internal_revenue_service number release date index number ---------------------------- ------------------------------ ------------------------------------------- ------------- -------------------------------------- -------------------------- ------------------------ -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc corp b02 plr-136525-07 date november ---------------------------- ---------------------------------- ------------------------------------ legend distributing ------------------------------------------------------------------- ---------------------------------------------------------------------------- controlled ------------------------------------------------------------------------- ---------------------------------------------------------------------------- sub -------------------------------------------------------------------- ----------------------------------------------------------------------------------- sub -------------------------------------------------------------------- ----------------------------------------------------------------------------------- llc -------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- business a business b asset -------------------------------------------------- ------------------------------------------- ------------------------------------------- ------------------------------------ -------------------- -- -- ---- --------------- ----------------- -------------------- ------------------------------------------------------------------------ plr-136525-07 a b c d e state x entity ------------------------------------------------------------------------------------------------ dear this letter responds to your date letter requesting rulings on certain federal_income_tax consequences of the proposed transaction described below the information provided in that letter and in later correspondence is summarized below the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover this office has not reviewed any information pertaining to and has made no determination regarding whether the distribution described below i satisfies the business_purpose requirement of sec_1_355-2 ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code the code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 facts privately held distributing is the common parent of an affiliated_group filing a consolidated federal_income_tax return the distributing group distributing has outstanding both common and preferred_stock plr-136525-07 the distributing group and its foreign subsidiaries none of which are relevant to the proposed transaction are engaged in business a and business b distributing and its direct and indirect subsidiaries conduct business a and will continue to do so following the proposed transaction controlled will conduct business b directly and through its wholly owned subsidiary sub other than the assets identified below as being owned by sub and sub distributing currently owns and operates directly all the assets associated with business b distributing owns all the stock of sub and sub and is the sole member of llc sub is engaged directly in business b and owns certain business b assets sub is engaged directly in business a sub 2’s assets include intercorporate debt of dollar_figurea owed by distributing to sub and acquired by sub in the ordinary course of business the taxpayer has represented that the issue_price and basis of the intercorporate debt equals the debt’s fair_market_value sub 2’s assets also include asset which is a business b asset asset makes up less than b of the fair_market_value of sub 2’s gross assets and less than b of the fair_market_value of its net assets llc is a limited_liability_company that is disregarded as a separate_entity for federal tax purposes pursuant to sec_301_7701-3 llc currently has no assets and is not engaged in any activities controlled will be newly formed by distributing with a nominal amount of cash the issued and outstanding_stock of controlled will consist of the same classes common and preferred and the same number of shares in each class as the distributing stock financial information has been received indicating that business a and business b each has had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years distributing wishes to separate business a from business b by transferring business b to controlled and distributing the controlled stock to distributing’s shareholders pro_rata the purpose of the proposed transactions is i to enhance the performance of the businesses in distributing and controlled by resolving problems that arise from or are exacerbated by the operation of different businesses within a single affiliated_group by enabling more focused management attention to the particular characteristics and needs of these businesses and ii to enhance the protection of business a from the risks of business b which may require borrowing to realize its long-term potential the corporate business purposes proposed transaction plr-136525-07 to achieve the corporate business purposes distributing has proposed the following transactions collectively the proposed transaction i distributing and sub will adopt a plan_of_liquidation by merger sub will merge under state x law into llc the merger with llc surviving after the merger distributing will continue to own all of the ownership interests in the llc and llc will continue to be a disregarded_entity as a result for federal tax purposes distributing will be treated as receiving and directly holding the assets of sub including asset and the intercorporate debt owed to sub by distributing will be extinguished llc will transfer asset to distributing ii iii distributing will transfer to wholly owned controlled a all of the assets associated with business b that are held directly by distributing including asset the business b direct assets b all of the stock of sub c dollar_figurec of cash the cash and d the option described below collectively the contributed assets and in exchange for such assets controlled will assume certain liabilities associated with business b and will issue to distributing all the outstanding_stock of controlled consisting of common_stock and preferred_stock the controlled asset exchange the number of shares of the controlled common_stock and the controlled preferred_stock issued will be equal to the number of shares of the distributing common_stock and the distributing preferred_stock respectively then outstanding iv distributing will distribute the controlled common_stock to the holders of the distributing common_stock and the controlled preferred_stock to the holders of the distributing preferred_stock in each case pro_rata the distribution the option to be transferred to controlled will give controlled the right to purchase certain of distributing’s retained business b assets for a period of d days from the date controlled receives notice that the asset has ceased to be useful in distributing’s business the option will be exercisable for e years from the date of the distribution the exercise price of the option will be equal to the fair_market_value of the business b asset as of the date of controlled’s exercise of the option the transfer of a limited number of business b direct assets the delayed transfer assets may be delayed briefly due to the resolution of legal impediments that may not be completed by the date of the controlled asset exchange distributing will transfer such assets to controlled as soon as distributing obtains the approvals and consents that are necessary to remove such impediments at all times subsequent to the controlled asset exchange controlled will have the right to receive the delayed transfer assets plr-136525-07 in connection with the proposed transaction distributing and controlled will enter into a master separation agreement and certain ancillary agreements relating to administrative and other services and office facility leasing and a tax_sharing_agreement that will set forth each party’s rights and obligations regarding tax matters for periods before and after the date of the distribution collectively the separation agreements payments made between distributing and controlled or their respective subsidiaries pursuant to the separation agreements will reflect arm’s length rates representations the merger the following representations are made with respect to the merger a distributing and sub will adopt a plan_of_liquidation by merger the plan of b c d e f g liquidation and the merger will occur pursuant to such plan distributing on the date of adoption of the plan_of_liquidation and at all times until the effective date of the merger will be the owner of at least percent of the single outstanding class of sub stock no shares of sub stock will have been redeemed during the three years preceding the adoption of the plan_of_liquidation of sub by operation of state x law all transfers from sub to llc pursuant to the plan_of_liquidation will occur on the effective date of the merger all of the stock of sub will be redeemed and cancelled and sub will cease to exist for federal_income_tax purposes at the effective time of the merger sub will retain no assets following the merger sub will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the date of adoption of the plan_of_liquidation h other than the transfer of asset described in step iii of the proposed transaction no assets of sub have been or will be disposed of by either sub or distributing except for dispositions in the ordinary course of business and dispositions occurring more than three years prior to adoption of the plan_of_liquidation i other than the transfer of asset described in step iii of the proposed transaction the merger of sub will not be preceded or followed by the plr-136525-07 j k l reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of sub if persons holding directly or indirectly more than percent in value of the sub stock also hold directly or indirectly more than percent in value of the stock in recipient for purposes of this representation ownership will be determined immediately after the distribution and by application of the constructive_ownership rules of sec_318 of the code as modified by sec_304 prior to adoption of the plan_of_liquidation no assets of sub will have been distributed in_kind transferred or sold to distributing except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to adoption of the plan_of_liquidation sub will report all earned_income represented by assets that will be distributed to distributing such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc the fair_market_value of the assets of sub will exceed its liabilities both at the date of the adoption of the plan_of_liquidation and immediately before the merger m other than the intercorporate debt owed by distributing to sub created in the ordinary course of business there is no intercorporate debt existing between distributing and sub and none has been cancelled forgiven or discounted except for transactions that occurred more than three years prior to the date of the adoption of the plan_of_liquidation n distributing is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code o all other transactions that will be undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the proposed liquidation of sub have been fully disclosed p no election will be made under the treasury regulations promulgated under sec_7701 that would cause llc to be classified as other than an entity disregarded as separate from its owner for federal_income_tax purposes the controlled asset exchange and the distribution the following representations are made with respect to the controlled asset exchange and the distribution plr-136525-07 q any indebtedness owed by controlled to distributing after the distribution will not constitute stock_or_securities r no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation s the five years of financial information submitted on behalf of business a conducted by distributing’s separate_affiliated_group as defined in sec_355 the distributing sag is representative of the distributing sag’s present operation of business a and with regard to business a there have been no substantial operational changes since the date of the last financial statements submitted t the five years of financial information submitted on behalf of business b is representative of the present operation of business b and with regard to business b there have been no substantial operational changes since the date of the last financial statements submitted u following the proposed transaction the distributing sag will continue the active_conduct of business a and controlled and members of its separate_affiliated_group the controlled sag will continue the active_conduct of business b in each case independently and with their separate employees v the distribution is carried out for the corporate business purposes the distribution is motivated in whole or substantial part by one or more of these corporate business purposes w the distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both x the total adjusted bases and fair_market_value of the assets transferred to controlled by distributing will each equal or exceed the sum of the total liabilities if any assumed within the meaning of sec_357 by controlled plus any liabilities to which the transferred assets are subject y the liabilities assumed in the transaction as determined under sec_357 if any and the liabilities to which the transferred assets are subject if any were incurred in the ordinary course of business and are associated with the assets being transferred z the income_tax_liability for the taxable_year in which investment_credit_property including any building to which sec_47 applies if any is transferred will be adjusted pursuant to sec_50 or a or sec_47 as in effect plr-136525-07 before amendment by public law title 104_stat_1388 if applicable to reflect an early disposition of the property aa no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution of the controlled stock other than i that arising in the ordinary course of business ii pursuant to certain service agreements and office facility lease agreements between distributing and controlled or iii pursuant to indemnity or similar obligations arising under the separation agreements bb immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further distributing’s excess_loss_account if any with respect to the controlled stock will be included in income immediately before the distribution see sec_1_1502-19 cc payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length dd no two parties to the transaction are investment companies as defined in sec_368 and iv ee for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or 50-percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the distribution ff for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or 50-percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the distribution plr-136525-07 gg the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation hh immediately after the transaction as defined in sec_355 no person will hold a percent or greater interest as defined in sec_355 in distributing or controlled ii neither the distributing preferred_stock nor the controlled preferred_stock is jj nonqualified_preferred_stock as defined in sec_351 distributing and controlled and their respective shareholders will each pay their own expenses if any incurred in connection with the distribution kk controlled will not elect to be an entity within three years after the effective date of the proposed transaction ll controlled will not be liquidated within the meaning of sec_331 through of the code within three years after the effective date of the proposed transaction mm except for intra-family gifts and transfers by reason of death no more than percent of the stock of controlled will be sold redeemed for property within the meaning of sec_317 of the code or otherwise transferred during the three- year period after the effective date of the proposed transaction for purposes of this representation each share of controlled preferred_stock is equivalent to shares of controlled common_stock rulings the merger based solely on the information and representations submitted we rule as follows on the merger the merger will be treated as a complete_liquidation of sub within the meaning of sec_332 sec_332 and sec_1_332-2 no gain_or_loss will be recognized by sub in the merger sec_336 and sec_337 no gain_or_loss will be recognized by distributing in the merger sec_332 plr-136525-07 distributing’s basis in each asset deemed received from sub in the merger will equal the basis of that asset in the hands of sub immediately before the merger sec_334 distributing’s holding_period in each asset deemed received from sub in the merger will include the period during which that asset was held by sub sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 and sec_1_381_a_-1 except to the extent sub 2’s earnings_and_profits are reflected in distributing’s earnings_and_profits distributing will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of the merger sec_381 sec_1_381_c_2_-1 and sec_1 a any deficit in earnings_and_profits of sub or distributing will be used only to offset earnings_and_profits accumulated after the date of the merger sec_381 no income gain deduction or loss will be recognized by sub or distributing upon the extinguishment of the intercorporate debt in the merger the controlled asset exchange and the distribution based solely on the information and representations submitted we rule as follows on the controlled asset exchange and the distribution the controlled asset exchange together with the distribution will qualify as a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing upon the transfer of the contributed assets to controlled in exchange for the controlled common_stock and controlled preferred_stock and the assumption by controlled of liabilities of distributing in the controlled asset exchange sec_357 and sec_361 the aggregate basis of the controlled common_stock and the controlled preferred_stock in the hands of distributing immediately after the controlled asset exchange will be equal to distributing’s aggregate basis in the contributed assets immediately before the controlled asset exchange reduced by the plr-136525-07 amount of any liabilities other than liabilities excluded under sec_357 assumed by controlled sec_358 and d such aggregate basis will be allocated between the controlled common_stock and the controlled preferred_stock in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 no gain_or_loss will be recognized by controlled upon the receipt of the contributed assets in exchange for the controlled common_stock and controlled preferred_stock sec_1032 the basis of each asset received by controlled in the controlled asset exchange will equal the basis of that asset in the hands of distributing immediately prior to its transfer sec_362 the holding_period of each asset received by controlled in the controlled asset exchange will include the period during which distributing held that asset sec_1223 no gain_or_loss will be recognized by distributing in connection with the distribution sec_361 no gain_or_loss will be recognized by and no amount will be included in the income of any shareholder of distributing on the receipt solely of controlled stock in the distribution sec_355 each distributing shareholder's basis in a share of distributing stock as adjusted under sec_1_358-1 shall be allocated between the share of distributing stock with respect to which the distribution is made and the share of controlled stock received with respect to the share of distributing stock in proportion to their fair market values if a distributing shareholder that purchased or acquired shares of distributing stock on different dates or at different prices is not able to identify which particular share of controlled stock is received with respect to a particular share of distributing stock the shareholder may designate which particular share of controlled stock is received with respect to a particular share of distributing stock provided the designation is consistent with the terms of the distribution sec_358 b and c and sec_1_358-2 the holding_period of the controlled stock received by a distributing shareholder in the distribution will include the holding_period of the distributing stock with respect to which the distribution is made provided the distributing stock is held as a capital_asset in the hands of the distributing shareholder on the date of the distribution sec_1223 plr-136525-07 earnings_and_profits of distributing if any will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 distributing’s transfer of the delayed transfer assets to controlled will occur pursuant to the plan_of_reorganization that includes the transfer of the other contributed assets to controlled and the distribution sec_1_368-2 payments made between any of distributing and controlled and their respective affiliates under the separation agreements regarding liabilities indemnities or other obligations that i have arisen or will arise for a taxable_period ending on or before the distribution or for a taxable_period beginning before and ending after the distribution and ii will not become fixed and ascertainable until after the distribution will be treated as occurring immediately before the distribution see 344_us_6 73_sct_71 97_led_6 1952_2_cb_136 revrul_83_73 1983_1_cb_84 a transfer of property by distributing to controlled pursuant to an exercise of the option will not be treated as part of the plan_of_reorganization but will be taxable to distributing as a separate transaction caveats we express no opinion about the tax treatment of the proposed transaction under other provisions of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding i whether llc qualifies as a disregarded_entity under sec_301_7701-3 ii whether the distribution satisfies the business_purpose requirement of sec_1_355-2 iii whether the distribution is being used principally as a device for the distribution of the earnings_and_profits of distributing or controlled see sec_355 and sec_1_355-2 iv whether the distribution is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in distributing or controlled see sec_355 and sec_1_355-7 or plr-136525-07 vi the federal_income_tax consequences of any payments made in continuing transactions between distributing and any member of its consolidated_group and controlled or any member of its consolidated_group procedural statements this ruling letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of this letter_ruling sincerely _____________________________ frances kelly assistant to the branch chief branch office of associate chief_counsel corporate cc


department of the treasury internal_revenue_service x exempt and erwision washington d c dec t cp ra td li -00-00 yb0 oy legend taxpayer a individual b traditional_ira x roth_ira y company m month l dear in letters dated date and date your authorized representative requested a ruling on your behalf in which you request relief under sec_301_9100-3 of the procedure and administration regulations following facts and representations support your ruling_request the taxpayer a maintained ira x an individual_retirement_arrangement of described in code sec_408 with company m during month l pursuant to the advice of her investment_advisor individual b taxpayer a converted traditional_ira x adjusted_gross_income for exceeded the limit found at sec_408a b taxpayer a was not advised by her investment_advisor that taxpayer a was ineligible to convert ira x year date for the election to recharacterize the roth_ira y x had passed by taxpayer a’s tax preparer however when it was discovered the to the traditional_ira the error was discovered in the the internal_revenue_code however prior to the taxpayer a's also with company m to roth_ira y to roth_ira y conversion tra taxpayer a timely filed the calendar_year federal_income_tax return based on the above you request the following letter_ruling that pursuant to sec_301_9100-3 of the regulations taxpayer a is granted a period not to exceed six months from the date of this ruling letter to recharacterize her roth roth_ira y a traditional_ira ira to ce with respect to your request for relief under sec_301_9100-3 of the regulations sec_408a of the internal_revenue_code and sec_1_408a-5 of the iricome tax regulations provide that except as otherwise provided by the secretary a taxpayer may elect to recharacterize an ira contribution made to one type of ira as having been made to another type of ira by making a trustee-to-trustee transfer of the ira contribution plus earnings to the other type of ira contribution is treated as having been made to the transferee ira and not the transferor ira under sec_408a recharacterizgation election generally must occur on or before the date prescribed by law including extensions for filing the taxpayer's federal_income_tax returns for the year of contributions in a recharacterization the ira and sec_1_408a-5 this sec_1_408a-5 question and answer -6 describes how a taxpayer makes the election to recharacterize the ira contribution amount that has been converted from a traditional_ira to a roth_ira taxpayer must notify the roth_ira trustee of the taxpayer’s intent to recharacterize the amount transferee trustee if different from the transferor trustee with specified information that is sufficient to effect the recharacterization and the trustee must make the transfer the taxpayer must provide the trustee and the to recharacterize an the sec_1_408a-4 q a-2 provides in summary that an individual with modified_adjusted_gross_income in excess of dollar_figure for a taxable_year is not permitted to convert an amount to a roth_ira during that taxable_year sec_1_408a-4 q a-2 further provides in summary that an individual and his spouse must file a joint federal tax_return to convert a traditional_ira to a roth_ira and that the modified_adjusted_gross_income subject_to the dollar_figure limit for a taxable_year is the modified agi derived from the joint_return using the couple's combined income sec_301_9100-1 sec_301_9100-2 and of the procedure and administration regulations in general provide guidance concerning requests for relief submitted to the service on or after december section c of the regulations provides that the commissioner of the internal_revenue_service in his discretion may grant a reasonable extension of the time fixed by a regulation a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin for the making of an election or application_for relief in respect of tax under among others subtitle a of the code sec_301_9100-2 lists certain elections for which automatic extensions of time to file are granted sec_301_9100-3 of the regulations generally provides guidance with respect to the granting of relief with respect to the elections not referenced in sec_301_9100-2 the relief requested in this case is not referenced in section sec_301_9100-3 of the regulations provides that applications for relief that fall within sec_301_9100-3 will be granted when the taxpayer provides sufficient evidence including affidavits described in sec_302 e to establish that reasonably and in good_faith and interests of the government granting relief would not prejudice the the taxpayer acted sec_301_9100-3 of the temporary regulations provides that a taxpayer will be deemed to have acted reasonably and in good_faith i request for sec_301_9100-1 relief is filed before the failure to make a timely election is discovered by the service inadvertently failed to make the election because of intervening events beyond the taxpayer's control if the taxpayer if the taxpayer failed to make the election if its iii ii o2 because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election the taxpayer reasonably relied upon the written advice of he service or the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election iv v sec_301_9100-3 ii of the temporary regulations provides that ordinarily the interests of the government will be treated as prejudiced and that ordinarily the service will not grant relief when tax years that would have been affected by the election had it been timely made are closed by the statute_of_limitations before the taxpayer's receipt of a ruling granting relief under this section in taxpayer a was ineligible to convert her traditional_ira x to is necessary to determine if she is eligible for roth_ira y therefore it relief under the provisions of sec_301_9100-3 of the regulations in this case taxpayer a was ineligible to convert traditional_ira xx to roth_ira y since taxpayer a’ however taxpayer a believed that she was eligible to convert her traditional_ira x to a roth_ira until she discovered otherwise at which time the time limit in sec_1_408a-5 of the regulations had passed taxpayer a filed this request for sec_301 relief shortly after discovering that taxpayer a was ineligible to convert traditional_ira x to a roth_ira calendar_year is not a closed tax_year s adjusted_gross_income exceeded dollar_figure with respect to your request for relief we believe that based on the and that you have acted reasonably and in good_faith with respect to a traditional iras information submitted and the representations contained herein the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been met making the election to recharacterize your roth_ira as specifically the service has concluded that you have met the requirements of clauses of sec_301_9100-3 of the regulations therefore you are granted an extension of six months from the date of the issuance of this letter_ruling to so recharacterize iii and v no opinion is expressed as described herein under the provisions of any other section or either the code or regulations which may be applicable thereto to the tax treatment of the transaction this letter is directed only to the taxpayer who requested it j of the code provides that it may not be used or cited as precedent section cognetta id at if you have any questions concerning this ruling please contact mr val please refer to t ep ra t3 a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours don rd loro frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division


internal_revenue_service number release date index number ---------------------------------------- -------------------------------- ----------------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- ------------------- telephone number -------------------- refer reply to cc psi b02 plr-113671-07 date date ------------------------------------------------------------------------------------------------------ legend x ----------------------- state ------------------- ------------------- d1 dear --------------- this responds to a letter dated date and prior correspondence submitted on behalf of x by x's authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on d1 it was intended for x to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x accordingly x requests a ruling that it may elect to be treated as an s_corporation effective d1 sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election plr-113671-07 is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning d1 a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representatives sincerely james a quinn senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc intl plr-124509-06 date date internal_revenue_service number release date index number ---------------------------- --------------------------------------------- --------------------------------------------- --------------------------------- - in re ---------------------------- --------------------------------- ------------------ ------------------------- ------------------------------ legend legend taxpayer parent individual a date date date date date cpa firm tax_year one ------- ---------------------------- --------------------------------- -------------------- ----------------------- ------------------- --------------------- --------------------- ------------------ --------------------------------------------- dear ---------------- this replies to your letter dated date in which you request on behalf of taxpayer an extension of time under sec_301_9100-3 to file the election as required under sec_992 and temp sec_1_921-1t for tax_year one the information submitted for consideration is substantially as set forth below wholly-owned by parent a domestic_corporation cpa firm recommended that taxpayer elect treatment as a domestic_international_sales_corporation disc pursuant to sec_991 through of the internal_revenue_code individual a is taxpayer is a domestic_corporation that was incorporated on date and is at the end of date during an annual bookkeeping review it was discovered cpa firm was aware of the requirements that taxpayer needed to satisfy under plr-124509-06 taxpayer’s executive vice president temp sec_1_921-1t to qualify as a disc for tax_year one in particular cpa firm correctly understood that the deadline to elect to be a disc under sec_992 was date cpa firm completed form 4876-a election to be treated as an interest_charge_disc on behalf of taxpayer and submitted the form to taxpayer on date under the assumption that taxpayer would sign the form and file it with the service the form was delivered to the attention of individual a on date at parent’s receiving dock where an employee of parent signed for the document the form was never actually delivered to individual a that a signed form 4876-a was not on file with either taxpayer or cpa firm taxpayer had assumed that form 4876-a was prepared and filed by cpa firm as part of the organization proceedings of taxpayer and cpa firm had assumed that taxpayer had received form 4876-a and filed the election with the service this mutual misunderstanding led to the failure_to_file an election to be treated as a disc under temp sec_1_921-1t when individual a became aware of the situation individual a contacted cpa firm cpa firm advised taxpayer to request an extension under sec_301_9100-3 to file the required election on form 4876-a effective date the second and third sentences of temp sec_1_921-1t answer provide be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate a corporation electing interest_charge_disc status must file form 4876a a corporation electing to be treated as a fsc small_fsc or interest_charge_disc for its first taxable_year shall make its election within days after the beginning of that year an election by a corporation to be treated as a disc shall sec_992 provides requests for extensions of time for regulatory an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i plr-124509-06 sec_301_9100-1 provides in part sec_301_9100-1 provides that a regulatory election is for this purpose an election includes an application_for relief in respect of tax sec_301_9100-1 sec_301_9100-3 provides in part in the present situation the election described in the second and third sentences of temp sec_1_921-1t answer is a regulatory election as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards for relief set forth in sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the election described in temp sec_1_921-1t for tax_year one otherwise eligible to file the election or to claim disc status or benefits a copy of this ruling letter should be associated with the election submitted by taxpayer and accompanied by a penalty of perjury statement executed by elections that do not meet the requirements of sec_301_9100-2 must be made under the rules of this section requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in paragraph e of this section to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government the ruling contained in this letter is predicated upon facts and representations the granting of an extension of time is not a determination that taxpayer is plr-124509-06 an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented being furnished to your authorized representatives pursuant to a power_of_attorney on file in this office a copy of this ruling letter is sincerely _______________ christopher j bello senior technical reviewer branch office of the associate chief_counsel international enclosure copy for purposes


internal_revenue_service number release date index number -------------------------------- -------------------------------- ------------------------------------- -------------------------------- re ----------------------------------------- ------------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ----------------- telephone number ---------- refer reply to cc psi plr-104724-10 date date legend decedent spouse trust a_trust b daughter daughter date x bank date date accountant date dear -------------- ---------------------------------------------- ------------------------------------------------------ ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- -------------------------------- -------------------------------- ---------------------------- ------------------------------------------------------------------------------------------ ----------------------- --------- -------------------------------------- --------------------------- ------------------------- ----------------------------------- ------------------ this responds to your letter dated date by your authorized representatives requesting an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to allocate decedent’s and spouse’s generation-skipping_transfer gst_exemption to the transfers made to trust a and trust b on date prior to date decedent created an irrevocable_trust trust a for the benefit of daughter and her issue and funded it with x shares of bank trust a has gst potential on the same date spouse created an irrevocable_trust trust b for the benefit of daughter and her issue and funded it with x shares of bank trust b plr-104724-10 has gst potential both daughter and daughter have children currently living decedent and spouse retained accountant to prepare their respective form sec_709 united_states gift and generation-skipping_transfer_tax return decedent and spouse each timely filed their respective form sec_709 and elected under sec_2513 to treat decedent’s and spouse’s transfers as made one-half by each spouse accountant reported the value of the transfers on decedent’s and spouse’s form sec_709 and did not allocate decedent’s and spouse’s available gst exemptions to the transfers to trust a and trust b accountant died on date decedent died on date decedent’s form_706 united_states estate and generation- skipping transfer_tax return is due with extension on date in preparing for the filing of form_706 accountant’s failure to allocate decedent’s and spouse’s gst exemptions to the date transfers to trust a and trust b was discovered it is represented that to date no taxable_distributions taxable terminations or any other gst taxable events have occurred with respect to either trust a or trust b that would result in a gst tax_liability on the part of any of trust a_trust b or the beneficiaries of each trust it is further represented that no addition either actual or constructive have been made to trust a or trust b since date at the time of the transfers to trust a and trust b decedent and spouse had their full gst_exemption available for allocation to the date transfers decedent and spouse have not yet allocated any part of their respective gst_exemption to any other gifts law and analysis sec_2513 provides generally that for gift_tax purposes if the parties consent a gift made by one spouse to any person other than his or her spouse shall for gift_tax purposes be considered as made one-half by the donor spouse and one-half by his or her spouse sec_2601 imposes a tax on every generation-skipping_transfer gst made by a transferor to a skip_person a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the gst tax is determined by multiplying the taxable_amount by the applicable_rate sec_2641 provides that the term applicable_rate means with respect to any gst transfer the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer is generally defined as the excess of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of gst_exemption under sec_2631 allocated to the trust or to plr-104724-10 property transferred in a direct_skip and the denominator of which is the value of the property transferred to the trust or involved in the direct_skip sec_2631 as in effect for the tax_year at issue provided that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime is made on form_709 sec_2652 and sec_26_2652-1 provide that if under sec_2513 one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of the individual then for purposes of the gst tax each spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor spouse regardless of the interest the electing spouse is actually deemed to have transferred under sec_2513 sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer the value of such property for purposes of determining the inclusion_ratio under sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute plr-104724-10 notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government under sec_301_9100-3 a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 are satisfied therefore decedent and spouse are granted an extension of time of days from the date of this letter to allocate decedent’s and spouse’s available gst_exemption with respect to the date transfers to trust a and trust b the allocations will be effective as of the date of the transfers to the trusts and the gift_tax values of the transfers to the trusts will be used in determining the inclusion_ratio with respect to each trust the allocations should be made on supplemental form sec_709 for the appropriate calendar_year and filed with the internal_revenue_service cincinnati service_center - stop cincinnati ohio a copy of this letter should be attached to each supplemental form_709 plr-104724-10 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the ruling s in this letter pertaining to the federal estate and or generation- skipping transfer_tax apply only to the extent that the relevant sections of the internal_revenue_code are in effect during the period at issue this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel passthroughs special industries by lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc dom p si plr-112569-00 date date legend x y state sub sec_1 sub sub sec_3 d1 plr-112569-00 d2 d3 d4 d5 dear this letter responds to your letter dated date submitted on behalf of x and y requesting an extension of time to make an election under sec_1361 of the internal_revenue_code to treat sub sec_1 sub and sub sec_3 as qualified subchapter_s subsidiaries qsubs facts x was incorporated under the laws of state on d1 and made an election under sec_1362 to be treated as an s_corporation effective d1 sub sec_1 sub2 and sub sec_3 were formed on d2 d3 and d4 respectively as wholly owned subsidiaries of x x intended each of these subsidiaries to qualify as a qsub effective as of the date of each subsidiary’s incorporation the qsub elections however were not timely filed on d5 all of x’s stock was transferred to y which filed an election to treat x as a qsub law sec_1361 defines the term qualified_subchapter_s_subsidiary qsub as a domestic_corporation that is not an ineligible_corporation if percent of the stock of the corporation is held by an s_corporation and the s_corporation elects to treat the corporation as a qsub the statutory provision does not however provide guidance on the manner in which the qsub election is made or the effective date of the election under sec_301_9100-1 of the procedure and administration regulations the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain plr-112569-00 elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion in this case it has been established that the requirements of sec_301 and are satisfied consequently an extension of days from the date of this letter is granted for electing under sec_1361 to treat sub sec_1 sub2 and sub sec_3 as qsubs a copy of this letter should be attached to the form_8869 qualified_subchapter_s_subsidiary election filed with the service_center a copy is enclosed for that purpose except for the specific ruling above no opinion is expressed or implied concerning the federal_income_tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed regarding y’s eligibility to be an s_corporation or the eligibility of any corporation to be a qsub in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative this ruling is directed only to the taxpayer on whose behalf it was requested according to sec_6110 this ruling may not be used or cited as precedent enclosures copy of this letter copy for sec_6110 purposes sincerely paul f kugler assistant chief_counsel passthroughs and special industries


leen ee eee significant index number department of the treasury internal_revenue_service washington d c nov tax_exempt_and_government_entities_division --------eee tep aa al re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 bx2 b and b of the intemal revenue code code and sec_304 b b and b of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning january bases as identified in your application submission established as of date this extension applies to the eligible amortization charge the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with section d of the code section d a of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 dx1 b the plan has submitted the required information to meet the criteria in sec_431 d b including a certification from the plan's actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status he aee nnn nnn eee iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the _ to the and to your authorized representative pursuant to a power_of_attorney on file in this office this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent lf you require further assistance in this matter please contact sincerely yours roy dp ia len david m ziegler manager ep actuarial group


number release date id office uilc cca-102315-08 ---------------- from --------------- sent thursday date pm to ----------------- cc subject re reseller discounts --------- i think it is fair to say when i spoke to -------- before it was to give her ideas of how to pursue the potential issues depending upon the facts rather than telling her exactly what and how to argue -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------- so the issue of how to analyze the discount may depend upon whether there was a sale of products from ------ to -------------- or a sale of products from ------ through -------------- to the government to argue there was a price adjustment in selling its product a taxpayer must how it negotiated a lower price what i don't understand is why -------------- would be getting a reseller discount if it is not acting as the middleman seems to be they would get a referral fee in this situation so if the reseller discount only kicks in where -------------- is buying the products from ------ to then resell to the government it is plausible for the taxpayer to argue the discount is not income the only argument i see for the service here is to argue that there is no price adjustment because the discount is not being given to -------------- for the purpose of giving -------------- a net lower price but is really being given to -------------- for bringing in government business that is why i mentioned united draperies to ----------it is an example of where a payment to a manufacturer to employees of the customer the party buying the draperies is consideration for something other than a reduced selling_price the customer didn't get a reduced selling_price its basis in the draperies was the same regardless of the payment to the employees in consideration of bringing customers to the tp so the payment in that case was outside the sales transaction here the payments are going from------- seller to -------------- is -------------- the purchaser or is the government the purchaser if the government is the purchaser it doesn't end up with a reduced price -------------- ends up with some benefit that makes this case like united draperies if -------------- is the purchaser then it does end up with a reduced price basis which party is the purchaser i think that depends upon what the documents say and that is not a determination i made in the past--maybe-------- has


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si plr-114506-99 date re sec_29 request for a ruling credit for producing fuel from a nonconventional source partnership a partnership b state a state b state c process dear this letter responds to the ruling_request of partnership a dated date two rulings are requested partnership a will produce a qualified_fuel within the meaning of sec_29 of the internal_revenue_code and if partnership a’s facilities are placed_in_service prior to date within the meaning of sec_29 relocation of a facility after date will not result in a new placed_in_service_date for the facility for purposes of sec_29 provided the fair_market_value of the used_property is more than percent of the relocated facility’s total fair_market_value at the time of the relocation we understand the facts as presented by partnership a’s authorized representative to be as follows partnership a is a limited_partnership formed for the purpose of raising capital to build four facilities for producing synthetic_fuel two facilities in state a one facility in state b and one facility in state c all four facilities were placed_in_service before date the general_partner will be partnership b with a percent interest and the limited partners are four institutional investors with percent of the interests each facility in state b and state c is owned by a separate project limited_liability_company the two facilities in state a are owned by the same project limited_liability_company all project limited_liability companies are owned by partnership a partnership a may move the facilities to new locations the facilities were built plr-114506-99 in modules the facilities were intended to be moved for example to be closer to feedstock supplies or synthetic_fuel purchasers each project limited_liability_company has a license authorizing it to use a patented process called the process for converting coal feedstock into synthetic_fuel according to partnership a the process was developed to upgrade lower-ranked coals and coal waste material by chemically converting them into a synthetic_fuel without the need to subject the coal feedstock to high heat ie pyrolysis partnership a claims that the chemical reaction yields a fuel that differs significantly in chemical composition from the coal feedstock used to produce it the process uses a quinoline-based chemical reagent that reacts with the feedstock in a manner that reduces oxygen content reduces inherent moisture makes the coal less reactive increases volatile matter and raises the fuel’s heating value btu content the coal feedstock will consist of waste coal such as coal pond fines and coarse coal refuse recovered from gob piles or coal from conventional supply sources that can be significantly upgraded using the process pond fines are small particles of waste coal usually less than ¼ in diameter rejected from coal cleaning operations and stored in settling ponds pond fines contain significant amounts of recoverable coal but are difficult to process because of their size and high moisture content the high moisture content and small particle size of coal pond fines make them unsuitable for use as a fuel or feedstock for carbonization liquefaction and gasification applications the process overcomes these limitations by reducing the moisture content of the feedstock material and chemically bonding it into a useable solid the total moisture content of coal includes surface moisture acquired from exposure to moisture in the environment and inherent moisture also known as equilibrium moisture that is ionically ie chemically bonded to the coal the process reagent reacts with the coal structure to produce a chemically active solid that rejects surface moisture the process eliminates the ionic bonding between inherent moisture and coal resulting in synthetic_fuel that has a much lower inherent moisture content by contrast thermal drying cannot permanently eliminate ionically-bound moisture because thermally-dried coal rapidly absorbs moisture from the air to return the ionically-bound moisture to its original level by removing oxygen functional groups the process results in a synthetic_fuel that has a much lower inherent moisture content the process also alters the ionic structure of the surface of the synthetic coal pellet making the synthetic_fuel hydrophobic rejects surface moisture as opposed to coal's natural hydrophilic state attracts surface moisture thus the process permanently removes inherent moisture from the feedstock material and causes the synthetic_fuel to reject surface moisture so that the synthetic_fuel produced by the process maintains its low total moisture content even when exposed to rain or groundwater partnership a claims that both of these plr-114506-99 effects result from chemical changes to the coal feedstock the process converts the coal feedstock into a synthetic_fuel by use of the following five steps in step one mineral matter is removed from the coal feedstock and the feedstock is sized to form coal particles no larger than f in diameter the coal feedstock is stockpiled next to the fuel production plant in step two the prepared coal feedstock is transported from the stockpile to the mixing apparatus using a specially-designed bin and feeder system that can handle high-moisture fine-sized coal the feeder system controls the rate of delivery of the feedstock to the plant and monitors the feed rate with a weight belt this system also is equipped with variable feed drivers to maintain accurate control of the feed rate the weight and moisture content of the feedstock is monitored data are fed to a computerized process control system that controls the mixing time and the reagent feed rate according to partnership a step three of the process initiates the chemical change by uniformly blending the process reagent and the coal feedstock in a high-efficiency mixer the coal feedstock is fed continuously into the reactor ie the mixing apparatus by the conveyor and feeder system and the process reagent is fed at a controlled rate and is uniformly mixed with the feedstock to reduce viscosity the reagent is heated to 200e f to form an emulsion before it is fed into the reactor the concentration and rate of feed of the reagent for a given coal feedstock are determined in the laboratory prior to the processing the reagent dosage is sensitive to the coal rank particle size of the feedstock coal structure and the feed rate of the unprocessed material the active reagent in the process is quinoline and related nitrogen containing compounds only a small amount of quinoline is required to ensure that the reagent is distributed uniformly over the coal the quinoline is mixed into a much larger volume of a carrier in the past orimulsion a naturally occurring product has been imported and used as the carrier it was discovered that orimulsion had a variable composition for this reason use of orimulsion was discontinued in its place a domestically-produced commercially-available asphaltic emulsion is now used this is a product from the petroleum distillation process and it tends to have a more consistent composition the chemical reaction in the third step continues for hours partnership a represents that no heat or pressure is necessary for the chemical reaction to occur the process works equally well with low- and high-rank coals as well as waste coals including pond fines of coal ranks however the effects are most dramatic with pond fines and low-rank coals because of their high total moisture and oxygen content in addition the chemical reaction between the process reagent and coal feedstock causes the coal to become bonded bonding occurs without the use of traditional reforming equipment such as briquetting or pelletizing equipment to form a hard mass plr-114506-99 step four involves reforming the chemically altered output from the reactor to increase the ease of handling of the final product the output from the reactor is fed into a reforming apparatus to produce briquettes pellets or extrusions water rejected from the reformed synfuel is collected and drained step five involves conveying the synthetic_fuel to a curing pile where the desiccation non-thermal drying and agglomeration binding processes continue until completed in hours the desiccated synthetic_fuel can then be stored or shipped to customers without risk of spontaneous combustion partnership a represents that comparing coal samples before and after the process reveals significant chemical change the most significant changes occur in oxygen content moisture content and heating value ruling_request sec_29 of the code allows a credit for qualified_fuels sold by the taxpayer to an unrelated_person during the tax_year the production of which is attributable to the taxpayer the credit for the tax_year is an amount equal to dollar_figure adjusted for inflation multiplied by the barrel-of-oil_equivalent of qualified_fuels sold sec_29 of the code defines qualified_fuels to include liquid gaseous or solid synthetic fuels produced from coal including lignite including such fuels when used as feedstocks in revrul_86_100 1986_2_cb_3 the internal_revenue_service ruled that the definition of the term synthetic_fuel under sec_48 of the code and its regulations are relevant to the interpretation of the term under sec_29 former sec_48 provided a credit for the cost of equipment used for converting an alternate_substance into a synthetic liquid gaseous or solid fuel the ruling notes that both sec_29 and former sec_48 contain almost identical language and have the same overall congressional intent namely to encourage energy conservation and aid development of domestic energy production under sec_1_48-9 of the income_tax regulations a synthetic_fuel differs significantly in chemical composition as opposed to physical composition from the alternate_substance used to produce it coal is an alternate_substance under sec_1_48-9 based on the representations of partnership a including the preponderance of proffered data on the significant difference in the chemical composition of the fuel to be produced from that of the coal the fuel to be produced using the process will be a solid synthetic_fuel from coal within the meaning of revrul_86_100 and sec_1_48-9 of the regulations accordingly the process produces a qualified_fuel as defined in sec_29 of the code ruling_request plr-114506-99 sec_29 and f of the code provide that sec_29 applies with respect to qualified_fuels which are produced in a facility placed_in_service after date and before date and which are sold before date sec_29 of the code modifies sec_29 in the case of a facility producing qualified_fuels described in sec_29 which qualified_fuels include solid synthetic fuels produced from coal or lignite sec_29 provides that for purposes of sec_29 such a facility is to be treated as placed_in_service before date if the facility is placed_in_service before date pursuant to a binding written contract in effect before date sec_29 provides that if the facility is originally placed_in_service after date sec_29 is to be applied by substituting for the date therein date while sec_29 does not define placed_in_service the term has been defined for purposes of the deduction for depreciation and the investment_tax_credit property is placed_in_service in the taxable_year the property is placed in a condition or state of readiness and availability for a specifically assigned function sec_1_167_a_-11 and sec_1_46-3 of the regulations placed_in_service has consistently been construed as having the same meaning for purposes of the deduction for depreciation and the investment_tax_credit see revrul_76_256 1976_2_cb_46 revrul_94_31 1994_1_cb_16 concerns sec_45 which provides a credit for electricity produced from certain renewable resources including wind the credit is based on the amount of electricity produced_by_the_taxpayer at a qualified_facility during the 10-year period beginning on the date the facility was originally placed_in_service and sold by the taxpayer to an unrelated_person during the taxable_year revrul_94_31 holds that for purposes of sec_45 a facility qualifies as originally placed_in_service even though it contains some used_property provided the fair_market_value of the used_property is not more than percent of the facility’s total value the cost of the new property plus the value of the used_property revrul_94_31 concerns a factual context similar to the present situation consistent with the holding in revrul_94_31 the relocation of partnership a’s facilities after date will not prevent the relocated facilities from continuing to be treated as originally placed_in_service prior to date for purposes of sec_29 provided the fair_market_value of the used_property is more than percent of the relocated facility’s total fair_market_value at the time of the relocation accordingly based on the facts as presented by partnership a and partnership a’s authorized representative we conclude as follows partnership a with use of the process in the facilities will produce a plr-114506-99 qualified_fuel within the meaning of sec_29 of the code if partnership a’s facilities are placed_in_service prior to date within the meaning of sec_29 of the code relocation of a facility after date will not result in a new placed_in_service_date for the facility for purposes of sec_29 provided the fair_market_value of the used_property is more than percent of the relocated facility’s total fair_market_value at the time of the relocation except as specifically ruled upon above we express no opinion concerning the federal_income_tax consequences of the transaction described above specifically we express no opinion on when partnership a’s facilities were placed_in_service for purposes of sec_29 who the partners in partnership a are or how the partners' interests in partnership a are determined this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusions in the ruling see section dollar_figure of revproc_99_1 1999_1_irb_6 however when the criteria in section dollar_figure of revproc_99_1 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances in accordance with the power_of_attorney on file with this office the original of this letter is being sent to partnership a's first-named authorized representative and a copy is being sent to partnership a sincerely yours charles b ramsey branch chief branch office of assistant chief_counsel passthroughs and special industries


office_of_chief_counsel internal_revenue_service memorandum number release date cc psi b07 tcortright postn-114840-09 uilc date date to associate area_counsel detroit large mid-size business attn katy lin from branch chief branch passthroughs special industries subject application of sec_40 this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend taxpayer ---------------------------------------- taxable_year ---------- month a ------ month b --------- month c ----- month d --------------- month e -------------- a gallons -------------------------- b gallons ------------------------- postn-114840-09 c gallons ------------------------- d gallons ------------------------- e gallons ------------------------- f gallons ------------------------ g gallons ------------------------- gallons per month ----------------------------------------------------------------------------------------- --------------------------------------------------------------------- dollar_figure --------------- issue whether taxpayer’s facility had a productive capacity for alcohol in excess of big_number gallons during taxable_year for purposes of the small_ethanol_producer_credit under sec_40 of the internal_revenue_code the code conclusions taxpayer’s facility did not have a productive capacity for alcohol in excess of big_number gallons during taxable_year for purposes of the small_ethanol_producer_credit under sec_40 of the code facts based on the facts provided taxpayer is a calendar_year filer that owned one ethanol production facility facility in taxable_year the engineered boilerplate capacity of the facility was a gallons which is less than big_number gallons in month a of taxable_year taxpayer received from the environmental protection agency epa through the relevant state_agency responsible for regulating environmental quality a permit limit production capacity rating limiting taxpayer's ethanol production at the facility to b gallons which is less than big_number gallons taxpayer began production of ethanol in month b of taxable_year during taxable_year taxpayer produced a total of c gallons of ethanol its monthly production was gallons per month during the second quarter of the year after taxable_year taxpayer determined that its actual capacity at the facility could exceed both the a gallons engineered boilerplate capacity and the b gallons epa ethanol production capacity rating taxpayer applied for and received in month c of the year after taxable_year a revised epa permit limit postn-114840-09 production capacity rating limiting taxpayer's ethanol production to d gallons a number of gallons in excess of big_number gallons other than routine repairs and maintenance there were no upgrades at the facility during taxable_year or the year after taxable_year that would result in the increased capacity in month d of the year after taxable_year taxpayer filed its taxable_year tax_return and claimed a small_ethanol_producer_credit of dollar_figurefor e gallons of ethanol thus at the time taxpayer claimed the credit on its taxable_year return taxpayer had actual knowledge that its facility had a production capacity in excess of big_number gallons taxpayer did not claim a small_ethanol_producer_credit for the year after taxable_year taxpayer chose not to provide any additional facts or arguments for counsel review law and analysis sec_40 of the code allows in the case of an eligible_small_ethanol_producer the small_ethanol_producer_credit sec_40 provides that the small_ethanol_producer_credit of any eligible_small_ethanol_producer for any taxable_year is cents for each gallon of qualified_ethanol_fuel_production of such producer sec_40 provides that qualified_ethanol_fuel_production means any alcohol that is ethanol that is produced by an eligible_small_ethanol_producer and which during the taxable_year is sold for use or used by the producer in certain specified uses sec_40 limits the small_ethanol_producer_credit to big_number gallons for any taxable_year sec_40 provides that eligible_small_ethanol_producer means a person who at all times during the taxable_year has a productive capacity for alcohol not in excess of big_number gallons sec_40 provides that for purposes of the big_number gallon limitation of sec_40 and the big_number gallon limitation of sec_40 all facilities under common_control or ownership should be treated as one person sec_40 provides that the rules of sec_40 and sec_40 are applied at the entity level and at the partner level taxable_year was taxpayer's first year of operation at the facility during taxable_year taxpayer actually produced less than big_number gallons of ethanol during taxable_year taxpayer was limited by the epa permit limit production capacity rating to less than big_number gallons during taxable_year taxpayer was limited by the engineered boilerplate capacity to less than big_number gallons taxpayer realized during the second quarter of the year after taxable_year that its actual capacity could exceed the epa capacity the engineered boilerplate capacity and the statutory big_number gallon capacity limitation taxpayer knew this before it filed its taxable_year return and claimed the small_ethanol_producer_credit of dollar_figure however there is no evidence that taxpayer had actual knowledge at any point during taxable_year that its actual capacity could exceed the statutory big_number gallon capacity limitation for postn-114840-09 example during taxable_year taxpayer produced the most ethanol in month e with f gallons if taxpayer had produced f gallons each month during taxable_year f gallons x it would have produced g gallons which is less than the statutory limit thus during taxable_year despite its subsequent knowledge taxpayer did not have a productive capacity for alcohol in excess of big_number gallons if the conditions of sec_40 have also been met this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions


internal_revenue_service number release date index number --------------------------------------------------------- -------------------------------- ------------------------------ re ------------- ------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ----------------- telephone number -------------------- refer reply to cc psi plr-103761-15 date date legend decedent date spouse date --------------------------------------------- ----------------------- ----------------------- ------------------------ dear -------------------- this letter responds to your authorized representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a timely form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election it is represented that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of decedent’s death including taxable_gifts made during his lifetime plr-103761-15 you request an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 plr-103761-15 sec_6075 prescribes that returns made under sec_6018 relating to estate_taxes shall be filed within months after the date of the decedent’s death sec_6018 provides that in all cases where the gross_estate at the death of a citizen or resident exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death the executor shall make a return with respect to the estate_tax imposed by subtitle b of the code sec_6018 provides in part that the basic exclusion amount referred to in sec_6018 shall be reduced but not below zero by the sum of- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date sec_20_2010-2t a of the estate_tax regulations provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 sec_20_2010-2t a provides that an estate that elects portability will be considered for purposes of subtitle b and subtitle f of the code to be required to file a return under sec_6018 accordingly the due_date of an estate_tax_return required to elect portability is months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been obtained sec_20_2010-2t a provides that upon the timely filing of a complete and properly-prepared estate_tax_return an executor of an estate of a decedent survived by a spouse will have elected portability of the decedent’s dsue amount unless the executor chooses not to elect portability and satisfies the requirements for the election not to apply in sec_20_2010-2t a i sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin plr-103761-15 sec_301_9100-2 and sec_301_9100-3 provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain statutory and regulatory elections sec_301_9100-3 provides for an extension of time for making regulatory elections that do not meet the requirements for an automatic_extension of time under sec_301_9100-2 a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election sec_2010 sec_6075 and sec_6018 when construed jointly prescribe a due_date for electing portability for those estates required to file an estate_tax_return under sec_6018 accordingly with respect to those estates the portability election is a statutory election as defined in sec_301_9100-1 however when an executor is not required to file an estate_tax_return under sec_6018 the code does not specify a due_date for an estate_tax_return filed for the purpose of making a portability election rather the regulations under sec_20_2010-2t a which are applicable to all estates electing portability specify that the portability election must be made on a timely-filed form_706 accordingly with respect to estates not required to file an estate_tax_return under sec_6018 the portability election is a regulatory election as defined in sec_301_9100-1 it is represented that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly an extension of time of days from the date of this letter is granted in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed plr-103761-15 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely melissa c liquerman chief branch office of the associate chief_counsel passthroughs special industries enclosures cc