internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc it a 3-plr-112763-00 date date legend trust c trust d trust a_trust b state court year year year a b c d e f g h j k dear this is in response to the private_letter_ruling request dated date that you submitted on behalf of the trustees of trust d we have received additional submissions from you dated date date date and date issue you requested a ruling as to whether the proposed reformation of the income interests in trust c and trust d will result in the realization of gain_or_loss under sec_1001 of the internal_revenue_code plr-112763-00 conclusion the proposed reformation of the income interests in trust c and trust d will not result in the realization of gain_or_loss under sec_1001 facts trust c and trust d each has as its principal investment activity the ownership and rental of farmland in state each trust is irrevocable and is classified as a simple_trust the parties involved with trust c and trust d are as follows c and d the sons are the only children of a and b c and d are both adults d has two children e and f both adults e has two children g and h both minors c has two children j and k both adults a and b are both deceased in year while residents of state a and b desired to establish separate trusts for each of their sons and their families to accomplish this objective a and b executed two irrevocable_trust agreements in year the terms of the two trusts were identical except that each trust was primarily for the benefit of one son and the family of that son the corpus of each trust consisted of an acre parcel of state farm_land the acre parcels were of substantially equal value one of the trusts was denominated as trust a for income_tax purposes the other trust was denominated as trust b for income_tax purposes in year a and b again intended to establish new trusts of equal value for each son and his family to carry out this purpose they executed the two irrevocable_trust agreements which are the subject of this ruling_request the trust agreement between a the trustor and b the trustee has always been denominated as trust c for income_tax purposes the trust agreement between b as trustor and a as trustee has always been denominated as trust d for income_tax purposes the situs of trust c and trust d is state due to the fact that the assets of each trust consist only of farm real_estate located in state and a very small amount of cash and each trust expressly provides that all questions of law shall be determined in accordance with the laws of state by a decree of the court in year c is the trustee of trust c and d is the trustee of trust d a and b were still alive at the time of this decree this decree added a provision to trust d stating in the event the trustee shall die resign or become incapacitated during the term of the trust d shall be the successor trustee without bond in the event that d dies becomes incompetent to serve or ceases to serve for any reason c shall serve as successor trustee without bond if c does not serve or ceases to serve for any reason the last trustee to serve shall designate his plr-112763-00 successor as trustee every successor trustee shall have the same duties and powers as are assumed and conferred in this agreement upon the trustee including the duty to appoint his successor as trustee the same decree added a similar provision to trust c naming c as the successor trustee and providing for d to serve as trustee if c does not serve the terms of the two trusts are similar in that each trust is primarily for the benefit of the family of one son however the income_interest in each trust is shared between the two sons the corpus of each trust consisted of an acre parcel of state farm_land owned by the respective trustor and no additional assets have been transferred to either of the trusts at the present time each trust owns an acre parcel of farm_land in state and the value of the parcels is substantially equal and any difference in fair_market_value can be considered de_minimis at the time trust c and trust d were created and funded it was the intention of the respective trustors to establish separate trusts of equal value for each of their sons although the acre tracts of farm_land were equivalent in value the tract used to fund trust c was subject_to a mortgage debt while the tract used to fund trust d was owned free of any indebtedness the method chosen to equalize the two trusts was to divide the income_interest in each trust between the two sons so the income to each son or his family would reflect the reduction in income caused by the mortgage payment in due course the mortgage was paid in full and both trusts are now free of indebtedness the purpose of the provisions to share the income of the two trusts between the two current income beneficiaries has been accomplished however contrary to the intentions of the trustors the draftsman omitted any provision to terminate the shared income interests after the mortgage indebtedness was fully paid article ii of the trust agreement provides after payment of the charges and expenses of the trust the trustee shall pay to the trustor’s sons c and d in equal shares all of the current net_income in convenient installments at least annually after the death of either of said sons one-half of the current net_income shall be paid to the children of said deceased son in equal shares subject_to article iii c article iii provides that at the death of the surviving son of b the trustee shall divide the trust assets so as to provide one share for each living child of d and one share collectively for the living children of each deceased child of d article iii paragraph a provides that shares for each living child of d shall remain in trust until his youngest living child attains age twenty-one during such period of time the income and principal of each of said shares shall be fully available for the care support maintenance and education of said living child of d plr-112763-00 article iii paragraph c provides if at any time any share becomes distributable to a beneficiary who has not attained the age of twenty-one years then and in each such case the trustee shall retain possession of such share for the period during which that beneficiary is under the age of twenty-one years and in the meantime the trustee shall use and expend so much of the income and principal of such share as he in his sole discretion deems necessary or advisable for the care support maintenance and education of that beneficiary and any income not so expended shall be added to principal when the beneficiary attains the age of twenty-one years any balance held for his or her benefit shall be paid over and distributed outright to him or her if a beneficiary for whom such a share is held shall die before attaining the age of twenty-one years then any remaining portion of his or her share shall be paid over and distributed outright to his or her heirs provided however that any portion otherwise distributable to an heir of said beneficiary for whom a share of the trust is then being held pursuant to this instrument be paid over to the trustee of such and become a part thereof proposed transaction the trustees have filed an action in the court requesting that the court approve an amendment to each trust that removes one son as an income_beneficiary from one trust and makes him the sole current income_beneficiary of the trust under which his family receives the remainder_interest each of the children of the respective sons presently being all of the living remaindermen has joined in this legal action by filing a consent and waiver the trustees will request that the court construe the trusts in light of the intent and purposes of the trustors and make certain amendments to the trusts to fully implement the intention of the trustors to have separate trusts for each son and his family the court will be requested to amend each trust to remove one son as an income_beneficiary from one trust and make him the sole current income_beneficiary of the trust under which his family receives the remainder_interest in other words the court will be requested to remove d as an income_beneficiary of trust c and remove c as an income_beneficiary of trust d each of the original trusts provides that only after the death of both sons will the trusts terminate and the assets be distributed to the descendants of the son named in the particular trust in order not to accelerate the termination of the trusts which might occur depending on the order of the death of the sons the amendments to the trusts retain the requirement that both sons must die before ultimate distribution of the assets of the trust plr-112763-00 the trustees have proposed to the court that trust d be amended by deleting article ii of the original trust agreement and substituting in lieu thereof article ii after payment of the charges and expenses of the trust the trustee shall pay to the trustor’s son d all of the current net_income in convenient installments at least annually during his lifetime upon the death of trustor’s son d if the trustor’s other son c survives then in such event said income shall be paid to the children of d in equal shares subject_to article iii c the trustees have proposed to the court to make a similar amendment to trust c as part of the amendments the trustees have also requested that the court reform the successor trustee provisions to provide that the adult children of each son serve as successor co-trustees of their family’s trust rather than the other son to implement this change the trustees have proposed to the court that trust d be amended by deleting the provision dealing with trustee succession and substituting in lieu thereof the following new article x at this time d is the trustee of this trust in the event d shall cease for any reason to serve during the term of this trust e and f shall serve as successor co-trustees if either of them does not serve or ceases to serve for any reason the other shall continue to serve as sole trustee if both e and f do not serve or ceases to serve for any reason the last trustee to serve shall designate his or her successor as trustee every successor trustee shall have the same duties and powers as are assumed and conferred by this agreement upon the trustee including the duty to appoint his successor as trustee the trustees have proposed to the court that a similar amendment be made to trust c that names j and k as successor trustees law and analysis sec_61 of the internal_revenue_code provides that gross_income includes gains derived from dealings in property sec_1001 provides that the gain from the sale_or_other_disposition of property is the excess of the amount_realized over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss must be recognized except as otherwise provided sec_1_1001-1 of the income_tax regulations provides that except as otherwise provided in subtitle a of the code the gain_or_loss realized from the exchange of plr-112763-00 property for other_property differing materially either in_kind or in extent is treated as income or as loss sustained 499_us_554 concerns when a sale_or_exchange has taken place that results in realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender's interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution the supreme court in cottage savings u s pincite concluded that sec_1_1001-1 of the regulations reasonably interprets sec_1001 and stated that an exchange of property is a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as they embody legal entitlements that are different in_kind or extent cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans id pincite the court in cottage savings rejected the service's argument that properties are materially different only if they differ in economic_substance id pincite the service argued unsuccessfully that differences in properties are material for purposes of the code only when it can be said that the parties the relevant market and the relevant regulatory body would consider them material id pincite the taxpayer has represented that removing d as an income_beneficiary of trust c and removing c as an income_beneficiary of trust d would carry out the original intentions of the trustor if the court determines that this is the case and orders that d be removed as an income_beneficiary of trust c and orders that c be removed as an income_beneficiary of trust d as a way to meet the original intentions of the trustors of the two trusts this will not result in a sale or disposition for purposes of sec_1001 of the code the proposed transaction will not be an exchange between the income beneficiaries of trust c and trust d but instead will be a clarification of the original intention of the trustor therefore it is consistent with sec_1001 and cottage savings to conclude that the proposed removal of income beneficiaries from trust c and trust d will not constitute a sale or disposition under sec_1001 further the modification of the manner in which the successor trustees will be named is not a material difference for purposes of sec_1001 or cottage savings this will be a change in the way that trust c and trust d will be administered and this change will be consistent with the intention to have a separate trust for each son and his family since e f j and k are adults the trustee would not have any discretion over payments to plr-112763-00 them this means that if e f j or k were to become a trustee of trust c or trust d they would not have discretion over payments to themselves in the event that a minor were to become an income_beneficiary of the trust the revised trust agreement would not require that the income_beneficiary also be the trustee no opinion is expressed about the federal_income_tax treatment of the transaction under other provisions of the code the above rulings are directed only to the taxpayer who requested them sec_6110 of the code provides that these rulings may not be used or cited as precedent sincerely associate chief_counsel income_tax accounting by michael d finley chief branch enclosure copy for sec_6110 purposes


t c summary opinion united_states tax_court shawn jeffrey hintz petitioner v commissioner of internal revenue respondent docket no 21553-03s filed date shawn jeffrey hintz pro_se catherine s tyson for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent 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 respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure for the taxable_year after concessions the issue for decision is whether petitioner is entitled to exclude from gross_income dollar_figure received as disability pension income from the defense finance and accounting service because his pension income received is due to a combat-related_injury under sec_104 background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in san antonio texas on the date the petition was filed in this case from date to date petitioner served in the united_states army while serving in the united_states army petitioner was assigned a primary specialty of 11b10 infantryman petitioner enlisted with the united_states army at the age of after enlisting petitioner went to basic training for months at fort benning georgia after basic training petitioner was transferred to fort mcnair in washington d c while stationed at fort mcnair petitioner was delegated to presidential guard assignment this assignment included such duties as presidential guard battle reenactments and operation field duty at different posts throughout the united_states petitioner was never in actual combat in date petitioner underwent a medical evaluation at walter reed army medical center as a result of this evaluation petitioner was diagnosed as having bipolar disorder manic with mood-congruent psychotic features this diagnosis resulted in petitioner’s being relieved from assignment and duty because of physical disability incurred while entitled to basic_pay and under conditions which permit his being placed on the temporary disability retired list as of date petitioner’s effective date of retirement was date on date petitioner was removed from the temporary disability retired list tdrl and put on permanent retirement as a result of permanent disability after his discharge from the united_states army petitioner moved back to his parents’ home in eureka california for a brief period after his discharge petitioner attended the college of the redwoods taking a variety of courses with a special interest in sociology and psychology at the time of trial petitioner was a first-year apprentice with a pipefitters union sometime in petitioner was hospitalized in the general hospital at eureka during a psychiatric visit where it 1we understand these reenactments to be combat simulations was discovered he had scarlet fever at this hospital it was determined that his psychiatric symptomology was due to delirium during petitioner received disability pension income of dollar_figure from the defense finance and accounting service by notice_of_deficiency respondent determined that petitioner’s disability pension income of dollar_figure from the defense finance and accounting service in tax_year is not excludable from gross_income under sec_104 discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct and the taxpayer bears the burden of showing that the determination is in error rule a 290_us_111 in certain circumstances however if the taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the proper tax_liability sec_7491 places the burden_of_proof on the commissioner sec_7491 credible_evidence is ‘the quality of evidence which after critical analysis a court would find sufficient to base a decision on the issue if no contrary evidence were submitted’ 116_tc_438 quoting h conf rept pincite 1998_3_cb_747 sec_7491 applies only if an individual taxpayer complies with substantiation requirements maintains all required records and cooperates with reasonable requests by the commissioner for witnesses information documents meetings and interviews sec_7491 in this case sec_7491 is inapplicable because petitioner did not introduce any credible_evidence with respect to the origination of his disability and failed to comply with the substantiation cooperation and record-keeping requirements the burden_of_proof remains on petitioner to show that respondent’s determination is in error disability pension income as previously stated the issue for decision is whether under sec_104 petitioner is entitled to exclude from gross_income dollar_figure of pension income because he claims it was received on account of a combat-related_injury respondent argues that petitioner has not introduced credible_evidence as to the origination of his disability thus the disability pension income is not excluded from gross_income under sec_104 on the record we agree with respondent as a general_rule the internal_revenue_code imposes a tax on the taxable_income of every individual sec_1 sec_61 specifies that except as otherwise provided gross_income for purposes of calculating taxable_income means all income from whatever source derived the supreme court has long reiterated the sweeping scope of sec_61 515_us_323 348_us_426 340_f3d_1074 9th cir affg in part and revg in part on another ground tcmemo_2002_5 pensions and retirement allowances paid either by the government or by private persons constitute gross_income unless excluded by law sec_1_61-11 income_tax regs sec_104 in contrast provides an exclusion with respect to compensation_for injuries or sickness such exclusions from gross_income are construed narrowly commissioner v schleier supra pincite 504_us_229 banaitis v commissioner supra pincite sec_104 provides in pertinent part sec_104 compensation_for injuries or sickness a in general --except in the case of amounts attributable to and not in excess of deductions allowed under sec_213 relating to medical etc expenses for any prior taxable_year gross_income does not include-- amounts received as a pension annuity or similar allowance for personal injuries or sickness resulting from active_service in the armed_forces of any country or in the coast and geodetic survey or the public health service or as a disability annuity payable under the provisions of sec_808 of the foreign service act of congress enacted sec_104 to curb perceived abuses of sec_104 sec_104 provides that the exclusion under sec_104 is restricted to the classes of individuals described in sec_104 as follows individuals to whom subsection a continues to apply --an individual is described in this paragraph if-- a on or before date he was entitled to receive any amount described in subsection a b on date he was a member of any organization or reserve component thereof referred to in subsection a or under a binding written commitment to become such a member c he receives an amount described in subsection a by reason of a combat-related_injury or d on application therefor he would be entitled to receive disability compensation from the veterans’ administration for purposes of sec_104 the term combat-related_injury means personal_injury_or_sickness that is incurred as a direct result of armed conflict while engaged in extra 2the legislative_history explains the reasons for the amendments as follows in many cases armed_forces personnel have been classified as disabled for military service shortly before they would have become eligible for retirement principally to obtain the benefits of the special tax exclusion on the disability portion of their retirement pay in most of these cases the individuals having retired from the military earn income from other employment while receiving tax-free disability payments from the military h rept pincite 1976_3_cb_695 hazardous service or under conditions simulating war or caused by an instrumentality of war sec_104 as previously stated during petitioner received disability pension income of dollar_figure from the defense finance and accounting service petitioner claims that he is entitled to exclude his disability pension income from gross_income because he served in a combat-related specialty to support his contention petitioner provided copies of form dd214 certificate of release or discharge from active_duty form da physical evaluation board proceedings and a tdrl evaluation form dd214 summarizes petitioner’s military service it shows that petitioner served in a primary specialty of 11b10 infantryman and that he was separated from duty on account of a disability the decorations section of form dd214 lists only sec_104 also provides that in the case of an individual who is not described in subparagraph a or b of paragraph except as provided in paragraph the only amounts taken into account under subsection a shall be the amounts which he receives by reason of a combat-related_injury 4in his petition petitioner refers to combat-related special compensation crsc crsc provides additional compensation_for certain retirees with qualifying disabilities rated pincite percent or higher or for retirees with disabilities associated with the award of a purple heart decoration crsc was not authorized until the passage of the bob stump national defense authorization act for fiscal_year publaw_107_314 116_stat_2574 since the tax_year at issue in the present case is prior to the authorization of such compensation petitioner’s reference to crsc is erroneous normal basic training ribbons such as good conduct medal expert badge w m-16 rifle and hand grenades bars army service ribbon and nco professional development ribbon the decorations section of form dd214 lacks any combat-related decoration such as a campaign ribbon the record of service section of form dd214 shows that petitioner did not serve in any foreign_country moreover petitioner admits he was never in actual combat to further support his contention that the pension income at issue in the present case is eligible for exclusion_from_gross_income under sec_104 petitioner provided a copy of form da physical evaluation board proceedings however those sections of the form that relate to the origin of the medical problem have been left blank moreover in support of his contention petitioner provided a copy of a tdrl evaluation a medical evaluation which took place on date after petitioner had retired from active_duty the history of original illness section of the tdrl evaluation reads see original medical board summary dated february the medical board summary has not been supplied by petitioner and is not in the record of this case the evidence petitioner presented and his own testimony show only that he served in the united_states army as an infantryman and that he was retired on account of his bipolar disorder the evidence in the record does not show that his illness was incurred as a direct result of any combat-related activity or under conditions simulating war from the record we conclude that petitioner suffered from bipolar disorder which may have resulted in part from the stress of routine military duty such a disorder without evidence of its direct result from combat- related activity is not a combat-related_injury as defined by sec_104 therefore respondent’s determination on this issue is sustained conclusion we have considered all of the other arguments made by the parties and to the extent that we have not specifically addressed them we conclude they are without merit reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


ae government entities division department of the treasury internal_revenue_service washington d c nov fa gd z2uu008027 ge we ba set ep rat3 uniform issue list legend insurance_company a bank b _ amount d amount e amount f date l date m date n date o ira x dear this is in response to your request dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code correspondence dated date - supplemented the request the following facts and representations have been submitted under penalty of perjury in support of the ruling requested you are under and maintained ira x an individual_retirement_arrangement described in sec_408 of the code at insurance_company a ira x contained page quv0vv6 v2 amount d one date l you received a distribution from ira x in the amount of amount d with the intent of rolling that money over into another ira which would give you a better return on your investment on date m one day after the distribution you deposited the money in bank b while you looked for another ira to invest in within the days on date n your daughter passed away the day rollover period expired on date o shortly after your daughter passed away because you were dealing with issues surrounding the death of your daughter you were unable to complete the rollover within days on date o two days after the rollover period expired you attempted to rollover the funds however because you had missed the rollover date the bank would not accept the funds you also state that you used part of the distribution amount e for your personal expenses based on the facts and representations you request a ruling that the internal_revenue_service waive the day rollover requirement with respect to the distribution of amount f the difference between the amount distributed_amount d and the amount that you used amount e contained in sec_408 of the code in this instance sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers page sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by you is consistent with your assertion that your failure to accomplish a timely rollover was caused by your grief following the death of your daughter also you attempted to rollover the funds within two days after the time for completing the rollover had expired therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount f from ira x you are granted a period of days from the issuance of this ruling letter to contribute amount f into another ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution amount f will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact id - at ee _ please address all correspondence to se t ep ra t t3 sincerely yours rances v sloan employee pla mahager technical group enclosures deleted copy of ruling letter notice of intention to disclose


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc intl br1-plr-112985-01 date date number release date index number a ty country b year l year year year dear this is in response to a letter from your authorized representative dated date requesting a ruling that a’s surrender of her u s alien registration card green card did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code additional information was submitted in letters dated may and date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination a was born in country b in year in year a accompanied her husband to the united_states for his employment in year a obtained a green card a’s husband has now retired and the couple has returned to country b a surrendered her green card in year a will be subject_to country b tax on her worldwide income on the date of a's expatriation her net_worth exceeded the amount set forth in sec_877 plr-112985-01 sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be subject_to the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 a provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former u s citizen or former u s long-term_resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 a if the individual’s average income_tax_liability or the individual’s net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 a c under notice_98_34 1998_27_irb_30 modifying notice_97_19 1997_1_cb_394 a former long-term_resident whose net_worth or average tax_liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax_avoidance if that former resident is described within certain categories and submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes notice_98_34 requires that certain information be submitted with a request for a ruling that an individual’s expatriation did not have for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_98_34 because she is a resident of country b and her worldwide income is subject_to country b tax the country in which she was born a submitted all of the information required to be submitted by notice_97_19 as modified by notice_98_34 including additional information requested by the service after review of the submission accordingly based solely on the facts submitted and the representations made we conclude that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 therefore a will not be presumed under sec_877 to have as one of her principal purposes for expatriating the avoidance of u s taxes we further conclude that a will not be treated under sec_877 as plr-112985-01 having as one of her principal purposes for expatriating the avoidance of u s taxes because the information submitted clearly establishes the lack of a principal purpose to avoid taxes under subtitle a or b of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition no opinion is expressed as to a’s u s tax_liability for the taxable years prior to or after her expatriation under sections of the code other than sec_877 sec_2107 and sec_2501 a copy of this letter must be attached to a’s u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely w edward williams senior technical reviewer cc intl br1


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 tege eoeg e02 - plr-160165-03 date date do ---ty legend a state department commissioner -------------------------------------------------------------- act ------------------------------------------------------------------- ------------- --------------------------------- --------------------------------------------------------------------------------------- -------- --------------------------------------------------------------------------------------- ------------------------------ ------------------------------------------------------------- ----------------------------------------------------------- --------------------------------------------------------------------------- ------- ------- ------------------------ ------------------- ------------- ------------------ ----------------------------- ------------------- ------------------------------------------------------ ---------------------------------------------- act act b plan c plan_year year event date disaster disaster disaster dollar_figurex b c plr-160165-03 dear ----------------- this is in response to your letter dated date as supplemented by a letter signed date requesting the following rulings whether a will be an integral part of the state or a political_subdivision of the state and its income will be exempt from federal_income_tax whether the debt obligations issued by a will constitute obligations of a political_subdivision thereof within the meaning of sec_103 facts and representations a is a non-profit public corporation that was formed by the state legislature by act its purpose is to operate insurance plans that function exclusively as residual market mechanisms to provide essential property insurance for residential and commercial property solely for applicants who are in good_faith entitled to but are unable to procure insurance through the voluntary market a will take over operation of b plan and c plan through a plan of operation a’s assets are not part of the general fund of the state and are not subject_to debts claims or liabilities of the state so that the funds will be preserved for the activities of the plans a is subject_to state’s open meeting laws public record laws and public bid laws for the procurement of contracts which are imposed by state law on public bodies state had instituted b plan to provide a residual market for adequate insurance on property in the state in year as a result of civil unrest and urban civil disobedience causing property damage in state’s inner cities market demands led b plan to be expanded to include any area not within the designated coastal plain area set forth in act state also instituted c plan in act to provide adequate insurance on property in the coastal areas of the state as a result of the damage caused in year by event both plans were recreated and continued by act as insurance programs of a all insurers authorized to write property insurance covering risks located in state are required to participate in b plan and c plan as a condition of their authority to transact business in the state state mandated participation is intended to prevent the burden of insuring such risks falling upon a few public-spirited insurers and also designed to assure an adequate market for fire extended coverage and vandalism and malicious mischief and if necessary homeowners insurance in coastal and noncoastal areas of the state participating insurers have no financial interest in the assets or revenue of a since date the state has experienced catastrophic losses resulting from what had been considered routine or relatively minor natural disasters during this period losses plr-160165-03 in excess of dollar_figurex over aggregate premiums were experienced by participants in b plan and c plan resulting from disaster disaster and disaster these losses required substantial assessments against participating insurers which were only recovered after the fact through approved rate increases as a result you represent that insurers have become reluctant to write insurance in state act was enacted to preserve the normal insurance market while strengthening the residual market by giving participating insurers the ability to recoup losses from all insureds act was determined to be necessary for the economic welfare of the state a has statutory authority to issue policies of insurance to eligible applicants purchase reinsurance borrow funds sue or be sued and enter into contracts a is required to keep separate_accounts for the two plans retain profits and excess reserves to offset deficits and develop and annually reassess a prudent reinsurance program for the plans it is intended that a’s income and operations be tax-exempt and that it have authority to issue tax-exempt_bonds or have such bonds issued on its behalf a’s board_of directors is composed of the commissioner of the department or an employee of the department as his designee state treasurer or an employee of the department of the treasury as his designee the chairman of the house committee on insurance or a member of the committee designated by the chairman the chairman of the senate committee on insurance or a member of the committee designated by the chairman five representatives appointed by the governor that include one from the list of two nominees of domestic insurer with the largest direct written premium in the state of the subject lines of business one from two nominees from an insurer with at least one percent of the aggregate state-wide direct written premium of the subject lines of business and three representatives appointed at large two members appointed by the commissioner from a list of nominees of two organizations of insurance agents three members appointed by the governor from a list of nominees of three organizations of insurers and a member appointed by the governor from a list of nominees from the insurer with largest direct written premium in the state of subject lines of business members of the a’s board_of directors serve at the pleasure of the respective appointing party all persons of a’s senior management shall be engaged in by the commissioner and serve at the commissioner’s pleasure all compensated employees of a except members of the governing board are subject_to the provisions of the state constitution relating to prohibitions on political activities as if they were employees of state the act and the plan of operation provide all insurers writing policies of property insurance in state shall participate in plans b and c in the proportion that the net direct premium of such participant in the state during the preceding calendar_year bears to the plr-160165-03 aggregate net direct premiums written in the state by all assessable insurers as certified by b a’s plans of operation are subject_to the oversight of the house and senate insurance committees of the state legislature assessable insurers shall not participate in the gains or losses of either of the plans there are also regular assessments to be levied on assessable insurers market equalization charges to be levied on the policyholders of the two plans and emergency assessments to be levied on all policyholders for the applicable lines of business when a deficit incurred in a particular calendar_year is not greater than ten percent of the aggregate statewide direct written premium the entire deficit shall be recovered through regular assessments of the assessable insurers assessable insurers are permitted to recoup all regular assessments from their voluntary policy holders by applying a surcharge to all policies for the subject lines of business the surcharge shall be a percentage of premium but shall not be considered premium when a regular assessment is levied all policy holders of plans b and c shall be subject_to a market equalization charge the market equalization charge shall be a uniform percentage of premiums as a ratio of the total regular assessment levied by a to the total aggregate statewide direct premiums of the subject lines of business for the prior calendar_year but shall not be considered premium when the deficit exceeds the amount that will be recovered through regular assessments the board_of directors shall levy after verification by the department emergency assessments for as many years as necessary to cover the deficits the emergency assessments shall be levied on all assessable insureds upon insurance or renewal of policies emergency assessments will be collected from assessable insureds by assessable insurers and plans b and c emergency assessments shall be a uniform percentage of premiums but shall not be premiums premium rates shall be set by the board_of directors in accordance with provisions of act at rates that will not be competitive with the voluntary market in additional to the normal premium tax provided by state law a will impose and collect an additional_amount equal to the premium tax to augment a’s financial resources which shall be retained by a as a contribution from state a is required to file annual and quarterly statements with b a and the plans shall be subject_to examination of the commissioner and the legislative auditor a is authorized to pledge the proceeds of assessments insurance and reinsurance recoverables surcharges and other funds available to a as revenue sources to secure bonds or other indebtedness and financing mechanisms as a result of deficits or events giving rise to plr-160165-03 deficits to assist a in covering claims and expenses attributable to catastrophes all bonds and other indebtedness of a must be approved by c upon depopulation of the plans and a determination of the governing board that the declaration and purpose as set forth in act a no longer requires operation of the plans and with the approval of the state senate and house committees on insurance and the commissioner a shall effectuate a plan of dissolution upon dissolution all remaining assets after the payment of all debts liabilities and obligations including reasonable reserves for contingent liabilities or obligations shall become property of state and be deposited in state’s general fund law integral part in general if income is earned by an enterprise that is an integral part of a state or a political_subdivision of a state that income is not taxable in the absence of specific statutory authorization to tax that income see revrul_87_2 1987_1_cb_18 gcm c b xiv-1 superseded by revrul_71_131 1971_1_cb_28 in 308_fsupp_761 rev'd on other grounds 400_us_4 the state of maryland formed a corporation to insure the customer accounts of state chartered savings and loan associations under mssic's charter the full faith and credit of the state was not pledged for mssic's obligations only three of eleven directors were selected by state officials the district_court rejected mssic's claim of intergovernmental tax immunity because the state made no financial contribution to mssic and had no present_interest in the income of mssic thus the imposition of an income_tax on mssic would not burden the state of maryland although the supreme court reversed the lower court on other grounds it agreed with the lower court's analysis of the instrumentality and sec_115 issues mssic u s pincite n in state of michigan and 40_f3d_817 6th cir rev'g 802_fsupp_120 w d mich the court held that the investment_income of the michigan education trust met was not subject_to current taxation under sec_11 of the code the court's opinion is internally inconsistent because it concludes that met qualifies as a political_subdivision of the state of michigan id pincite that met is in a broad sense a municipal corporation id pincite and that met is in any event an integral part of the state of michigan id pincite moreover the court's reliance on the factors listed in revrul_57_128 c b to reach its conclusion is misplaced the revenue_ruling applies to entities that are separate from a plr-160165-03 state the factors in the revenue_ruling do not determine whether an enterprise is considered to be a separate_entity or an integral part of the state sec_301_7701-1 et seg of the procedure and administration regulations the so- called check-the-box_regulations support the position that an entity that is recognized as separate from a state or political_subdivision for local law purposes may still be an integral part of that state or political_subdivision sec_301_7701-1 provides in part that an entity formed under local law is not always recognized as a separate_entity for federal tax purposes for example an organization wholly owned by a state is not recognized as a separate_entity for federal tax purposes if it is an integral part of the state in determining whether an enterprise is an integral part of a state it is necessary to consider all of the facts and circumstances including the state's degree of control_over the enterprise and the state's financial commitment to the enterprise a was created by statute for the public purpose of insuring the existence of an orderly market of types of insurance offered by b and c plans for state residents and businesses under the legislation a will be supervised and controlled by state the members of the board_of directors include public officials and their designees and members appointed by the commissioner or governor all members of a’s senior management are engaged in by the commissioner and serve at the commissioner’s pleasure all of a’s compensated employees except for members of a’s board are subject_to provisions of the state constitution relating to prohibitions on political employees as if they were state employees a’s operations are subject under the statute to continuous review and supervision by the department and the house and senate insurance committees of the state legislature its governing board meetings are conducted in accordance with the state open meetings law a must receive approval for its plan of operation from the department and must file regular financial reports the rates a will be allowed to charge are specified in the proposed_legislation and the circumstances under which assessments to cover deficits can be made will be subject_to verification by the department all of new fund’s activities and its employees will be subject_to the supervision and control of the commissioner and the state legislature all bonds and other indebtedness of a must be approved by a state commissioner thus state will exercise a significant degree of control_over a plr-160165-03 under the proposed_legislation a will also collect an amount equal to the premium tax and will retain such amount to augment its resources accordingly state will provide a substantial financial commitment to a issue bonds sec_103 provides that except as provided in subsection b gross_income does not include interest on any state_or_local_bond sec_103 provides that the term state_or_local_bond means an obligation of a state or political_subdivision thereof we have already determined that a is an integral part of state obligations issued by a will thus be obligations issued by or on behalf of state and will constitute obligations of a state or political_subdivision within the meaning of sec_103 of the internal_revenue_code conclusion sec_1 a constitutes an integral part of state and its income will be exempt from federal_income_tax obligations issued by a will constitute obligations of a state or political_subdivision within the meaning of sec_103 of the code we are not ruling as to whether the interest of any specific obligation that may be issued by a will be exempt from taxation 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 expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-160165-03 in accordance with the power_of_attorney on file with this office the original of this letter is being sent to your authorized representative and you are being sent a copy sincerely barbara e beckman assistant chief exempt_organizations branch office of division counsel associate chief_counsel tax exempt government entities sec_6110 copy of letter enclosures cc ---------------------------------------------- -------------------------------------------------------------------------------------------- -------------------------------------------------------------------


tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c uniform issue list kkkkkekak kr kkk kk keke krkekkkeekrkeekreeeeekeke rik t ep ra ‘tou e e ‘ legend taxpayer krekerkkkkekkk kek ira x krkekekkeekeekekekreeeekekeke krekrekeekekeekeeererrkk kerri kkeekkrerekrrkkekekrerkeee keke ira y krreeekker ere keke ekerrekrekreakk kkk kkk kkekerkkkekreererererekkk kr kick financial_institution a financial_institution b amount serra rear irr irie ialalalalalelalalalalalalslsialale kekkkkkekkkekeke dear kekrkkkekkeee this is in response to your request dated date as supplemented by correspondence dated date and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer represents that she received a distribution from ira x totaling amount taxpayer asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to postal error taxpayer further represents that amount has not been used for any other purpose taxpayer represents that she received a distribution of amount from ira x on date with the intent to roll it over into ira y taxpayer asserts that on date she had placed the distribution check in an envelope with instructions to roll it into ira y and sent it certified mail to her advisor at financial_institution a for deposit on date which was after the 60-day rollover period ended she had received the certified mail envelope unopened with the check inside and no indication that financial_institution a had received the check taxpayer then forwarded the check to financial_institution b who deposited the check into ira y on date taxpayer asserts that her failure to rollover amount within the 60-day period was due to postal error taxpayer further represents that she never accessed the funds during the relevant time period and that amount remains in ira y and has not been used for any purpose based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 of the code do not apply to any amount required to be distributed under sec_408 of the code sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer is consistent with her assertion that her failure to accomplish a timely rollover was caused by a postal error therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira x provided all other requirements of sec_408 of the code except the day requirement are met with respect to such contribution the deposit of amount in ira y on date will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed under sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent kreekkkk if you wish to inquire about this ruling please contact at hh please address all correspondence to se t ep ra t2 sincerely yours on e lévine manager ployeg plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


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 fip b02 plr-146571-13 date april legend taxpayer year year a entity a joint_venture llc llc b c d e f dear ---------------- --------------------------------------------------------- ------ ------ --- -------------------------------------- ------------------------------ --------------------------------- ------------------------------- --- --- -- --- --- plr-146571-13 this is in reply to a letter dated date requesting a ruling on behalf of taxpayer taxpayer has requested a ruling regarding the definition of qualified_health_care_property under sec_856 of the internal_revenue_code for purposes of the related-party rent exception of sec_856 facts taxpayer is a publicly traded corporation that elected to be taxed as a reit beginning in year taxpayer is in the business of owning and leasing the full spectrum of senior housing and healthcare related real_estate including seniors housing communities skilled nursing post-acute facilities medical office buildings inpatient and outpatient medical centers and life science facilities in year taxpayer acquired an ownership_interest in a senior living facilities through joint_venture joint_venture was formed using two limited_liability companies llc and llc each llc is taxed as a partnership for federal_income_tax purposes the members of llc are i a wholly-owned subsidiary of taxpayer that is treated as a disregarded_entity and a qualified_reit_subsidiary qrs of taxpayer for u s federal_income_tax purposes and ii an affiliate of entity a qrs owns a b percent interest in llc and the affiliate of entity a owns a c percent interest in llc the members of llc are i a wholly-owned taxable_reit_subsidiary of taxpayer trs and ii an entity a affiliate trs owns b percent of llc and the affiliate of entity a owns c percent of llc d of the acquired entities referred to herein as senior living facilities collectively and senior living facility individually have been held in an ownership structure intended to conform with the ownership structure permitted by sec_856 each senior living facility is owned by a separate wholly-owned subsidiary of llc each referred to herein as lessor each lessor is a party to a master lease agreement with llc with respect to the senior living facility owned by such lessor llc has further sub-leased each senior living facility to a separate wholly-owned subsidiary of llc each referred to herein as subtenant each lessor and each subtenant are treated as disregarded entities for federal_income_tax purposes each subtenant has entered into a management agreement with an affiliate of entity a to serve as an eligible_independent_contractor herein referred to as the eik within the meaning of sec_856 to manage and operate the particular senior living facility the senior living facilities are unlicensed age-restricted residential communities that provide living quarters and significant congregate care services for residents taxpayer represents that the senior living facilities offer congregate care and wellness plr-146571-13 related_services that are not commonly offered by typical multi-family residential rental properties in the markets in which the senior living facilities are located the senior living facilities provide full service community meals housekeeping services scheduled transportation services 24-hour staff daily social programs events and outings general maintenance service for units paid utilities and on-site beauty salon and store the senior living facilities also offer a fitness center and daily fitness classes 24-hour emergency response system personal emergency pendants maintenance of current do not resuscitate dnr forms for residents upon request sharps containers are made available for use in residential units for medical bio-hazard disposal oxygen use is permitted in residential units with compliance with local laws monitored by the on-site manager on-site rehabilitation clinic for physical speech and occupational therapy also offered to all residents are i screenings conducted by licensed therapists and nurses employed by an entity a affiliate at each senior living facility ii meetings with clinical directors to discuss pro-active intervention for residents who may be at risk of falls a decline in physical health and or cognitive impairment and iii an on-site director with responsibility to promote resident health independence and self-management through educational programs community and supportive services hospital tracking and communication with family members in addition to the foregoing standard services for an additional fee some or all of the senior living facilities offer outpatient therapy services hospice services home healthcare services and companion services the outpatient therapy is provided in an on-site clinic by appointment with costs covered by medicare and or secondary insurance hospice services are currently available or pending at one senior living facility and are provided by a licensed hospice agency these services are pending at the other senior living facilities the hospice services include all levels of palliative care as well as bereavement services for the family the hospice care is covered by medicare the home healthcare services are provided by licensed home health care agencies and are generally covered by medicare for a 60-day period with re-evaluation and re-certification if needed the companion services are provided by certified nursing assistants the services are covered by long-term care insurance or private pay the residents at each of the senior living facilities are also eligible to participate in a resident transfer program the resident transfer program benefits include i free basic services at a higher level of care for e days annually and up to f days cumulative ii priority access to a higher level of care at other facilities iii ability to transfer plr-146571-13 residency to a facility offering a higher level of care without paying another community entry fee and iv reduced annual basic service fee increases for long-term residents taxpayer is requesting a ruling that its ownership interests in the senior living facilities represent interests in real properties that are qualified_health_care_property within the meaning of sec_856 specifically taxpayer requests a ruling that the senior living facilities are congregate care facilities within the meaning of sec_856 and as long as the senior living facilities are operated by an eligible_independent_contractor eik any amounts derived by taxpayer from its ownership_interest in llc shall not be excluded from the definition of rents_from_real_property by operation of sec_856 law and analysis sec_856 provides that at least percent of a reit’s gross_income must be derived from among other sources rents_from_real_property sec_856 provides that at least percent of a reit’s gross_income must be derived from among other sources rents_from_real_property sec_856 provides that rents_from_real_property include subject_to exclusions provided in sec_856 a rents from interests_in_real_property b charges for services customarily furnished or rendered in connection with the rental of real_property whether or not such charges are separately_stated and c rent attributable to personal_property leased under or in connection with a lease of real_property but only if the rent attributable to the personal_property for the taxable_year does not exceed percent of the total rent for the tax_year attributable to both the real and personal_property leased under or in connection with the lease sec_856 provides that rents_from_real_property do not include amounts received directly or indirectly from a corporation if the reit owns percent or more of the total combined voting power or percent or more of the total value of the shares of the corporation sec_856 provides that amounts paid to a reit by a trs shall not be excluded from rents_from_real_property by reason of sec_856 when a reit leases a qualified_lodging_facility or qualified_health_care_property to a trs and the facility or property is operated on behalf of the trs by a person who is an eligible_independent_contractor sec_856 provides that the term eligible_independent_contractor with respect to any qualified_health_care_property as defined in sec_856 means any independent_contractor if at the time such contractor enters into a management agreement or other similar service_contract with the trs to operate such plr-146571-13 qualified_health_care_property such contractor or any related_person is actively engaged in the trade_or_business of operating qualified health care properties respectively for any person who is not a related_person with respect to the real_estate_investment_trust or the taxable_reit_subsidiary sec_856 defines qualified_health_care_property as any real_property which is a health_care_facility a health_care_facility is defined in sec_856 as a hospital nursing facility assisted living facility congregate care facility qualified_continuing_care_facility as defined in sec_7872 or other licensed facility which extends medical or nursing or ancillary services to patients and which was operated by a provider of such services that is eligible for participation in the medicare program under title xvii of the social_security act subchapter xviii of chapter of title u s c a et seq with respect to the facility sec_1_856-3 of the income_tax regulations provides that a reit that is a partner in a partnership is deemed to own its proportionate share of each of the assets of the partnership and to be entitled to the income of the partnership attributable to that share for purposes of sec_856 the interest of a partner in the partnership’s assets is determined in accordance with the partner’s capital interest in the partnership the character of the various assets in the hands of the partnership and items of gross_income of the partnership retain the same character in the hands of the partnership for all purposes of sec_856 in the present case the senior living facilities offer services that have a significant health care related focus with the goal of offering a medical services intensive environment for senior citizens who are generally physically able to care for themselves the programs offered at the senior living facilities are targeted to monitor and help improve the health and well-being of the senior citizen residents for example the eik at each senior living facility maintains a permanent full-time_employee who is in charge of matters such as i establishing health related educational programs ii coordinating services with third party medical providers iii monitoring the suitability of the living environment for the residents and proposing alternatives where necessary and iv communicating with family members regarding the medical needs of the residents the eik also supports and monitors certain health-related activities of the residents for example by making available certified nursing assistants and licensed therapist by monitoring the use of in-unit medical equipment such as oxygen by providing for emergency call pendants and first responders and by maintaining dnr forms at the option of a resident numerous other personalized health services are also available further through the resident transfer program offered by the senior living facilities senior citizen residents who are in need of a more intensive level of medical related_services and care are able to easily transfer to another community plr-146571-13 these healthcare related_services and alternatives for residents are not available in a typical multi-family residential_rental_property conclusion based on the facts as represented we rule that the facilities are congregate care facilities within the meaning of sec_856 and therefore constitute qualified health care properties within the meaning of sec_856 accordingly amounts paid to the taxpayer by the trs shall not be excluded from rents_from_real_property by reason of sec_856 if the senior living facilities are operated and managed by an eligible_independent_contractor except as specifically ruled upon above no opinion is expressed concerning any federal_income_tax consequences relating to the facts herein under any other provision of the code specifically we do not rule whether taxpayer otherwise qualifies as a reit under part ii of subchapter_m of chapter of the code or whether contractor qualifies as an eligible_independent_contractor under sec_856 this ruling is directed only to the taxpayer requesting it taxpayer should attach a copy of this ruling to each tax_return to which it applies sec_6110 of the code provides that this ruling may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely jonathan d silver jonathan d silver assistant to the branch chief branch office of associate chief_counsel financial institutions products


t c memo united_states tax_court bohdan senyszyn and kelly l senyszyn petitioners v commissioner of internal revenue respondent docket no filed date bohdan senyszyn and kelly l senyszyn pro_se marco franco and lydia a branche for respondent memorandum opinion halpern judge by notice_of_deficiency dated date notice respondent determined a deficiency in petitioners' federal_income_tax of dollar_figure together with a fraud_penalty of dollar_figure and an accuracy-related penalty of dollar_figure petitioners have assigned error to those determinations and in partial response respondent relies on the affirmative defense of collateral_estoppel based on mr senyszyn's conviction for tax_evasion respondent moves for partial summary adjudication that petitioners are estopped from denying that during mr senyszyn received unreported income of dollar_figure petitioners are estopped from denying that the fraud_penalty applies for and the period of limitations on assessment and collection of tax remains open for the reasons stated below we will grant in part and deny in part respondent's motion motion unless otherwise indicated all section references are to the internal_revenue_code in effect for and all rule references are to the tax_court rules_of_practice and procedure all dollar amounts have been rounded to the nearest dollar we may grant summary_judgment with respect to all or any part of the legal issues in controversy if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits or respondent determined the fraud_penalty only with respect to petitioner husband mr senyszyn and he determined the accuracy-related_penalty with respect to both petitioners but with respect to mr senyszyn only as an alternative to the fraud_penalty declarations if any show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law rule a and b the moving party bears the burden of proving that no genuine dispute as to any material fact exists and we will draw any factual inferences in the light most favorable to the nonmoving party see eg 134_tc_13 citing 85_tc_812 in response to a properly supported motion for summary_judgment an adverse_party may not rest upon the mere allegations or denials of such party's pleading but such party's response by affidavits or declarations or as otherwise provided in this rule must set forth specific facts showing that there is a genuine dispute for trial rule d background the following facts are gathered from the pleadings the motion respondent's declaration in support of the motion respondent's memorandum of law in support of the motion petitioners' objection petitioners' declaration in support of the objection and other items constituting the record petitioners husband and wife resided in new jersey at the time the petition was filed during mr senyszyn was employed as a revenue_agent in the internal revenue service's irs large_and_mid-size_business_division in that capacity mr senyszyn was responsible for examining and investigating complex tax returns filed by large corporations among other things mr senyszyn's duties as a revenue_agent included recognizing indicators of fraudulent activity in respondent removed mr senyszyn from his position as a revenue_agent after he pleaded guilty in federal district_court to filing false returns as an irs agent tax_evasion structuring evasive financial transactions and bank fraud see 465_fedappx_935 fed cir petitioners timely filed their form_1040 u s individual_income_tax_return for on that return petitioners reported wages of dollar_figure gross_receipts of dollar_figure on schedule c profit or loss from business and gross_receipts of dollar_figure on schedule f profit or loss from farming petitioners did not report gross_income from any other sources on their return nor did they otherwise disclose any other sources of income on the return or on a statement attached to the return mr senyszyn was the defendant in a criminal case united_states v senyszyn no 06-cr-0311-01 d n j filed date brought in the u s district_court for the district of new jersey on date the u s attorney for the district of new jersey filed a superseding information in that case which set forth the following charge against him count two tax_evasion the allegations contained in paragraph sec_1 through of count one of this superseding information are repeated realleged and incorporated by reference as though fully set forth herein during the calendar_year defendant bohdan senyszyn embezzled taxable_income from the sale of real_estate owned by dh that was in addition to the income paid to him as salary and wages by the irs specifically defendant bohdan senyszyn embezzled approximately dollar_figure from the date sale of dh-owned property in andover township identified as lot which was sold for dollar_figure on or about date defendant bohdan senyszyn prepared co-signed and filed a united_states individual_income_tax_return form_1040 for himself and his wife who also signed the return that joint_return declared dollar_figure in wages and salaries as their only income and stated that the amount of tax due and owing was dollar_figure the return did not include about dollar_figure in additional taxable_income that defendant bohdan senyszyn embezzled in from the sale of lot upon this additional income an additional tax of about dollar_figure was due and owing to the united_states on or about date in the district of new jersey and elsewhere defendant bohdan senyszyn knowingly and willfully did attempt to evade and defeat a substantial part of the income_tax due and owing by him to the united_states for the calendar_year in that he signed filed and caused to be filed a false and fraudulent united_states individual_income_tax_return form_1040 as described in paragraph knowing it to be false and fraudulent as described in paragraph in violation of title_26 united_states_code sec_7201 contemporaneous with the u s attorney's filing the superseding information mr senyszyn signed a plea agreement with him in which mr senyszyn agreed to plead guilty to the above-set-forth count ie tax_evasion for the tax_year in violation of sec_7201 he agreed to stipulate at sentencing bohdan senyszyn knowingly and willfully did not include about dollar_figure in additional taxable_income that he acquired in upon this additional income an additional tax of about dollar_figure was due and owing to the united_states on date mr senyszyn entered a plea of guilty to all of the charges set forth in the superseding information including the charge of tax_evasion during the plea colloquy mr senyszyn was asked whether he was pleading guilty to the crimes listed in the superseding information because he was in fact guilty he responded yes i am mr senyszyn subsequently moved to withdraw his guilty plea asserting his innocence as to whether a tax was actually due on the money he failed to report in the district_court denied the motion and on date it entered judgment pursuant to the plea mr senyszyn appealed the denial of his motion to withdraw the guilty plea and the u s court_of_appeals for the third circuit affirmed the denial see 338_fedappx_201 3d cir mr senyszyn filed a motion to vacate set_aside or correct his sentence and that motion was denied as well see senyszyn v united_states no 09-cv-6120 d n j filed date he did not file a direct appeal of his criminal sentence and his conviction has become final following mr senyszyn's criminal conviction respondent examined petitioners' federal_income_tax return for the purpose of determining any deficiency in tax the notice followed respondent making a positive adjustment to petitioners' gross_income on account of unreported income of dollar_figure discussion i collateral_estoppel a introduction under the doctrine_of collateral_estoppel or issue preclusion once an issue of fact or law is actually and necessarily determined by a court of competent jurisdiction that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation 440_us_147 citing parklane hosiery co v shore u s n collateral_estoppel is a judicially created equitable doctrine the purposes of which are to protect parties from unnecessary and redundant litigation to conserve judicial resources and to foster certainty in and reliance on judicial action see eg id pincite estate of chemodurow v commissioner tcmemo_2001_14 wl at before the application of collateral_estoppel in the context of a factual dispute the following conditions must be satisfied the issue in the second suit must be identical in all respects with the one decided in the first suit there must be a final judgment rendered by a court of competent jurisdiction collateral_estoppel may be invoked against parties and their privies to the prior judgment the parties must have actually litigated the issues and the resolution of these issues must have been essential to the prior decision and the controlling facts and applicable legal rules must remain unchanged from those in the prior litigation 90_tc_162 aff'd 904_f2d_525 9th cir even if the peck requirements are satisfied however we have broad discretion to determine when collateral_estoppel should apply and we may refuse to apply it where for instance it is to be applied offensively and the party against whom it is applied had little incentive to defend in the first action or where the second action affords the party procedural opportunities unavailable in the first action that could readily cause a different result see parklane hosiery co u s pincite see also 84_tc_137 b application unreported income respondent argues that mr senyszyn's conviction for tax_evasion precludes petitioners from denying that mr senyszyn received dollar_figure of unreported income in relying on 698_f3d_160 3d cir aff'g tcmemo_2009_44 respondent asserts that a defendant's admission in a guilty plea for tax_evasion that he failed to report a specific amount of income on his tax_return precludes the defendant from contesting that such amount is taxable to him in a later proceeding respondent argues that mr senyszyn's stipulation in his criminal tax proceeding that he knowingly and willfully did not include about dollar_figure of additional taxable_income that he acquired in precludes him from challenging the deficiency amount we disagree although the existence of an underpayment in tax is a necessary element of tax_evasion under sec_7201 the determination of an exact liability evaded is not see eg 360_f2d_353 4th cir see also ferguson v commissioner tcmemo_2004_90 wl at even where the taxpayer has stipulated a specific amount of underpayment in a guilty plea such stipulation--though strong evidence of the deficiency amount--does not collaterally estop the taxpayer from challenging that amount in a subsequent civil_proceeding see eg ferguson v commissioner wl at see also livingston v commissioner tcmemo_2000_121 wl at respondent's reliance on 698_f3d_160 is misplaced in anderson the court_of_appeals for the third circuit reasoned that because the taxable nature of income generated by one of the taxpayer's companies was necessary to establish the taxpayer's conviction under sec_7201 the taxpayer's conviction did hinge on the question of whether the income was taxable id pincite therefore the taxpayer was collaterally estopped from arguing that that income was not taxable to him in a subsequent civil tax_fraud proceeding id the court_of_appeals then determined the specific amount of the deficiency but that determination relied not on the preclusive effect of the taxpayer's conviction but on stipulations filed with the tax_court during the course of the deficiency proceedings id the specific amount of the unreported income was not an essential element of mr senszyn's tax_evasion conviction accordingly mr senyszyn's stipulation in his criminal tax proceeding does not collaterally estop him from challenging respondent's adjustment for unreported income in this civil_proceeding sec_6663 fraud_penalty sec_6663 provides if any part of any underpayment_of_tax required to be shown on a return is due to fraud there shall be added to the tax an amount equal to percent of the portion of the underpayment which is attributable to fraud respondent bears the burden of proving fraud by clear_and_convincing evidence see sec_7454 see also rule b to satisfy that burden respondent must show an underpayment exists and mr senyszyn intended to evade taxes known to be owing by conduct intended to conceal mislead or otherwise prevent the collection_of_taxes e g 113_tc_99 a conviction for tax_evasion pursuant to sec_7201 either upon a guilty plea or upon a jury verdict conclusively establishes fraud in a subsequent civil tax_fraud proceeding through the doctrine_of collateral_estoppel e g 96_tc_858 aff'd 959_f2d_16 2d cir marretta v commissioner tcmemo_2004_128 wl at aff'd 168_fedappx_528 3d cir that is because the elements of criminal_tax_evasion and civil tax_fraud are virtually identical see eg anderson v commissioner f 3d pincite williams v commissioner tcmemo_2009_81 wl at mr senyszyn pleaded guilty to tax_evasion under sec_7201 for and that judgment has become final petitioners do not deny the conviction but raise a number of objections to the application of collateral_estoppel petitioners' arguments that the notice was based on a report prepared by the irs criminal_investigation_division while pursuing an indictment under sec_7206 a charge that was apparently dropped by the time mr senyszyn entered his guilty plea are without merit we do not look behind a notice_of_deficiency to examine the evidence used the propriety of the commissioner's motives or administrative policy or procedure used in making that determination 136_tc_38 citing 62_tc_324 aff'd 483_fedappx_847 4th cir moreover petitioners' claim even if true has no bearing on whether the conviction for tax_evasion under sec_7201 conclusively establishes that mr senyszyn underpaid his tax_liability with fraudulent intent similarly petitioners' objections that mr senyszyn was not convicted of embezzlement are irrelevant to whether his conviction under sec_7201 collaterally estops him from contesting the civil tax_fraud penalty at issue is only whether an underpayment existed for and whether petitioner possessed the requisite fraudulent intent with respect to that underpayment such elements were established by petitioner's criminal conviction the source of that income to the extent that it does not affect its taxable nature is irrelevant for our purposes petitioners' argument that all of the parties to the previous action must be present for collateral_estoppel to attach is without merit petitioners direct us to no case establishing such a requirement and we are aware of none moreover it is clear that as between respondent and mr senyszyn there is an identity of parties in this case and in the criminal case respondent being in privity with the united_states the plaintiff in the criminal case e g 62_tc_359 accordingly petitioners are precluded from challenging respondent's determination that mr senszyn underpaid his tax for the tax_year and that he filed a false and fraudulent federal_income_tax return with the requisite fraudulent intent mr senyszyn is therefore liable for the sec_6663 fraud_penalty for that year as with the deficiency however the issue of the amount of that penalty remains for trial see sec_6663 ii period of limitations sec_6501 provides generally that the amount of any_tax must be assessed within three years of the filing of a return sec_6501 however provides that i n the case of a false_or_fraudulent_return with the intent to evade tax the tax may be assessed at any time the determination of fraud for purposes of sec_6501 is the same as the determination of fraud for the purposes of the penalty under sec_6663 116_tc_79 in the case of income_tax deficiencies on joint returns proof of fraud against either spouse prevents the running of the period of limitations as to both spouses 54_tc_1011 evans v commissioner tcmemo_2010_199 wl at aff'd 507_fedappx_645 9th cir because we have determined that mr senyszyn filed a fraudulent return for the period for assessment remains open iii conclusion respondent has shown that he is entitled to summary_judgment with respect to the issue of whether collateral_estoppel applies to establish mr senyszyn's liability for civil tax_fraud for the tax_year and we hold accordingly we further hold that the statute_of_limitations does not bar assessment of petitioners' tax liability for that year the issues of the amounts of the deficiency in tax and the penalties for remain for trial to reflect the foregoing an appropriate order will be issued