t c no united_states tax_court scott t blackburn petitioner v commissioner of internal revenue respondent docket no 27721-14l filed date this case arises under sec_6320 and sec_6330 p disputes r’s attempt to collect the trust fund recovery penalty tfrp assessed under sec_6672 but the immediate issue is framed by r’s motion for summary_judgment the liability subject_to collection is not in dispute under sec_6330 r argues that the tfrp is not subject_to sec_6751 and also that there was sufficient evidence of supervisory approval such that it was not an abuse_of_discretion for the settlement officer so to find compliance with sec_6751 in any event we do not reach the first question because we find the so did not abuse discretion in finding that r had met the requirements of applicable law and administrative procedure under sec_6330 held the verification required by sec_6330 does not require an analysis of the thought process of the approving immediate supervisor under sec_6751 but rather verification that the supervisor approved in writing the initial determination of the penalty held further r’s motion for summary_judgment is granted regarding the tfrp because the related assessment was properly verified by the so there being no further issues the proposed collection action is sustained jaye a calhoun david p hamm jr christie b rao and kernan a hand jr for petitioner ardney j boland iii and susan s canavello for respondent opinion goeke judge in graev v commissioner t c __ date supplementing t c __ date we held that the written approval required by sec_6751 b must be established as part of the commissioner’s burden of production under sec_7491 the present case involves a previously assessed trust fund recovery penalty tfrp under sec_6672 there is an issue regarding verification of compliance with sec_6751 required by sec_6330 and a the appeals officer must obtain verification 1unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure sec_6751 provides no penalty under this title shall be assessed continued from the secretary that the requirements of any applicable law or administrative procedure have been met sec_6330 respondent maintains that the sec_6672 tfrp is not subject_to the written supervisory approval requirements of sec_6751 but that respondent complied with sec_6751 in any event because we find no abuse_of_discretion by the appeals officer regarding verification of compliance with sec_6751 we need not address the legal question whether b applies to the trust fund penalty background the following facts are not in dispute petitioner resided in louisiana when the petition was filed during emergency response training inc ert became delinquent in its employment_tax liabilities specifically ert failed to file a number of form sec_941 employer’s quarterly federal tax_return or satisfy numerous self-reported employment_tax liabilities during the years through on or around date revenue_officer adams made the initial determination to assert tfrps liabilities under sec_6672 against petitioner continued unless the initial determination of such assessment is personally approved in writing by the immediate supervisor of the individual making such determination or such higher level official as the secretary many designate scott t blackburn and a second individual at the time senior revenue_officer janet reed was acting group manager of revenue_officer adams’ collection group and revenue_officer adams’ acting immediate supervisor on or before date revenue_officer adams received new information and changed her determination regarding the second individual’s tfrp liability under sec_6672 for ert’s unpaid employment_taxes on date revenue_officer adams submitted a request for supervisory approval to assert tfrp liabilities under sec_6672 against petitioner on date a form_4183 recommendation re trust fund recovery penalty assessment was generated which shows that ms reed approved asserting tfrp liabilities under sec_6672 the version of the form_4183 offered by respondent does not contain ms reed’s signature but shows ms reed’s name in the signature block for supervisor it is also uncontested that the copy of form_4183 offered by respondent was generated by respondent’s computer system on date respondent assessed tfrp liabilities against petitioner for the fourth quarter of and the fourth quarter of 3respondent offers a copy of the form_4183 as an attachment to the declaration of ms reed we find this declaration contains the elements conforming with fed r evid regardless it is uncontested for purposes of respondent’s motion for summary_judgment that the form_4183 was in the administrative record petitioner does not contest his liability for the tfrps and also concedes that this liability is not an issue in this case discussion summary_judgment standard rule b provides that summary_judgment is appropriate if the supporting materials show that there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law when a motion for summary_judgment is made and supported an adverse_party may not rest upon the mere allegations or denials in such party’s pleadings rather the adverse_party must set forth specific facts showing a genuine dispute for trial rule d petitioner’s arguments petitioner argues that in enacting sec_6751 congress could not have meant to require a meaningless supervisory rubber stamped signature petitioner has asked respondent repeatedly to provide some evidence that the supervisor’s review was meaningful and respondent’s response has been limited to irs complied with the statute and the strong implication that the government’s position is that no more than a signature is required for verification of statutory compliance accordingly petitioner maintains that a motion for summary_judgment is premature petitioner relies upon the internal_revenue_manual to suggest an argument that the signature of the supervisor in support of a penalty is not in itself a sufficient showing to comply with sec_6751 petitioner maintains that a meaningful supervisory review must be verified by the settlement officer to comply with sec_6330 and a in effect petitioner expects verification will require a factual analysis of the thought process of the supervisor and a determination that the thought process was meaningful verification sec_6330 permits a taxpayer to raise issues concerning the merits of the underlying liability if the taxpayer did not have a prior opportunity to challenge the liability it is undisputed that petitioner had prior opportunities to challenge the liabilities petitioner argues however that the verification requirement regarding sec_6751 compliance incorporates a showing of a meaningful approval of the merits of the liability caselaw applying sec_6330 has not imposed a substantive review of the procedural steps that have been verified by the settlement officer or of the settlement officer’s thought process rather the settlement officer’s review of the administrative steps taken before assessment of the underlying liabilities has been accepted as adequate to the requirements of sec_6330 if there is supporting documentation in the administrative record 118_tc_162 lindsey v commissioner tcmemo_2002_87 aff’d 56_fedappx_802 9th cir duffield v commissioner tcmemo_2002_53 to impose the requirement of a substantive review on the settlement officer would allow the taxpayer to avoid the limitations of pursuing the underlying liability in a review under sec_6330 and apply a level of detail in the verification process that has never been previously required the reference to form_4340 certificate of assessment and payments to verify assessments in sec_6330 cases and other situations is an apt parallel to the issue before us as to form_4183 generally courts have held that form_4340 provides presumptive evidence that a tax has been validly assessed under sec_6203 see 10_f3d_1440 9th cir 990_f2d_451 9th cir 961_f2d_1 1st cir 933_f2d_991 fed cir 871_f2d_1015 11th cir 318_f2d_637 7th cir form_4340 is routinely used to prove that tax_assessment has in fact been made and is presumptive proof of a valid assessment geiselman f 2d pincite we have held with respect to collection_due_process hearings that it is not an abuse_of_discretion for the irs to rely on form_4340 where the taxpayer has not shown any irregularity in the assessment procedure that would raise a question about the validity of the assessment 115_tc_35 we have also held that an appeals officer may rely on a computer printout of the taxpayer’s transcript of account to verify the taxpayer’s tax_liability and the assessment of tax see howard v commissioner tcmemo_2002_81 kuglin v commissioner tcmemo_2002_51 mann v commissioner tcmemo_2002_48 wylie v commissioner tcmemo_2001_65 the irs uses form_4340 to provide evidence of an assessment when a taxpayer requests a copy of his assessment record an assessment requires a signature an assessment is made by an assessment officer’s signing the summary record of assessments sec_301_6203-1 proced admin regs the assessment does not require the assessment officer’s signature on form_4340 see 117_tc_117 form_4340 provides the details of the assessments including the relevant date that the summary record of assessment was signed by the assessment officer the summary record of assessment may be made either on form 23c assessment certificate--summary record of assessments or on its computer-generated equivalent the revenue accounting control system racs report which is generated on the computer and then signed see 118_tc_365 aff’d 329_f3d_1224 11th cir form_4340 creates a presumption that a summary record of assessment whether on form 23c or racs report both of which require the assessment officer’s signature was validly executed and certified 335_f3d_1186 10th cir similar to the arguments addressed regarding forms petitioner asserts that the form_4183 does not have an actual signature this is true however the form does show ms reed as the party who approved the tfrp as the revenue officer’s supervisor a finding of fact that ms reed signed the form_4183 might be based upon rule of the federal rule_of evidence but in the context of an abuse_of_discretion determination the mere existence of the form in the administrative record supports the settlement officer’s verification because petitioner’s liabilities are not in dispute the only question before us is whether the settlement officer abused discretion in upholding the tfrp assessment under sec_6330 and a we review the verification requirement for abuse_of_discretion 114_tc_604 114_tc_176 we have consistently upheld a settlement officer’s verification of assessments when the administrative record reflects compliance with administrative procedures the actual documents generally are the commissioner’s records such as form_4330 953_f2d_531 9th cir chila f 2d pincite8 our caselaw acknowledges that reliance upon standard administrative records is acceptable to verify assessments nestor v commissioner t c pincite davis v commissioner t c pincite here the form_4183 provides a similar mechanism to demonstrate supervisory approval accordingly regardless of whether supervisory approval was required before the tfrp assessment a record of such prior approval was present in this case at the hearing on this motion petitioner conceded there were no other issues regarding the determination by the settlement officer accordingly our determination to grant respondent’s motion permits a decision to sustain the proposed collection action 4petitioner has not argued that respondent has the burden of production under sec_7491 in a case applying the abuse_of_discretion standard and we do not find sec_7491 to be applicable in reaching our holdings herein we have considered all arguments the parties made and to the extent we did not mention them above we conclude they are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c date jul employer_identification_number contact person contact number op e0 t a2 uniform issue s e r a e e e z n s v o f g t n o f n a r b dear applicant this letter is in reply to the letter from your authorized representative dated date in which m n p and q requested rulings with respect to the tax consequences of a proposed reorganization and the related transactions described below m is an organization recognized by the internal_revenue_service as exempt from federal_income_tax under sec_501 of the internal_revenue_code m is a publicly_supported_organization described in sec_509 of the code m states that it is the leading association of the m profession and that it conducts an extensive program of research and education m’s activities in pursuance of its objectives include the following development and publication of a variety of materials concerning n including a standard reference and diagnostic work in the field of n which functions as a clinical a research and education tool for the profession and facilitates the collection and communication of certain public statistics b the monthly official journal which consists primarily of scholarly papers on all aspects of n and includes editorials book reviews letters to the editor and advertising certain classes of m’s members automatically receive a subscription as part of their membership dues while other subscribers pay a charge a monthly peer-reviewed journal for certain m professionals with a strong clinical focus and c provision of coverage of all aspects of m care treatment and service delivery publication of o20 a semi-monthly newspaper which is the principal and official means of communication clinical and research papers review of articles commentary and reporting of administrative lega economic and public policy matters of current interest and controversy in n sold only by subscription and is not provided as a perquisite of membership in m d within m about policies and legal issues affecting n as well as the actions and policies of m it also serves as a source of clinical and research news and information of interest to persons in the field of n regularly printing letters to the editor and other columns of interest to m’s members m's members receive the newspaper as a membership benefit and paid subscriptions are available to nonmembers and this journat is e a quarterly journal consisting of clinical and research submissions of interest to certain researchers including articles on research outcome studies comparative treatmenis utilization interventions and treatment of special populations and reprints of classic articles with commentaries by today's experts in the field conduct of a variety of activities directed toward the continuing professional education and development of its members in the m profession addressing new and established knowledge emerging through research technical advances and clinical practice presentation of a scientific program at m’s annual meeting consisting of an extensive number of educational and scientific activities including industry-sponsored symposia and multimedia and audiovisual presentations maintenance of a member-based council on education whose responsibilities include a spectrum of education of individuals preparing to enter the profession of n and m aspects of the education of individuals preparing to enter other specific specialties maintenance of a library and archives which serve as an information and reference resource concerning n make awards for the conduct of research in areas related ton provide leadership and advocacy for the m research community and administer fellowship and research training programs maintenance of various member-based councils on particular problems quality improvement policy formulation for improved access and delivery of services development of programs to improve public understanding of n monitor trends in public attitudes and media coverage of n dissemination of information to members concerning issues related to n so that the information may be further distributed on a local basis and answer public inquiries concerning m and n and maintenance of a member-based council on n and the law which evaluates legal developments and other government interventions affecting the practice of n n o and p are organizations recognized by the service as exempt from federal_income_tax under sec_501 of the code all three are supporting organizations of m are controlled by m and are described in sec_509 c2q2 n is a research and education organization organized and operated exclusively for the benefit of and to perform research and education programs for m n was created to establish a leadership role in contributing to the scientific basis of n and policy by strengthening the research infrastructure enhancing and supporting m education training and career development and improving the quality of care by conducting and supporting clinical and services research and training activities to accomplish this mission n focuses on studies and programs of national and international significance particularly those requiring a national organization to organize and lead efforts involving a broad consortium of academic institutions and practitioners there will be collaboration with academic institutions particularly departments of n in connection with n's educational and training initiatives n’s research activities will involve multi-site studies a consortium of minority research training sites and a consortium of researchers conducting secondary analysis of publicly available data it is anticipated that n will serve as the coordinating center for these efforts and expand activities in such areas as policy and educational research o is organized and operated exclusively to assist and support m by performing fundraising functions of m and by developing public and professional activities to advance education and research into n m illnesses and related subjects and to promote the treatment of m illness in addition to coordination of fundraising activities for m awards o coordinates fundraising events held in conjunction with m's annual meeting solicits contributions from m members and produces a newsletter provides grant funding for m research and education and programs to foster greater public awareness of the benefits of m medicine individual members of m interested corporations and foundations are the principal sources of funding and the principal sources of o's funding p is organized and operated to carry on publishing activities related to and supportive of the educational and scientific purposes of m although p prints markets and distributes m books and reports p has complete control of and responsibility for the contents of the material q is a newly formed organization that has been recognized as a business league exempt from federal_income_tax under sec_501 of the code membership in q the members of m is and will be comprised of all m states that in recent years the m profession has found that many of its needs can no longer be met by an organization exempt under sec_501 of the code the leadership of the m profession has determined that a more vigorous voice is needed in legislative affairs and as the same time members of the profession need a better understanding of the economics of medical practice in a managed care environment m states that as a sec_501 organization it cannot fulfill this role additionally it has been constrained in its ability to provide support fo its related local associations because most such organizations are exempt under sec_501 as a consequence m determined that the new organization q should be created to fulfill the role of a traditional professional association q was created to promote the common professional interests of its members including legislative advocacy as well as providing greater support to focal m associations than m is permitted to provide -4- local m associations while related to m are separately incorporated and the majority are separately recognized as exempt under sec_501 m states that it will amend its governing documents to provide among other matters that q will be the sole voting member of m and will appoint m’s governing body q will also have the power to approve certain extraordinary actions of m such as m’s annual business plan operating and capital budgets and any material changes thereto the termination or settlement of litigation where the amount in controversy exceeds a certain amount entering into material leases of real_property or acquiring real_property the sale mortgage or pledge of all or substantially_all of m's assets or the merger or consolidation of m and the voluntary reorganization dissolution liquidation or bankruptcy of m additionally the same individuals may occupy seats on both q's board_of trustees and m's board_of trustees and the same individuals may be officers of both q and m q will assume the name and certain functions of the present m and the present m will asume the name of q the present members of m will automatically become members of q will pay dues to q and will elect q’s board_of trustees m states that it will continue to supply the local m associations with educational materials and other support that is consistent with the exempt purposes of m set forth in sec_501 c of the code q however will form its own independent relationship with the local m associations and will support the local m associations with respect to matters involving the common professional interests of q's members q expects to provide certain administrative services to the local m associations such as joint dues collection for those local m associations that will be on q's centralized billing file q will undertake and m will cease performing functions related to q's membership such as dues collection the conduct of the annual meeting resolution of ethics matters matters relating to the economic aspects of the practice of n governmental relations and certain public affairs activities and publication of the semi-monthly newspaper generally central office staff supporting the functions assumed by q will be employed by q and to the extent that q makes use of the services of central office staff continuing to be employed by m such as staff supporting publications functions a charge will be made to q based on q’s actual use of those services m however states that it would continue to carry out an extensive array of charitable educational and scientific activities such as publication of the monthly official journal the monthly peer-reviewed journal and the quarterly journal as well as other works in the field of n such as the standard reference and diagnostic work the central office staff that supports activities related to these publications will continue to be employed by m and advertising revenues derived in connection with these publications would continue to be received by m as part of the reorganization the goveming instruments of n o and p will be amended to provide that in each case q is the supported_organization and q has the power to elect at least a majority of the members of the boards of these organizations m will continue to conduct other educational and research activities that have historically been conducted by it m states that it will maintain its office of education and will develop and conduct a variety of programs and activities directed toward the professional education and development of individuals currently in and in training for careers in n the activities of the office of education will continue to include developing and providing continuing educational programs related to n m will continue to maintain its library as an information resource on n m states that its research staff office will continue to provide leadership and advocacy for the m research community administer fellowship and research training programs enhance system studies by expanding capacity and resources in services research enable sophisticated analysis of relevant data and develop and advocate for the used of evidence-based guidelines m’s staff-based office of quality improvement and m services will continue to formulate policy for improved access and delivery of m and other services to general and special populations in general and special settings this office will also o204 continue to promote m leadership in the improvement of treatment through development of practice guidelines and their derivative products as well as scientifically and clinically informed advocacy for proposed standards and quality improvement measures intended for use by individuals organized systems accrediting bodies and others m states that it will also continue to conduct certain public affairs activities but no substantial part of its activities will consist of carrying on of propaganda or otherwise attempting to influence tegislation m will continue to deal with women’s and minority group issues as they pertain to n and to support activities that focus on particular subspecialties in the field of n m will continue research and educational activities pertaining to the quality and availability of m services while the member-based councils related to these functions will become part of q the m staff associated with these functions will continue to work as part of m m states that q may require a loan to meet temporary cash_flow needs in order to begin operations and that in the event that a loan from m is deemed advisable such a loan would likely be of a certain amount and be outstanding for two months m states that the terms of any such loan will be determined on an arm's-length basis m does not expect that it will make any further loans to q to defray the cost of q's operations m states that it n o and p may provide services and make grants to q in furtherance of the exempt purposes of those organizations no portion of the resources provided to q by m n o or p will be used for any activity of an organization exempt under sec_501 of the code that is not permitted under sec_501 sec_501 of the code provides for exemption from federal_income_tax of organizations organized and operated exclusively for charitable scientific or educational_purposes provided no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that the term charitable is used in sec_501 of the code in its generally accepted legal sense in the law of charity the promotion of health is considered to be a charitable purpose sec_501 of the code provides for the exemption from federal_income_tax of business_leagues chambers_of_commerce real-estate boards or boards_of_trade not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_6_-1 of the regulations provides that a business league is an association of persons having some common business_interest the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit it is an organization of the same general class as a chamber of commerce or board_of trade thus its activities should be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons sec_509 of the code excludes from the definition of the term private_foundation an organization which is organized and at all times thereafter is operated exclusively for the benefit of to perform the functions of or to carry out the purposes of one or more specified organizations described in sec_509 or and is operated supervised or controlled by or in connection with one or more organizations described in sec_509 or the code continues that for purposes of this paragraph an organization described in sec_509 shall be deemed to include an organization described in sec_501 or which would be described in sec_509 if it were an organization described in sec_501 sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations described in sec_501 sec_512 of the code defines the term unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less certain allowabie deductions and modifications sec_513 of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of the function constituting the basis of its exemption sec_1_513-1 of the regulations provides that trade_or_business is related to exempt purposes in the relevant sense only where the conduct of the business activities has causal relationship to the achievement of exempt purposes and it is substantially related only if the causal relationship is a substantial one the regulation continues that for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes sec_514 of the code provides that a portion of the income derived from or on account of each debt-financed_property shall be included as an item_of_gross_income derived from unrelated_trade_or_business sec_514 of the code defines debt-financed_property to mean with certain exceptions any property which is held to produce income and with respect to which there is an acquisition_indebtedness at any time during the taxable_year sec_514 of the code defines acquisition_indebtedness as the unpaid amount of indebtedness incurred in acquiring or improving the property subsequent to the proposed reorganization m n o and p will operate exclusively for charitable purposes within the meaning of sec_501 of the code the transfer of activities and actions described above will have no adverse effect on a determination of exempt status or exception from private_foundation_status subsequent to the proposed reorganization q will operate as a business league within the meaning of sec_501 the transfer of activities and actions described above will have no adverse effect on a determination of exempt status under sec_501 further the creation of q and the proposed transfers of activities and actions as described above do not involve the regular carrying on of unrelated_trade_or_business within the meaning of sec_513 also a single short term_loan from a sec_501 organization to a related sec_501 organization made on an arm’s-length basis does not involve the regular carrying on of unrelated_trade_or_business nor will it have an adverse effect on a determination of exempt status nor does the loan in this case represent acquisition_indebtedness incurred by q an organization exempt under sec_501 of the code may create an organization exempt under sec_501 to act as its parent without jeopardizing its exempt status however the sec_501 organization must not give up control of its purposes or activities to the sec_501 parent in this case control could mean the day-to-day management of the sec_501 organization or the adoption or performance of activities by the sec_501 organization that are described in section o20b ov c -1 of the regulations and which would normally be carried on by a sec_501 organization also in this case as allowed under sec_509 m would not be defined as a private_foundation because q’s support would be counted as proper support under sec_509 if q had been a sec_501 organization accordingly based on the facts and circumstances concerning the reorganization and related transactions as stated above we rule as follows the reorganization and the continuing relationships described wil not affect the tax-exempt status of q under sec_501 of the code or m n o and p under sec_501 the following specific transactions as part of the reorganization will not result in unrelated_business_taxable_income for m n o p or q under sec_511 through a the transactions described as being part of the reorganization b the provision without cost of the monthly official journal the monthly peer-reviewed journal and the quarterly journal by m to the members of q this relates only to the provision of these publications to members and not to further operations with respect to the publications such as advertising c the continuing collaboration in research and educational activities of member-based councils of q with m's staff d the start-up loan from m to q e the provision of management administrative support and governance services among m n o p and q and local m associations at cost f the leasing of office space by m equipment by m to q at cost and or a one-time sale of such equipment by m to q to q at cost and g a start-up lease of office foliowing the reorganization and amendment of articles to provide specific language m n o and p will be excepted from the definition of private_foundation pursuant to sec_509 of the code m may make grants to q for specific projects that are in furtherance of m's educational and scientific purposes m n o and p may provide without charge scholarly journals and other educational materials to members of q and to the local m associations without affecting the tax exempt status of m under sec_501 c these rulings are based on evidence that the funds of m n o and p are dedicated to the purposes listed in sec_501 of the code to assure their continued exemption they should maintain records to show that funds are expended only for those purposes if they distribute funds to other organizations their records should show whether those organizations are exempt under sec_501 in cases where the recipient organization is not exempt under sec_501 there should be evidence that the funds will remain dedicated to the required purposes and that they will be used for those purposes by the recipient these rulings are also based on the understanding that there will be no material changes in the facts upon which they are based any such change should be reported to the exempt and government entities te_ge customer service office because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records acopy of this ruling is being forwarded to the te_ge customer service office tax except as we have specifically ruled herein we express no opinion as to the consequences of these transactions under the cited provisions or under any other provisions of the code this ruling is limited to the facts contained herein 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 as precedent if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours signed garland carter garland a carter chief exempt_organizations technical group ol on


t c summary opinion united_states tax_court sandrea maryann and robert maynard woehl petitioners v commissioner of internal revenue respondent docket no 2735-05s filed date glen l moss for petitioners stephanie m profitt for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined for a deficiency of dollar_figure in petitioners’ federal_income_tax the sole issue for decision is whether petitioner sandrea maryann woehl properly excluded from gross_income under sec_104 a portion of her disability retirement distributions received from the california public employees’ retirement_system background the stipulation of facts and the exhibits received into evidence are incorporated herein by reference at the time the petition in this case was filed petitioners resided in newark california sandrea maryann woehl petitioner became employed as a public safety dispatcher by the city of san leandro police department in march of upon employment petitioner became a member of the california public employees’ retirement_system calpers as time progressed petitioner developed diabetes on date petitioner was placed on administrative leave because of her illness petitioner subsequently sent an application to calpers to request disability retirement and she underwent a medical examination to verify her eligibility petitioner’s medical report noted that job stress contributs sic to uncontrollable diabetes petitioner retired and received disability retirement benefits from calpers effective date during petitioner received distributions of dollar_figure from calpers distributions the distributions were not designed to reimburse petitioner for any medical_expenses the parties stipulated that the distributions were characterized as disability retirement benefits based on petitioner’s diabetic condition the parties further stipulated that the distributions were based on factors such as the length of her employment with the city of san leandro and the last position she held while employed by the city calpers issued to petitioner a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc for the form 1099-r reported that petitioner received in total distributions of dollar_figure consisting of a taxable_amount of dollar_figure and employee contributions or insurance premiums of dollar_figure petitioners filed for a joint form_1040 u s individual_income_tax_return reporting only half or dollar_figure of the total distributions as taxable petitioner currently has a proceeding pending before the worker’s compensation appeals board in california challenging the nature of the distributions respondent subsequently issued to petitioners a statutory_notice_of_deficiency determining that all the distributions except for the portion attributable to employee contributions or insurance premiums were taxable discussion the commissioner’s determinations are presumed correct and generally taxpayers bear the burden of proving otherwise rule a 290_us_111 gross_income includes all income from whatever source derived unless excludable by a specific provision of the internal_revenue_code sec_61 the supreme court has held that sec_61 reflects congress’s intent to use the full measure of its taxing power 309_us_331 therefore statutes granting tax exemptions should be strictly construed 43_f3d_1446 fed cir sec_104 provides that gross_income does not include amounts received under workmen’s compensation acts as compensation_for personal injuries or sickness the regulations expand the scope of sec_104 to exclude also from gross_income amounts received under a statute in the nature of a 1petitioner has not raised the issue of sec_7491 which shifts the burden_of_proof to the commissioner in certain situations this court concludes that sec_7491 does not apply because petitioner has not produced any evidence that establishes the preconditions for its application workmen’s compensation act which provides compensation to employees for personal injuries or sickness incurred in the course of employment sec_1_104-1 income_tax regs the regulations also provide that sec_104 does not apply to a retirement pension or annuity to the extent that it is determined by reference to the employee’s age or length of service or the employee’s prior contributions even though the employee’s retirement is occasioned by an occupational injury or sickness sec_1_104-1 income_tax regs respondent argues that pursuant to sec_1_104-1 income_tax regs the distributions are not excludable from gross_income under sec_104 because petitioner has stipulated that the distributions in this case were determined with reference to petitioner’s length of service respondent contends that benjamin v commissioner tcmemo_1993_575 is directly on point in benjamin the taxpayer was an accountant employed by the state of california who incurred a medical disability in the course and scope of his employment benjamin v commissioner supra the taxpayer was subsequently forced to retire and calpers determined that he was eligible for disability retirement although the taxpayer reported the benefit payments that he received from calpers on his return he failed to include them in his gross_income this court relied on sec_1 b income_tax regs and concluded that the benefits received by the taxpayer in benjamin were not excludable from gross_income because the benefits were made with reference to the taxpayer’s length of service the court agrees with respondent since petitioner stipulated that the distributions were made with reference to her length of service with the city of san leandro under sec_1_104-1 income_tax regs the distributions are not excludable from gross_income petitioner argues that the distributions nevertheless qualify for exclusion_from_gross_income because they were made under cal govt code west section petitioner contends that cal govt code section is akin to a worker’s compensation because it conditions eligibility for benefits on the existence of a work-related injury or sickness called industrial disability under the california statute without regard to age or amount of service industrial in this context means disability or death as a result of injury or disease arising out of and in the course of employment see cal govt code sec west cal govt code sec west in pertinent part provides section patrol state safety state industrial state peace officer firefighter or local safety members local or state miscellaneous members a any patrol state safety state industrial state peace officer firefighter or local safety member incapacitated for the performance of duty as the result of an industrial disability shall be retired for disability pursuant to this chapter regardless of age or amount of service petitioner however has not provided any evidence to show that the distributions were indeed made under cal govt code section respondent contends that petitioner received the distributions under cal govt code sec west which awards benefits with reference to the employee’s years of state service cal govt code section in pertinent part provides section incapacitated member state service_credit specified election eligibility any member incapacitated for the performance of duty shall be retired for disability if he or she is credited with five years of state service petitioner acknowledges that in order for her to qualify for benefits under cal govt code section she must have an industrial disability in fact petitioner has a proceeding pending before the worker’s compensation appeals board in california to challenge the state’s failure to consider the distributions to have been made as a result of an industrial injury the board however has not issued a decision at trial petitioner invited the court to decide whether the distributions were made as a result of an industrial injury petitioner argues that to the extent that this court finds that the distributions were paid on account of an industrial injury they are excludable from gross_income under sec_104 state law creates legal interests and rights the federal revenue acts designate when and how interests or rights so created shall be taxed 403_us_190 see also estate of posner v commissioner tcmemo_2004_112 the form 1099-r issued by the state of california is evidence that the state determined that petitioner’s legal right to the distributions were not from an industrial injury and that the distributions were made under cal govt code sec the court’s duty is to ascertain when and how such legal right ie the distributions will be taxed see 309_us_78 petitioner has not offered any evidence to show why the distributions are not of the type that is taxable therefore the distributions are includable in her gross_income sec_61 petitioner also argues that under 43_f3d_1446 fed cir the california employees’ retirement law is in the nature of a workmen’s compensation act because it is a dual-purpose statute that provides payment for both work- related and non-work related disabilities petitioner’s argument however is unpersuasive even if the california employees’ retirement law is a dual purpose statute petitioner does not prevail because the court has found that the distributions were made under cal govt code sec in other words the distributions were not awarded solely as a result of injury or sickness arising out of employment see kane v united_states supra pincite accordingly this court sustains respondent’s determination that petitioners are not entitled to exclude any taxable_portion of the distributions from their gross_income under sec_104 to reflect the foregoing decision will be entered for respondent


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc pa apjp scano-120953-02 uilc internal_revenue_service national_office service_center advice memorandum for ronald p rivelli chief partnerships trusts and international section op fs s p p attn nicholas palumbo from james c gibbons branch chief administrative provisions judicial practice cc pa apjp subject refunds when a correct itin is used on a form_1040 but an erroneous social_security_number is used on a form_w-2 this chief_counsel_advice responds to your inquiry of date specifically you ask how the service should process a form_1040 that claims a refund and shows the taxpayer’s correct itin but includes a form_w-2 with an incorrect ssn in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent issue sec_1 whether a form_1040 that claims a refund and shows the taxpayer’s correct itin on the form but includes a form_w-2 with an incorrect ssn constitutes a valid_return for purposes of the statute_of_limitations on assessment under sec_6501 of the code if the return constitutes a valid_return whether the return constitutes a valid claim_for_refund for purposes of sec_6402 of the internal_revenue_code if the return constitutes a valid_return and a valid claim_for_refund whether the return is in processible form for purposes of sec_6611 of the code scano-120953-02 conclusion sec_1 a form_1040 that claims a refund and shows the taxpayer’s correct itin on the form but includes a form_w-2 with an incorrect ssn constitutes a valid_return for purposes of the statute_of_limitations on assessment under sec_6501 of the code the return constitutes a valid claim_for_refund for purposes of sec_6402 the return is not in processible form for purposes of sec_6611 as a result the service may freeze the amount of the refund claim and will not be subject_to overpayment interest on the amount of the overpayment until the return is in processible form facts the service receives completed returns consisting of a form_1040 u s individual_income_tax_return which claims a tax_refund and lists the correct individual_taxpayer_identification_number itin of the taxpayer filing the return with an attached form_w-2 wage and tax statement that lists an erroneous social_security_number ssn not belonging to the taxpayer this situation sometimes arises when a taxpayer has a valid itin but provides an erroneous ssn to a potential employer in order to secure a job within the u s presently the service processes these returns using the valid itin and issues the refund to the taxpayer law and analysis issue sec_6011 of the code provides that any person made liable for any_tax imposed by this title or with respect to the collection thereof shall make a return or statement according to the forms and the regulations prescribed by the secretary every person required to make a return or statement shall include therein the information required by such forms and regulations sec_1_6011-1 of the income_tax regulations provides that each taxpayer should carefully prepare his return and set forth fully and clearly the information required to be included therein returns which have not been so prepared will not be accepted as meeting this requirement of the code although congress has granted the commissioner broad authority to determine what information should be submitted with a tax_return the issue of what constitutes a valid tax_return is frequently litigated courts have stated the criteria for a valid_return first there must be sufficient data to calculate tax_liability scano-120953-02 second the document must purport to be a return third there must be an honest and reasonable attempt to satisfy the requirements of the tax law and fourth the taxpayer must execute the return under penalties of perjury 82_tc_766 aff’d per curiam 793_f2d_139 6th cir this formulation known as the substantial compliance standard has been derived from a line of supreme court cases see 293_us_172 280_us_453 if an income_tax return meets the substantial compliance standard the return is a valid_return for purposes of the statute_of_limitations on assessment there is no bright line test to determine whether a form_1040 with an attached form_w-2 that contains incorrect information is a valid_return courts typically apply the substantial compliance standard to the specific facts of each case in blount v commissioner the court found that a form_1040 that was filed without a form_w-2 met the substantial compliance standard and did not invalidate the return or prevent the calculation of tax_liability see 86_tc_383 acq in result 1986_2_cb_1 if a form_w-2 that does not belong to the taxpayer is filed with a form_1040 the service should disregard the form w- because it contains all incorrect information with regard to the taxpayer however under blount the form_1040 is still a valid_return if a form_1040 that has an attached form_w-2 with all incorrect information is a valid_return a form_1040 that has an attached form_w-2 with partially incorrect information is a valid_return as well we conclude under the blount decision that a completed form_1040 with an attached form_w-2 that lists an incorrect ssn meets the substantial compliance standard and does not invalidate the return for purposes of the statute_of_limitations on assessment under sec_6501 of the code issue sec_6402 of the code provides that in the case of any overpayment the secretary within the applicable_period of limitations may credit the amount of such overpayment including any interest allowed thereon against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall subject_to certain offsets refund any balance to such person sec_301_6402-2 of the regulations on procedure and administration provides that credits or refunds of overpayments may not be allowed or made after the expiration of the statutory period of limitation properly applicable unless before the expiration of such period a claim therefor has been filed by the taxpayer sec_301_6402-2 of the regulations provides as a general_rule that all claims for credit or refund must set forth in detail each ground upon which a credit or scano-120953-02 refund is claimed and facts sufficient to apprise the commissioner of the exact basis thereof sec_301_6402-3 of the regulations provides special rules for refund claims of income_tax sec_301_6402-3 provides that a properly executed individual original income_tax return shall constitute a claim_for_refund_or_credit for the amount of the overpayment disclosed by such return to constitute a sufficient claim_for_refund the income_tax return must set forth the amount determined as an overpayment and should advise the service whether such amount shall be refunded to the taxpayer or shall be applied as a credit against the taxpayer’s estimated income_tax for the succeeding taxable_year the purpose of the general_rule of sec_301_6402-2 of the regulations which requires taxpayers to set forth in detail each ground upon which a refund is claimed is to adequately notify the service of the grounds on which the taxpayer’s claim is based allowing the service to properly investigate the claim angelus milling co v commissioner 325_us_239 sec_301_6402-3 provides a simplified procedure to notify the service of the grounds for the claim where the taxpayer makes his or her refund claim on the original or amended income_tax return for the taxable_year in such a case the taxpayer must simply set forth the amount of the overpayment and request that it be refunded or credited if the return meets the beard substantial compliance standard and the requirements of sec_301_6402-3 it will generally meet the requirements of sec_301_6402-2 see generally 548_fsupp_408 n d tex 64_f3d_1516 11th cir sumrall v united_states ustc pbig_number d colo in this situation the form_1040 meets the beard substantial compliance standard sets forth the amount of the overpayment and advises the service that the overpayment shall be refunded to the taxpayer although the attached form_w-2 lists an incorrect ssn the service is adequately notified of the grounds for the taxpayer’s claim therefore the form_1040 constitutes a valid claim_for_refund however if the service cannot resolve the mismatch between the form_1040 itin and the form_w-2 ssn it cannot determine that the taxpayer made an overpayment which requires the issuance of a refund under sec_6402 as such the service is not required to issue the refund under sec_6402 if the service does not issue the refund the taxpayer may file a suit_for_refund under sec_6532 of the code once the service renders a decision on the claim provided the applicable_period of limitations has not expired if the service does not render a decision the taxpayer may file a suit_for_refund beginning months after the date the claim_for_refund is filed issue scano-120953-02 sec_6611 of the code provides that interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax at the overpayment rate established under sec_6621 sec_6611 of the code provides that in the case of a return filed after the last date prescribed for filing the return determined without regard to extensions no interest shall be allowed or paid for any day before the date on which the return is filed sec_6611 of the code provides that if any overpayment_of_tax is refunded within days after the last day prescribed for filing the return of such tax determined without regard to any extension of time for filing the return or in the case of a return filed after such last date is refunded within days after the date the return is filed no interest shall be allowed under sec_6611 on such overpayment sec_6611 of the code provides that for purposes of sec_6611 and sec_6611 a return shall not be treated as filed until it is filed in processible form a return is in processible form if it is filed on a permitted form and it contains the taxpayer’s name address identifying number the required signature and sufficient required information whether on the return or on required attachments to permit the mathematical verification of tax_liability shown on the return according to the court in the columbia gas system inc v united_states m athematical verifiability requires sufficient information to permit irs to recalculate and corroborate the mathematics and data reported by the taxpayer thus under sec_6611 a taxpayer must submit in good_faith all the required forms with the required signatures and enough underlying data for irs to verify the tax_liability shown on the return the information must be sufficient to enable irs to calculate the tax_liability without undue burden the 70_f3d_1244 fed cir a form_1040 with a form_w-2 that lists an incorrect ssn does not meet the mathematical verification test because the form_w-2 does not provide sufficient information to allow the service to corroborate the mathematics and data reported by the taxpayer the service requires the correct taxpayer_identification_number tin to be listed on the form_w-2 and form_1040 in order to verify that the amounts paid_by the employer on behalf of the taxpayer are amounts which are properly attributable to the taxpayer without the correct tin listed on the form w- the service cannot ascertain with certainty that the attached form_w-2 belongs to the taxpayer filing the form_1040 as a result the return is not a processible return for purposes of sec_6611 and overpayment interest will not begin to accrue until the return is in processible form therefore the service can freeze the refund amount claimed on the form_1040 pending the resolution of the scano-120953-02 mismatching itin and ssn or the determination that an overpayment exists without subjecting itself to a liability for overpayment interest in order to obtain a processible return the service should notify the taxpayer that a form w-2c corrected wage and tax statement or a form_4852 substitute for form_w-2 wage and tax statement or form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc listing the correct itin must be filed once the service receives the form w- 2c or the form_4852 that lists the correct itin and which matches the itin listed on the form_1040 the return will be in processible form for purposes of sec_6611 if the service issues the refund within days from the date the return is in processible form the service will not owe overpayment interest on the refund amount if the service issues the refund after days from the date the return is in processible form the service will owe overpayment interest on the refund amount from the date the return is in processible form sec_6611 please call if you have any further questions


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division feb tep ra‘ta uniform issue list legend taxpayer a irab bank c dear bank d amount account this letter is in response to a request for a letter_ruling dated date from your authorized representative as supplemented by additional correspondence dated august and date and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 d of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution from ira b totaling amount taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to a miscommunication or misunderstanding with bank d taxpayer a maintained ira b with bank c on date taxpayer a received a check for amount from bank c on date taxpayer a represents that she went to bank d and told bank d personnel that she wanted amount to be rolled over and deposited into an ira at bank d taxpayer a further instructed bank d representatives to invest her amount ira assets ina bank d certificate of deposit cd however bank d deposited amount into account e a non-ira cd taxpayer a discovered the mistake when she received her form 1099-r for from bank c based on the above facts and representations you request that the service waive the 60-day rollover requirement contained in code sec_408 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 ‘ ii the entire amount received including money and any other_property is i the entire amount received including money and any other- roperty is day after paid into an ira for the benefit of such individual not later than the the day on which the individual receives the payment or distribution or 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 - 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 includibie in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 d3 does not apply to any amount described in sec_408 ax received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such ee i toh 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 rollqver period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 d 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 - we cashed and the time elapsed since the distribution occurred is the information presented and the documentation submitted by taxpayer a consistent with her assertion that her failure to accomplish a timely rollover was caused by a miscommunication or misunderstanding with bank d leading to amount being placed into a non-ira account therefore pursuant to code sec_408 the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from is-granted a period of days from the issuance of this ruling ira b taxpayer a letter to contribute amount into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution amount 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 this letter is directed only to the taxpayer who requested it sec_61 1q kx3 of the code provides that it may not be used or cited as precedent - may be applicable thereto a a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please if you wish to inquire about address all correspondence to se t ep ra‘ t1 _ sincerely yours cobtr a wotfind carlton a watkins manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice copy of cover letter to authorized representative


internal_revenue_service index numbers department of the treasury washington dc person to contact telephone number refer reply to cc dom corp br4 plr-114744-99 ate date dear this letter responds to your date request for a supplement to our prior letter_ruling dated date the prior letter_ruling the legend abbreviations factual summary and representations appearing in the prior letter_ruling are incorporated by reference into this letter pursuant to your request the prior letter_ruling has been modified as follows a the following step has been added to the proposed transaction in a reverse_stock_split the reverse_stock_split distributing will xiv issue one share of new common_stock new distributing common_stock for each m shares of outstanding distributing common_stock ‘old distributing common_stock no fractional shares will be issued in the reverse_stock_split instead an exchange agent will sell shares of new distributing common_stock equivalent to the aggregate of fractional share interests and pay the cash proceeds of the sale without interest to the persons otherwise entitled to the fractional shares b the following representation has been added reverse_stock_split representation ggg the payment of cash in lieu of fractional shares of new distributing common_stock in the reverse_stock_split is solely for the purpose of avoiding the expense and inconvenience to distributing of issuing fractional shares and does not represent separately bargained-for consideration the total cash consideration that will be paid to the distributing shareholders instead of issuing fractional shares of plr-114744-99 new distributing common_stock in the reverse_stock_split will not exceed one percent of the total consideration that will be issued in the reverse_stock_split to the distributing shareholders in exchange for their shares of old distributing common_stock the fractional share interests of each distributing shareholder will be aggregated and no distributing shareholder will receive cash in an amount equal to or greater than the value of one full share of new distributing common_stock the above changes have no effect on the rulings contained in the prior letter_ruling and those rulings retain full force and effect added to the prior letter_ruling in addition the following ruling is if a shareholder of distributing receives cash as a result of a sale by an exchange agent of a fractional share of new distributing common_stock the shareholder will recognize gain_or_loss measured by the difference between the basis of the fractional share interest and the amount of cash received if the fractional share qualifies as a capital_asset in the hands of the shareholder the gain_or_loss will be capital_gain or loss subject_to the provisions and limitations of subchapter_p of chapter of the code sec_1221 and sec_1222 no opinion is expressed about the tax treatment of the above changes under any other provisions of the code or federal_income_tax regulations the caveats contained in the prior letter_ruling remain unchanged and the following new caveat is added x whether the reverse_stock_split qualifies for non-recognition treatment under sec_368 this supplemental letter is directed only to the taxpayer who requested it sec_6110 provides that it cannot be used or cited as precedent copies of this supplemental letter and the prior letter_ruling must be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the proposed transaction is completed 32s plr-114744-99 pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to each of your authorized representatives sincerely assistant chief_counsel corporate by wayne t murray senior technician reviewer branch


department of the treasury internal_revenue_service tax_exempt_and_government_entities_division date date number release date person to contact identification_number uil contact telephone number telephone fax ein certified mail - return receipt requested dear this is a final_determination that your exempt status under sec_501 c of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective for the following reason s you did not respond to our requests for information about your financial records and activities necessary to complete our examination therefore you have not demonstrated that you are operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 as such you failed to meet the requirements of internal_revenue_code sec_501 c and sec_1_501_c_3_-1 d in that you failed to establish that you were operated exclusively for an exempt_purpose contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code effective you are required to file federal_income_tax returns on form_1120 these returns should be filed with and for all subsequent years the appropriate service_center for the year ending processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code contact the clerk of the appropriate court for the mies for initiating suits for declaratory ifyou decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the u nited states for the district of columbia before the day after the date this determination was mailed to you judgment regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note that the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the courts at the following addresses please contact the clerk of the respective court for mies and the appropriate forms united_states tax_court second street nw washington dc us court of federal claims madison place nw washington dc u s district_court for the district of columbia constitution ave n w washington dc you may call the irs telephone number listed in your local directory an irs employee there may be able to help you but the contact person at the address shown on this letter is most familiar with your case you may also call the internal_revenue_service taxpayer_advocate the taxpayer_advocate_service i'as is an independent organization within the irs that can help protect your taxpayer rights we can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs ifyou qualify for our assistance which is always free we will do everything possible to help you visit taxpayeradvocate irs gov or call ifyou have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours ii nclosures publication director eo i ' xaminations fi department of the treasury internal_revenue_service irs tax exempt and government entities exempt_organizations examinations pa agus ‘fication taxpayer_identification_number number form tax_year s ended person to contact id number contact numbers telephone fax manager’s name id number manager’s contact number response due_date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren’t an organization described in sec_501 after we issue the final revocation letter we’ll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code if we don't hear from you if you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years letter rev catalog number 34809f what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn’t a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at letter rev catalog number 34809f for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely director eo examinations enclosures report of examination form_6018 publication publication letter rev catalog number 34809f form_886 a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service issues whether the organization continues to qualify for exemption from federal_income_tax under sec_501 of the irc the organization filed form_1023 for exemption on august 20xx and was granted exemption under sec_501 on june 20xx with an effective date of exemption of facts an organization exempt under sec_501 needs to be organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes and to foster national and amatuer sports competition the organization was selected for audit to ensure that the examined organization's activities and operations align with its approved exempt status the organization failed to respond to the internal_revenue_service attempts to obtain information to perform an audit of form_990 for the above mentioned tax period e correspondence for the audit was as follows o o o letter rev with attachments were mailed to the organization on november 20xx with a response date of december 20xx letter rev returned to irs as undeliverable unable to forward eoca letter and letter 3844-a was mailed to the on june with a response date of july 20xx e revenue_agent also mailed letter 3844-a rev with copy of original letter with attachments certified to the organization’s alternative address on june with a response date of july 20xx article number this was signed for on june 20xx by verified by the july 20xx telephone call with the organization's officer and the receipt of the letter was e telephone contact for the audit was as follows o o called the phone december 20xx revenue_agent ra number listed on the form_1023 application due to return of letter ra received voice mail and left a message for an officer to return the phone call january 20xx ra called the ra received voice mail and left a message for an officer to return the phone call due to no response form 886-a rev department of the treasury - internal_revenue_service page -1- form_886 a name of taxpayer explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service o o o o o o co o march 20xx ra called the and left a message for an officer to return the phone call due to no response ra received voice mail may 20xx ra called the and left a message for an officer to return the phone call due to no response ra received voice mail date ra called the voice mail states name ra left the message to return the phone call with new phone number based on the research which matches with the officer of the july 20xx ra called the and left a message for an officer to return the phone call due to no response ra received voice mail and talk to july 20xx ra called officer of the organization he confirmed the receipt of our letter he stated that the organization is inactive he further stated that the organization was never operated and would not in the future advised him of dissolution process requirements including need to file articles of dissolution with the state he stated that he will file the articles of dissolution next week verified the new address and requested that to submit the change_of address request to the irs needs august 20xx ra called the and left a message for an officer to return the phone call due to no response ra received voice mail august 20xx ra called the appears no longer belong to from the research which matches with the officer of the case is transfer to new revenue_agent but the phone number used the second phone number the voice mail states name ra left the message that the ' - ra reviewed the state of the august 20xx case was transferred to from whether the eo filed the articles of dissolution as stated by the on july 20xx phone call no dissolution was filed as of august 20xx called the revenue_agent website to see ra left the message to return the phone call ' officer law internal_revenue_code irc sec_501 provides that an organization organized and operated exclusively for charitable or educational_purposes is exempt from federal_income_tax provided no part of its net_earnings inures to the benefit of any private_shareholder_or_individual sec_511 imposes a tax at corporate rates under sec_11 on the unrelated_business_taxable_income of certain tax-exempt organizations including those described in sec_501 form 886-a ev department of the treasury - internal_revenue_service page -2- form_886 a department of the ‘i'reasury - internal_revenue_service name of taxpayer explanation of items schedule no or exhibit year period ended sec_6001 provides that every person liable for any_tax imposed by this title or for the collection thereof shall keep such records render such statements make such returns and comply with such rules and regulations as the secretary may from time to time prescribe whenever in the judgment of the secretary it is necessary he may require any person by notice served upon such person or by regulations to make such returns render such statements or keep such records as the secretary deems sufficient to show whether or not such person is liable for tax under this title sec_6033 a provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_501_c_3_-1 states in order to be exempt under sec_501 the organization must be both organized and operated exclusively for one or more of the purposes specified in the section religious charitable scientific testing for public safety literary or educational sec_1_501_c_3_-1 states that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section meet either the organizational_test or the operational_test it is not exempt if an organization fails to sec_1_501_c_3_-1 provides that an organization will not be regarded as operated exclusively for one or more exempt purposes described in sec_501 of the code if more than an insubstantial part of its activities is not in furtherance of a c purpose accordingly the organization does not qualify for exemption under sec_501 of the code treasury regulation regulation sec_1_61-1 provides that gross_income means all income from whatever source derived unless excluded by law gross_income includes income realized in any form whether in money property or services income may be realized therefore in the form of services meals accommodations stock or other_property as well as in cash sec_1_6001-1 provides that such permanent books_and_records as are required by paragraph a of this section with respect to the tax imposed by sec_511 on unrelated_business_income of certain exempt_organizations every organization exempt from tax under sec_501 shall keep such permanent books of account or records including inventories as are sufficient to show specifically the items of gross_income receipts and disbursements such organizations shall also keep such books_and_records as are required to substantiate the information required by sec_6033 see sec_6033 and regulation sec_1_6033-1 through sec_1_6001-1 provides that the books_or_records required by this section shall be kept at all time available for inspection by authorized internal revenue officers or form 886-a crev department of the treasury - internal_revenue_service page -3- form_886 a department of the treasury - internal_revenue_service explanation of items name of taxpayer schedule no or exhibit year period ended employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_6033 provides except as provided in sec_6033 every organization exempt from tax under sec_501 shail file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status organization’s position the organization has failed to respond to all attempts to contact them government’s position based on the above facts the organization failed to respond and or verify that it is organized and operated exclusively for one or more of the purposes specified in sec_501 if an organization fails to meet either the organizational_test or the operational_test it is not exempt in accordance with the above-cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax sec_1_6033-1 specifically states that exempt_organizations form 886-a ev department of the treasury - internal_revenue_service page -4- form_886 a department of the ‘i'reasury - internal_revenue_service name of taxpayer explanation of items schedule no or exhibit year period ended shall submit additional information for the purpose of enabling the internal_revenue_service to inquire further into its exempt status using the rationale that was developed in revrul_59_95 the organization's failure to provide requested information should result in the termination of exempt status conclusion based on the foregoing reasons the organization does not qualify for exemption under section sec_501 and its tax-exempt status should be revoked it is the service's position that the organization failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under c of the internal_revenue_code accordingly the organization's exempt status is revoked effective january 20xx form_1120 returns should be filed for the tax periods after form 886-a rev department of the treasury - internal_revenue_service page -5-


t c memo united_states tax_court scott and soraya malowney petitioners v commissioner of internal revenue respondent docket no filed date o christopher meyers for petitioners william f castor for respondent memorandum opinion foley judge this matter is before the court on petitioners’ motion for litigation and administrative costs pursuant to section and rule the court held for unless otherwise indicated all 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 petitioners in a bench opinion dated date we incorporate herein the facts set forth in that opinion background in soraya malowney decided to start a business involving the rehabilitation and sale of real_estate mrs malowney had previous experience in the design and refurbishing of several homes some of which were her former personal residences after researching and evaluating several properties she purchased for dollar_figure property located pincite northwest 74th street in lawton oklahoma after purchasing the property she discovered that it required an extensive amount of work in date she began the renovation process and substantially completed the project by date in petitioners hired a real_estate agent and listed the property for dollar_figure in after hiring another agent and reducing the sales_price petitioners sold the property for dollar_figure on schedule c profit or loss from business of their federal_income_tax return petitioners claimed a dollar_figure business loss ie sales proceeds of dollar_figure less purchase_price of dollar_figure improvements of dollar_figure commissions of dollar_figure and other expenses of dollar_figure on date respondent issued petitioners a notice_of_deficiency relating to and determined that petitioners were not in a trade_or_business on date petitioners while residing in abilene texas filed their petition with the court after a brief trial on date the court determined that petitioners were engaged in a trade_or_business on date the court filed petitioners’ motion for litigation and administrative costs the court on date filed respondent’s response to petitioners’ motion for litigation and administrative costs discussion petitioners contend that they meet the requirements of sec_7430 and thus are entitled to recover litigation and administrative costs respondent however contends that petitioners failed to meet the requirements of sec_7430 because respondent’s position was substantially justified and petitioners failed to delineate sufficiently the nature and amount of each item of cost the prevailing_party in a tax_court proceeding may recover administrative or litigation costs see sec_7430 rule petitioners bear the burden of proving that they substantially prevailed and meet each requirement of sec_7430 rule e petitioners however will not be treated as the prevailing_party if respondent’s position was substantially justified ie had a reasonable basis in law and fact sec_7430 see 487_us_552 substantial justification is based upon respondent’s position on the date he issued the notice_of_deficiency and after filing his answer with this court 108_tc_430 citing huffman v commissioner 978_f2d_1139 9th cir affg in part revg in part and remanding t c memo on the date respondent issued the notice_of_deficiency and after filing his answer respondent maintained the position that petitioners were not in in the business of refurbishing or selling real_estate as a result respondent contends that petitioners’ house should have been treated as investment_property and the loss from the sale should have been treated as a capital_loss indeed in previous years petitioners claimed but subsequently acquiesced to respondent’s disallowance of certain reported business_expenses thus respondent’s position was substantially justified and reasonable based upon the information available to him at the time he took a position in the administrative and judicial proceedings the fact that petitioners established at trial that they were engaged in a trade_or_business does not diminish the reasonableness of respondent’s position see 86_tc_962 the second basis for respondent’s objection to petitioners’ motion to recover litigation costs is that petitioners failed to provide a detailed affidavit setting forth the nature and amount of each cost a motion for award of costs must be accompanied by a detailed affidavit which sets forth distinctly the nature and amount of each item of costs for which an award is claimed rule d see also 93_tc_256 affd in part revd in part on other grounds and remanded 936_f2d_736 2d cir petitioners’ affidavit does not describe the specific nature of the work performed by their attorney the number of hours their attorney worked on each matter or the date such work was performed accordingly petitioners are not entitled to recover administrative and litigation costs rule d contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing an appropriate order and decision will be entered