internal_revenue_service department of the treasury number release date index number re washington dc person to contact telephone number refer reply to cc dom p si 4-plr-102705-00 date date legend trust trust trust successor trustee spouse husband child child child attorney date date date state dear this is in response to your letter dated date and prior correspondence in which you requested rulings regarding the gift and generation-skipping_transfer_tax consequences resulting from a proposed modification of trust on date spouse and husband trustors created an irrevocable_trust trust spouse was designated as trustee of trust and trust and trust discussed below and currently serves in that capacity on date the successor trustee a corporate trustee declined to act as successor trustee of trust on date trustors’ petitioned superior court of state to appoint an individual as successor trustee and the court approved the appointment of plr-102705-00 successor trustee it is represented that all of the property transferred to trust at the time is was created and funded consisted of spouse’s one-half interest in the community_property held by spouse and husband it is further represented that all of property transferred to trust at the time it was created and funded consisted of husband’s one-half interest in the community_property held by husband and spouse paragraph i of trust provides that property is to be divided into two equal trusts trust and trust for the primary benefit of spouse during spouse’s life trust is to consist of spouse’s one-half community interest in certain property upon spouse’s death the then remaining property of trust is to be divided into separate trusts for the benefit of trustors’ descendants paragraph ii of trust provides that the net_income of trust be distributed in monthly or other convenient installments to spouse during life in addition spouse is entitled to withdraw any amount at any time from the principal of trust the trustee has the absolute discretion to pay and distribute the principal to spouse or any of trustors’ descendants for their proper support education medical treatment maintenance comfort or care upon the death of spouse trust is to terminate and the then remaining principal together with any undistributed_income is to be distributed to such person or persons including spouse’s estate as spouse appoints by will if spouse partially or wholly fails to exercise this power_of_appointment any unappointed amount of trust including any undistributed_income is to become part of trust and distributed in accordance with paragraph iii paragraph iii of trust provides that the trustee is to distribute to spouse all of the income and so much of the principal of trust as the trustee in its discretion determines to be proper for spouse’s support medical treatment maintenance comfort care having due regard to spouse’s other income and resources however spouse acting as trustee may not make distributions to spouse out of principal of trust the trustee may also distribute principal to any of descendants of trustors for their proper support education medical treatments maintenance comfort or care however spouse acting as trustee may only make these distributions to those persons to whom spouse owes no obligation of support paragraphs iii and of trust provide that upon the death of spouse the then remaining principal and any undistributed_income of trust is to be divided in equal shares for the benefit of the surviving children of trustors and for the issue of any deceased child by right of representation each share is to be held as a separate trust for the benefit of a child as follows a net_income is to be distributed in monthly or other convenient installments but not less frequently than in annual installments to the child during his or her lifetime b the trustee has the absolute discretion to make distributions to the child out of principal for the child’s proper support education medical treatment maintenance comfort or care c upon the death of the child the balance of the then remaining principal and any undistributed_income of trust is to be divided in shares for the then living issue of the child by right of representation and d if none of the issue survive the child the balance of the principal and any undistributed_income of trust is to be distributed to the then living issue of trustors by right of representation free and clear of all trusts provided however that any share which would otherwise be distributed to a person for whom a_trust created is then in existence is to be added to the trust and distributed as a part of that trust plr-102705-00 paragraphs iii and of trust provide that if any of the grandchildren of trustors for whom a share has been set_aside under paragraphs iii and attains age of his or her share is to be delivered to him or her free and clear of all trusts age of his or her share is to be delivered to him or her free and clear of all trusts age all of the share is to be delivered to him or her free and clear of all trusts each share of the trust set_aside for the benefit of any of the grandchildren of trustors under paragraphs iii and except any portion of such share distributed to a grandchild free and clear of all trusts as provided in paragraph is to be distributed as follows a until each of the grandchildren for whom a_trust has been established attains age the trustee is to pay grandchild so much of the net_income for the proper health support maintenance education comfort or care to grandchild the balance of net_income if any is to be accumulated by the trustee and added to the principal of grandchild’s trust upon each of grandchildren attaining age trustee is to pay currently to grandchild all of the net_income from his or her trust until grandchild attains age or dies whichever event is first to occur b when any grandchildren for whom a_trust has been established attains age of the then balance of the principal and accumulated income of his or her trust is to be delivered to him or her free and clear of all trusts age of the then balance is to be delivered to him or her free and clear of all trusts age all of the then balance of principal and accumulated income is to be delivered to him or her free and clear of all trusts c the trustee has the absolute discretion to make distributions to child out of principal for child’s proper support education medical treatment maintenance comfort or care d if at any time any trust contains less than dollar_figure the trustee may terminate trust and distribute the principal and accumulated income if any to the grandchild entitled to the distribution e if any grandchild for whom a_trust has been established dies prior to age the trustee is to set_aside all of the then balance of the principal and accumulated income of the deceased grandchild’s trust in equal shares for the benefit of his or her surviving issue if any by right of representation each share set_aside constitutes a separate and distinct trust and is to be distributed in the same manner as the other trust established under paragraphs iii and of trust if a grandchild leaves no surviving issue then the balance of his or her trust is to be delivered to grandchild’s then living brothers and sisters and the issue of any deceased brother or sister by right of representation in equal shares or if the grandchild leaves no brothers or sisters or their issue surviving then to the then living issue of trustors by right of representation provided that any share which would otherwise be delivered to any person for whom a_trust is created and is then in existence is to be added to and become part of the trust to held administered and distributed as part of that trust and f unless sooner terminated each of the trusts provided for in paragraph iii will cease to terminate on the date which i sec_21 years after the date of dearth of the last survivor of trustors and their issue living at the date of trust upon termination the entire principal of each of the trusts together with any accumulated income is to be distributed to the income beneficiaries for whom the property is then held in trust in proportion to their interests in income at that time paragraph iii provides that if upon termination or failure of any trust because there is no issue of trustors then living the entire balance of the trust is to be distributed to the heirs-at- law of trustors determined by the laws of succession of state then in effect relating to community_property and as if their simultaneous deaths had occurred upon the termination or failure of the trust plr-102705-00 spouse in her capacity as trustee proposes to file another petition in the superior court of state to modify the successor trustee provisions the petition proposes that if spouse ceases to act as trustee of trust child is to be appointed successor trustee of trust and each trust created under trust if child fails or ceases to act as successor trustee child is to be appointed successor trustee of trust and each trust created under trust if child fails or ceases to act as trustee child is to be appointed successor trustee of trust and each trust created under trust and if child fails or ceases to act as trustee attorney is to be appointed successor trustee of trust and each trust created under trust in addition the trustee or any party in interest will be authorized to petition the court for appointment of a trustee who is not related or subordinated to trustors the trustee-beneficiary or any descendants of trustors within the meaning of sec_672 of the internal_revenue_code for the purpose of effecting the exercise of any power described in section c of the state probate code which that section prohibits the trustee from exercising it is represented that no additions have been made to trust after date in section of the state probate code was amended effective date section c provides in part that unless a settlor or a testator clearly indicates that a broader power is intended by express reference to this section a person who is a beneficiary of a_trust that permits the person as trustee or co-trustee to make discretionary distributions of income or principal to or for the benefit of himself or herself may exercise that power in his or her favor only to provide for his or her health education support or maintenance within the meaning of sec_2041 and sec_2514 of the internal_revenue_code section e provides in part that section16081 c applies to any irrevocable_trust created under a document executed before date unless the parties_in_interest elect affirmatively not to be subject_to the application of subdivision c through a written instrument delivered to the trustee the election shall be made on or before the latest of date or three years after the date on which the trust became irrevocable it is represented that none of the interested parties elected out of this provision by date with respect to trust the following rulings have been requested under section of the state probate code if child child and child act as trustee of any trust created under trust these persons will not possess a general_power_of_appointment under sec_2041 or sec_2514 of the internal_revenue_code with respect to the trust the proposed modification will not cause trust to lose status under section of the tax_reform_act_of_1986 as exempt from the application of the generation-skipping_transfer_tax under chapter of the code ruling_request sec_2501 of the code imposes a tax on the transfer of property by gift by an individual sec_2511 provides that the tax imposed by sec_2501 applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible plr-102705-00 sec_2514 provides that for gift_tax purposes the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing the power sec_2514 provides the term general_power_of_appointment means a power that is exercisable in favor of the individual possessing the power possessor his estate his creditors or the creditors of his estate however a power to consume invade or appropriate property for the benefit of the possessor that is limited by an ascertainable_standard relating to the health education support or maintenance of the possessor is not a general_power_of_appointment sec_2514 provides that the lapse of a power_of_appointment created after date during the life of the individual possessing the power shall be considered a release of the power to the extent that the property that could have been appointed by exercise of the lapsed power during the calendar_year exceeds the greater of dollar_figure or percent of the aggregate value of the assets out of which the exercise of the lapsed powers could be satisfied sec_25_2514-1 of the gift_tax regulations provides that the term power_of_appointment includes all powers that are in substance and effect powers of appointment regardless of the nomenclature used in creating the power and regardless of local property law connotations if a_trust instrument provides that the beneficiary may appropriate or consume the principal of the trust the power to consume or appropriate is a power_of_appointment similarly a power given to a donee to affect the beneficial_enjoyment of trust property or its income by altering amending or revoking the trust instrument or terminating the trust is a power_of_appointment further a power in a donee to remove or discharge a trustee and appoint himself may be a power_of_appointment for example if the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and another person has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself that person is considered as having a power_of_appointment sec_25_2514-1 provides that a power to consume invade or appropriate income or corpus or both for the benefit of the possessor of the power that is limited by an ascertainable_standard relating to health education support or maintenance of the possessor is by reason of sec_2514 not a general_power_of_appointment a power to use property for the comfort welfare or happiness of the holder is not limited by the requisite standard sec_25_2514-3 provides that if a trustee has in his capacity as trustee a power that is considered a general_power_of_appointment the trustee's resignation or removal as trustee will be considered a lapse of his power for purposes of sec_2514 sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition that is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive plr-102705-00 sec_2041 provides that a general_power_of_appointment is a power that is exercisable in favor of the decedent his estate his creditors or the creditors of his estate however a power to consume invade or appropriate property for the benefit of the decedent that is limited to the health education support or maintenance of the decedent is not deemed to be a general_power_of_appointment sec_2041 provides that the lapse of a power_of_appointment created after date is considered a release of the power while federal_law controls what rights or interests shall be taxed after they are created creation of legal rights and interests in property such as the breadth and scope of a power_of_appointment over the corpus of a testamentary_trust is a matter of state law uniited states v pelzer 312_us_399 1941_1_cb_441 309_us_78 1940_1_cb_229 as stated above section c of state probate code provides generally that a person who is a beneficiary of a_trust that permits the person as trustee or cotrustee to make discretionary distributions of income or principal to or for the benefit of himself or herself may exercise that power in his or her favor only to provide for his or her health education support or maintenance within the meaning of sec_2041 and sec_2514 of the code revproc_94_44 1994_2_cb_683 sets forth the service's position regarding the transfer_tax consequences of the enactment of florida statutes annotated sec_737 a under this statute any fiduciary power conferred upon a trustee to make discretionary distributions of either principal or income to or for the trustee's own benefit cannot be exercised by the trustee except to provide for that trustee's health education maintenance or support as described in sec_2041 and sec_2514 the statute was effective with respect to trusts that were irrevocable on or after date pursuant to the revenue_procedure the service will not treat the statute as causing the lapse of a general_power_of_appointment for purposes of sec_2041 and sec_2514 where the scope of a fiduciary power held by a beneficiary was restricted as a result of the statute we conclude that under section c of state probate code if child child or child becomes a trustee of trust or any trust created under the terms of trust such child will not possess a general_power_of_appointment with respect to such trust for purposes of sec_2041 and sec_2514 as a result of the trustee invasion power requested ruling sec_2601 imposes a tax on every generation-skipping_transfer made by a transferor to a skip_person a person assigned to a generation that i sec_2 or more generations below the generation assignment of the transferor after date section a of the tax_reform_act_of_1986 tra of provides that the generation-skipping_transfer_tax is generally applicable to generation-skipping transfers made after october however under b a of the tra of and sec_26 b i of the generation-skipping_transfer_tax regulations the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date under sec_26_2601-1 any trust in existence on date will be considered an irrevocable_trust unless the settlor plr-102705-00 possessed a power that would have caused the trust to be included in the settlor’s gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26 b v provides that where any portion of a_trust remains in the trust after the release exercise or lapse of a general_power_of_appointment and the release exercise or lapse is treated to any extent as a taxable transfer for estate and gift_tax purposes the value of the corpus subject_to the power is treated as an addition to the trust after date a modification of a_trust that is otherwise exempt for purposes of chapter and the applicable regulations will generally result in a loss of exempt or grandfathered status if the modification changes the quality value or timing of any powers beneficial interests rights or expectancies originally provided for under the terms of the trust we conclude that the proposed modification of the successor trustee provisions will not change the quality value or timing of any powers beneficial interests rights or expectancies originally provided for under the terms of trust further as discussed above neither child child or child will possess a general_power_of_appointment over trust corpus if she becomes trustee thus we conclude that the proposed modification will not cause trust to lose any status under section of the tax_reform_act_of_1986 as exempt from application of generation-skipping_transfer_tax under chapter of the code the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code the rulings contained in this letter are directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file a copy of this letter is being sent to trustee of trust sincerely yours george l masnik chief branch enclosure copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc te_ge eoeg et2-plr-131282-00 date key town worker state this is in response to your request for a ruling concerning the worker’s status for federal employment_tax purposes with respect to services he performs for the town the applicable federal employment_taxes are those imposed by the federal_insurance_contributions_act fica and the collection of income_tax at source on wages in cases that involve a possible employer-employee relationship it is our practice to solicit information from the parties involved so we requested information from the worker as well the worker is a deputy tax collector for town with responsibility for collecting motor_vehicle excise_taxes he receives a yearly certificate of appointment as deputy collector of taxes pursuant to state-mandated procedures the town tax collector sends the worker notice of taxpayers whose motor_vehicle excise_tax has not been paid the worker then serves notice on the taxpayers and notifies the registry of motor vehicles electronically so that delinquent taxpayers cannot renew their licenses or registration before their tax is paid taxpayers’ checks for taxes interest and fees are required to be made payable to the town and are deposited in the town’s account the town pays the statutorily established collection fees to the deputy once a month procedures applicable to tax collectors based upon state law are found in the collector’s manual the worker maintains his own office with clerical employees as well as field employees and works as deputy tax collector for a number of municipalities he pays expenses for rent utilities employees’ wages office equipment etc the worker is required to swear an oath of office by some municipalities but not by the town the plr-131282-00 town reports compensation it pays the worker on form 1099-misc as nonemployee compensation the question presented is whether the worker is an employee subject_to fica_taxes and or federal_income_tax withholding the answer will require a determination of whether the worker is a public official sec_3402 of the internal_revenue_code the code provides that every employer making payment of wages shall deduct and withhold federal income taxes code sec_3401 provides that for purposes of this chapter the term employee includes an officer employee or elected official of a state or any political_subdivision thereof for this purpose the regulations include both elected and appointed officials in the definition of employee sec_31_3401_c_-1 employment_tax regulations the chapter referred to is chapter collection of income_tax at source on wages in other words sec_3401 applies only for income_tax_withholding purposes for purposes of fica_taxes employee status is determined under the common_law code sec_3121 the code does not define the term public official but sec_1_1402_c_-2 of the income_tax regulations gives the following examples the president the vice president a governor a mayor the secretary of state a member of congress a state representative a county commissioner a judge a justice of the peace a county or city attorney a marshal a sheriff a constable a registrar of deeds or a notary public taxes under the self-employment contributions act seca are imposed pursuant to sec_1401 and sec_1402 on the gross_income less applicable deductions derived by an individual from any trade_or_business for seca purposes the term trade_or_business has the same meaning as when used in code sec_162 relating to trade_or_business_expenses sec_1402 provides that the performance of the functions of a public_office is not a trade_or_business for seca purposes code sec_1402 and sec_1_1402_c_-2 income_tax regulations contain an exception providing that the performance of the functions of a public_office is a trade_or_business with respect to fees received for functions performed in a position compensated solely on a fee basis but only if the functions are not covered by an agreement under sec_218 of the social_security act agreement thus a fee-based public official who is not 1these provisions do not state that every public official is an employee but only that a public official is not self-employed they leave open the possibility that there may occasionally be non-employee public officials such individuals do not carry on a trade_or_business for seca purposes and consequently are not subject_to seca_tax on their compensation as public officials since they are not employees they are not subject_to fica tax see revrul_61_113 1961_1_cb_400 for an example plr-131282-00 covered by a agreement is subject_to seca_tax revrul_74_608 1974_2_cb_275 clarifies that a fee-based public official is one who receives compensation in the form of fees directly from members of the public a tax collector who is paid a salary based on the amount of tax collected is not a fee-based public official for fica purposes an individual is an employee if under the common_law rules the relationship between the individual and the person for whom he or she performs services is the legal relationship of employer and employee generally this relationship exists when the person for whom services are performed has the right to control and direct the individual who performs the services not only as to the result to be accomplished but also as to the details and means by which the result is accomplished in this connection it is not necessary that the employer actually direct or control the manner in which the services are performed it is sufficient if he has the right to do so sec_31_3121_d_-1 employment_tax regulations in applying the common-law rules the irs considers whether the service_recipient has behavioral and financial control_over the worker and evaluates the relationship between the parties including how they view their relationship behavioral controls are evidenced by facts which indicate whether the service_recipient has a right to direct or control how the worker performs the tasks for which he or she is hired facts which illustrate the right to control how a worker performs a task include the provision of training or instruction financial controls are evidenced by facts which indicate whether the service_recipient has a right to direct or control the financial aspects of the worker’s activities these include significant investment unreimbursed expenses making services available to the relevant market the method of payment and the opportunity for profit or loss the relationship of the parties is generally evidenced by examining the parties’ agreements and actions with respect to each other paying close attention to those facts which show not only how they perceive their own relationship but also how they represent their relationship to others facts which illustrate how the parties perceive their relationship include the intent of the parties as expressed in written contracts the provision of or lack of employee_benefits the right of the parties to terminate the relationship the permanency of the relationship and whether the services performed are part of the service recipient’s regular business activities the fact that an individual is employed part-time or works for more than one employer is not evidence of independent_contractor status a part-time worker may be an employee under the common-law rules while the code does not define the term public official there is a body of case law defining the term in buckley v valeo u s the supreme court stated plr-131282-00 that anyone who exercises significant authority pursuant to the laws of the united_states is an officer the term officers embraces all appointed officials exercising responsibility under the public laws of the nation u s pincite officers perform a significant governmental duty exercised pursuant to a public law u s pincite officers administer and enforce the public law 424_us_139 269_us_514 specifically defines the term officer there the supreme court considered whether consulting engineers hired by states municipalities water supply and sewage districts were independent contractors or officers and employees of a state the court stated an office is a public station conferred by the appointment of a government the term embraces the idea of tenure duration emolument and duties fixed by law where an office is created the law usually fixes its incidents including its term its duties and its compensation u s pincite citations omitted officers and employees are agents of a state to administer its laws u s pincite citations omitted the independent_contractor has liberty of action which excludes control or the right to control characteristic of the employer- employee relationship u s pincite in 138_f2d_1006 6th cir the sixth circuit following metcalf eddy established the following standards to define the term public_office it must be created by the constitution or the legislature or by a municipality or other body with authority conferred by the legislature there must be a delegation of a portion of the sovereign powers of government to be exercised for the benefit of the public the powers conferred and the duties to be discharged must be defined either directly or indirectly by the legislature or through legislative authority the duties must be performed independently and without control of a superior power other than the law the office must have some permanency and continuity and the officer must take an official oath the provisions of state law applicable to the position of deputy tax collector are as follows state statutes provide for the creation of the position of deputy tax collector stating that a deputy has all the powers of a tax collector 2section a of the war revenue act stat pincite exempted from tax the compensation or fees received by officers and employees of the u s or any state local subdivision etc the purpose of this act was to exempt instrumentalities of a state or the federal government from taxation plr-131282-00 a treasurer or collector of taxes for a town can appoint and remove a deputy as he or she deems expedient collection methods are established in part in the same statute fees for each legal process as well as interest are established by law and required to be accounted for to the town treasurer the town then pays the collector’s fees to the tax collector as his compensation there are two methods of handling payments made to a deputy tax collector the deputy can establish a deputy account into which all taxes fees and interest are deposited when the checks clear the deputy pays the taxes over to the municipality and retains the fees otherwise a municipality as in the case of the town can receive the payments directly and remit the fees to the deputy in either case the checks must be made out to the municipality a deputy is required by statute to give bond for the faithful performance of duties and to plr-131282-00 keep specific records and make monthly reports procedures applicable to tax collectors are set forth in the collector’s manual state statutes establish penalties for neglect of duty is the worker a public official within the meaning of sec_3401 for income_tax_withholding purposes according to buckely v valeo an officer administers and enforces the public law 424_us_139 where an office is created the law usually fixes its incidents including its term its duties and its compensation metcalf eddy v mitchell u s pincite the deputy tax collector position conforms to these definitions in that the deputy enforces the taxing power of the state under a delegation of authority from the tax collector the duties of the office and its compensation are fixed by statute the deputy tax collector position fulfills five of the six conditions for public_office enumerated in 138_f2d_1006 6th cir it is legislatively created there is a delegation of a portion of the sovereign powers the duties are defined by statute and performed with a degree of independence under the law the only condition not satisfied is that the worker does not take an oath of office some municipalities however do require the worker to take an oath we conclude that the worker is a public official consequently the worker is subject_to federal_income_tax withholding sec_3401 the common-law rules apply to determine whether an individual is an employee for fica purposes sec_3121 in the case of a public official many of the statutory provisions which establish his status as an official are also relevant to the determination of whether he is an employee these provisions provide facts tending to show that the town and the tax collector have a right to control the way in which the worker performs his duties under the law ie that the worker does not operate with the freedom from control characteristic of an independent_contractor provision of training and instruction is one type of behavioral control while the town does not provide instruction to the worker it has the right to require him to change his methods if they do not conform to legal requirements the duties of the office of deputy tax collector are established by statute and the required procedures are set forth in the collector’s manual if the deputy does not conform to required procedures the tax collector has the right to require him to change his procedures or to terminate his appointment plr-131282-00 the deputy tax collector operates with a certain amount of independence but is constrained by the power of the law and the authority of the town exercised by the tax collector this is one of the of the characteristics of an officer in pope v commissioner as well as an indication of the control typical of employee status the worker represents himself to the public as an agent of the town though the worker pays for the forms issued by his office the requirements of these forms are statutorily establisheddollar_figure the forms bear the heading town of ____ state the envelopes the worker uses contain the notice official business penalty for private use under state law the town could be held liable for a deputy tax collector’s malfeasance in the exercise of his duties for instance in the plaintiff was awarded attorney’s fees arising from a civil rights suit against a city and its officers including treasurer tax collector and deputy tax collector the case arose from one in which the supreme court held unconstitutional a state statute allowing for collection of motor_vehicle taxes by imprisonment without adequate notice and an opportunity to be heard the rationale for liability in tort or civil rights suits is that municipal officers acting within the scope of their authority are employees under the control of the municipality for which they workdollar_figure plr-131282-00 we conclude the evidence establishes the town has the right to exercise enough behavioral control_over the worker to create an employer-employee relationship the worker has a considerable amount of financial independence he maintains an office and has expenses for equipment and employees he has a genuine risk of profit or loss different from that of a salaried employee he does not work exclusively for the town but has a number of client towns on the other hand he does not have absolute financial independence his financial arrangements including records bank accounts and reporting are largely dictated by state statute payments to the deputy are limited to penalties and charges for the various notices he serves he cannot negotiate for himself a payment schedule different from that provided by state statute he cannot compromise a tax_liability except as permitted by statutedollar_figure thus while he bears a risk of profit or loss he does not have the full measure of financial independence characteristic of an independent_contractor the evidence concerning the relationship between the parties also contains indicia of both employee and independent_contractor status the parties apparently see their relationship as one of service_recipient and independent_contractor the town reports its payments to the worker on form_1099 the worker does not receive employee_benefits or reimbursement for business_expenses on the other hand the worker’s contract a yearly certificate of appointment as deputy collector of taxes suggests that he holds an appointed public_office and is an employee while the relationship between the town and the worker has certain indicia of independent_contractor status we conclude that there is sufficient evidence of control and the right to control to establish an employer-employee relationship in this decision we gave great weight to the supreme court and appellate cases defining the term public official and holding public officials to be employees therefore the town and the worker are subject_to fica tax on the worker’s compensation this letter does not constitute a notice_of_determination concerning worker classification under sec_7436 of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code plr-131282-00 provides that it may not be used or cited as precedent sincerely yours marie cashman senior technician reviewer employment_tax office of division counsel assistant chief_counsel tax exempt and government entities enclosure copy of ruling for purposes


internal_revenue_service department of the treasury number release date index number x washington dc person to contact telephone number refer reply to cc psi - plr-120660-03 date date sub d1 d2 d3 dear this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting that the service grant x an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to elect to treat sub as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code the information submitted states that sub is a corporation that elected to be an s_corporation effective d1 x is a corporation that elected to be an s_corporation effective as of its incorporation on d2 x acquired all of the shares of sub on d3 x represents that x intended to treat sub as a qsub effective d3 however x inadvertently failed to timely file the proper election sec_1361 defines the term qualified_subchapter_s_subsidiary qsub as a domestic_corporation which is not an ineligible_corporation if percent of the stock of the corporation is owned by the s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations provides that an s_corporation may elect to treat an eligible subsidiary as a qsub by filing the form prescribed by the irs and that the election may be effective no more than two months and days prior to the date of the filing notice_2000_58 2000_2_cb_491 provides that form_8869 qualified_subchapter_s_subsidiary election should be used to elect qsub treatment if a valid qsub election is made the subsidiary is not treated as a separate corporation and all assets liabilities and items of income deduction and credit of the qsub are treated as assets liabilities and items of income deduction and credit of the parent s_corporation plr-120660-03 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i 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 sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 based on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time for days from the date of this letter to file a form_8869 to elect to treat sub as a qsub effective d3 a copy of this letter should be attached to the form_8869 a copy is included for that purpose except as specifically set forth above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code specifically no opinion is expressed concerning whether x is a valid s_corporation or whether sub is otherwise a valid qsub for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x’s authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court betty kendrix petitioner v commissioner of internal revenue respondent docket no filed date r disallowed deductions claimed by p for and on account of cash and noncash contributions to certain churches and charitable organizations r also imposed accuracy-related_penalties under sec_6662 sec_1 held substantial portions of both cash and noncash contributions claimed by p are disallowed for failure to comply with the substantiation requirements of sec_170 i r c and sec_1_170a-13 and income_tax regs held further r’s imposition of the sec_6662 i r c penalty is sustained betty kendrix pro_se jonathan sloat for respondent memorandum findings_of_fact and opinion halpern judge by notice_of_deficiency dated date the notice respondent determined deficiencies in petitioner’s federal_income_tax liabilities of dollar_figure and dollar_figure for her taxable calendar years and the audit years respectively and accuracy-related_penalties of dollar_figure and dollar_figure for and respectively at the trial of this case petitioner conceded respondent’s denial for lack of substantiation of her reported capital_loss of dollar_figure and respondent’s application of the 10-percent additional tax under sec_72 in the sum of dollar_figure on a premature_distribution from her individual_retirement_account on brief respondent concedes a cash contribution by petitioner of dollar_figure the issues for decision are whether petitioner is entitled to certain charitable_contribution deductions for the audit years and whether petitioner is liable for the accuracy-related_penalties determined by respondent under sec_6662 unless otherwise indicated all section references are to the internal_revenue_code in effect for the audit years and all rule references are to the tax_court rules_of_practice and procedure all dollar amounts have been rounded to the nearest dollar findings_of_fact some facts are stipulated and are so found the stipulation of facts with accompanying exhibits is incorporated herein by this reference at the time the petition was filed petitioner resided in los angeles california petitioner’s returns and supporting documentation petitioner filed an internal_revenue_service irs form_1040 u s individual_income_tax_return for the filed return on line of schedule a itemized_deductions to that return she claimed a dollar_figure charitable_contribution_deduction for g ifts by cash or check the cash contributions during respondent’s audit of petitioner’s and filed returns the audit petitioner submitted to the examining agent an irs form 1040x amended u s individual_income_tax_return for the amended_return which stated that the schedule a contribution described in the filed return was incorrectly written as a cash contribution on line of the schedule a attached to the amended_return petitioner claimed a dollar_figure charitable_contribution_deduction for gifts o ther than by cash or check the noncash contributions also attached to that return is an irs form_8283 noncash charitable_contributions which lists three separate contributions to goodwill industries of items described variously as clothing housewares audio equipment var items and misc items and a contribution to l a family housing of appliances furniture tv and misc items two of the contributions to goodwill industries and the contribution to l a family housing are each valued at dollar_figure by appraisal and the other contribution to goodwill industries is valued at dollar_figure based upon thrift shop value in each case the date of contribution is listed as various and the method of acquisition is stated to be by purchase also during the audit petitioner submitted to the examining agent a second irs form_8283 for the amended form which lists the following noncash contributions for three contributions to goodwill los angeles ca or goodwill described as consisting of women clothing fmv est dollar_figure linens houseware books videos misc bicycles dollar_figure and audio electrical items dollar_figure two contributions to l a family housing-l a ca described as consisting of furniture fmv dollar_figure and furniture fmv dollar_figure attached to the amended form_8283 are worksheets prepared by petitioner one for each of the five above-mentioned contributions which list each item included in the contribution by cost and fair_market_value the total dollar value of the items listed on the worksheets dollar_figure matches the total dollar value of the five contributions listed on the amended form_8283 also attached to the amended form_8283 are copies of three receipts furnished by goodwill the goodwill receipts two dated and one dated all signed by the same attendant and a copy of a receipt from l a family housing dated the l a family housing receipt which is unsigned each of the goodwill receipts contains petitioner’s name and address and the form itself under the heading items received lists certain types of items eg clothing shoes purses housewares etc on each receipt someone has filled in the quantity donated if any in each category eg clothing five bags shoes purses five boxes the goodwill receipts do not list values either per item or in total the l a family housing receipt also contains petitioner’s name and address and it has a line marked donation on which someone has filled in the items donated eg furniture beds set tv vcr dinner set there is also a line marked estimated value on which someone has filled in dollar_figure the l a family housing receipt also states no goods or services were rendered to you as a result of this donation in connection with this litigation petitioner furnished a receipt for taxable_year cash contributions to gospel temple baptist church partners program the gospel temple baptist church receipt dated date which lists a total of dollar_figure in contributions for and is signed by both the church pastor and secretary that contribution was not listed on schedule a to the amended_return the gospel temple baptist church receipt breaks down the total contribution into monthly contributions ranging from dollar_figure to dollar_figure it also lists specific payments for church anniversary revival annual choir concert pastor’s appreciation and building fund in amounts ranging from dollar_figure for annual choir concert to dollar_figure for building fund petitioner filed an irs form_1040 for the filed return on line of schedule a she claimed a dollar_figure deduction for cash contributions and on line a dollar_figure deduction for noncash contributions the irs form_8283 attached to that return lists a single noncash contribution to goodwill ind los angeles ca of clothing furniture misc items valued pincite as discussed infra petitioner also furnished a receipt for contributions to the same church dated date we assume that the receipt for contributions was inadvertently misdated and that the writer meant to enter date as the date of execution of the receipt dollar_figure based upon thrift shop value the date of contribution is listed as various and the acquisition is stated to be by purchase during the audit petitioner submitted to the examining agent two irs form 1040x amended returns for only the first of which contains a schedule a and form_8283 and neither of which modifies the description of petitioner’ sec_2001 charitable_contributions as set forth on the schedule a and form_8283 attached to the filed return subsequently petitioner furnished another irs form_8283 for the amended form on which the only change from the two prior forms is the substitution of salvation army los angeles ca for goodwill ind as the charitable donee attached to the amended form_8283 is a worksheet prepared by petitioner similar to the worksheets attached to the amended form_8283 consistent with each of those worksheets it lists each item included in the contribution by alleged cost and fair_market_value the total dollar value of the items listed on the worksheet dollar_figure is less than both the dollar_figure claimed on all three of the forms filed or submitted for and the dollar_figure deduction for noncash contributions claimed on the two schedules a filed or submitted for that year also attached to the worksheet erroneously states that the total dollar value of the listed items is dollar_figure the amended form_8283 is a copy of a receipt furnished by the salvation army dated date and initialed ov which contains petitioner’s name and address a preprinted list of items we need and a handwritten list of the items received consisting entirely of various items of men’s and women’s clothing and accessories the receipt does not list any values in connection with this litigation petitioner furnished receipts for cash contributions of dollar_figure to west angeles church of god in christ the west angeles church receipt and dollar_figure to gospel temple baptist church partners program the gospel temple baptist church receipt the west angeles church receipt dated date consists of a form letter thanking all donors and an attachment detailing petitioner’ sec_2001 contributions which consisted of donations throughout the year ranging from dollar_figure to dollar_figure in amount and certifying that west angeles church provided no goods and services in exchange for these contributions the gospel temple baptist church receipt is identical in form to the receipt only the dollar_figure contribution for revival the dollar_figure contribution for annual choir concert and the april june september and december contributions of dollar_figure dollar_figure dollar_figure and dollar_figure respectively are less than dollar_figure the dollar_figure total cash contribution claimed by petitioner on the basis of the west angeles church receipt and gospel temple baptist church receipt is more than the dollar_figure in cash contributions claimed on the schedules a attached to the filed and amended returns petitioner’s voluntary bankruptcy petition on date petitioner filed a voluntary petition for relief under chapter of the bankruptcy code with the u s bankruptcy court for the central district of california the bankruptcy petition the bankruptcy petition lists total assets of dollar_figure and total liabilities of dollar_figure for petitioner the bankruptcy petition also lists petitioner’s monthly charitable_contributions as zero petitioner’s and charitable_contribution deductions on schedule a attached to both her and federal_income_tax returns petitioner claimed dollar_figure in cash contributions petitioner’s employment by the irs petitioner was employed by the irs for more than years she was employed by the irs’s criminal_investigation_division from through and as a revenue_officer from through i burden_of_proof opinion generally petitioner bears the burden_of_proof see rule a sec_7491 may shift the burden to the commissioner in certain circumstances but petitioner does not contend nor has she shown that she satisfies the prerequisites for the application of sec_7491 in fact as discussed infra petitioner has failed to substantiate adequately many of the charitable_contribution deductions at issue therefore she has failed to satisfy the prerequisite of sec_7491 to substantiate any item moreover respondent introduced uncontradicted testimony by the examining agent that petitioner refused his request for bank statements and did not feel she had to answer any question as a result she has also violated the prerequisite of sec_7491 to cooperate with reasonable requests for information and documents petitioner bears the burden_of_proof under sec_7491 respondent retains the burden of production but not the overall burden_of_proof with respect to petitioner’s liability for the accuracy-related_penalties determined by respondent under sec_6662 see 116_tc_438 ii code and regulations a code in pertinent part sec_170 provides that a taxpayer may deduct any charitable_contribution payment of which is made within the taxable_year and a charitable_contribution shall be allowable as a deduction only if verified under regulations prescribed by the secretary pursuant to sec_170 a charitable_contribution is a contribution or gift to or for_the_use_of an organization described in that subsection in pertinent part sec_170 disallows a deduction under sec_170 for any contribution of dollar_figure or more unless substantiated by a contemporaneous written acknowledgment of the contribution by the donee organization that meets the requirements of subparagraph b under sec_170 the acknowledgment must state the amount of cash and describe but not value any property other than cash contributed state whether the donee organization provided any goods and services in consideration in whole or in part for the contribution and provide a description and good_faith estimate of the value of any goods and services provided by the donee organization or if such goods or services consist solely of intangible religious benefits a statement to that effect the term intangible_religious_benefit is defined to mean any intangible_religious_benefit which is provided by an organization organized exclusively for religious purposes and which generally is not sold in a commercial transaction outside the donative context sec_170 b regulations pursuant to sec_1_170a-13 income_tax regs cash contributions must be substantiated by either a canceled check a receipt from the donee showing the donee’s name and the date and amount of the contribution or other reliable written records showing the donee’s name and the date and amount of the contribution sec_1_170a-13 income_tax regs provides rules governing the reliability of records pursuant to sec_1_170a-13 income_tax regs noncash contributions must be substantiated at a minimum by a receipt from the donee organization showing the name of the donee the date and location of the contribution and a description of the property in detail reasonably sufficient under the circumstances where it is impractical to obtain a receipt taxpayers must maintain reliable written records of their noncash contributions see id sec_1_170a-13 income_tax regs provides rules governing the reliability and content of such records and paragraph b provides information retention and reporting requirements for claimed noncash contributions in excess of dollar_figure which incorporate the rules of paragraph b ii regarding the content of records pursuant to sec_1_170a-13 income_tax regs s eparate contributions of less than dollar_figure are not subject_to sec_170 regardless of whether the sum of the contributions made by the taxpayer to a donee organization during a taxable_year equals dollar_figure or more iii discussion a cash contribution sec_1 on brief petitioner claims a deduction for documented cash contributions of dollar_figure in support of that claim petitioner relies on the gospel temple baptist church receipt and a letter dated date from west angeles church of god in christ attached to her opening brief the west angeles church of god letter stating that petitioner contributed dollar_figure to that church in because the west angeles church of god letter was neither shared with respondent before trial introduced in evidence at trial or brought to the court’s attention before the record was closed it is not admissible evidence attachments to briefs are not evidence and may not be considered rule b 65_tc_959 ndollar_figure perkins v with respect to the gospel temple baptist church receipt petitioner concedes on brief that the amounts totaling dollar_figure attributed to church anniversary pastor’s appreciation and building fund which constitute the proceeds of fundraisers or benefits organized by petitioner that she donated to the church do not constitute deductible contributions that leaves total listed contributions of dollar_figure dollar_figure less dollar_figure that amount plus the alleged dollar_figure contribution to west angeles church of god in christ totals dollar_figure which exceeds the dollar_figure that petitioner claims is supported by the documentary_evidence of cash contributions commissioner 40_tc_330 even though petitioner is a pro_se taxpayer application of that rule in this case is appropriate the court during the trial specifically advised petitioner you can’t add any facts in the brief and any facts that you want me to consider you have to tell me right now on the record cf clifton-bligh v commissioner tcmemo_2003_44 moreover by failing to state whether west angeles church of god in christ provided any goods or services in consideration in whole or in part for what on its face appears to be a contribution in excess of dollar_figure the letter fails to satisfy the substantiation requirements of sec_170 see sec_170 we are satisfied that the gospel temple baptist church receipt constitutes a receipt for the contributions listed therein see sec_1_170a-13 income_tax regs it fails to state however whether the church provided any goods or services in consideration in whole or in part for those contributions because the contribution for revival and each of the monthly contributions are stated to be contributions of dollar_figure or more all of those contributions fail to meet the requirements of sec_170 therefore they are the west angeles church of god letter contains no breakdown by amount of the dollar_figure in total contributions for therefore it does not support a finding that all or any portion of that contribution was in increments of less than dollar_figure nondeductible see castleton v commissioner tcmemo_2005_58 deduction for contribution of property to allegedly tax-exempt religious_organization alternatively denied for failure of the organization to issue a receipt satisfying the requirements of sec_170 see also roark v commissioner tcmemo_2004_271 only the dollar_figure contribution for annual choir concert is not subject_to sec_170 respondent does not otherwise challenge the or gospel temple baptist church receipts as evidencing petitioner’s payment of the amounts listed therein or the status of that church as an organization described in sec_170 therefore we hold that for petitioner is entitled to deduct dollar_figure on account of cash contributed to gospel temple baptist church for annual choir concert on brief petitioner claims to have provided documentation sufficient to support a deduction for cash contributions of dollar_figure consisting of dollar_figure in donations to west angeles church of god in christ and dollar_figure in donations to gospel temple baptist church respondent concedes that the west angeles church receipt satisfies the requirements of sec_170 accordingly respondent concedes petitioner’s entitlement to a dollar_figure deduction for cash contributions to that church the gospel temple baptist church receipt like the receipt fails to state whether the church provided any goods or services in consideration in whole or in part for the contributions listed therein therefore all of the listed contributions of dollar_figure or more are nondeductible pursuant to sec_170 only the dollar_figure revival contribution the dollar_figure annual choir concert contribution and the respective april june september and december contributions of dollar_figure dollar_figure dollar_figure and dollar_figure a total of dollar_figure are not subject_to sec_170 and are therefore deductible b noncash contributions on brief petitioner claims to have documented noncash contribution deductions of dollar_figure for and dollar_figure for although the total dollar value of the items listed on the worksheets attached to the amended form_8283 is dollar_figure not dollar_figure she claims that her documented contributions be allowed for and in support of her valuations of the donated items which consist of used clothing and accessories housewares linens books furniture audio video equipment and home appliances petitioner attached to her opening brief a printed sheet of consistent with her position for petitioner concedes on brief that the amounts attributed to church anniversary pastor’s appreciation and building fund totaling dollar_figure are nondeductible unspecified origin which purports to list suggested price ranges developed with the help of salvation army and goodwill for those types of items petitioner argues that her valuations are within the suggested ranges as stated supra attachments to briefs are not evidence and may not be considered respondent argues that petitioner is not entitled to any deduction for her alleged noncash contributions because her contribution claims lack credibility and because they do not satisfy the substantiation requirements of the code and regulations petitioner testified that all of the donated items either were purchased from the son of a deceased girlfriend who needed the money dollar_figure to buy drugs or were purchased or picked up off the street and refurbished by her petitioner also cites distributions from her thrift_plan as a source of funds used to purchase the donated items although she also testified that she needed and used those funds for living_expenses respondent finds petitioner’s testimony to be implausible and uncorroborated and he concludes on the basis of the evidence that petitioner lacked the property that she claims to have contributed respondent lists several reasons for his skepticism he notes the discrepancy between petitioner’s return in which she reported cash charitable_contributions of dollar_figure and her representations in her bankruptcy petition under penalty of perjury that as of date she owned dollar_figure in total assets and that her current monthly expenses did not include any charitable_contributions respondent also points to a deposition taken of petitioner on date in connection with the bankruptcy proceeding in which she states that one of her creditors had seized all of her property in addition respondent argues that p etitioner’s numerous inconsistent reporting positions further undermine her credibility petitioner has failed to corroborate her testimony regarding the manner in which she acquired the allegedly donated items nor has she offered any proof in support of her claims regarding the costs together with dates of acquisition of those items as reflected in her worksheets which if supported might give some indication of the values of those items nonetheless the receipts from goodwill industries l a family housing and the salvation army are evidence that those organizations did in fact receive some amount of used clothing appliances furniture etc from petitioner respondent does not challenge the authenticity of those receipts nor does he question the status of those organizations as organizations described in sec_170 and we find that petitioner delivered the items listed in those receipts to those organizations although the preprinted receipts may be authentic the receipts furnished by goodwill industries and the salvation army fail to state whether those organizations provided any goods or services in consideration in whole or in part for the items listed therein because petitioner claims that the total value of the items listed on each of those receipts is at least indeed exceeds dollar_figure those contributions for and are nondeductible pursuant to sec_170 that leaves for our consideration only the l a family housing receipt for which does state that no goods or services were rendered to you as a result of this donation and is therefore compliant internal_revenue_service publication charitable_contributions rev date explains how a taxpayer claims a deduction for a charitable_contribution the publication makes clear that the various record-keeping requirements for noncash contributions depend on the amount of the deduction claimed for the noncash contribution not on the actual value of the property contributed id pincite that rule focusing on the amount of the claimed deduction rather than the value of the property contributed is supported by the legislative_history of sec of the omnibus_budget_reconciliation_act_of_1993 publaw_103_66 107_stat_445 which added para to sec_170 see h rept pincite 1993_3_cb_167 describing house bill provisions requiring substantiation for charitable_contributions and stating that the responsibility is on taxpayer claiming an itemized_deduction of dollar_figure or more reduced to dollar_figure in senate amendment to request substantiation from the charity of the contribution id pincite 1993_3_cb_443 describing the senate amendment to the same effect id pincite 1993_3_cb_445 describing the conference agreement as following the senate amendment thus sec_170 applies to petitioner’s noncash contributions by virtue of her claim that each of those contributions was at least dollar_figure it is of no consequence that the actual value of the items of the property on each receipt may have been less than dollar_figure with sec_170 however that receipt for a claimed deduction of dollar_figure does not contain a description of the donated property in detail reasonably sufficient under the circumstances as required by sec_1_170a-13 income_tax regs see also castleton v commissioner tcmemo_2005_58 although it sets forth a list of items eg furniture beds tv vcr dinner set stove old recorder and a total estimated value of dollar_figure the l a family housing receipt contains almost no information regarding the quality age or condition of the donated items that would enable us to ascertain their value at the time of the donation therefore there is no evidence that the dollar_figure estimated value is accurate or that it was furnished by the donee rather than by petitioner we also find that petitioner’s worksheets listing the items allegedly donated to l a family housing counsel fail to comply with the requirement of sec_1_170a-13 income_tax regs regarding the content of a taxpayer’s written records that such records state the method utilized in determining the fair_market_value of the donated property the only semblance of a valuation methodology is petitioner’s practice of valuing each item at less than the alleged cost of that item but petitioner’s valuation of the items allegedly donated to l a family housing as set forth in her worksheets attached to the amended form_8283 dollar_figure is close enough to dollar_figure to suggest that that figure was furnished by petitioner rather than l a family housing petitioner has furnished no evidence such as canceled checks or bank withdrawals contemporaneous with the property acquisition dates that would support her cost figures moreover because petitioner’s worksheets were attached to an amended form_8283 that was furnished to respondent on date in connection with the audit we infer that they were not prepared contemporaneously with the contributions in a fact which casts doubt upon the reliability of those worksheets see sec_1_170a-13 income_tax regs under these circumstances we find that petitioner’s worksheets are inadequate to substantiate her claimed deduction for noncash contributions to l a family housing in nonetheless as noted supra we are satisfied that petitioner did donate property to l a family housing which raises the issue as to whether we may use our discretion under the cohan_rule to find some amount of allowable deduction for the property donated to l a family housing see 39_f2d_540 2d cir under which we may estimate the amount of a deductible expense bearing heavily against the taxpayer whose inexactitude is of his or her own even if we were to admit into evidence the printed list of suggested price ranges developed with the help of salvation army and goodwill attached to petitioner’s opening brief see discussion supra the correlation between the items on that list and the items on petitioner’s worksheets is unclear moreover as a list of suggested price ranges that list is not evidence of the actual value of any particular item making the issue is whether cohan is applicable in the face of the statutory admonition of sec_170 that a charitable_contribution shall be allowable as a deduction only if verified under regulations prescribed by the secretary here petitioner has not complied with the verification requirements of sec_1_170a-13 income_tax regs nor has there been even substantial compliance with those regulations see 100_tc_32 in which we held that the reporting requirements of the regulations under sec_170 are directory and not mandatory and that substantial as opposed to literal compliance with those regulations is sufficient to sustain a claimed charitable_contribution_deduction on a number of occasions this court has utilized the cohan_rule to permit deductions for a portion of claimed charitable_contributions that have not been adequately substantiated see eg fontanilla v commissioner tcmemo_1999_156 drake v commissioner tcmemo_1997_487 cavalaris v commissioner tcmemo_1996_308 bernardeau v commissioner tcmemo_1981_ olken v commissioner tcmemo_1981_176 in none of those cases did we squarely address the potential conflict between sec_170 and our application of cohan to unverified or inadequately substantiated charitable_contributions nor is it necessary to do so in this case because the deduction we would be inclined to allow by applying the cohan_rule dollar_figure would result in total itemized_deductions for that are less than the standard_deduction applicable to a head_of_household that respondent has allowed to petitioner in computing her deficiency for that year therefore because of our disallowances with respect to petitioner’s claimed deductions for cash and other noncash contributions for the issue of whether we may allow her a deduction under the cohan_rule for noncash contributions to l a family housing is moot c sec_6662 penalty sec_6662 imposes a penalty equal to percent of the underpayment in tax attributable to among other things negligence or disregard of rules or regulations without distinction negligence see sec_6662 the penalty for negligence will not apply to an underpayment_of_tax to the extent the taxpayer can show both reasonable_cause and that the taxpayer acted in good_faith see sec_6664 negligence includes any failure by the taxpayer to substantiate items properly sec_1_6662-3 income_tax regs all of the charitable_contributions deductions that we have disallowed herein are attributable to a lack of adequate substantiation including the deductions disallowed because the acknowledgments obtained by petitioner from donees were in violation of sec_170 petitioner’s failure to obtain acknowledgments stating that the donee did not provide goods or services in consideration in whole or in part for all but one of her cash and noncash contributions in excess of dollar_figure constituted a failure to comply with what is specifically described by the internal_revenue_code as a s ubstantiation requirement see sec_170 petitioner a long-time irs employee and self-professed frequent contributor to charitable organizations should have been aware that all but one of the donee acknowledgments failed to satisfy the special substantiation requirement of sec_170 and she should have asked the issuing donee organizations to satisfy that requirement before deducting her contribution to those organizations in excess of dollar_figure not only is the requirement to obtain a proper acknowledgment set forth in the code and in the regulations see sec_1_170a-13 it is also contained in both the instructions for preparing schedule a see eg instructions for schedule a itemized_deductions p a-4 and irs publication charitable_contributions rev date by demonstrating petitioner’s failure to substantiate the charitable_contributions disallowed herein respondent has met his burden of production under sec_7491 with respect to his determination of penalties under sec_6662 because petitioner has failed to meet her burden of proving that she acted with reasonable_cause and good_faith we sustain respondent’s determination that petitioner is liable for the accuracy-related_penalty on her underpayments for the audit years associated with the charitable_contribution deductions disallowed herein see higbee v commissioner t c pincite we also sustain respondent’s imposition of that penalty on petitioner’s underpayment associated with the conceded adjustments for respondent’s denial of petitioner’s reported capital_loss of dollar_figure for lack of substantiation and respondent’s application of the 10-percent additional tax in the sum of dollar_figure on a premature_distribution from petitioner’s individual_retirement_account iv conclusion as noted supra note we sustain the full amount of respondent’s tax_deficiency and penalty determinations decision will be entered for respondent our disallowance of petitioner’s deductions for charitable_contributions although less than respondent’s still has the effect of requiring the identical recomputation of petitioner’s tax_liability for both and whereby respondent applied the standard_deduction applicable to a head_of_household consequently we sustain the full amount of respondent’s tax_deficiency and penalty determinations for the audit years


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom p si 2-plr-111298-98 date nov company seller newco t i plr plr date y date date k dear this is in reply to your letter dated date and subsequent correspondence requesting rulings on behalf of company under sec_708 of the internal_revenue_code and regarding the applicability of two prior letter rulings the information submitted states that company is a limited_liability_company that is classified as income_tax purposes interest in company and b holds a interest in company a holds a a partnership for federal percent capital and profit sec_1 percent capital and profits g on date company acquired certain operating interests in mineral properties and a net_profits_interest plr assets from seller in exchange for cash and additional payments payable from time to time the internal_revenue_service the service issued to company plr with respect to the transfer of the plr assets seller also retained production payments on date company acquired certain additional operating interests in mineral properties and net profits interests plr assets service issued to company plr with respect to the transfer of the plr assets from seller in a similarly structured transaction the to accomplish this company decided to separate the plr assets from the plr in date company divided into assets company and newco a newly formed limited_liability_company that is classified as immediately thereafter a held a interest and b held a both company and newco newco holds the plr assets a partnership for federal_income_tax purposes percent capital and profit sec_1 percent capital and profits interest in company holds the plr assets and company represents that all of the plr assets will continue to be owned by company there will not be any material changes to the purchase and sale agreement between seller and company regarding the plr assets in connection with the transfer of the plr assets company also represents that company represents that after the division all of the plr assets will be owned by newco changes to the purchase and sale agreement between seller and company regarding the plr assets in connection with this transfer there will not be any material you-have requested rulings that after the division both company and newco will be considered continuations of company for federal_income_tax purposes to apply to company and plr will apply to newco plr will continue sec_708 b b provides that in the case of a division a partnership into two or more partnerships the resulting of partnerships other than a resulting_partnership the members of which had an interest of profits of the prior_partnership shall be considered a continuation of the prior_partnership percent or less in capital and for purposes of sec_708 sec_1_708-1 ii of the income_tax regulations provides in part that upon the division of a partnership into two or more partnerships the resulting_partnership or partnerships shall be considered a continuation of the prior_partnership if its members had an interest of more than percent in the capital and profits of the prior_partnership based on the facts and representations submitted we conclude that company after the division and newco are to be considered continuations of the present company conclude that plr will continue to apply to company after the division applied to company plr will apply to newco to the same extent that plr in addition we except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed regarding the tax consequences of the transfer of the plr assets to newco or the assumption of the liabilities associated with the plr assets by newco this ruling is directed only to the taxpayer who requested of the code provides that it may not be sec_6110 it used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to company sincerely ‘ aigned h gragh u4 h grace kim assistant to the chief branch office of the assistant chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------------------------ --------------------------------- -------------------- ------------------------- department of the treasury washington dc person to contact ---------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 - plr-119307-06 date date x -------------------------------------------------- ---------------------------------- y -------------------------------------------------- ---------------------------------- ---------- ------------------ country date dear ----- ---------- this letter responds to a letter dated date written on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity under sec_301_7701-3 facts date x represents that x is a foreign_entity eligible to be treated as a disregarded_entity however x inadvertently failed to timely file a form_8832 entity classification election electing to treat x as a disregarded_entity effective date law and analysis the information submitted states that x was formed under the laws of country on sec_301_9100-1 through provide the standards the sec_301_7701-3 provides guidance on the classification of a foreign sec_301_9100-1 provides that the commissioner may grant a reasonable sec_301_7701-3 provides that an entity classification election must be filed plr-119307-06 entity for federal_income_tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if the foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin commissioner will use to determine whether to grant an extension of time to make the election making certain elections determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose sec_301_9100-2 provides the rules governing automatic extensions of time for sec_301_9100-3 provides the standards the commissioner will use to except as specifically set forth above no opinion is expressed concerning the plr-119307-06 federal tax consequences of the facts described above under any other provision of the code provides that it may not be used or cited as precedent being sent to x's authorized representative pursuant to a power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer requesting it sec_6110 sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes ------------------ cc --------------------------------------------------------- ------------------------------------- ---------------------------- ------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------


t c summary opinion united_states tax_court janine h hansen petitioner v commissioner of internal revenue respondent docket no 9861-05s filed date janine h hansen pro_se david w sorensen for respondent foley judge this case was heard pursuant to the provisions of section of the internal_revenue_code in effect when the petition was filed the decision to be entered unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure is not reviewable by any other court and this opinion should not be cited as authority the issues for decision are whether petitioner is liable for tax relating to unreported income and for the sec_6651 and additions to tax relating to and background petitioner is the president of the state of nevada eagle forum a state chapter of the national eagle forum in and petitioner annually received dollar_figure of non- employee compensation from a foundation associated with the national eagle forum the foundation yet petitioner did not file tax returns relating to those years in a notice_of_deficiency dated date respondent determined that petitioner is liable for tax deficiencies totaling dollar_figure sec_6651 additions to tax for failure_to_file a return and sec_6651 additions to tax for failure to timely pay taxes relating to and at trial on date respondent moved for the imposition of a sec_6673 penalty on date petitioner while residing in sparks nevada filed her petition discussion petitioner concedes that she received income and failed to report the amounts determined by respondent petitioner contends however that she is not liable for tax on these payments because of her religious beliefs the supreme court has held that because the broad public interest in maintaining a sound tax system is of such a high order religious belief in conflict with the payment of taxes affords no basis for resisting the tax 455_us_252 see also 110_tc_137 affd 170_f3d_173 3d cir accordingly petitioner is liable for the tax relating to the payments from the foundation see sec_61 respondent bears and has met the burden of production with respect to the sec_6651 and additions to tax see sec_7491 rule a petitioner does not meet the requirements of any exception to sec_6651 or accordingly respondent’s determinations are sustained see 116_tc_438 respondent contends that petitioner’s position is frivolous and that pursuant to sec_6673 the court should impose a penalty on petitioner we however conclude that it is not appropriate to impose such a penalty in this case contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing an appropriate order and decision will be entered