t c memo united_states tax_court patricia a schott petitioner v commissioner of internal revenue respondent stephen c schott petitioner v commissioner of internal revenue respondent docket nos filed date scott a bieber for petitioners catherine m thayer james a whitten and william e bogner for respondent memorandum opinion cohen judge respondent determined federal gift_tax deficiencies for in docket no in the amount of dollar_figure and in docket no in the amount of dollar_figure the issue for decision in these consolidated cases is whether a successor annuity interest of a spouse in a retained two-life annuity is a qualified_interest that is subject_to valuation pursuant to sec_2702 unless otherwise indicated all section references are to the internal_revenue_code in effect on the date of the transfers and all rule references are to the tax_court rules_of_practice and procedure background the parties submitted these cases fully stipulated pursuant to rule the stipulated facts are incorporated by this reference at the time of the filing of the petitions in these cases petitioners resided in los altos california petitioners owned percent of the outstanding_stock of scs development company company a closely_held_corporation that develops constructs and sells single-family houses on date stephen c schott mr schott created the stephen c schott qualified annuity_trust a grantor_retained_annuity_trust grat in which mr schott was both the grantor and trustee on that same day patricia a schott mrs schott created the patricia a schott qualified annuity_trust a grat in which mrs schott was both the grantor and trustee each grat was funded by big_number shares of stock in the company that were valued at dollar_figure fach grat provided for fixed annual annuity payments in an amount egual to dollar_figure percent of the initial fair_market_value of the assets that were contributed the annuity was to be paid to the grantor commencing on date and ending on the date that wa sec_15 years after the commencement_date or if sooner on the date of death of the grantor if the grantor died prior to the end of the 15-year term the annuity was to be paid to the spouse for the balance of the term unless this right had been previously revoked by the grantor if the grantor died prior to the end of the 15-year term and if the spouse did not survive the grantor or if the grantor had revoked the interest of the spouse the annuity payments would cease and the remaining grat property would be held in trust for the surviving_spouse or for the descendants of the grantor for the stephen c schott qualified annuity_trust if the grantor survived the 15-year term the assets remaining in the grat would be held in trust for the grantor’s spouse if then living or otherwise for the grantor’s descendants for the patricia a schott qualified annuity_trust if the grantor survived the 15-year term the assets remaining in the grat would be held in trust for the grantor’s descendants during the annuity term distribution of trust income or principal could not be made to any person other than the grantor during the life of the grantor in the event that the grantor died and the spouse received the annuity distribution of income or principal could not be made to any person other than the spouse during the life of the spouse each grat was irrevocable except that the grantor retained the right to revoke the successor interest of his or her spouse in the annuity rach grat provided that the grantor intended to create a qualified_interest as defined in sec_2702 and that the provisions of the grat document were to be construed in accord with that intent each grat document further provided that if the initial fair_market_value of the assets that were contributed was incorrectly determined the trustee would either pay to or recover from the grantor or his or her spouse the amount necessary to account for the undervaluation or overvaluation of the assets within a reasonable period after the final federal tax_determination of the correct value each grat document also prohibited commutation of the annuity interest and additional contributions to the grat’s after the initial funding discussion petitioners assert that the interests in the annuities that were given to each spouse are qualified interests under sec_2702 and that the retained interests are single annuities based on two lives referred to as dual-life annuities petitioners contend that the retained interests in the annuities should be valued as interests for the term of years or for the lives of the grantor and spouse whichever is shorter respondent asserts that the interests in the annuities that were given to each spouse are not qualified interests and that the retained interests are single-life annuities respondent contends that the retained interests in the annuities should be valued as interests for the term of years or for the life of the grantor whichever is shorter valuation of a retained_interest as a dual-life annuity produces a greater retained value than valuation as a single-life annuity and correspondingly reduces the amount of the taxable gift of the remainder sec_2501 imposes a tax for each calendar_year on the transfer of property by gift a gift of property is valued as of the date of the transfer see sec_2512 generally where property is transferred in trust but the donor retains an interest in such property the value_of_the_gift is the value of the property that is transferred less the value of the donor’s retained_interest see sec_25_2512-5a gift_tax regs however if the gift in trust is to a family_member as defined in sec_2704 the value_of_the_gift is determined subject_to the limitations of sec_2702 sec_2702 provides sec_2702 special valuation rules in case of transfers of interests in trusts a valuation rules -- in general --solely for purposes of determining----whether a transfer of an interest in trust to or for the benefit of a member of the transferor’s family is a gift and the value of such transfer the value of any interest in such trust retained by the transferor or any applicable_family_member shall be determined as provided in paragraph valuation of retained interests -- a in general --the value of any retained_interest which is not a qualified_interest shall be treated as being zero b valuation of gualified interest --- the value of any retained_interest which is a qualified_interest shall be determined under sec_7520 providing for use of valuation table prescribed by the secretary for annuities life interests etc b qualified_interest --for purposes of this section the term qualified_interest means---- any interest which consists of the right to receive fixed amounts payable not less frequently than annually any interest which consists of the right to receive amounts which are payable not less frequently than annually and are a fixed percentage of the fair_market_value of the property in the trust determined annually and any noncontingent remainder_interest if all of the other interests in the trust consist of interests described in paragraph or regulations promulgated under sec_2702 expand the definition of qualified_interest in the following manner qualified_interest means a qualified_annuity_interest a qualified_unitrust_interest or a qualified_remainder_interest retention of a power_to_revoke a qualified_annuity_interest of the transferor’s spouse is treated as the retention of a qualified_annuity_interest sec_25_2702-2 gift_tax regs emphasis added a qualified_annuity_interest 1s an irrevocable right to receive a fixed amount payable to or for the benefit of the holder of the annuity interest for each taxable_year of the term sec_25_2702-3 gift_tax regs the term of a qualified_annuity_interest must be fixed and ascertainable at the creation of a grat see 115_tc_15 sec_25_2702-3 example gift_tax regs a gualified annuity interest cannot be a contingent_interest that may in fact never take effect see id a fixed amount is either a stated dollar amount or a fixed fraction or percentage not to exceed percent of the fixed fraction or percentage payable in the preceding year of the initial fair_market_value of the property that is being transferred to the trust as finally determined for federal tax purposes see sec_25 b gift_tax regs in either case a fixed amount must be payable periodically but not less frequently than annually see id the trust instrument must also prohibit distributions from the trust to or for the benefit of any person other than the holder of the qualified_annuity_interest during the term of the qualified_interest see sec_25_2702-3 gift_tax regs the term of the annuity interest must be fixed by the trust instrument for the life of the term holder for a specified term of years or for the shorter but not the longer of those periods sec_25_2702-3 gift_tax regs for purposes of sec_2702 a transfer of an interest in property with respect to which there are one or more term interests is treated as a transfer in trust see sec_2702 a term_interest is one of a series of successive as contrasted with concurrent interests sec_25_2702-4 gift_tax regs petitioners’ argument that the retained interests in the annuities should be valued as interests for the term of years or for the lives of the grantor and spouse is essentially the same as the argument we rejected in cook v commissioner supra a case with nearly identical facts to those of the cases at hand in cook the taxpayers husband and wife each created two grat’s the grantor of each grat retained an annuity for a stated term of years if the grantor died before the expiration of the stated term of years and was survived by the spouse the annuity continued for the spouse until the earlier of his or her death or the expiration of the stated term if the grantor died before the expiration of the stated term of years and was not survived by the spouse the term of the annuity ended upon the death of the grantor in each trust the grantor reserved the power_to_revoke the interest of the spouse the taxpayers argued that the value of the remainder_interest in each grat of which the grantor made a taxable gift was the value of the assets that were contributed to the trust reduced by the value of a dual-life annuity see id pincite in cook the court decided that because the spousal interest in each grat was not fixed and ascertainable at the inception of the grat the spousal interest was contingent on the spouse’s surviving the grantor furthermore the court held that each spousal interest was not a qualified_interest because the spousal interest was subject_to revocation by the grantor and therefore if treated as a retained_interest of the grantor pursuant to sec_25_2702-2 gift_tax regs the requirement of sec_25_2702-3 gift_tax regs would not be met see cook v commissioner supra pincite as a retained_interest of the grantor the possibility existed that each retained annuity would extend for the life of the spouse which could be beyond the life of the term holder i1 e the grantor but less than a specified term of years thus each retained_interest violated sec_25_2702-3 -- - gift_tax regs which provides that the term of the annuity interest must be fixed by the trust instrument for one of three terms the life of the term holder a specified term of years or the shorter but not the longer of those periods for these reasons the spousal interests were valued at zero under sec_2702 a see id pincite petitioners acknowledge that cook is applicable to this issue but argue that cook was incorrectly decided however we find no reason to reach a result that is different from the result in cook as part of the analysis in cook the court relied on sec_25_2702-2 examples and gift_tax regs examples and are as follows example a transfers property to an irrevocable_trust retaining the right to receive the income for years upon expiration of years the income of the trust is payable to a’s spouse for years if living upon expiration of the spouse’s interest the trust terminates and the trust corpus is payable to a’s child a retains the right to revoke the spouse’s interest because the transfer of property to the trust is not incomplete as to all interests in the property 1ie a has made a completed_gift of the remainder_interest sec_2702 applies a’s power_to_revoke the spouse’s term_interest is treated as a retained_interest for purposes of sec_2702 because no interest retained by a is a qualified_interest the amount_of_the_gift is the fair_market_value of the property transferred to the trust example the facts are the same as in example except that both the term_interest retained by a and the interest transferred to a’s spouse subject_to a’s right of revocation are qualified annuity or unitrust interests the amount_of_the_gift is the fair_market_value of the property transferred to the trust reduced by the value of both a’s qualified_interest and the value of the qualified_interest transferred to a’s spouse subject_to a’ss power_to_revoke the court noted that in example the revocable spousal interest is treated as an interest retained by a and that a’s direct interest and the revocable spousal interest are both qualified interests pursuant to sec_2702 the interests of both a and his or her spouse at the creation of the trust are fixed and ascertainable for specified 10-year terms and are not contingent upon a’s death or the spouse’s death furthermore the court noted that because the interests were for a collective 20-year specified term example was an illustration of how a grantor could retain a power of revocation over a spousal interest that did not extend beyond the life of the term holder a specified term of years or the shorter but not the longer of those periods see cook v commissioner supra pincite petitioners claim that the holding in cook is inconsistent with example petitioners argue that example provides that the spouse’s receipt of payments from the trust is contingent upon the spouse’s living beyond the 10-year period of a’s interest ie the grantor’s interest petitioners contend that there is a possibility that the spouse in example will receive nothing and yet example holds that the interest of the spouse is a qualified_interest thus petitioners claim that the requirement in sec_25_2702-3 gift_tax regs that an interest be fixed was only intended to prevent interests such as the interest in sec_25_2702-3 example gift_tax regs from satisfying the definition of a qualified_interest sec_25_2702-3 examples and gift_tax regs incorporates the same factual scenario example a transfers property to an irrevocable_trust retaining the right to receive percent of the net fair_market_value of the trust property valued annually for years if a dies within the 10-year term the unitrust_amount is to be paid to a’s estate for the balance of the term a’s interest is a qualified_unitrust_interest to the extent of the right to receive the unitrust payment for years or until a’s prior death example the facts are the same as example except that if a dies within the 10-year term the unitrust_amount will be paid to a’s estate for an additional years the result is the same as in example because the 10-year term is the only term that is fixed and ascertainable at the creation of the interest reliance by petitioners on sec_25_2702-2 example gift_tax regs for the proposition that a contingent_interest can be a qualified_interest under sec_2702 1s misplaced petitioners misread example to include a nonfixed contingent spousal interest on the premise that the trust will only make payments to the spouse if the spouse is living at the end of the grantor’s 10-year term_interest petitioners’ interpretation of the example concentrates on the language that reads upon expiration of a’s years the income of the trust is payable to a’s spouse for years if living sec_25_2702-2 example gift_tax regs emphasis added however the spousal interest in examples and is a fixed noncontingent spousal interest for a term of years and the spouse or the estate of the spouse will receive payments from the grat whether or not the spouse is living at the end of the 10-year term of the grantor to hold that examples and contain a contingent spousal interest would ignore other language in the examples that states upon expiration of the spouse’s interest the trust terminates and the trust corpus is payable to a’s child sec_25_2702-2 example gift_tax regs emphasis added this sentence reflects that the remainder_interest of the child will vest only after the expiration of the 10-year term of the spouse the if living language in example relied on by petitioners should be interpreted to read that if the spouse is living at the end of the grantor’s 10-year term annuity payments shall be payable to the spouse but if the spouse is not living at the end of the grantor’s 10-year term the spouse’s 10-year term_interest is payable to the estate of the spouse petitioners also argue that dual-life annuities should be treated as qualified interests in valuing remainder interests in grat’s because dual-life annuities are respected in valuing charitable_remainder trusts petitioners rely on the legislative_history of sec_2702 which states that qualified interests under sec_2702 are similar to those permitted in charitable split interest trusts under sec_664 cong rec s15629 s15682 ndollar_figure daily ed date explanatory material concerning committee on finance reconciliation submission pursuant to house concurrent resolution sec_664 defines a charitable_remainder_annuity_trust as follows d definitions --- charitable_remainder_annuity_trust ---for purposes of this section a charitable_remainder_annuity_trust is a trust---- a from which a sum certain which is not less than percent of the initial net fair_market_value of all property placed in trust is to be paid not less often than annually to one or more persons at least one of which is not an organization described in sec_170 and in the case of individuals only to an individual who is living at the time of the creation of the trust for a term of years not in excess of years or for the life or lives of such individual or individuals emphasis added if congress intended to include dual-life annuities in the definition of a qualified_interest for valuing the remainder interests of grat’s congress could have included similar life or lives language in sec_2702 instead sec_2702 is silent as to what constitutes an acceptable term for a qualified -- - interest however the regulations under sec_2702 state that the term of a qualified annuity must be for the life of the term holder for a specified term of years or for the shorter but not the longer of those periods sec_25_2702-3 gift_tax regs emphasis added the term restrictions that are found in the regulations are consistent with the purpose of sec_2702 which is to deter the potential valuation abuse that is inherent in using actuarial_tables by making unfavorable assumptions regarding certain retained rights see cong rec sdollar_figure s15680-s15681 daily ed date cook v commissioner supra pincite thus the general intent of congress to conform qualified interests in valuing grat’s with charitable split interest trusts did not include dual-life annuities our holding that the spousal interest in each grat that was created by petitioners is not a qualified_interest under sec_2702 is distinguishable from the previous decision of the court in 115_tc_589 in walton the taxpayer established two grat’s in which the taxpayer retained annuity rights in the event that the taxpayer died prior to the expiration of the annuity term the remaining scheduled annuity payments were to be made to the estate of the taxpayer the balance of the grat property would then be paid to the remainder beneficiaries at the expiration of the annuity term see id pincite -- - as part of the analysis the court in walton found that the interest of the estate could not be bifurcated from the retained_interest of the taxpayer see id pincite the court noted that an individual cannot make a gift to himself or to his or her own estate see id pincite therefore the court held that for purposes of determining the value under sec_2702 the taxpayer’s retained_interest should be valued as an annuity for a specified term of years rather than as an annuity for the shorter of a term certain or for the period ending upon the taxpayer’s death the dual-life annuity in the cases at hand differs from the annuity for a specified term of years in walton in that with the dual-life annuity the value of the remainder_interest would be reduced for a contingent spousal interest that may in fact never take effect furthermore the retained interests in walton satisfied one of the three term requirements of sec_25_2702-3 gift_tax regs we have considered all remaining arguments made by petitioners for a result contrary to that expressed herein and to the extent not discussed above they are irrelevant or without merit to reflect the foregoing and the concessions of the parties decisions will be entered under rule


internal_revenue_service department of the treasury index no number info release date washington dc person to contact john t sapienza jr id no telephone number refer reply to cc dom it a - cor-111382-00 date date dear commissioner rossotti asked me to respond to your letter concerning obesity and weight-loss programs you asked the internal_revenue_service to issue a revenue_ruling allowing obese individuals to deduct the costs of weight-loss programs as medical_care expenses under sec_213 of the internal_revenue_code the current irs position on weight-loss programs is stated in revrul_79_151 1979_1_cb_116 this ruling holds that if participation in the program was to improve the participant’s appearance general health and sense of well-being the expenses of the program are not for medical_care and therefore are not deductible of course the expenses of a weight-loss program prescribed to treat a specific disease are for medical_care and are deductible we appreciate your suggestion and the references you provided to studies on obesity each year the irs and the department of the treasury review the many suggestions for revenue rulings and other forms of guidance to be published the projects selected are announced in the annual priority guidance plan input such as you have provided is helpful to us in selecting projects for the priority guidance plan i hope this information is helpful please call john t sapienza jr at the number above if you have any questions sincerely deputy assistant chief_counsel income_tax accounting by robert a berkovsky chief branch


t c memo united_states tax_court joann thompson f k a joann bates petitioner v commissioner of internal revenue respondent docket no filed date charles n woodward for petitioner elizabeth downs for respondent memorandum opinion powell special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined a deficiency in petitioner's federal_income_tax and an addition_to_tax under sec_6651 unless otherwise indicated section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure in the amounts of dollar_figure and dollar_figure respectively petitioner resided in guthrie oklahoma when she filed her petition in this case the issue is whether dollar_figure petitioner received from united design corp united is excludable from gross_income under sec_104 background the facts may be summarized as follows prior to date petitioner worked for the oklahoma school system in date she was employed by united and became united's personnel manager in december of that year petitioner reported to robert m clinton vice president of united after becoming the personnel manager conflicts developed between petitioner and other employees of united the controversies centered around petitioner's veracity concerning certain events at united at mr clinton's suggestion petitioner was referred to the university of oklahoma health sciences center for evaluation that evaluation found that petitioner did not appear to be suffering from brain dysfunction or psychopathology however on date mr clinton wrote to petitioner that united had determined to release you from your at-will employment effective this same date the reasons for this decision petitioner concedes that if the dollar_figure is includable in gross_income she is liable for the addition_to_tax under sec_6651 for failure to timely file her return include your inability to effectively manage the central functions of the personnel department in recognition of your past service to the company we have decided to offer you the opportunity to submit a voluntary resignation in exchange for a severance package consisting of the following severance_pay severance_pay in the total amount of dollar_figure this payment amounts to twelve weeks of severance_pay in consideration for the severance package described herein the company asks you to i execute a voluntary resignation see attached and ii sign a release and waiver of claims see attached this offer is non-negotiable the release provided inter alia i in consideration of payments to be made to me in the sum of dollar_figure in addition to other sufficient and valuable consideration release waive and discharge united design corporation of from any and all claims actions causes of actions damages costs expenses and compensation known or unknown which i may now have incidental to or in connection with my employment and or any cessation thereof i represent that i have no injuries or claims against united design corporation other than those being expressly released herein and which claims are expressly denied by united design corporation and that i intend to release all claims including but not limited to the age discrimination in employment act the letter of resignation stated that petitioner was resigning her employment for reasons purely personal and not connected to her employment or working conditions petitioner executed both the release and the letter of resignation after her resignation petitioner interviewed with the local school system and was hired as superintendent of schools commencing on date mr clinton was of the opinion that united had valid reasons to terminate petitioner's employment united had a policy of paying severance amounts when an employment was terminated that typically were determined by the weekly salary multiplied by some number of weeks it also had a practice of obtaining releases from employees whose employment was terminated initially united's proposed severance payment was for or weeks after discussions with petitioner her attorney guy jackson mr jackson and united's in-house counsel the weekly component of the severance_pay was increased to weeks in deciding the amount of severance_pay mr clinton specifically did not intend to compensate petitioner for any personal injury petitioner did not state to mr clinton any claims she felt she may have had he never heard that there was a claim for personal injury from psychological mental and emotional distress at the outset of her difficulties at united petitioner had contacted mr jackson mr jackson considered possible tort claims of unjust dismissal and wrongful discharge and claims based on negligent infliction of emotional distress he also would have considered an age discrimination claim mr jackson had discussions with united's in-house counsel concerning petitioner's potential claims the release was drafted by united and united did not want the tort claims of unjust discharge wrongful termination and emotional distress specified in the release united at petitioner's request did not include the dollar_figure on the form_w-2 issued to petitioner for rather united issued a form 1099-misc for the payment on her federal_income_tax return petitioner revealed the dollar_figure but took the position that the payment was excluded from gross_income under sec_104 respondent determined that the payment was not excludable discussion sec_61 defines gross_income broadly as all income from whatever source derived the supreme court has given a liberal construction to this broad phraseology in recognition of the intention of congress to tax all gains except those specifically exempted 348_us_426 exclusions from income are matters of legislative grace and are construed narrowly 515_us_323 966_f2d_668 fed cir a taxpayer seeking a deduction or exclusion must be able to point to an applicable statute and show that he comes within its terms 292_us_435 see also commissioner v schleier supra sec_104 excludes from gross_income the amount of any damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal injuries or sickness the term 'damages received whether by suit or agreement ' means an amount received other than workmen's_compensation through prosecution of a legal suit or action based upon tort or tort type rights or through a settlement agreement entered into in lieu of such prosecution sec_1_104-1 income_tax regs there are two separate requirements that petitioner must satisfy under sec_104 the underlying cause of action giving rise to the recovery is 'based upon tort or tort type rights' and the damages were received 'on account of personal injuries or sickness ' commissioner v schleier supra pincite for purposes here we are willing to assume that under the applicable oklahoma law petitioner may have had some claim against united in the nature of a tort or tort type cause of action see barnes v commissioner tcmemo_1997_25 the more difficult question however is whether the dollar_figure was received on account of a tort or tort type cause of action the question is for what was the amount_paid 105_tc_396 affd 121_f3d_393 8th cir we are primarily concerned with united's intent in making the payment 349_f2d_610 10th cir affg tcmemo_1964_33 while there was not a comprehensive settlement agreement the agreement reflected in the correspondence between petitioner and united indicated that united considered that the amount was paid as severance_pay petitioner's letter of resignation states that she resigned for personal reasons that were not connected with her employment the only mention of petitioner's claims against united is in the release which releases united from any and all claims actions causes of actions damages costs expenses and compensation including claims under the age discrimination in employment act of adea publaw_90_202 81_stat_602 included in the release are claims that do not fall within the ambit of sec_104 see eg commissioner v schleier supra adea knuckles v commissioner supra compensation furthermore mr clinton was unaware of any specific tort claims that may have been raised against united we recognize that any involuntary employment termination may involve mental anguish that may be classified as a tort damage on the other hand there is no indication here that the dollar_figure was paid to compensate petitioner for that type of damage therefore the dollar_figure severance payment is not excludable from gross_income under sec_104 to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number 468a ---------------------------- -------------------- ------------------------------------------------- ------------------------ ----------------------------- ----------------------------- 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 b06 plr-155325-07 date date in re ------------------------------------------------------- ------------------------------------------------------------------------------ legend taxpayer a -------------------------------------------------- ------------------------ ----------------------------------------- ------------------------------------------------------------- --------------------------------------------------------------------- -------- ------------- ------- ---------------------------------------------------------------- former name taxpayer b plant state a state b year partner a ----------------------------------------------------------- partner b ----------------------------------------------------------- director --------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- location commission method transfer date amount x -------------------------------------------------- ------------------------------------------- ---------------------------------------------------- ---------------------- --------------- ----- -------------------------------------------- dear ----------------- plr-155325-07 this letter responds to your request dated date for an allocation of the previously-approved schedule of ruling amounts for the year--------due to a transfer of the plant as described below under 468a-6t of the temporary income_tax regulations for the taxpayer's nuclear decommissioning fund fund with respect to the plant the taxpayers have represented the following facts and information relating to the ruling_request taxpayer a a limited_liability_company organized under the laws of state a is engaged in the generation and sale of electric energy in state a during year taxpayer a has been indirectly owned through one or more limited_liability companies each of which is disregarded for federal tax purposes by taxpayer b during year prior to transfer date taxpayer a was considered the owner of ----- percent of plant and its qualified nuclear decommissioning fund under the laws of state a however during that time taxpayer a was an entity disregarded for federal tax purposes and thus taxpayer a was not considered to be the owner of plant for federal tax purposes taxpayer b a limited_liability_company organized under the laws of state b is regarded as a partnership during year until date of transfer this partnership was owned --- percent by partner a and ---percent by partner b during this period when taxpayer b was a partnership for federal tax purposes taxpayer b was considered the owner of plant and its fund effective transfer date as part of a liquidation which taxpayers a and b represent qualifies under sec_332 partner b assigned all of its assets and liabilities to its parent partner a at the same time taxpayer b became a disregarded_entity when its membership was reduced to a single member partner a thus on transfer date the partnership terminated and plant and its fund were transferred to taxpayer b because taxpayer b is a disregarded_entity partner a became owner of plant and its fund for federal tax purposes on that date taxpayer a under its former name received a revised schedule of ruling amounts for plant by letter dated date that schedule provided a ruling_amount for year of amount taxpayer a and taxpayer b request that the service issue an allocation of the scheduled ruling_amount for year so that the transferor may deduct that portion of the amount which is the product of multiplying amount by that fraction in which x is the numerator the number of days in year prior to the date of transfer and is the denominator law and analysis sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified decommissioning fund plr-155325-07 however sec_468a limits the amount_paid into such fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to this fund which is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the total nuclear power plant as the period for which the nuclear decommissioning fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year and is made within ½ months after the close of the tax_year additionally a taxpayer that files for a schedule of ruling amounts and receives such schedule of ruling amounts after the ½ month deadline for making a payment to a nuclear decommissioning fund must make such payment to the fund within days after the date that the taxpayer receives the schedule of ruling amounts for the tax_year sec_1_468a-1t a of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in among other things a direct ownership_interest including an interest as a tenant in common or joint tenant sec_1_468a-3t a provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3t a provides that the irs may in its discretion provide a schedule of ruling amounts that is determined on a basis other than sec_1_468a-3t if the taxpayer explains the need for the special treatment and sets forth an alternative basis plr-155325-07 for determining the schedule of ruling amounts in addition the irs must determine that the special treatment is consistent with the purpose of sec_468a sec_1_468a-5t a sets out the qualification requirements for nuclear decommissioning funds it provides in part that a qualified nuclear decommissioning fund must be established and maintained pursuant to an arrangement that qualifies as a_trust under state law sec_1_468a-5t a iii provides that an electing taxpayer can establish and maintain only one qualified nuclear decommissioning fund for each nuclear power plant if a nuclear power plant is subject_to the ratemaking jurisdiction of two or more public_utility commissions and any such public_utility commission requires a separate fund to be maintained for the benefit of ratepayers whose rates are established or approved by the public_utility commission the separate funds maintained for such plant whether or not established and maintained pursuant to a single trust agreement shall be considered a single nuclear decommissioning fund sec_1_468a-6t provides rules applicable to the transfer of an interest in a nuclear power plant and transfer of the qualified nuclear decommissioning fund where certain requirements are met specifically sec_1_468a-6t b provides that sec_1_468a-6t applies if-- immediately before the disposition the transferor maintained a qualified nuclear decommissioning fund with respect to the interest disposed of and immediately after the disposition-- i the transferee maintains a qualified nuclear decommissioning fund with respect to the interest acquired ii the interest acquired is a qualifying interest of the transferee in the nuclear power plant in connection with the disposition either- i the transferee acquires part or all of the transferor’s qualifying interest in the plant and a proportionate amount of the assets of the transferor’s fund is transferred to a fund of the transferee or ii the transferee acquires the transferor’s entire qualifying interest in the plant and the transferor’s entire fund is transferred to the transferee and plr-155325-07 the transferee continues to satisfy the requirements of sec_1_468a-5t a iii which permits an electing taxpayer to maintain only one qualified nuclear decommissioning fund for each plant sec_1_468a-6t c provides that a disposition that satisfies the requirements of sec_1_468a-6t b will have the following tax consequences at the time it occurs neither the transferor nor the transferor’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not be considered a distribution of assets by the transferor’s qualified nuclear decommissioning fund neither the transferee nor the transferee’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not constitute a payment or a contribution of assets by the transferee to its qualified nuclear decommissioning fund transfers of assets of a qualified nuclear decommissioning fund to which this section applies do not affect basis thus the transferee’s qualified nuclear decommissioning fund will have a basis in the assets received from the transferor’s qualified nuclear decommissioning fund that is the same as the basis of those assets in the transferor’s qualified nuclear decommissioning fund immediately before the distribution sec_1_468a-6t e provides the rules for determining the transferor’s schedule of ruling amounts where a transferor transfers or disposes of all or a portion of its qualifying interest in a nuclear power plant in a transaction to which sec_1_468a-6t applies sec_1_468a-6t e i provides that if the transferor does not file a request for a revised schedule of ruling amounts on or before the deemed payment_date for the year of the transfer then the transferor’s schedule of ruling amounts with respect to that plant for the year of transfer is the ruling_amount contained in the transferor’s current schedule of ruling amounts multiplied by that portion of the transferor’s interest that is transferred or disposed of and by a fraction the numerator of which is the plr-155325-07 number of days in the taxable_year that precede the date of transfer and the denominator of which is the number of days in that taxable_year in this case because the partnership and its taxable_year terminated on the transfer date application of the rules in sec_1_468a-6t e would result in the transferor receiving nearly the entire amount of the ruling_amount for that year taxpayers have requested under the provisions of sec_1_468a-3t a that we calculate the transferor’s ruling_amount on the basis of the number of days in the calendar_year in which the transfer date occurs rather than on the basis of the number of days in the partnership taxable_year we agree that the taxpayers request for an alternative basis for determining the schedule of ruling amounts is consistent with the principles and provisions of sec_468a and the temporary regulations thereunder therefore we grant the requested ruling accordingly we rule that the transferor’s ruling_amount for year is dollar_figure------------- calculated by multiplying amount transferor’s scheduled ruling_amount for year by taxpayers’ ownership_interest ----- percent and by a fraction the numerator or which is x and the denominator of which is approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the ruling dated date was issued or of the facts and circumstances described in this ruling is issued if any of the events described in sec_1_468a-3t f of the temporary regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above in particular no opinion is expressed or implied concerning whether the liquidation described above qualifies under any section of the code in addition we have not been asked to rule on whether the transfer described above meets the conditions of sec_1_468a-6t and we do not rule on that issue the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code payments made to such fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the plr-155325-07 power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7t a of the temporary regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom fi p plr-115626-99 date date legend retirement_system trust board program state x date a date b year c this is in response to a letter dated date and subsequent correspondence requesting a ruling concerning the exclusion of income of trust from gross_income under sec_115 of the internal_revenue_code facts retirement_system was created by the legislature of state x on date a for the purpose of providing for retirement income for public school employees within state x membership in retirement_system is mandatory for all public school employees employers are required to make regular member contributions for current service credits in addition to contributions from public elementary middle and high schools contributions from state-owned colleges and universities as well as state x itself for employees of the department of education are required the required employer contributions are actuarially determined retirement_system provides for retirement annuity disability and death_benefits since year c employer contributions have included the amount necessary to fund a health insurance premium assistance program for annuitants trust was created by board pursuant to a statute of state x in order to operate program program is a participant-funded group health insurance program for annuitants spouses of annuitants survivor annuitants and dependents the general assembly of state x amended the retirement code on date b giving the board the authority to sponsor such a health insurance program as well as the authority to promulgate regulations concerning the health insurance program all funds related to the health insurance program are maintained and accounted for separately from the public school retirement fund plr-115626-99 the board ex officio acts as the trustee of trust the board consists of fifteen members as follows the secretary of education ex officio the state treasurer ex officio two senators of state general assembly two members of the house of representatives of state general assembly the executive secretary of the state x school boards association ex officio two members appointed by the governor of state x three members elected by the active professional members of the retirement_system from among their number one member elected by the annuitants from among their number one member elected by the active nonprofessional members of the retirement_system from among their number and one elected by members of the state x public school boards from among their number the expenses of administrative employees of the board are paid_by state x as trustee the board has fiduciary duties to operate trust solely in the interest of and for the exclusive benefit of the annuitants and those covered through them who are participants in program the declaration of trust will be amended to provide that upon termination of trust the remaining assets of trust are to be used to pay the expenses of administration of program as then in effect and to provide continuation of benefits under program until trust assets are exhausted funding for program is provided by the participants either directly to the providers through a third-party administrator or by automatic deduction from their pension check if the monthly insurance premium is covered entirely through a combination of the monthly health insurance assistance payment and deductions from the monthly annuity check then the insurance premium is paid_by retirement_system directly to trust if the monthly insurance premium cannot be covered through a combination of the health insurance assistance payment and a deduction from the participant’s monthly annuity check the participant pays the full amount of the premium directly to the third-party administrator law and analysis sec_115 provides that gross_income does not include income derived from any public_utility or the exercise of any essential_governmental_function and accruing to a state or political_subdivision of a state when determining if sec_115 applies the service considers all the facts and circumstances relating to the organization to determine whether the organization performs an essential_governmental_function and whether the income of the organization accrues to a state or a political_subdivision of the state revrul_90_74 1990_2_cb_34 concerns an organization formed operated and funded by political subdivisions to pool their casualty risks and other risks arising from their obligations concerning public liability workers’ compensation or employees’ health obligations the ruling states that the income of such an organization is excluded from gross_income under sec_115 so long as private interests do not participate in the organization or benefit more than incidentally from the organization the benefit to the employees of the insurance coverage obtained by the member political subdivisions was deemed incidental to the public benefit revrul_77_261 1977_2_cb_45 holds that income from a fund established under a written declaration of trust by a state for the temporary investment of positive cash balances of a state and its political subdivisions is excludable from gross_income under sec_115 of the code the ruling reasons that the investment of positive cash balances by a state or political_subdivision in order to receive some plr-115626-99 yield on the funds until needed to meet expenses is a necessary incident of the power of the state or political_subdivision to collect taxes and raise revenue trust was created pursuant to state statute to operate program for participants in retirement_system participation in the retirement_system is mandatory for all individuals employed by or affiliated with public school entities recognized under state x law funding for program is provided by public school entities within state x in the form of health insurance premium assistance and by deductions from annuity checks sent to participants trust was created by state x to provide a mechanism whereby public school employees upon retirement can participate in a group health insurance program based upon revrul_90_74 and revrul_77_261 trust performs an essential_governmental_function within the meaning of sec_115 of the code under sec_115 of the code income of trust must accrue to states or their political subdivisions upon termination trust's remaining assets must be applied by the trustee to provide continuation of benefits under the program until trust assets are exhausted private interests do not participate in or benefit from income of trust other than as provided in revrul_90_74 accordingly the income of trust accrues to political subdivisions of states and entities whose income is excludable from gross_income under sec_115 holding based on the information and representations submitted by trust and provided that the dissolution clause in the declaration of trust is amended as described above we hold that the income of trust is excludable from gross_income under sec_115 except as specifically ruled upon above no opinion is expressed or implied as to the federal tax consequences of the transaction described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the provisions of a power_of_attorney currently on file we are sending a copy of this ruling letter to your authorized representative sincerely assistant chief_counsel financial institutions and products by alice m bennett chief branch enclosures copy of letter for sec_6110 purposes


t c memo united_states tax_court michael h johnson and patricia e johnson petitioners v commissioner of internal revenue respondent docket no filed date terry b bates brian j seery and robert a olson for petitioners steven m roth for respondent memorandum opinion vasquez judge this case is before the court on petitioners’ motion for award of litigation and administrative costs and attorney's_fees pursuant to sec_7430 and rule we see no reason for an evidentiary hearing on this matter see unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure - rule a accordingly we rule on petitioners' motion on the basis of the parties' submissions and the existing record see rule a the portions of our opinion on the merits in the instant case johnson v commissioner tcmemo_1998_448 johnson i that are relevant to our disposition of this motion are incorporated herein by this reference after concessions ’ the issues for decision are whether petitioners are the prevailing_party in the underlying tax case whether petitioners unreasonably protracted the court's proceeding and whether the amounts of administrative and litigation costs claimed by petitioners are reasonable background petitioners are husband and wife mr johnson operated ford and lincoln-mercury motor_vehicle dealerships the substantive issues in johnson i were whether petitioners were entitled to defer recognition of gain on the disposition of certain property pursuant to sec_1033 whether petitioners were liable for the fraud_penalty pursuant to sec_6663 or in the alternative the accuracy-related_penalty pursuant to sec_6662 for and whether petitioners were liable for the addition_to_tax for failure_to_file timely their return for we held that petitioners were entitled to defer recognition of gain on the disposition of that property pursuant to sec_1033 petitioners were not liable for the fraud or accuracy- respondent concedes that petitioners exhausted their administrative remedies and substantially prevailed related penalties and we lacked jurisdiction over the addition_to_tax for failure_to_file timely discussion sec_7430 provides for the award of administrative and litigation costs to a taxpayer in an administrative or court_proceeding brought against the united_states involving the determination of any_tax interest or penalty pursuant to the internal_revenue_code an award of administrative or litigation costs may be made where the taxpayer is the prevailing_party exhausted available administrative remedies did not unreasonably protract the administrative or judicial proceeding and claimed reasonable administrative and litigation costs see sec_7430 b c these requirements are conjunctive and failure to satisfy any one will preclude an award of costs to petitioners see 88_tc_492 prevailing_party to be a prevailing_party the taxpayer must substantially prevail with respect to either the amount in controversy or the most significant issue or set of issues presented and at the time the petition in the case was filed the taxpayer must meet the net_worth requirements of u s c sec d b see sec_7430 a a taxpayer however will not be treated as the prevailing_party if this requirement applies only to litigation costs see sec_7430 - the commissioner establishes that the commissioner's position was substantially justified see sec_7430 b respondent contends inter alia that petitioners have not satisfied the net_worth requirements net_worth requirements rule b provides that a motion for litigation or administrative costs shall contain a statement that the moving party meets the net_worth regquirements if applicable of section d b of title united_states_code as in effect on date which statement shall be supported by an affidavit executed by the moving party and not by counsel for the moving party the net_worth limitation of dollar_figure million applicable to individuals applies separately to each taxpayer see 100_tc_88 prager v commissioner tcmemo_1994_420 the taxpayers bear the burden of establishing that they meet the net_worth requirements see rule e 94_tc_708 petitioners' motion for costs contained a statement that petitioners satisfied the net_worth requirements petitioners submitted an affidavit that stated their net_worth was less than dollar_figure million jointly and dollar_figure million individually petitioners also the taxpayer_relief_act_of_1997 publaw_105_34 sec a 111_stat_788 effective with respect to proceedings commenced after date amended sec_7430 to adopt this rule see sec_7430 d as amended the petition in this case however was filed on date therefore this amendment is not applicable herein cf 108_tc_430 - - submitted a schedule of their assets and liabilities as of the date the petition was filed first joint net_worth schedule the first joint net_worth schedule listed the following assets and liabilities assets value savings accounts and or certificates dollar_figure checking accounts big_number annuity big_number investment in dealership big_number real_estate big_number home furnishings big_number total assets big_number liabilities value unsecured bank loans dollar_figure mortgages trust deeds or contracts payable big_number total liabilities big_number the first joint net_worth schedule listed the combined net_worth of petitioners to be dollar_figure the first joint net_worth schedule did not list either mr johnson's or mrs johnson's individual net_worth respondent filed an objection to petitioners' motion in which respondent argues that petitioners' affidavit and first joint net_worth schedule are insufficient and that petitioners have failed to prove that they meet the net_worth requirements respondent contends that petitioners did not itemize their assets or provide their cost bases it is unclear whether although the term net_worth is not statutorily defined the acquisition_cost of the asset rather than the fair_market_value should be used see 106_tc_76 continued -- - the listed liabilities are personal liabilities of petitioners or corporate liabilities ie liabilities of mr johnson's car dealership if the liabilities are personal liabilities it is unclear whether they are joint liabilities or separate liabilities of either mr johnson or mrs johnson petitioners failed to identify which assets are community_property and which are separate_property and the dollar_figure million net_worth limitation applies separately to each taxpayer and the first joint net_worth schedule lists the aggregate net_worth of petitioners as less than dollar_figure million but does not establish the net_worth of each petitioner petitioners filed a reply to respondent's objection and again submitted an affidavit that stated their net_worth was less than dollar_figure million jointly and dollar_figure million individually petitioners also submitted three net_worth schedules one listing the net_worth of both petitioners as of the date the petition was filed second joint net_worth schedule one listing the net_worth of mr johnson as of the date the petition was filed mr johnson's net_worth schedule and one listing the net_worth of mrs johnson as of the date the petition was filed mrs johnson's net_worth schedule the second joint net_worth schedule listed the following assets continued assets savings accounts and or certificates checking accounts investment in dealership real_estate home furnishings total assets value dollar_figure big_number big_number big_number big_number big_number the real_estate_assets were broken down as follows real_estate acquisition_cost accumulated depreciation net_book_value value personal_residence dollar_figure -- -- dollar_figure fox field bldg big_number dollar_figure dollar_figure -- fox field equip big_number big_number big_number -- el monte bldg big_number big_number big_number -- el monte bldg big_number big_number big_number -- points subtotal -- -- -- big_number crv big_number big_number -- --o- wasu rental big_number --o- big_number -- land wasu rental big_number big_number big_number -- rental subtotal -- -- -- big_number ford dealership land big_number -0- big_number -- bldg big_number big_number big_number -- computer big_number big_number -o- --- subtotal -- -- -- big_number real_estate total -- -- -- big_number the second joint net_worth schedule listed the following liabilities liabilities unsecured bank loans secured loans taxes payable real_estate loans first union mortgage ca-jon hangar project loan crv havasu rental antelope valley ford shuttle lincoln-mercury facilities loan total liabilities value dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number --- - the second joint net_worth schedule determined the combined net_worth of petitioners to be dollar_figure mr johnson's net_worth schedule and mrs johnson's net_worth schedule are identical mr johnson's net_worth schedule and mrs johnson's net_worth schedule each listed the following assets assets value savings accounts and or certificates dollar_figure checking accounts big_number investment in dealership big_number real_estate big_number home furnishings big_number total assets big_number the real_estate_assets were broken down as follows real_estate acquisition_cost accumulated depreciation net_book_value value personal_residence dollar_figure -- -- dollar_figure fox field bldg big_number dollar_figure dollar_figure -- fox field equip big_number big_number big_number -- el monte bldg big_number big_number big_number -- el monte bldg big_number big_number big_number -- points subtotal -- -- -- big_number crv big_number big_number -- -0- wasu rental big_number -0- big_number -- land wasu rental big_number big_number big_number -- rental subtotal -- -- -- big_number ford dealership land big_number -0- big_number -- bldg big_number big_number big_number -- computer big_number big_number -o- --- subtotal -- -- -- big_number real_estate total -- -- -- big_number mr johnson's net_worth schedule and mrs johnson's net_worth schedule each listed the following liabilities liabilities value unsecured bank loans dollar_figure secured loans big_number taxes payable big_number real_estate loans first union mortgage big_number ca-jon hangar project loan big_number crv big_number havasu rental big_number antelope valley ford shuttle lincoln-mercury facilities loan big_number total liabilities big_number mr johnson's net_worth schedule and mrs johnson's net_worth schedule determined the individual net_worth of each petitioner to be dollar_figure essentially petitioners split the amounts contained on the second joint net_worth schedule in half attributing one-half to mr johnson and the other half to mrs johnson petitioners argue that to satisfy the net_worth requirements they only need to submit a statement supported by an affidavit executed by the moving party that they meet the net_worth requirements we disagree petitioners were put on notice that respondent was specifically objecting to an award of administrative and litigation costs because petitioners failed to prove they meet the net_worth requirements after a taxpayer is put on notice that the commissioner is specifically objecting to an award of administrative and or litigation costs because of the taxpayer's failure to prove his net_worth the taxpayer must provide supporting information e evidence to establish his net_worth see 99_tc_335 -- - dixson intl serv corp v commissioner t c pincite see also mccoy v commissioner tcmemo_1992_423 petitioners submitted no evidence supporting the amounts listed in the various net_worth schedules or the statements in their original motion and supporting affidavits that they meet the net_worth requirements furthermore respondent submitted evidence that the land upon which mr johnson's motor_vehicle dealerships are located is mr johnson's sole and separate_property petitioners in their reply failed to address whether this or any other_property listed on the various net_worth schedules was separate or community_property additionally petitioners included half the value of each property in both mr johnson's net_worth schedule and mrs johnson's net_worth schedule the various net_worth schedules submitted by petitioners leave doubt as to their veracity the first joint net_worth schedule and the second joint net_worth schedule are almost dollar_figure million apart as to petitioners’ joint net_worth as of the date the petition was filed the amounts listed on the second joint net_worth schedule changed by tens of thousands of dollars for petitioners' checking and savings accounts changed by hundreds of thousands of dollars for their investment in the dealership and changed by millions of dollars for their real_estate from the amounts listed on the first joint net_worth schedule petitioners' liabilities also increased by over dollar_figure million from the first joint net_worth schedule to the second joint net_worth schedule additionally petitioners included an annuity as an asset in the first joint net_worth schedule but did not list this asset in the second joint net_worth schedule or in their individual net_worth schedules the second joint net_worth schedule also included over dollar_figure in taxes that was not listed on the first joint net_worth schedule petitioners did not explain any of these discrepancies petitioners supplied no explanation why their calculations of their net_worth as of the time the petition in the case was filed changed so drastically in the less than months between the submission of their original motion which contained the first joint net_worth schedule and their reply to respondent's objection which contained the second joint net_worth schedule and the individual net_worth schedules under the circumstances present in this case we do not feel compelled to accept petitioners' unsubstantiated conclusory and self-serving assertion that they meet the net_worth requirements see estate of hubberd v commissioner supra dixson intl serv corp v commissioner supra see also mccoy on date petitioners filed a statement of errata in which they state that their joint net_worth schedules contained several errors due to misunderstandings and miscommunications petitioners attached a third joint net_worth schedule that listed their combined net_worth as dollar_figure petitioners submitted no evidence supporting the amounts listed in this schedule we believe that this submission further supports our conclusions in this case v commissioner supra cf 87_tc_74 we conclude that petitioners have failed to prove they meet the net_worth requirements necessary to be a prevailing_party under sec_7430 in light of our holding that petitioners failed to prove they meet the net_worth requirements we need not address whether respondent's position was substantially justified petitioners unreasonably protracted the court's proceeding or the amounts of administrative and litigation costs claimed by petitioners are reasonable accordingly we hold that petitioners are not entitled to an award of administrative or litigation costs to reflect the foregoing an appropriate order will be issued