internal_revenue_service department of the treasury index number u ill no washington dc person to contact telephone number refer reply to cc dom p si plr-104476-99 date ate legend company state shareholders a i u dear this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated on a state company has two shareholders shareholders it is represented that company has intended to be an s_corporation since its incorporation in believing itself to be an s_corporation company has operated accordingly since b after the end of its taxable_year beginning on b however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on b loe plr-104476-99 sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 explains when an s election will be effective generally if an s election is made within the first two and one half months of a corporation's taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the sdollar_figure election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on b however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of b with the appropriate service_center within days from the date of this tuling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours signed william p o'shea william p o'shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes o2b


internal_revenue_service department of the treasury index number u i l no washington dc person to contact telephone number refer reply to cc dom p si plr-117946-99 date date number release date legend company state shareholder a b this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated in a in state company has one shareholder shareholder it is represented that company has intended to be an s_corporation since its incorporation believing itself to be an s_corporation company has operated accordingly since b after the end of its taxable_year beginning on b however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on b sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 explains when an s election will be effective generally if an s plr-117946-99 election is made within the first two and one half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on b however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of b with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------- --------------------- --------------------------------------- -------------------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ---------------- telephone number -------------------- refer reply to cc fip plr-148847-13 date date legend company ---------------------- ------------------------------------------------------------------ llp llp state ------------------------ ------------------------------ ------------ dear --------------- this is in reply to a letter dated date requesting on behalf of company an extension of time under sec_301_9100-1 of the procedure and administration regulations to elect to be treated as a real_estate_investment_trust reit under sec_856 of the internal_revenue_code facts company is a state corporation that was formed on date company’s primary business is dealing with real_estate_assets that it owns either directly or through subsidiaries company has at all times intended to qualify as a reit beginning with its first taxable_year ending date llp is an accounting firm hired by company to prepare its federal tax returns llp is a law firm providing services to company plr-148847-13 on date the due_date for company’s first federal_income_tax return llp tried to file electronically form_7004 to request an automatic_extension of time for company to file its return for the form was rejected with a response that the form code on the form_7004 did not match the form code in the internal_revenue_service database thereafter llp filed electronically another form_7004 but for a form_1120 which is for a non-reit corporation instead of form reit the correct form for company llp also mailed a paper form_7004 on behalf of company on date llp filed a form_1120 rather than form 1120-reit on behalf of company for its first taxable_year neither company nor llp was informed that a form_7004 had been rejected prior to the filing of the form_1120 llp did not inform company or llp that llp would not be filing an 1120-reit on behalf of company on date llp became aware that form 1120-reit had not been filed for company on date llp notified company and llp of the need to file form 1120-reit in order to elect reit status for company prior to that notice company was unaware of the need to file form reit instead of form_1120 to elect reit status after llp notified llp of the need to file form 1120-reit for company llp immediately began preparing the form 1120-reit for company the following representations are made in connection with the request for an extension of time the request for relief was filed before the failure to make the regulatory election was discovered by the internal_revenue_service granting the relief requested will not result in company having a lower tax_liability in the aggregate for all years to which the election applies than company would have had if the election had been timely made taking into account the time_value_of_money company does not seek to alter a return position for which an accuracy- related penalty has been or could have been imposed under sec_6662 of the code at the time company requested relief and the new position requires or permits a regulatory election for which relief is requested plr-148847-13 company failed to file the election inadvertently company has not used hindsight to seek an extension of time to make the election company always had the intent to elect reit status if company had been advised by their tax professionals of the need for the election to be made on form 1120-reit company would have made the election on that form law and analysis sec_856 of the code provides that a corporation trust or association shall not be considered a reit for any taxable_year unless it files with its return for the taxable_year an election to be a reit or has made such election for a previous taxable_year sec_301_9100-1 of the regulations provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose deadline is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 through c i of the regulations sets forth rules that the internal_revenue_service generally will use to determine whether under the facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money conclusion based upon the facts and representations submitted we conclude that company has shown good cause for granting a reasonable extension of time to elect to be treated as a reit under sec_856 of the code we further conclude that the time for filing the election under sec_856 is extended by days from the date of this letter this ruling is limited to the timeliness of the filing of company’s form1120-reit for purposes of the election under sec_856 of the code this ruling’s application is limited to the facts representations code sections and regulations cited plr-148847-13 herein no opinion is expressed with regard to whether company otherwise qualifies as a reit under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of company is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect except as specifically provided otherwise no opinion is expressed on the federal_income_tax consequences of the transaction described above this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the terms of a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely yours susan thompson baker susan thompson baker senior technician reviewer branch office of the associate chief_counsel financial institutions products


department of the treasury_department of the treasury int ernal revenue service int ernal revenue service washington d c washington d c o f f i c e o f o f f i c e o f c h i e f c o u n s e l c h i e f c o u n s e l number release date uilc date cc tege eoeg et2 jrichards wta-n-117405-00 memorandum for project director m es ttrc from mary oppenheimer assistant chief_counsel cc tege eoeg subject taxability under sec_132 of reimbursement for parking at nontemporary work locations this is in response to your request for advice on whether parking reimbursement is excludable from gross_income under sec_132 of the internal_revenue_code issue whether reimbursement provided to nontemporary work locations is excludable from wages for income and employment_tax purposes for parking costs incurred at conclusion reimbursement provided to employees for parking at a nontemporary work location is excludable from wages for income and employment_tax purposes to the extent it does not exceed the statutory monthly limitation facts their permanent post-of-duty pod on a long-term basis the irs expense reimbursement arrangement provides that an employee may be reimbursed for all parking expenses_incurred at work locations away from the employee’s whether or not those expenses would be deductible by the employee under sec_162 of the code oftentimes work at locations away from law and analysis sec_132 of the code provides that gross_income does not include any benefit that is a qualified_transportation_fringe sec_132 provides that qualified_transportation fringes include qualified_parking wta-n-117405-00 sec_132 of the code provides that the amount excludable for qualified_parking may not exceed dollar_figure per month sec_132 of the code provides the term ‘qualified parking’ means parking provided to an employee on or near the business_premises of the employer or on or near a location from which the employee commutes to work by mass transit including van pool transportation provided by a person providing transportation for compensation or hire in a commuter_highway_vehicle or by carpool such term shall not include any parking on or near property used by the employee for residential purposes sec_3121 and sec_3401 of the code provide in relevant part that wages do not include any benefits provided to an employee if at the time the benefit is provided it is reasonable to believe the benefit would be excludable to the employee under sec_132 revrul_99_7 1999_1_cb_361 addresses under what circumstances daily transportation_expenses including parking incurred by a taxpayer in going between the taxpayer’s residence and work location are deductible under sec_162 of the code sec_162 allows a deduction for all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business sec_262 however provides that no deduction is allowed for personal living or family_expenses the costs of commuting to work including parking generally are nondeductible personal expenses under sec_1_162-2 and sec_1_262-1 of the income_tax regulations however the ruling provides that if a taxpayer has one or more regular work locations the taxpayer may deduct under sec_162 the daily transportation_expenses incurred in going between the taxpayer’s residence and a temporary_work_location under the ruling a temporary_work_location is a work location that is realistically expected to last and does in fact last for year or less in the absence of facts and circumstances indicating otherwise if employment at a work location is realistically expected to last for more than year or there is no realistic expectation that the employment will last for year or less the employment is not temporary regardless of whether it actually exceed sec_1 year if employment at a work location initially is realistically expected to last for year or less but at some later date the employment is realistically expected to exceed year that employment will be treated as temporary in the absence of facts and circumstances indicating otherwise until the date that the taxpayer's realistic expectation changes and will be treated as not temporary after that date we believe the sec_132 exclusion for qualified_parking is intended to provide a tax-free benefit for commuter parking in other words this section is generally intended wta-n-117405-00 to provide a benefit for parking costs that are not deductible under sec_162 under revrul_99_7 parking costs incurred at a temporary_work_location are generally deductible under sec_162 whereas costs for parking at any nontemporary work location are considered personal and are therefore nondeductible thus we have concluded that reimbursement for parking at any nontemporary work location under the standards in revrul_99_7 falls within the meaning of parking provided to an employee on or near the business_premises of the employer under sec_132 accordingly these parking benefits are qualified_transportation fringes provided the other requirements under sec_132 are met including the statutory monthly limitation please contact john richards of this office if we can provide further assistance


tax_exempt_and_government_entities_division number release date date date department of the treasury internal_revenue_service washington d c contact person identification_number contact number ein uil definition of self-dealing legend collection grantor_trust vendor state dear this is in response to your ruling_request dated date and amended on date you are requesting certain rulings with respect to the income_tax consequences under sec_4941 of the internal_revenue_code i r c of a disqualified person’s loan of property to you facts you are a state nonprofit corporation recognized as exempt under sec_501 as an organization described in sec_501 and classified as a private_operating_foundation under sec_4940 one of your exempt purposes is education your activities include exhibitions educational programs and academic relationships and original research and published materials your primary activity is the operation of a museum open seasonally to the public during regularly scheduled hours and year round to academics group tours and events on weekends and other times by appointment your regularly scheduled hours are seven hours per day three days per week grantor is the owner of the collection consisting of a library portion and an artifact portion the library portion consists of books documents photos and memorabilia about artifacts generally together the library collection the artifact portion consists of artifacts selected for their historical social technical or aesthetic significance the artifact collection grantor plans to transfer ownership of the collection to trust a revocable_living_trust of which grantor is trustee trust and grantor are each disqualified persons with respect to you within the meaning of sec_4946 currently grantor loans the library collection to you free of charge trust will pay all expenses for the betterment of the library collection in turn you will pay all repairs and maintenance preservation and safekeeping costs of the library collection in grantor through trust proposes to loan the artifact collection to you free of charge as well addition trust will provide office and display space for your exclusive use in a building that it owns free of charge provide office equipment furniture and supplies and accounting services and other general and administrative services vendor which is solely owned by grantor and therefore is itself a disqualified_person with respect to you under sec_4946 occupies the portion of the building you do not use you and vendor will share the cost of the building maintenance various occupancy costs such as security landscaping cleaning building repair and maintenance lighting pest control trash water and sewer association dues etc will be allocated between you and vendor according to your respective occupancies based on square footage general and administration costs including the telephone system copy machines computers and other equipment costs will be provided by vendor to you at no cost as well any direct costs that you incur in connection with the office equipment will be paid_by you directly to unrelated vendors any furniture office equipment or other supplies purchased by you will not be available for grantor's use you and vendor will pay your respective portion of occupancy costs associated with the building directly to third party service providers vendor's portion of the occupancy costs is based on the percentage of building space vendor uses and any costs not directly attributable to you will be paid_by vendor the artifact collection is subject_to additional expenses due to its nature pursuant to the loan agreement you will transport artifacts for exhibition at appropriate public events and use certain artifacts in competitions you will pay for associated expenses such as transportation insurance etc grantor and or vendor may from time to time to participate in exhibitions by sitting as panel judges and speak to the technical and historical importance of the artifacts however grantor and vendor will pay their own expenses trust will pay all capital expenses which improve an artifact such as restoration with respect to the artifact collection you are responsible for all maintenance and conservation costs vendor will at no charge to you perform restoration services for a fee vendor will aiso perform specialized repairs and maintenance this fee will be no more than the actual costs of the technicians performing work and excludes all overhead expenses including front office expenses and supplies used you propose to hire employees to perform certain low-level conservation tasks vendor's employees will perform specialized conservation tasks which require long years of study to master particularly since the results must satisfy museum quality standards for historical artifacts the collection loan period i sec_5 years automatically renewable for an additional years trust will deliver the collection to you you have a duty_of care with respect to the display preservation and safekeeping of the collection to the same standard you use for your own comparable_property but not less than the standard of care adopted by museums accredited by the american alliance of museums formerly known as the american association of museums you will insure the collection while in your possession you will pay all ordinary and necessary maintenance_expenses in connection with your duty_of care you may but are not obligated to credit ownership of the collection with a notice courtesy of trust collection trust retains ownership of the collection you have formal relationships with a public university and a private college each exempt under sec_501 to provide for the academic study of the collection by faculty and students one goal of the academic partnerships is to digitize the library collection the library collection is open to the public only during scheduled hours it is available to academia on an appointment basis educational organizations the artifact collection will also be open to the public you also provide an internship program through a college to train students about artifacts and museum operations in addition you provide docent led tours by appointment to local schools nonprofits and you hold a biennial artifact symposium which is open to the public you charge a fee to cover the cost of the event the symposium is designed to provide valuable education for the museum curators and specialists regarding the artifacts and provides for small_group seminars panel discussions and gallery studies of the collection and restoration and shop presentations from nationally renowned restorers and conservators neither trust nor grantor has taken a charitable deduction with respect to collection upon the death of grantor the assets of trust will be transferred to an organization that is exempt from federal_income_tax pursuant to sec_501 and satisfies the requirements under sec_170 sec_170 sec_2055 and sec_2522 rulings requested the lending by trust a revocable grantor_trust beneficially owned by grantor of the artifact collection to you is not an act of self-dealing within the meaning of sec_4941 by reason of the without charge exception in sec_4941 even though you will assume the cost of transportation insurance conservation and maintenance with respect to the artifact collection the lease by trust of display space associated with the artifact and library collections to you is not an act of self-dealing within the meaning of sec_4941 by reason of the without charge exception in sec_4941 even though trust will directly pay its allocated portion of shared building expenses invoiced by third party vendors such as utility companies maintenance contractors and insurance providers certain reasonable payments made by you to vendor for technical assistance in conserving and maintaining the artifact collection will not be treated as an act of self-dealing under the reasonable and necessary compensation exception in sec_4941 the participation by grantor and or vendor in certain show or event activities on behalf of you and the acknowledgement of grantor and or vendor even if not directly participating result in only incidental benefit and do not result in self-dealing under the incidental or tenuous benefit exception in sec_53 d -2 f law sec_501 provides an exemption from federal tax for organizations that are organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual r c sec_4941 imposes an excise_tax on private_foundations and foundation managers for each act of self-dealing and between a private_foundation and a disqualified_person subsection d defines the term ‘self-dealing includes any direct or indirect i sale_or_exchange or leasing of property between a private_foundation and a disqualified_person ii lending of money or other extension of credit between a private_foundation and a disqualified_person iii furnishing of goods services or facilities between a private_foundation and a disqualified_person iv payment of compensation or payment or reimbursement of expenses by a private_foundation to a disqualified_person and iv transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation sec_4941 provides special rules which modify the definition of self-dealing in relevant part subparagraph c the furnishing of goods services or facilities by a disqualified_person to a private_foundation shall not be an act of self-dealing if the furnishing is without charge and the goods services or facilities so furnished are used exclusively for purposes specified in sec_501 subparagraph d the furnishing of goods services or facilities by a private_foundation to a disqualified_person shall not be an act of self-dealing if such furnishing is made on a basis no more favorable than that on which such goods services or facilities are made available to the general_public and subparagraph e except in the case of a government_official as defined in sec_4946 the payment of compensation and the payment or reimbursement of expenses by a private_foundation to a disqualified_person for personal services which are reasonable and necessary to carrying out the exempt_purpose of the private_foundation shall not be an act of self-dealing if the compensation or payment or reimbursement is not excessive if sec_4946 defines disqualified persons’ to include with respect to a private_foundation a person who is a substantial_contributor to the foundation or a corporation of which a person who is a substantial_contributor owns more than percent of the profits interest sec_53_4941_d_-2 provides that the leasing of property by a disqualified_person to a private_foundation shall not be an act of self-dealing if the lease is without charge for purposes of this subparagraph a lease shall be considered to be without charge even though the private_foundation pays for janitorial services utilities or other maintenance_costs it incurs for_the_use_of the property so long as the payment is not made directly or indirectly to a disqualified_person sec_53_4941_d_-2 excludes from self-dealing furnishing of goods services or facilities without charge thus for example the furnishing of goods such as pencils stationery or other incidental supplies or the furnishing of facilities such as a building by a disqualified_person to a foundation shall be allowed if such supplies or facilities are furnished without charge similarly the furnishing of services even though such services are not personal in nature shall be permitted if such furnishing is without charge for purposes of this subparagraph a furnishing of goods shall be considered without charge even though the private_foundation pays for transportation insurance or maintenance_costs it incurs in obtaining or using the property so long as the payment is not made directly or indirectly to the disqualified_person sec_53_4941_d_-2 provides that generally the transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation shall constitute an act of self-dealing sec_53 d -2 f provides an exclusion for certain incidental_benefits the fact that a disqualified_person receives an incidental or tenuous benefit from the use by a foundation of its income or assets will not by itself make such use an act of self-dealing thus the public recognition a person may receive arising from the charitable activities of a private_foundation to which such person is a substantial_contributor does not in itself result in an act of self-dealing since generally the benefit is incidental and tenuous sec_53_4941_d_-3 explains that the exception to self-dealing stated in sec_4941 for the payment of compensation by a private_foundation to a disqualified_person for the performance of personal services includes brokerage banking and legal services sec_53_4941_d_-3 list examples of personal services such as legal services investment counseling services banking services but not manufacturing services in john w madden jr et al v commissioner 74_tcm_440 the court upheld self-dealing excise_taxes against maintenance company disqualified_person that received compensation from taxpayer an exempt museum for services rendered since they were not personal services under sec_4941 the maintenance janitorial and security work were not professional and managerial in nature and were not reasonable and necessary to carry out taxpayer's exempt_purpose of exposing people to outdoor work revrul_68_372 1968_2_cb_205 holds that a nonprofit organization that displays items of lasting interest or value relating to a particular sport is exempt revrul_73_407 1973_2_cb_383 holds that a contribution by a private_foundation to a public charity made on the condition that the public charity change its name to that of a substantial_contributor to the foundation and agree not to change the name again for years does not constitute an act of self-dealing revrul_74_600 1974_2_cb_385 holds that even though the foundation’s paintings were sometimes made available for viewing by the public the placement in the residence of a disqualified_person resulted in the direct use of the foundation’s assets by or for the benefit of the disqualified_person and therefore an act of self-dealing analysis sec_4941 generally imposes a ten percent excise_tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 defines acts of self-dealing and subparagraph provides some special rules ruling_request sec_4941 defines self-dealing to include the direct or indirect furnishing of goods services or facilities between a private_foundation and a disqualified_person the furnishing of goods between a private_foundation and a disqualified_person is an act of self-dealing unless an exception applies sec_4941 allows such furnishing of goods by a disqualified_person to a private_foundation if the furnishing is without charge and if the goods services or facilities so furnished are used exclusively for purposes specified in sec_501 you are borrowing the artifact collection from trust without charge and exhibiting it to the public this transaction is not an act of self-dealing within the meaning of sec_4941 while you are paying for transportation insurance conservation but not restoration or other improvements and maintenance_costs sec_53 d -2 d considers the furnishing of goods to be without charge even though the private_foundation pays for transportation insurance or maintenance_costs it incurs in obtaining or using the property so long as the payment is not made directly or indirectly to the disqualified_person all such payments are made to third- parties who are not disqualified persons sec_4941 also requires the goods furnished be used exclusively for purposes specified in sec_501 you are like the organization described in revrul_68_372 1968_2_cb_205 because you are a museum exhibiting artifacts of lasting interest and value and you provide public access the artifact collection consists of artifacts and memorabilia related to the history of the technological development of artifacts its role as an agent of social and economic change and even as an art object the artifacts are of lasting interest and value you plan to display the artifact collection in a museum setting open to the public with regular hours of operation to engage in public outreach through the use of volunteer tour guides to seek public financial support and to charge affordable admission fees discounted for seniors and students in addition particular artifacts and memorabilia may be displayed at public events or loaned to other museums and universities you will also provide access to scholars tour groups and for related events upon an appointment basis unlike the organization in revrul_74_600 1974_2_cb_385 you do not own the artifacts and you make them regularly available to the public trust acknowledges that the charitable_contribution_deduction provided for under sec_170 is not available as the loan does not constitute a completed_gift and you plan to display them in your museum or other places accessible to the public accordingly based on the foregoing the loan without charge of the artifact collection and associated memorabilia to you is not an act of self-dealing under sec_4941 ruling_request sec_4941 makes the lease of property between a private_foundation and a disqualified_person an act of self-dealing unless an exception applies sec_4941 - allows disqualified persons to furnish facilities free of charge sec_53 d -2 b provides that a lease shall be considered to be without charge even though the private_foundation pays for janitorial services utilities or other maintenance_costs it incurs for_the_use_of the property so long as the payment is not made directly or indirectly to a disqualified_person this regulation does not prohibit payments from disqualified persons to private_foundations nonetheless sec_4941 d -2 c is a rule that generally prohibits loans and extensions of credit by private_foundations to disqualified persons with certain exceptions not applicable here but allows disqualified persons to loan private_foundations money without interest or other charge see sec_53_4941_d_-2 trust will provide you with exhibit space in a building it owns without charge vendor is the other occupant of the facility the lease agreement provides that you and vendor will share occupational costs such janitorial services utilities or other maintenance_costs under a separate shared costs agreement based upon your respective percentage uses of the facility none of these costs are for improvements to the facility any costs not reasonably allocable to you are paid_by vendor vendor will pay its portion of occupancy costs of the facility directly to service providers unrelated to you your payment of reasonable occupancy costs to unrelated persons does not prevent us from concluding that the lease agreement is without charge accordingly the loan of the facility to you without charge for use in your charitable mission is not an act of self-dealing within the meaning of sec_4941 by reason of the without charge exception in sec_4941 ruling_request sec_4941 treats the payment of compensation by a private_foundation to a disqualified_person as an act of self-dealing however sec_4941 provides an exception where the payment of compensation and the payment or reimbursement of expenses by a private_foundation to a disqualified_person for personal services which are reasonable and necessary to carrying out the exempt_purpose of the private_foundation shall not be an act of self-dealing if the compensation is not excessive sec_4941 allows an exception for personal services which are not defined in the statute regulations or cases sec_53 d -3 c includes legal services investment management services and general banking services in the term personal services in madden v commissioner of internal revenue 74_tcm_440 the tax_court directs the term be construed narrowly the services provided by the disqualified_person in madden were general maintenance janitorial and security and were not professional in nature after reviewing the legislative_history the court concluded that personal services were essentially professional and managerial in nature and like the examples set out in the sec_53 d -3 c id pincite you propose to hire employees to perform certain low-level conservation tasks unlike madden the services you propose to acquire from vendor are very specific technical services for the conservation of exhibits they require long years of study to master particularly since the results must satisfy museum quality standards for historical artifacts they are similar to the services an anthropologist or archeologist would provide with respect to artifacts such services are professional in nature the sec_4941 exception also requires such personal services be reasonable and necessary to carrying out the exempt_purpose of the private_foundation and compensation is not excessive conservation of exhibit artifacts is a reasonable and necessary activity of any museum accordingly your engaging technical experts to perform such tasks is reasonable and necessary while we do not rule whether the compensation is excessive but assume it is reasonable for purposes of ruling we note favorably the circumstances here your payments to vendor are only the actual hourly cost of the salary and benefits of the various technical experts there are no added administrative fees charges for materials or the use of equipment and no technical experts are themselves disqualified persons ruling_request sec_53 d -2 f states that no self-dealing occurs where a disqualified_person receives an incidental or tenuous benefit from the use by a foundation of its income or assets the regulation cites public recognition as an example of an incidental and tenuous benefit you intend to publicly display select pieces of the artifact collection outside of the museum from time to time and will incur costs associated with these events such as transportation and travel_expenses for staff but not for grantor or vendor grantor will participate without charge or reimbursement as a panel judge panel moderator to speak as an historical expert and to the technical and historical importance of the artifacts you intend to publicly acknowledge grantor and or the vendor for making the artifacts available for display in revrul_73_407 1973_2_cb_383 the service held that a grant made to a public charity by private_foundation on the condition that the public charity change its name to that of a substantial_contributor did not constitute self-dealing similarly crediting grantor or vendor for making the collection available to the public does not constitute self-dealing accordingly we rule that the participation of grantor and or vendor in certain show or event activities on your behalf and the acknowledgement of grantor and or vendor even if not directly participating results in only an incidental benefit and does not result in self-dealing under the exception in sec_53 d -2 f rulings based on the foregoing we rule as follows trust’s lending of its artifact collection to you is not an act of self-dealing within the meaning of sec_4941 by reason of the without charge exception in sec_4941 d c even though you will assume the cost of transportation insurance conservation and maintenance with respect to the artifact collection the lease by trust of display space associated with the artifact and library collections to you is not an act of self-dealing within the meaning of sec_4941 by reason of the without charge exception in sec_4941 even though trust will directly pay the allocated portion of shared building expenses invoiced by third party vendors such as utility companies maintenance contractors and insurance providers certain reasonable payments made by you to vendor for technical assistance in conserving and maintaining the artifact collection will not be treated as an act of self-dealing under the reasonable and necessary compensation exception in sec_4941 the participation by grantor and or vendor in certain show or event activities on behalf of you and the acknowledgement of grantor and or vendor even if not directly participating result in only incidental benefit and do not result in self-dealing under the incidental or tenuous benefit exception in sec_53_4941_d_-2 this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for if you disagree with our proposed deletions you public inspection is attached to notice should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the understanding there will be no material changes in the facts upon which it is based any changes that may have a bearing upon your tax status should be reported to the service this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because this letter could help resolve any future questions about tax consequences of your activities you should keep a copy of this ruling in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney and declaration of representative currently on file with the service we are sending a copy of this letter to your authorized representative sincerely theodore r lieber manager exempt_organizations technical group enclosure notice cc


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-161453-04 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities ---------------------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion upon reexamination that a determination dated ------------------------concerning the following business under the railroad retirement act and the railroad unemployment insurance act be revoked --------------------------------------------------- --------------------------------------------- -------------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that the opinion concerning the employer status of ------------------------- ---------------- under the railroad_retirement_tax_act be revoked the prior determination copy enclosed provided that -----------------------------------------became an employer under the act effective ----------------- please take the appropriate action regarding this business cc janine cook


internal_revenue_service number release date index number - ---------------------- ----------------------------------- ------------------------------ ------------------------------- --------------------------------------------- ------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc tege eoeg teb presp-149285-06 date date dear ---------------- pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the project described in appendix a attached hereto is qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------------------------- -------------------------------------------------------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure------------of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the project described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met if you have any questions with respect to this allocation please contact --------------------- ---------or -----------------------------of the ------------------------------------------------------------------- ---------------------------------------------------------------on --------------------- not a toll-free call 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 presp-149285-06 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in appendix a is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation 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 application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-149285-06 borrower name ----------------------------------- ----------------------------------- ----------------------------------- ---------------------------------- appendix a project type project location solar_energy_facility -------------------------------- ---------------- amount allocated dollar_figure----------- ------------------------------------------------ ------------------------------------------------- -------------------------- -------------------------------------------- ---------------------------


department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc fip b04 plr-125435-04 date date internal_revenue_service number release date index number -------------------------------- --------------------------------- ----------------------- ------------------------------------ ------------------------------------------ -------------------------------------------------------- ------------------------ ------------------ -------------------------------------------- - -------------------------------- ------------------------------------------ --- -- -- -------------- --------------------- ------------------ ----------------------------------------- --------------------------------------- ------------------------------------ ----------------- ------------------ ---------------- --- ----- -------------------------- -------------------------------------------------------- legend legend parent sub number a number b number c state d country e date fronting company f fronting company g company h date date date number i number j date company k dear ----------------- this responds to your letter of date as supplemented by letters of date and date requesting certain rulings regarding the treatment of an arrangement to be entered into between parent entities affiliated with parent and sub plr-125435-04 parent is an organization described by sec_501 of the internal_revenue_code code that is exempt from tax under sec_501 parent is the sole owner either directly or indirectly of several other organizations some of which are described by sec_501 and some of which are not described by sec_501 or otherwise exempt from tax collectively referred to as parent affiliates of the parent affiliates number a are corporations and number b are limited_liability companies disregarded as entities for federal_income_tax purposes some of the sec_501 parent affiliates in turn have ownership interests in condominium associations relating to medical office buildings condo associations additionally parent has controlling ownership either directly or indirectly of several organizations that are not tax-exempt parent-controlled entities also involved in parent’s and parent affiliates’ activities are number c organizations described by sec_501 which parent does not directly or indirectly control non-controlled entities for purposes of this letter parent group means the group comprised of parent parent affiliates condo associations parent-controlled entities and non-controlled entities parent group operates in state d as a health care provider as such it faces various insurance risks general liability physician hospital professional liability including the malpractice risks of its employees managed care liability and pharmacy liability collectively risks state d law caps the malpractice liability of a health care provider if the provider among other things maintains either liability insurance issued by an insurer admitted in state d or self-insurance in an amount specified by state d law parent group determined that it could avail itself of the liability cap by obtaining liability insurance issued from an admitted insurer which the admitted insurer would then cede to a wholly owned subsidiary of parent parent incorporated sub in country e the members of sub’s board_of directors are executives of parent or of a parent affiliate s the insurance regulatory authority of country e issued sub an insurance license parent capitalized sub with the minimum amount required by country x law to hold this license sub is not admitted to engage in the insurance_business in state d on date fronting company f and fronting company g both subsidiaries of company h and insurers admitted in state d issued binder letter covering risk sec_2 for the period of date through date the coverage limits of binder letter varied with each of the risks measured by exposure-weighting and considering the loss experience history parent accounts for of the premium and risk parent affiliates account for and the parent-controlled entities condo associations and non- controlled entities account for the binder letter was conditioned upon several things all to be implemented in a manner approved by fronting company f and fronting company g parent affiliates own controlling_interest in all but one of these condo associations specifically binder letter represented policies which can be categorized into five groups fronting company f covered four of the groups and fronting company g writing the other the managed care coverage was retroactive to date that parent guarantee fronting company f and fronting company g that sub post collateral and provide fronting company f and fronting that sub agree to assume without the right to cancel all liabilities and plr-125435-04 adjustment expenses assumed by fronting company f and fronting company g under the binder letter company g a letter_of_credit the amount of required collateral will be periodically reviewed and will be based on an actuarial estimate of the ultimate undiscounted losses covered by the binder letter and the payment of any and all obligations of sub under the reinsurance agreement s between sub and fronting company f and fronting company g additionally fronting company f and fronting company g agreed to administer claims for a separate charge to implement condition effective date fronting company f and fronting company g entered into reinsurance agreement a facultative agreement with sub whereby fronting company f and fronting company g ceded to sub the risks including the expenses_incurred to investigate and administer claims covered by the binder letter the reinsurance_premium paid to sub was of the premium paid_by parent group under the binder letter less a ceding commission in the amount specified in reinsurance agreement reinsurance agreement called for sub to secure its ability to meet its obligations thereunder by funding and maintaining its the loss and unearned_premium reserves as determined by fronting company f and fronting company g at a confidence level of number i reinsurance agreement contemplates that sub will fund and maintain a notional account which fronting company f and fronting company g can draw against to pay losses and loss expenses to implement condition and to satisfy its obligation under reinsurance agreement to secure its ability to meet its obligations thereunder contemporaneous with reinsurance agreement sub established reinsurance trust naming fronting company f5 beneficiary and an unrelated banking association trustee sub funded reinsurance trust with sufficient assets to fulfill its obligation under reinsurance agreement to secure its ability to perform thereunder reinsurance trust required sub to maintain sufficient assets in reinsurance trust to satisfy this obligation under reinsurance agreement the assets are held in a_trust account by the trustee and only fronting company f as beneficiary can withdraw assets from reinsurance trust the only fronting company f and fronting company g required this because of the concern that sub’s capital was inadequate to ensure its ability to perform under the reinsurance agreement fronting company g is not a named beneficiary of reinsurance trust it is represented that this may have been either an oversight or it may have been intended given that fronting company g assumed substantially less of risks than fronting company f plr-125435-04 uses to which the reinsurance trust assets can be put are to satisfy sub’s obligations under reinsurance agreement or to return to sub the excess over number j of the amount reinsurance agreement requires to be secured sub is obligated to pay the trustee’s fee and other expenses associated with reinsurance trust out of other of its assets to implement condition on date parent executed guarantee in favor of fronting company f guarantee recites that in consideration for binder letter and reinsurance agreement effective date parent unconditionally guarantees sub’s performance of all obligations under reinsurance agreement and the payment in full of all amounts due from sub under reinsurance agreement until guarantee is terminated sub’s assets other than the assets in reinsurance trust are minimal never significantly exceeding the minimum capital required by the insurance regulatory authority of country e sub has contracted with company k to manage its day-to-day activities the totality of sub’s activities will be those associated with reinsurance agreement the following rulings are requested the arrangements involving sub with respect to risks do not constitute insurance or reinsurance for federal tax purposes and that sub is not an insurance_company as that term is used for purposes of sec_831 of the internal_revenue_code code no portion of the amount_paid in connection with the arrangements involving sub with respect to risks is subject_to the excise_tax under sec_4371 requested ruling law this requested ruling can be broken into two components first that the arrangements involving sub with respect to risks do not constitute insurance or reinsurance for federal tax purposes and second that sub is not an insurance_company as that term is used for purposes of sec_831 neither the code nor the regulations thereunder define the terms insurance or insurance_contract the bedrock for evaluating whether an arrangement qualifies as it is represented that guarantee was also to favor fronting company g no document specifically referencing fronting company g was provided however the document provided states that it is in favor of fronting company f and any of its parents subsidiaries or affiliates inasmuch as fronting company g is a sibling corporation to fronting company f this document may have been operative to effect a guarantee in favor of fronting company g plr-125435-04 insurance is 312_us_531 in which the court stated that historically and commonly insurance involves risk - shifting and risk - distributing insurance has been described as involv ing a contract whereby for adequate_consideration one party agrees to indemnify another against loss arising from certain specified contingencies or perils i t is contractual security against possible anticipated loss epmeir v united_states 199_f2d_508 7th cir cases analyzing captive insurance arrangements have distilled the concept of insurance for federal_income_tax purposes to three elements applied consistently with principles of federal income_taxation involvement of an insurance risk shifting and distribution of that risk and insurance in its commonly accepted sense see eg 979_f2d_162 9th cir aff’g 96_tc_18 the risk transferred must be risk of economic loss 572_f2d_1190 7th cir the risk must contemplate the fortuitous occurrence of a stated contingency 183_f2d_288 2d cir and must not be merely an investment or business risk legierse u s pincite revrul_89_96 1989_2_cb_114 risk shifting occurs when a person facing the possibility of economic loss transfers some or all of the financial consequences of the potential loss to the insurer see revrul_92_93 1992-c b where parent_corporation purchased a group-term_life_insurance policy from its wholly owned insurance subsidiary the arrangement was held to be not self-insurance because the economic risk of loss was not that of the parent modified on other grounds revrul_2001_31 2001_1_cb_1348 if the insured has shifted its risk to the insurer then a loss by the insured does not affect the insured because the loss is offset by the insurance payment see 811_f2d_1297 9th cir risk_distribution incorporates the statistical phenomenon known as the law of large numbers distributing risk allows the insurer to reduce the possibility that a single costly claim will exceed the amount taken in as a premium and set_aside for the payment of such a claim insuring many independent risks in return for numerous premiums serves to distribute risk by assuming numerous relatively small independent risks that occur randomly over time the insurer smoothes out losses to match more closely its receipt of premiums see clougherty packing co f 2d pincite risk_distribution necessarily entails a pooling of premiums so a potential insured is not in significant part paying for its own risks see 881_f2d_247 6th cir the commonly accepted sense of insurance derives from all of the facts surrounding each case with emphasis on comparing the implementation of the arrangement with that of known insurance court opinions identify several nonexclusive factors bearing these principles include respecting the separateness of corporate entities the substance of the transaction s and the relationship between the parties 96_tc_61 aff’d 972_f2d_858 7th cir plr-125435-04 on this such as the treatment of an arrangement under the applicable state law amerco inc t c pincite the adequacy of the insurer’s capitalization and utilization of premiums priced at arm’s length the 96_tc_45 aff’d 979_f2d_1341 9th cir separately maintained funds to pay claims ocean drilling exploration co v united_states cl_ct aff’d per curiam 988_f2d_1135 fed cir and the language of the operative agreements and the method of resolving claims kidde indus inc v commissioner 49_fedclaims_42 under sec_301_7701-2 of the income_tax regulations a business_entity that has a single owner and is not a corporation is disregarded as an entity separate from its owner under sec_301_7701-2 the activities of a disregarded_entity are treated in the same manner as a division of the owner revrul_2004_77 2004_31_irb_119 holds that an entity with two members under local law one of which is disregarded for federal tax purposes must be classified either as an association_taxable_as_a_corporation or is disregarded as separate from its owner the risk of loss arising from the acts of employees for which an employer is liable under the doctrine_of respondeat superior is considered to be that of the employer not that of the individual employees see 85_tc_1031 aff’d 825_f2d_241 9th cir see also 88_tc_197 rev’d in part on other issue 881_f2d_247 6th cir revrul_2002_89 2002_2_cb_984 holds that where a subsidiary provides coverage of its parent’s insurance risk in the context of no parental guarantees of performance and that coverage is less than of the subsidiary’s premiums and assumed risk the coverage qualifies as insurance for federal_income_tax purposes where such coverage i sec_90 of the subsidiary’s premiums and assumed risk the coverage does not qualify as insurance for federal_income_tax purposes revrul_2002_90 2002_2_cb_985 concludes that an arrangement qualifies as insurance for federal_income_tax purposes where a subsidiary provides coverage of the insurance risks of sibling corporations each of which present a significant volume of independent homogeneous risks and none of which account for less than or more than of the subsidiary’s assumed risk with no parental or other related_party guarantees of performance the presence of an explicit obligation by a subsidiary insurer’s parent that has the effect of guaranteeing the subsidiary insurer’s performance negates shifting of risk from the parent to the subsidiary 640_f2d_1010 9th cir kidde indus revrul_2002_89 case law supports the position that where the insured subsidiaries join their parent in filing a consolidated_return a guarantee by the parent of the insuring subsidiary’s performance will negate the shifting of risk from an insured subsidiary 62_f3d_835 6th cir plr-125435-04 914_f2d_396 3rd cir humana f 2d pincite revrul_2002_90 noting in the facts the absence of a parental or other related_party guarantee for taxable years beginning before date an insurance_company other than a life_insurance_company for federal tax purposes is a company whose primary and predominant business activity during the year was the issuing of insurance or annuity_contracts or the reinsuring of risks underwritten by insurance_companies sec_1_801-3 of the income_tax regulations for taxable years beginning after date an insurance_company other than a life_insurance_company for federal tax purposes is a company more than half the business of which during the taxable_year is the issuing of insurance or annuity_contracts or the reinsuring of risks underwritten by insurance_companies sec_831 for effective date see pension funding equity act of pub_l_no e 118_stat_596 analysis risks covered by binder letter are insurance risks risks are either inherently sourced to the business entities that comprise parent group eg general liability or deemed sourced to the business entities that comprise parent group eg professional liability see anesthesia service accordingly for purposes of evaluating whether the arrangements involving sub constitute insurance or reinsurance for federal tax purposes risks are considered those of the business entities comprising parent group the number b of parent affiliates which are disregarded as entities separate from parent for federal_income_tax purposes are instead treated as divisions of parent thus the risks allocable to these parent affiliates are deemed to be those of parent the structure of parent group demonstrates risks are covered in three forms of corporate relationship a parent-subsidiary arrangement risks allocable to parent a sibling brother-sister arrangement risks allocable to parent affiliates condo associations parent-controlled entities and an arrangement between unrelated corporations risks allocable to non-controlled entities8 with respect to the parent-subsidiary arrangement guarantee negates the shifting of risk from parent to sub the parent-subsidiary arrangement does not qualify as insurance or reinsurance for federal_income_tax purposes similarly with respect to the sibling arrangement the arrangement fails to qualify as insurance or reinsurance for federal_income_tax purposes because guarantee negates the shifting of risk plus the one condo association of which parent affiliates do not own controlling_interest plr-125435-04 with respect to the arrangement between unrelated corporations though the unrelated corporations can be said to have shifted their risk to sub the small number of unrelated corporations involved precludes finding risk_distribution accordingly the arrangement between unrelated corporations does not qualify as insurance or reinsurance for federal_income_tax purposes based on the facts represented by taxpayer we conclude that the arrangements involving sub with respect to risks do not constitute insurance or reinsurance for federal_income_tax purposes taxpayer represents that sub does not engage in a business activity other than reinsurance agreement which we conclude does not qualify as insurance for federal_income_tax purposes therefore based on taxpayer’s representations we conclude that sub does not qualify as an insurance_company for federal_income_tax purposes requested ruling law sec_4371 imposes a tax on each policy of insurance indemnity_bond annuity_contract or policy_of_reinsurance issued by a foreign_insurer_or_reinsurer sec_4372 defines foreign_insurer_or_reinsurer as an insurer or reinsurer who is a nonresident_alien_individual or a foreign_partnership or a foreign_corporation sec_4371 imposes the tax at a rate of four cents on each dollar or fractional part thereof of the premium paid on a policy_of_casualty_insurance or an indemnity_bond defined by sec_4372 and c respectively if issued to or for or in the name of an insured as defined by sec_4372 sec_4372 defines the term insured to mean a domestic_corporation or partnership or an individual resident_of_the_united_states against or with respect to hazards risks losses or liabilities wholly or partly within the united_states or a foreign_corporation foreign_partnership or nonresident individual engaged_in_a_trade_or_business_within_the_united_states against or with respect to hazards risks losses or liabilities within the united_states sec_4371 imposes the tax at a rate of one cent on each dollar or fractional part thereof of the premium paid on the policy_of_reinsurance covering any of the contracts taxable under sec_4371 sec_4372 defines a policy_of_reinsurance to mean any policy or other instrument by whatever name called whereby a contract of reinsurance is made continued or renewed against or with respect to any of the hazards risks losses or liabilities covered by contracts taxable under sec_4371 analysis plr-125435-04 we conclude that the arrangements involving sub with respect to risks do not constitute insurance or reinsurance for federal_income_tax purposes accordingly sec_4371 does not apply to these arrangements 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 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 a copy of this letter must be attached to any income_tax return to which it is relevant 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 donald j drees jr acting chief branch office of associate chief_counsel financial institutions and products sincerely s