private interests participate in or benefit from the operation of trust the benefit to the participating employees is incidental to the public benefit see revrul_90_74 upon dissolution of trust the funds remaining in trust will be applied to pay any remaining debts liabilities and approved claims of plan and any amount remaining shall be distributed to city the code except as specifically provided above this ruling expresses no opinion as to the federal tax consequences of any other transaction including but not limited to the tax consequences to participants retirees or their beneficiaries from any amounts contributed to or paid or reimbursed by or from plan or trust or as to compliance with cobra_continuation_coverage requirements accordingly trust’s income is excludable from gross_income under sec_115 of the income of trust accrues to city city is the sole participating employer in trust provides health benefits to former employees of city city is a political plr-136190-04 this ruling is directed only to the taxpayer who requested it sec_6110 provides that this ruling may not be used or cited as precedent enclosures copy of this letter copy for sec_6110 purposes sincerely __________________________ david l marshall chief exempt_organizations branch division counsel associate chief_counsel tax exempt and government entities


department of the treasury internal_revenue_service washington d c office_of_chief_counsel number info release date uil number date dear we regret the delay in replying to your letter of date to commissioner rossotti regarding the federal_insurance_contributions_act fica and income_tax_withholding liabilities of your organization in response to your inquiry we are providing the following general information definition of an international_organization the status of an entity as an international_organization is provided for in the international organizations immunities act u s c this section provides that the term international_organization means a public international_organization in which the united_states participates pursuant to any treaty or under the authority of any act of congress and which has been designated by the president through appropriate executive_order as being entitled to enjoy the privileges exemptions and immunities provided in the international organizations immunities act the definition of international_organization in the international organizations immunities act also applies for purposes of the internal_revenue_code hereinafter code sec_7701 of the code provides that the term international_organization means a public international_organization entitled to enjoy privileges exemptions and immunities as an international_organization under the international organizations immunities act in the remainder of this letter all references to international_organization are intended to use the term as defined in sec_7701 fica and self-employment_tax provisions related to service for an international_organization specific exceptions from fica and income_tax_withholding apply to services performed in the employ of an international_organization sec_3121 of the code relating to the fica provides that service in the employ of an international_organization is excepted from the definition of employment for purposes of the fica and thus remuneration for such service is not subject_to fica_taxes there is no provision allowing an international_organization to waive this exception from fica thus an international_organization is not liable for fica_taxes with respect to its employees under the code social_security and medicare benefits are generally financed through two taxing systems the fica which generally taxes employers and employees on wages received by employees and the self-employment contributions act seca which imposes the self-employment_tax on the self-employment_income of self- employed individuals the services of certain employees are excepted from fica but the employees are treated as if they were self-employed for purposes of the seca thus such employees are subject_to self-employment_tax on their earnings and they obtain coverage for social_security and medicare through the seca included within the groups of employees that are deemed to be self-employed for purposes of the seca are citizens of the united_states who are performing services in the united_states as employees of an international_organization sec_1402 of the code provides that service described in sec_3121 performed in the united_states by a citizen_of_the_united_states is generally treated as a trade_or_business for self-employment_tax purposes and thus the earnings from such service is subject_to self-employment_tax under sec_3121 there is an exception to this rule providing that in the case of certain federal employees who are transferred to the employ of international organizations pursuant to section of title united_states_code the employees will be treated as if employed by the united_states government and subject_to fica self-employment taxes are computed on form_1040 schedule se self-employment_tax generally an individual is required to take account of self-employment_tax liability in computing estimated_tax liability see form 1040-es estimated_tax for individuals in contrast to united_states citizens performing services within the united_states aliens in the employ of an international_organization are not subject_to self-employment taxes and cannot waive that exception income_tax_withholding a aliens we now turn to the issue of income_tax_withholding generally federal_income_tax withholding is imposed on wages as defined in sec_3401 of the code sec_3401 provides an exception from wages for such services performed by a nonresident_alien_individual as may be designated by regulations prescribed by the secretary_of_the_treasury the employment_tax regulations under sec_3401 of the code provide that all remuneration paid for services performed by a nonresident_alien_individual if such remuneration otherwise constitutes wages within the meaning of sec_31_3401_a_-1 of the regulations and if such remuneration is effectively connected with the conduct_of_a_trade_or_business within the united_states is subject_to_withholding under sec_3402 unless excepted from wages under this regulations section sec_31_3401_a_6_-1 of the regulations provides that remuneration paid for services performed within the united_states by a nonresident_alien_individual is excepted from wages and hence is not subject_to_withholding if such remuneration is or will be exempt from the income_tax imposed by chapter of the code by reason of a provision of the code or an income_tax convention to which the united_states is a party an employer may rely on a claim that the employee is entitled to an exemption from tax if it complies with the requirements of sec_1_1441-1 of the regulations for a claim based on a provision of the code or sec_1_1441-4 of this chapter for a claim based on an income_tax convention sec_893 of the code in part excludes from gross_income and exempts from income_taxation the wages fees or salary of any employee of an international_organization received as compensation_for official services to such international_organization if such employee is not a citizen_of_the_united_states or is a citizen of the republic of the philippines whether or not a citizen_of_the_united_states a provision exists under the immigration and nationality act allowing certain individuals to waive the privileges exemptions and immunities that otherwise accrue because of their occupational status including the exemption under sec_893 of the code in order to retain their immigrant status but no provision exists for the international_organization to waive the individuals’ exemption under sec_893 or any other privileges exemptions and immunities they are otherwise entitled to because of their international_organization status an officer_or_employee of an international_organization who executes and files with the attorney_general the waiver provided for in sec_247 of the immigration and nationality act u s c b thereby waives the exemption conferred by sec_893 of the code as a consequence that exemption does not apply to income received by that individual after the date of the filing of the waiver sec_1_893-1 of the regulations however if a tax_convention consular convention or international agreement provides that compensation paid_by the foreign government or international_organization to its employees is exempt from federal_income_tax and the application of this exemption is not dependent upon the provisions of the internal revenue laws the exemption so conferred is not affected by the execution and filing of a waiver under sec_247 of the immigration and nationality act b united_states citizens and resident aliens with respect to income_tax_withholding on compensation paid to united_states citizens or resident aliens sec_3401 of the code provides an exception from wages for remuneration for services by a citizen or resident_of_the_united_states for an international_organization there is also no provision for voluntary income_tax_withholding on compensation paid to united_states citizen or resident_alien employees for services for an international_organization sec_3402 of the code authorizes regulations to provide for voluntary withholding on remuneration for services performed by an employee for the employer that is not wages sec_31_3402_p_-1 of the regulations provides that an employee and his employer may enter into an agreement to provide for the withholding of income_tax upon payments of amounts described in paragraph b of sec_31_3401_a_-3 of the regulations however sec_31_3401_a_-3 provides in effect that remuneration for services in the employ for an international_organization may not be the subject of a voluntary withholding agreement generally employees of international organizations who are united_states citizens should satisfy their income_tax_liability through the payment of estimated_tax see form 1040-es we hope the above information will prove helpful to you if you have questions about this matter please contact alfred g kelley internal_revenue_service sincerely yours lynne camillo chief employment_tax branch office of the division counsel associate chief_counsel tax exempt and government entities


t c memo united_states tax_court estate of sam homer marmaduke deceased john h marmaduke independent executor petitioner v commissioner of internal revenue respondent docket no filed date william r cousins iii robert don collier and robert m bolton for petitioners audrey m morris for respondent memorandum findings_of_fact and opinion swift judge respondent determined a deficiency of dollar_figure in the federal estate_tax of the estate of decedent sam homer marmaduke unless otherwise indicated all section references are to the internal_revenue_code in effect as of date the date of decedent's death or the valuation_date and all rule references are to the tax_court rules_of_practice and procedure after settlement of some issues the sole remaining issue for decision is the fair_market_value as of the date of decedent's death of big_number shares of common_stock of a closely_held_corporation findings_of_fact some of the facts have been stipulated and are so found at the time of decedent's death decedent resided in amarillo texas at the time the petition was filed john h marmaduke the executor of decedent's_estate resided in amarillo texas upon his death in decedent owned big_number shares or approximately percent of the total outstanding common_stock in hastings books music video inc hastings other members of the marmaduke family owned another big_number shares or percent of the total outstanding common_stock in hastings together the marmaduke family including decedent's wife children and grandchildren owned percent of the total common_stock in hastings shareholders unrelated to the marmaduke family comprising hastings employees and a qualified_employee benefit plan covering hastings employees the esop owned the remaining percent of the total outstanding shares of common_stock in hastings the stock in hastings is not listed on any stock exchange and is not traded over the counter as of the valuation_date hastings was engaged throughout the southern and southwestern united_states in the business of operating retail stores that sold prerecorded music books and video cassettes hastings was originally created in the 1960's as a retail subsidiary of western merchandisers inc western western in turn was a wholesaler and distributor of similar merchandise to stores such as wal-mart stores inc wal-mart in hastings was split off from western in a tax-free reorganization following the reorganization western was sold to wal-mart and western's former shareholders held stock in both hastings and wal-mart pursuant to a 5-year branch service agreement however hastings' management remained dependent upon western's headquarters and distribution facilities information systems and accounting functions from the date of the reorganization until the valuation_date of date hastings was in excellent financial condition with both sales and profits increasing significantly in january of a g edwards sons inc a g edwards a valuation company prepared a valuation report of the fair_market_value of common_stock in hastings the purpose of the a g edwards' report was to establish the fair_market_value of an approximate 3-percent interest in hastings common_stock held by the esop plan when esop plan participants purchased a new home needed money for a child's education or terminated employment they had the right to direct the plan to sell shares of hastings stock back to hastings at the then current fair_market_value this put option provided liguidity for small blocks of stock in hastings held by the esop before any discount for lack of marketability the a g erdwards' report calculated the total value of hastings as of january of to be dollar_figure million the a g edwards' report then applied a 40-percent discount for lack of marketability that would have reflected a value for hastings stock of dollar_figure per share however due to the above-described liquidity of esop plan shares provided by the put option the a g edwards' report reduced the 40-percent lack-of-marketability discount in half to percent and opined that the fair_market_value of hastings stock held by the esop was dollar_figure per share in separate transactions involving small blocks of hastings stock occurred between employees officers and other individuals with an ongoing relationship with hastings or western cumulatively representing approximately percent of the total issued and outstanding shares of stock in hastings all but two of these transactions occurred at a price per share of sec_47 in june of decedent sold big_number shares of his common_stock in hastings at dollar_figure per share decedent sold big_number of these shares to an officer and treasurer of western who possessed full knowledge of the financial affairs of hastings in november of petitioner who is decedent's son and president and ceo of both western and hastings sold big_number shares of his stock in hastings at dollar_figure per share on date petitioner timely filed decedent's federal estate_tax_return based on a valuation report of gibbs smith schwartzman a valuation company the fair_market_value of decedent's big_number shares of stock in hastings was reported on decedent's_estate tax_return at dollar_figure or dollar_figure per share on audit based largely on the transactions in hastings stock that occurred in respondent determined that the total fair_market_value of decedent's shares of stock in hastings was dollar_figure or dollar_figure per share based thereon respondent determined an increase in the value of decedent's gross_estate of dollar_figure opinion for federal estate_tax purposes property is generally included in a gross_estate at its fair_market_value on the date of death see sec_2031 sec_20_2031-1 estate_tax regs fair_market_value is defined as the price at which property would change hands between a willing buyer and a willing seller neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts see 411_us_546 estate of brookshire v commissioner tcmemo_1998_365 sec_20_2031-1 estate_tax regs fair_market_value involves a question of fact and facts reasonably known on the valuation_date are particularly relevant see 94_tc_193 estate of brookshire v commissioner supra arm's-- length sales of stock within a reasonable_time before and after the appropriate valuation_date are strong indicators of fair_market_value see 79_tc_938 estate of brookshire v commissioner supra additional factors that are relevant in valuing shares of stock in closely held corporations are the financial condition of the corporation the value of listed stock of corporations engaged in similar lines of business the corporation's net_worth the size of the block of stock to be valued and the earning and dividend paying capacity of the corporation see estate of newhouse v commissioner supra pincite 92_tc_312 estate of wright v commissioner tcmemo_1997_53 sec_20_2031-2 estate_tax regs revrul_59_60 1959_1_cb_237 also in valuing closely held corporations discounts may be warranted to reflect the stock's lack of marketability and limitations on transferability see estate of newhouse v commissioner supra pincite estate of andrews v commissioner supra pincite estate of brookshire supra we weigh expert witness testimony offered by the parties in light of particular facts and circumstances of each case see 304_us_282 102_tc_149 united parcel serv of am inc v commissioner tcmemo_1999_268 petitioner's first expert using a 60-percent discount for lack of marketability values the shares of decedent's stock in hastings at dollar_figure or dollar_figure per share petitioner's first expert reached this opinion by using the guideline company method of valuation and comparing hastings to several publicly traded corporations engaged in similar lines of business using the guideline merged-and-acquired company method and comparing similar corporations that were bought or sold within a reasonable_time of the valuation_date and using the discounted cash-flow method due to alleged lack of independent bargaining and negotiations relating to the dollar_figure price reflected in the transactions involving hastings stock petitioner's first expert entirely rejects the transaction_method petitioner's second expert using a 40-percent lack-of- marketability discount values the shares of decedent's stock in hastings at dollar_figure or dollar_figure per share petitioner's second expert relies solely on the guideline company and discounted cash-flow methods while rejecting the transaction and other valuation methods as inappropriate indicators of value respondent's expert using a 15-percent lack-of- marketability discount values decedent's shares of stock at dollar_figure or dollar_figure per share respondent's expert utilizes the guideline company the discounted cash-flow and the transaction methods of valuation in the schedule below we summarize the total equity value of the hastings corporation the discount for lack of marketability and the per-share value of the hastings stock as reflected in the a g edwards' report and in the reports of the parties' expert witnesses with regard to the a g edwards' report in the schedule we reflect separately the indicated value for the hastings shares of stock owned in general and for those stocks held by the esop at trial and on brief neither party relies on the dollar_figure per-share value of decedent's hastings stock reflected on decedent's federal estate_tax_return accordingly we do not continued a g edwards a g edwards petitioner's petitioner's respondent's general esop first expert second expert expert equity value dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure discount value per share dollar_figure sec_47 dollar_figure dollar_figure sec_47 represents the approximate average equity value for hastings from all methods utilized by each expert we conclude that the total equity value of hastings was dollar_figure million on the valuation_date this falls within the range for the estimated equity value of hastings reflected in the reports of each of the experts and in particular is supported by the a g edwards report as indicated in determining the fair_market_value of decedent's big_number shares of stock in hastings the parties’ experts all agree that some discount reflecting lack of marketability is appropriate they disagree however as to the percentage -- suggesting to percent with regard to the appropriate marketability discount for small blocks of stock in hastings the testimony of the officer and treasurer of western is significant he testified that dollar_figure per share reflecting a 20-percent discount was a fair and accurate price for the big_number shares of stock he purchased from continued reflect that valuation in the schedule nor do we refer to it again in the opinion -- - decedent shortly before the valuation_date he stated that at no time was he under compulsion to buy or sell the shares of stock the value however of decedent's large minority block of big_number shares of stock in hastings is not controlled by the value of big_number shares nor by the other transactions involving small blocks of hastings stock respondent's expert relies heavily on transactions cumulatively representing less than percent of hastings common_stock decedent's stock on the other hand represents some times the total number of shares of stock exchanged during we note that the a g edwards' report reduced the 40-percent discount for lack of marketability that it would use for hastings stock in general to a 20-percent discount only because of the liguidity available to the hastings stock held by the esop we regard a or 20-percent lack-of-marketability discount as inadeguate in valuing decedent's shares it is clear that decedent's large minority block of hastings stock was not readily marketable and that a significant lack-of-marketability discount 1s appropriate several studies in evidence confirm that discounts for lack of marketability of stock in closely held corporations often exceed percent in reaching our conclusion as to the appropriate lack-of- marketability discount to apply to decedent's stock in hastings we regard the following factors as supporting a significant discount the lack of a ready market for the hastings shares the comparatively small size of prior transactions relative to the size of decedent's block of stock the continued dependence of hastings on the branch service agreement with western and the general credibility of the a g edwards' report other factors however also indicate to us a marketability discount considerably less than the and 60-percent discounts suggested by petitioner's experts the several transactions of hastings stock that did occur in at dollar_figure per share were not in any way factored into the calculations of petitioner's experts and hastings was in excellent financial condition as of the valuation_date based on the evidence we conclude that the appropriate discount for lack of marketability of decedent's big_number shares of common_stock in hastings i sec_30 percent applying the 30-percent lack-of-marketability discount to the dollar_figure million total equity value of hastings yields a fair_market_value of dollar_figure per share we conclude that as of date the value of decedent's big_number shares of common_stock in hastings was dollar_figure dollar_figure times big_number equals dollar_figure to reflect the foregoing decision will be entered under rule


department of the treasury internal_revenue_service washington d c date number release date cc int b2 tl-n-6298-99 uilc internal_revenue_service national_office field_service_advice memorandum for from subject kenneth a hochman assistant district_counsel south florida cc ser sfl mia attn tamara moravia-israel phyllis marcus chief cc intl br2 this memorandum responds to your memorandums dated date november and date in the above-captioned case field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent legend company a company b company c year d year e year f date g h business years in question issue sec_1 whether company a can utilize the sec_1_955a-3 group excess deduction provision of the related group election to reduce its overall taxable_income for tax years in which it did not file a written election tl-n-6298-99 whether company a’s consent to the sec_1_955a-3 related group election of its parent_corporation in year d serves as a related group election by company a in year e and subsequent years whether company a can utilize in year f and subsequent years the sec_1_955a-3 group excess deduction provision of the related group election to reduce its overall taxable_income by making its initial related group election in year f a taxable_year beginning after the repeal of the sec_954 exclusion for reinvested shipping_income conclusion company a cannot utilize the group excess deduction provision of the related group election to reduce its overall taxable_income for tax years in which it did not file a written election company a’s consent to the election of its parent_corporation in year d does not constitute an election by company a in year e and subsequent years company a cannot utilize the group excess deduction by making a related group election that would first be effective in year f a year after the repeal of the sec_954 exclusion for reinvested shipping_income facts company a and its subsidiaries are diversified international companies engaged in h business_company a is a wholly owned domestic subsidiary of company b a domestic_corporation company c is a foreign holding_company that holds the stock of a number of foreign subsidiaries company c was wholly owned by company b on date g a date after the repeal of sec_954 company a purchased from company b the stock of company c company c and its subsidiaries are controlled_foreign_corporations cfcs under sec_957 of the code company a is a us shareholder within the meaning of sec_951 of the code in year d a year before the repeal of sec_954 company b as the u s shareholder of company c and its subsidiaries involved in shipping made the sec_1_955a-3 related group election thus aggregating the investment in foreign_base_company shipping operations of these shipping cfcs company a at the time owned a controlling_interest in several of the cfcs of the related group and consented within the meaning of sec_1_955a-3 to the election by company b after company a purchased the stock of company c from company b on date g it owned all but one of the cfcs of company b’s prior related group in years immediately thereafter company a used the related group election and group excess tl-n-6298-99 deduction provisions in computing the cfcs foreign_base_company_shipping_income even though company a made no related group election in year f approximately years after company a acquired the stock of company c company a began attaching to its u s federal_income_tax return form_1120 a sec_1_955a-3 election related group election listing its cfcs involved in shipping and stating that the cfcs’ foreign_base_company_shipping_income is computed pursuant to that election see sec_1_955a-3 company a’s related group calculations included the use of the group excess deduction in calculating the foreign_base_company_shipping_income of those cfcs sec_1_955a-3 for the years in question company a represents that it has no foreign_base_company_shipping_income resulting from a decrease in qualified_investments_in_foreign_base_company_shipping_operations background the subpart_f provisions enacted in severely limited the general_rule of deferral until repatriation congress provided for immediate taxation of certain categories of income but allowed continued deferral for other classes of income shipping_income was partially favored under the subpart_f regime as congress was encouraging investment in foreign shipping operations pursuant to sec_954 recognition of foreign_base_company_shipping_income was deferred to the extent such income was reinvested in foreign_base_company shipping operations this limited opportunity for deferral ended in when congress repealed sec_954 sec_954 repealed by public law sec_1221 provided that foreign_base_company_income does not include foreign_base_company_shipping_income to the extent that the amount of such income does not exceed the increase for the taxable_year in qualified_investments_in_foreign_base_company_shipping_operations of the controlled_foreign_corporation under the statutory framework in place between and the exclusion for reinvested shipping_income applied only to invested income that was qualified qualified_investments_in_foreign_base_company_shipping_operations are defined in sec_955 as investments in a any aircraft or vessel used in foreign_commerce and b other assets which are used in_connection_with_the_performance_of_services directly related to the use of any aircraft or vessel such term includes but is not limited to investments by a controlled_foreign_corporation in stock or obligations of another controlled_foreign_corporation which is a related_person within tl-n-6298-99 the meaning of sec_954 and which holds assets described in the preceding sentence but only to the extent that such assets are so used under this previously existing statutory framework pursuant to sec_1_955a-3 a controlled_foreign_corporation could calculate its qualified_investments on an individual basis or in conjunction with other controlled_foreign_corporations that qualified as related_persons any qualified_investment would be treated separately unless the taxpayer elected the aggregate approach the regulation provides this election through which a taxpayer can choose to consolidate its qualified_investments with those of related_persons sec_1_955a-3 provides in general that if a united_states_shareholder elects the benefits of sec_955 with respect to a related group of controlled_foreign_corporations then an investment in foreign_base_company shipping operation made by one member of such group will be treated as having been made by another member to the extent provided in paragraph c of this section and each member will be subject_to the other provisions of paragraph c of this section an election once made shall apply for the taxable_year for which it is made and for all subsequent years unless the election is revoked or a new election is made to add one or more controlled_foreign_corporations to election coverage for the manner of making an election under sec_955 and for rules relating to the revocation of such an election see paragraph d of this section for rules relating to the coordination of sec_955 and sec_955 see paragraph e of this section thus a u s shareholder was eligible to make the election only with respect to a related group of cfcs those covered under the election were also entitled to a pro_rata share of any group excess deduction see sec_1_955a-3 however an election as to qualified_investments by related_persons related group election was a prerequisite to use of the group excess deduction the most direct and obvious consequence of the repeal of sec_954 was that taxpayers could no longer exclude foreign base shipping_income by making qualified_investments in foreign base shipping operations the concept of qualified_investments became prospectively obsolete in that taxpayers could no longer except shipping_income from subpart_f and the sum total of excluded income from qualified_investments could no longer be increased however as a result of the repeal of sec_954 the previously excluded income was not subject_to immediate recognition and sec_955 continues to recognize this income only when withdrawn from foreign_base_company shipping operations therefore an accounting of a cfc’s previously excluded income from qualified_investments continues to be necessary and the concept of qualified_investments retains significance for this limited purpose analysis tl-n-6298-99 whether company a can utilize the sec_1_955a-3 group excess deduction provision of the related group election to reduce its overall taxable_income for tax years in which it did not file a written election company a cannot utilize the group excess deduction provision of the related group election to reduce its overall taxable_income for tax years in which it did not file a written election on date g a date within year e company a acquired the stock of company c and its subsidiaries company a made no related group election until year f even though company a had not made a related group election it computed the income of its cfcs on a group basis and used the group excess deduction provisions of the related group election to compute the foreign_base_company_shipping_income of its cfcs for year e and subsequent years during the first five years after acquiring the stock of company c company a added cfcs to its related group computation but still neglected to make a related group election a us shareholder cannot use the group excess deduction provision in calculating foreign_base_company_shipping_income without having made a related group election sec_1_955a-3 provides that a u s shareholder shall make an election under this section to treat two or more controlled_foreign_corporations as a related group for a group_taxable_year and subsequent years by filing a statement to such effect with the return for the taxable_year within which or with which such group_taxable_year ends the statement shall include i the name address taxpayer_identification_number and taxable_year of the united_states_shareholder ii the name address and taxable_year of each controlled_foreign_corporation which is a member of the related group and is to be subject_to the election and iii a schedule showing the calculations by which the amounts described in this section have been determined for the taxable_year for which the election is first effective with respect to each subsequent taxable_year to which the election applies a new schedule showing calculations of such amounts for that taxable_year must be filed with the return for that taxable_year a valid related group election made in the time and manner provided by sec_1_955a-3 is a prerequisite to use of the group excess deduction since no election whatsoever was made for year e and none was made until year f use of the group excess deduction in company a’s computation of the cfcs’ foreign base shipping_income during the years before year f is invalid regardless of whether company a was otherwise eligible to make a valid related group election for those years see issue tl-n-6298-99 whether company a’s consent to the sec_1_955a-3 related group election of its parent_corporation in year d serves as a related group election by company a in year e and subsequent years company a’s consent to the election of its parent_corporation in year d a year before the repeal of sec_954 was effectuated has no effect on company a and does not constitute an election by company a in year e or subsequent years by consenting to the election company a may have enabled company b its parent to make an election under sec_1_955a-3 that would otherwise have been invalid company b controlled company a which held controlling interests in some of the cfcs that were the subject of company b’s election an election under paragraph b iii of this section will not be valid in the case of an election by a u s shareholder the first u s shareholder if- a the first u s shareholder controls a second shareholder b the second u s shareholder controls one or more controlled_foreign_corporations and c any of the controlled_foreign_corporations are the subject of the election by the first u s shareholder unless the second u s shareholder consents to the election by the first u s shareholder sec_1_955a-3 however company a’s consent to company b’s election does not serve as the equivalent of an election by company a sec_1_955a-3 says that an election under sec_1_955a-3 shall have no effect on any other u s shareholder or any other controlled_foreign_corporation therefore the election by company b in year d has no effect on whether company a has made an election in year e and subsequent years whether a can utilize in year f and subsequent years the sec_1_955a-3 group excess deduction provision of the related group election to reduce its overall taxable_income by making its initial related group election in year f a taxable_year beginning after the repeal of the sec_954 exclusion for reinvested shipping_income company a cannot use the group excess deduction to reduce its overall taxable_income by making its initial related group election in year f a year after the repeal of sec_954 company a purchased the stock of company c from company b in year e several years after the repeal of sec_954 even though company a had not made a related group election it reported its cfcs’ foreign_base_company_shipping_income as if a group election had been in effect for year e and subsequent years in year f the fifth tax_year after purchasing the stock company a made its initial related group election tl-n-6298-99 a us shareholder cannot make a related group election which is first to be effective after the repeal of sec_954 during the period when foreign_base_company_shipping_income used for qualified_investments was excludable from subpart_f_income the related group election enabled related_taxpayers to work collectively to minimize that income however this exclusion for qualified_investments in foreign_base_company_shipping_income was repealed as part of the tax_reform_act_of_1986 sec_955 arguably is authority for the related group election under sec_1_955a-3 sec_955 however was not repealed along with sec_954 sec_955 is definitional and thus needed to be retained for purposes of implementing sec_955 which deals with withdrawal of previously excluded subpart_f_income from qualified_investment the retention of sec_955 however does not authorize a u s shareholder to make a related group election which is first effective subsequent to the sec_954 repeal as use of the group excess deduction is predicated upon a valid related group election the group excess deduction is also unavailable under such circumstances in addition subpart_f_income generally is computed on an individual corporation basis neither sec_954 nor sec_1_954-6 which provides rules for determining foreign_base_company_shipping_income allows for computing that income on a group basis sec_1_955a-3 is an exception to the general_rule further a reading of the provisions as a whole leads to the conclusion that sec_1_955a-3 cannot be used to compute foreign_base_company_shipping_income by a company making an initial election after the repeal of sec_954 the title of sec_1_955a-3 election as to qualified_investments by related_persons clearly demonstrates that the election pertains to qualified_investments the concept of qualified_investments became prospectively obsolete with the repeal of sec_954 to permit a first time election after the repeal of sec_954 would contravene the intent of the repeal the language found in sec_1_955a-1 also provides guidance in the analysis at hand sec_1_955a-1 explicitly states that a taxpayer’s share of the group excess deduction constitutes excluded subpart_f_income under sec_954 this language demonstrates that the group excess deduction is dependent upon the sec_954 exclusion as foreign_base_company_shipping_income is no longer excludable under sec_954 the group excess deduction is likewise unavailable to u s shareholders who first elect to use the deduction after repeal of sec_954 the policy consideration implemented by repeal of sec_954 current recognition of shipping_income earned through a foreign_corporation also suggests the curtailment of the group excess deduction tl-n-6298-99 congress has made a judgment that shipping_income is the inherently manipulable type of income rarely subjected to foreign tax that ought to be subject_to subpart_f when earned through a foreign_corporation the committee believes that as a matter of tax policy that judgment should be given full effect h_r rep no pincite the group excess deduction functions by enabling taxpayers to maneuver deductions in order to minimize current taxation an initial attempt to use the group excess deduction after sec_954 repeal would frustrate congress’ intent to fully subject shipping_income to current taxation and prevent manipulation of such income based upon all of the above company a cannot use the group excess deduction for the years in question if you have any further questions please call mark r pollard at _ s phyllis e marcus chief branch office of associate chief_counsel international


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc corp - plr-132608-01 date date legend target sellers date a date b parent purchaser company official tax professional tax professional this letter respond to letters dated june and submitted on behalf of parent and sellers requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election parent and sellers are requesting an extension to file a sec_338 election under sec_338 and sec_338 of the internal_revenue_code and sec_1_338_h_10_-1t c of the income_tax regulations with respect to purchaser’s acquisition of the stock of target sometimes hereinafter referred to as the election on date a all citations in this letter to regulations under sec_338 are to regulations in effect on date a additional information was received in a letter dated date the material information is summarized below plr-132608-01 parent is the common parent of an affiliated_group_of_corporations filing a consolidated_return purchaser a single member llc is treated as a branch of parent target was an s_corporation sellers owned all of target’s outstanding_stock on date a purchaser acquired all of the stock of target from sellers in exchange for cash it is represented that the acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 parent and sellers intended to file the election the election was due on date b 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_9100-1 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for parent’s consolidated group’s target’s or sellers’ taxable years in which the acquisition occurred the taxable years in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase sec_338 permits the purchasing and selling corporations to elect jointly to treat the target_corporation as deemed to sell all of its assets and distribute the proceeds in complete_liquidation a sec_338 election may be made for target only if purchaser acquires stock meeting the requirements of sec_1504 from a selling_consolidated_group a selling affiliate or the s_corporation shareholders in a qualified_stock_purchase sec_1_338_h_10_-1t c 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 internal_revenue_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 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 in this case the time for filing the election is fixed by the regulations ie sec_1_338_h_10_-1t c therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for parent and sellers to file the election plr-132608-01 provided parent and sellers show they 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 sellers company official and tax professional sec_1 and explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the government will not be prejudiced if relief is granted see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent and sellers have shown they 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 an extension of time is granted under sec_301_9100-1 until days from the date on this letter for parent and sellers to file the election with respect to the acquisition of the stock of target as described above the above extension of time is conditioned on the filing within days of the date on this letter of all returns and amended returns if any necessary to report the transaction in accordance with the election and the taxpayers' parent's consolidated group’s sellers’ and target’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 the taxpayers’ 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 further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 parent and sellers must file the election in accordance with sec_1_338_h_10_-1t c that is a new election on form_8023 must be executed on or after the date on this letter which grants an extension and filed in accordance with the instructions to the form a copy of this letter must be attached to the election form parent and sellers must file or amend as applicable their returns to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year and must attach to the returns a copy of this letter and a copy of the election we express no opinion as to whether the acquisition sale of the target stock qualifies as a qualified_stock_purchase under sec_338 whether the acquisition sale of target stock qualifies for sec_338 treatment or any other tax consequences arising from the election plr-132608-01 in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply parent must provide sellers with a copy of this letter this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office copies of this letter are being sent to parent’s authorized representatives sincerely yours ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service number release date index numbers ------------------------- --------------------------------------- ------------------------------------------ ------------------------------- 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 b03 plr-129939-15 date date legend purchaser ------------------------ llc ---------------------------------------------------------------------------------------------------- ----------------------- ---------------------------------------------------------- ---------------------------------------------------------------------------- s_corporation shareholder s_corporation target --------------------- --------------------------------------- --------------------------- ---------------------------------------------------------------------------- state a state b date d year x dear -------------- ----------- --------- -------------------------- -------------------------------------------------- ---- this letter responds to a letter dated date submitted on behalf of purchaser s_corporation shareholder and s_corporation target requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election purchaser s_corporation shareholder and s_corporation target are requesting an extension of time for s_corporation target to file an election under plr-129939-15 sec_1_336-2 of the income_tax regulations election with respect to purchaser’s acquisition through llc of x percent of the stock of s_corporation target from s_corporation shareholder on date the material information submitted is summarized below on date llc a state a limited_liability_company which is disregarded for federal_income_tax purposes acquired x percent at least percent of the stock of s_corporation target an s_corporation incorporated in state b from s_corporation shareholder in exchange for cash the disposition it has been represented that the disposition qualified as a qualified_stock_disposition as defined in sec_1_336-1 s_corporation target s_corporation shareholder and purchaser intended to make a sec_336 election but for various reasons a timely election was not made subsequently this request was submitted under sec_301_9100-3 of the procedure and administration regulations for an extension of time to file the election it has been represented that none of purchaser s_corporation shareholder or s_corporation target is seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 regulations promulgated under sec_336 permit certain_sales exchanges or distributions of stock of a corporation to be treated as asset dispositions if the disposition is a qualified_stock_disposition as defined in sec_1_336-1 and a sec_336 election is made sec_1_336-2 provides that a sec_336 election for an s_corporation target is made by i all of the s_corporation shareholders including those who do not dispose_of any stock in the qualified_stock_disposition and the s_corporation target entering into a written binding agreement on or before the due_date including extensions of the federal_income_tax return of the s_corporation target for the taxable_year that includes the disposition date to make a sec_336 election ii the s_corporation target retaining a copy of the written_agreement and iii the s_corporation target attaching the sec_336 election statement described in sec_1_336-2 and to its timely filed including extensions federal_income_tax return for the taxable_year that includes the disposition date 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 internal_revenue_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 plr-129939-15 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 and that granting relief will not prejudice the interests of the government sec_301_9100-3 the time for filing the election is fixed by the regulations ie sec_1_336-2 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for s_corporation target to file the election provided purchaser s_corporation shareholder and s_corporation target acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief would not prejudice the interests of the government information affidavits and representations submitted by purchaser and s_corporation shareholder explain the circumstances that resulted in the failure to timely file the election the information establishes that this request was filed before the failure_to_file the election statement was discovered by the internal_revenue_service see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that purchaser s_corporation shareholder and s_corporation target have 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 an extension of time is granted under sec_301_9100-3 until days from the date on this letter for s_corporation target to file the election with respect to the disposition within days of the date on this letter s_corporation target and s_corporation shareholder must enter into an agreement in accordance with sec_1 h i to make the election and s_corporation target must file the election statement in accordance with sec_1_336-2 the election statement must be attached to s_corporation target’s tax_return for d year in addition a copy of this letter must be attached to s_corporation target’s return alternatively if s_corporation target files its return electronically it may satisfy the requirement of attaching a copy of this letter to the return by attaching a statement to its return that provides the date and control number plr-129939-15 of this letter_ruling within days of the date on this letter all relevant parties must file or amend as applicable all returns and amended returns if any necessary to report the transaction consistently with the making of a sec_336 election for the taxable_year in which the transaction was consummated and for any other affected_taxable_year plr-129939-15 the above extension of time is conditioned on the taxpayers’ ie purchaser’s s_corporation target’s and s_corporation shareholder’s tax_liability if any being not lower in the aggregate for all years to which the sec_336 election applies than it would have been if the election had been timely filed taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ 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 as to whether the disposition qualifies as a qualified_stock_disposition or any other tax consequences arising from the sec_336 election in addition we express no opinion as to the tax consequences of filing the return or election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we have relied on certain statements and representations made by the taxpayers 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 letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely _ken cohen_________________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc


internal_revenue_service index nos number release date cc dom it a plr-121262-98 date ein attn dear this is in reference to a form_1128 application to adopt change or retain a tax_year submitted on behalf of the above- named taxpayer requesting permission to change its accounting_period for federal_income_tax purposes from a calendar_year ending december to a taxable_year ending june effective for the tax_year beginning date the taxpayer has requested that the form_1128 be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations the taxpayer's form_1128 requesting a change in accounting_period to a tax_year ending june was due on or before date information furnished indicates that the taxpayer intended to file the form on a timely basis but that due to an error or misunderstanding the form was not filed until shortly after the due_date the late filing was not due to any lack of due diligence or prompt action on the part of the taxpayer sec_1_442-1 of the income_tax regulations provides that in order to secure the commissioner's consent to a change in accounting_period the taxpayer must file an application on form_1128 with the commissioner on or before the 15th day of the second calendar month following the close of the short_period sec_301_9100-3 of the regulations provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case 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 evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government based on the facts and information submitted and the representations made we have determined that the taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government accordingly the requirements of the regulations for the granting of relief have been satisfied in this case and taxpayer’s late filed form_1128 requesting permission to change to a tax_year ending june effective for the tax_year beginning date is considered timely filed since the separate user_fee required to process taxpayer’s form_1128 has been paid we will begin processing the taxpayer’s application immediately the ruling contained in this letter is based 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 part of an examination process this ruling addresses the granting of sec_301_9100-3 relief only no opinion is expressed regarding the tax treatment of the instant transaction under the provisions of any other sections of the code or regulations that may be applicable thereto or regarding the tax treatment of any conditions existing at the time of or effects resulting from the instant transaction specifically no opinion is expressed as to whether the taxpayer is permitted under the code and applicable regulations to change to the tax_year requested in the subject form_1128 a copy of this letter is being sent to the taxpayer’s district_director in accordance with a power_of_attorney currently on file with this office a copy of this letter_ruling is also being sent to the taxpayer's authorized representatives this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel income_tax and accounting s irwin a leib enclosures copy of this letter copy for sec_6110 purposes by irwin a leib deputy assistant chief_counsel


significant index number department of the treasury internal_revenue_service washington c colt es oct zong cest ep ral az re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 b b and b of the internal_revenue_code code and sec_304 b b and of the employee_retirement_income_security_act_of_1974 erisa’ this extension is effective with the plan_year beginning date this extension applies to the amortization charge bases as identified in your application submission established as of september with a total outstanding balance of dollar_figure the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 af the code requires the secretary to extend the period of time required to emortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in section d '8 including a certification from the plan's actuary that as of that date _ absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding pian years ii the plan_sponsor has adopted a plan to improve the plan's funding status il the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph 3a has been provided we have sent a copy of this letter to the authorized representative pursuant to a power of attomey on file in this office and fo your this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent ifyou require further assistance in this matter please contact sincerely yours son apo david m ziegler manager ep actuarial group


cca_2015092412380047 id uilc number release date from sent thursday date pm to cc bcc subject re pub pub is required for form_8300 examinations because the determination or collection of any_tax as used in the statute includes penalties under sec_6721 sec_6722 for failing to file forms as these penalties are assessable_penalties that are treated as a tax see sec_6671 ---------------- ------------------------------------ ------------------------------------ ------------ --------------------------


sy ef7 go-ce internal_revenue_service op e ev ty department of the treasury washington dc contact person telephone number in reference to date jan dear sir or madam this is in response to your request for rulings dated october foundation status and a related request under chapter internal_revenue_code pertaining to the termination of private of the you are recognized as exempt from federal_income_tax under of the code and are classified as section so01 c foundation under sec_509 foster and promote the interest of and other c activities primarily in the state of surrounding area your primary purpose is to c educational organizations d and the a private b is exempt under sec_501 of the code and has been b is and b a vi a nonprivate foundation with classification to raise and manage endowment funds to sustain determined to be under sec_509 purposes of its operating and capital requirements and that class of publicly supported organizations for whose benefit b exists in perpetuity whose benefit b exists is educational organizations particularly those serving the disadvantaged population along the d and f border because a large percentage of the population which serves is benefits are also c one class of publicly supported organizations for c many of the educational organizations which b one of the you have instituted a plan_of_reorganization establish a closer relationship with b terminate your status as sec_509 supporting_organization to this relationship with a larger organization overseen py and diverse board_of directors you will be able to more a private_foundation and becoarr a b by establishing a large in order and have decided to two ias specifically b will be able to provide staff that can the charitable intent of your creator by eliminating the effectively accomplish your charitable mission and better carry out administrative and financial burdens of private_foundation_status effectively administer your grant program which extends across a wide area will the board_of directors of that you at you insure long-term governance because your bylaws specify that by becoming a supporting_organization of b will elect your members in the event any time cease to have members also b you and b have executed an agreement stating that you will b advised endowment funds at all times be operated in connection with b agreement with regard to property contained within any such advised fund the responsibility and authority for the investment of ef determined by received by the donor funds ave determined in accordance with the rules procedures and policies of b after taking into account ai recommendations distributions from the advised funds are all other matters concerning advised all advised funds further b has the assets b owns all under the b simultaneously with the execution of the agreement you and b executed an instrument of transfer in which you created a permanent endowment educational organizations in the area and consult recipients of will pursuant fund which will be used to benefit to tne rules procedures and policies of b concerning the distribution of acti independently in the furtherance of b will not and the fund with the b be bound by such advice and its exempt status although you may advise you represent that you have restated and amended your incorporation to expressly limit your purposes to the articles of exclusive support directors maintain a close and continuous working relationship with b you state that your officers and you state that substantially_all of your net_income will of br id te band that ppeart it will constitute over you further represent kyl riate distriet director of percent that you will giv your intentions te of notic b's your pravate foundation status and commence th piced indent tien bibi of the tmeame ‘pax oof bi sindation has neat may be terminared witha the code provides that the acted for y t the impe failed tea and bal t ries n l and the month period that it status satisfaction of such month period that such organization has complied with i such organization establishes to the the secretary immediately after the expiration of is terminating its private_foundation iii sec_1_507-2 of the regulations provides that an for a continuous period of meets the requirement of sec_509 organization can terminate its private_foundation_status if organization i or properly notifies the district_director before the commencement of the and iii properly establishes immediately after the expiration of the month period that it has complied with the requirements of sec_509 b month period in accordance with sec_1_507-2 in accordance with section calendar months ii the or sec_1_507-2 of the reguiations provides that in b for the order for an organization to meet bo organization described in section dollar_figure a satisfy the requirements of that section at the month period and continuously thereafter during the period month termination period as the requirements of section an organization must the commencement of an sec_509 is organized and at the code describes a supporting a of organization as one which thereafter 1s operated exclusively fer the benefit perform the functions of more specified organizations described in sec_509 connection with one or more organizations described in sec_509 indirectly by one or more disqualified persons as defined in than one or sec_4946 other foundation managers and other more organizations described in sec_509la or 1s operated supervised or controlled not controlled directly or to carry out times and al of b c or or is or to in or by the purposes of one the sect on of percent each net_investment_income of each private_foundation year on net_investment_income is determined by subtracting cerrain expenses and modifications from the sum of gross cnvestment income and capital_gain net the code imposes a inceme tax of a private_foundation may verminate i n operating as imposed a if public charity in which case there nave been no violations ne term cathion tax giving rise to liability for organization meets the requirements cf a a son nous per ies os fob mort under chapt apooter t gts po ys notice to the secretary of represent that you will comply with the notice requirements and that you have amended your articles of incorporation and bylaws to become a supporting_organization as provided for in sec_509 its intentions to terminate of the code you once the month period commences you will be treated as a non-private foundation would not apply therefore the provisions of section accordingly based on the information furnished we rule as follows that you can be expected to satisfy the requirements of sec_507 b months from september status will be terminated and your qualification a sec_509 organization will be established of the code such that on date your private_foundation a sec_2 that you will not be subject_to the tax on private_foundation terminations imposed by sec_507 because the termination of your private_foundation_status will qualify under sec_507 b of the code of the code that you will not be subject_to the tax on net_investment_income imposed by sec_4940 of time commencing on date or on such other date on which you establish to the satisfaction of your status as your private_foundation_status will qualify under sec_507 b the service that you have properly terminated a private_foundation because the termination of the code for the period of and ending on september the code of we are informing the ohio te_ge office of this action please keep a copy of this ruling with your organization's permanent records this ruling is directed only to the organization that requested it may not be used or cited as precedent sec_6110 of the code provides that it sincerely btr0ctot v bact gerald v manager exempt_organizations sack group


internal_revenue_service number release date index numbers --------------------------------------------------------- --------------------------------------------- --------------------- -------------------------------- 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-103874-15 date date legend x --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- y ------------------------------------------------------------------------- ----------------------------- z --------------------------------------------------------- ------------------------------- a ------------------------ b ----------------------- c ----------------------- d ------------------------- e ----------------------- state --------- date1 --------------------------- date2 ---------------------- date3 --------------------------- date4 --------------------------- date5 --------------------------- plr-103874-15 date6 --------------------------- date7 ----------------------- date8 ---------------------------- n1 -- n2 ------ n3 ---- n4 ---- dear ------------------ this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code code the information submitted states that x was formed under the laws of state on date1 and elected to be treated as an s_corporation effective date2 a and b formed y a state limited_liability_company on date3 and z a state limited_partnership on date4 at the time of z’s formation y owned an n1 general_partnership interest in z and a and b each owned an n2 limited_partnership_interest in z in addition a and b each own an n3 interest in y on date5 a and b each transferred their respective shares of x stock to z on date6 a and b each transferred by gift an n4 limited_partnership_interest in z to each of c d and e the children of a and b in date7 x learned that z was an ineligible shareholder and that x’s s_corporation_election had terminated effective date5 shortly thereafter on date8 z distributed all of the stock of x to its individual owners on a pro_rata basis to avoid multiple transfers any stock distributable to y was instead distributed directly to a and b as the members of y x’s tax_return for such tax_year was prepared consistent with this treatment x represents that x and x’s shareholders have filed tax returns consistent with x being an s_corporation since date2 x further represents that the circumstances resulting in the termination of x’s s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive tax planning x and persons who were or are shareholders of x at any time since date5 agree to make any adjustments consistent plr-103874-15 with the treatment of x as an s_corporation as may be required by the secretary with respect to such period 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 the year sec_1361 provides that the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that meets the requirements specified in sec_1361 through d sec_1361 provides that s_corporations may not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1_1361-1 of the income_tax regulations provides that except as otherwise provided in sec_1 e relating to nominees sec_1_1361-1 relating to certain trusts and for taxable years beginning after date sec_1361 relating to certain exempt_organizations a corporation in which any shareholder is a corporation partnership or trust does not qualify as a small_business_corporation sec_1362 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 the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that any termination shall be effective on and after the date of cessation sec_1362 provides that if an election under sec_1362 by a 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 date5 due to the transfer of x stock to z plr-103874-15 an ineligible shareholder we further conclude that this termination was inadvertent within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date5 and thereafter provided that x’s s_corporation_election was valid and the election was not otherwise terminated under sec_1362 except as specifically set forth above we express or imply no opinion concerning the federal_income_tax consequences of the facts described above under any other provision of the code and the regulations thereunder specifically we express or imply no opinion regarding whether x otherwise qualifies as a small_business_corporation under sec_1361 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 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely mary beth carchia senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc