internal_revenue_service department of the treasury number release date index number 6050p washington dc person to contact telephone number refer reply to cc pa apjp b01 plr-106131-01 date date legend re bank parent purchaser purchaser program date year dollar_figuredear this letter responds to the letter dated date submitted on behalf of the bank requesting the following ruling the cancellation of a cardholder’s obligation to pay the balance pursuant to the occurrence of under the program does not constitute an event subject_to information_return reporting under sec_6050p of the internal_revenue_code facts based upon the facts submitted and the representations made bank purchaser and purchaser are subsidiaries of parent chartered on date bank makes loans to holders of credit cards issued by the bank to purchase goods and services bank’s fiscal_year ends on the bank uses the accrual_method of accounting purchaser purchases certain receivables from the bank at their face value and resells them to purchaser a bankruptcy remote entity at the same price purchaser transfers the customer receivables to a_trust in exchange for a transferor certificate and sells a small percentage of that interest to the bank which receives a participation_certificate purchaser has secured a portion of its interest in the trust in both public and private transactions that are treated as sales for financial reporting purposes and cc pa apjp b01 plr-106131-01 as loans for federal_income_tax purposes the interests in the public transactions are freely transferable while the interest in the private transaction is not during year the bank began offering cardholders the program a cardholder joins the program by entering into a contractual agreement with the bank according to the terms of the program the cardholder pays a fee at a rate of dollar_figure in exchange for the fee the bank agrees to cancel all or a portion of the cardholder’s account balance where the cardholder experiences the bank adds the fee to the cardholder’s monthly account balance upon the occurrence of one of the above stated events the cardholder must file a claim within days law and analysis sec_6050p of the internal_revenue_code requires that an applicable_entity report any discharges in whole or in part of indebtedness of any person in excess of dollar_figure in addition sec_1_6050p-1 of the income_tax regulations provides that a discharge_of_indebtedness occurs if one of the following identifiable events takes place a a discharge_of_indebtedness under title of the united_states_code bankruptcy b a cancellation or extinguishment of an indebtedness that renders a debt unenforceable in a receivership foreclosure or similar proceeding in a federal or state court as described in sec_368 other than a discharge described in paragraph b i a of this section c a cancellation or extinguishment of an indebtedness upon the expiration of the statute_of_limitations for collection of an indebtedness subject_to the limitations described in paragraph b ii of this section or cc pa apjp b01 plr-106131-01 upon the expiration of a statutory period for filing a claim or commencing a deficiency judgment proceeding d a cancellation or extinguishment of an indebtedness pursuant to an election of foreclosure remedies by a creditor that statutorily extinguishes or bars the creditor’s right to pursue collection of the indebtedness e a cancellation or extinguishment of an indebtedness that renders a debt unenforceable pursuant to a probate or similar proceeding f a discharge_of_indebtedness pursuant to an agreement between an applicable_financial_entity and a debtor to discharge indebtedness at less than full consideration g a discharge_of_indebtedness pursuant to a decision by the creditor or the application of a defined policy of the creditor to discontinue collection activity and discharge debt or h the expiration of the non-payment testing_period as described in paragraph b iv of this section out of the above identifiable events two events contain language that may apply to the current situation first sec_1_6050p-1 states that an identifiable_event exists where the creditor and debtor agree to discharge the indebtedness for less than full consideration to establish consideration there must be a performance or a return promise which has been bargained for by the parties restatement second contracts sec_71 in this case the bank offers to credit the cardholder’s account at the occurrence of if the cardholder pays a monthly fee in the amount of dollar_figure the cardholder accepts the offer and pays the monthly fee the payment of the fee constitutes full consideration for the bank’s promise therefore sec_1_6050p-1 of the income_tax regulations does not apply second sec_1_6050p-1 holds that a discharge_of_indebtedness exists where a creditor discontinues collection activity pursuant to a decision by the creditor or a defined policy of the creditor according to sec_1_6050p-1 a creditor’s defined policy includes both a written policy and the creditor’s established business practice however in this case neither a decision nor a policy triggers the cancellation of indebtedness the contractual agreement triggers the cancellation the agreement requires the bank to cancel the cardholder’s account balance upon the occurrence of thus sec_1_6050p-1 of the income_tax regulations does not apply cc pa apjp b01 plr-106131-01 conclusion based solely on the information provided and the representations made we therefore conclude that the cancellation of a cardholder’s obligation to pay the account balance pursuant to the occurrence of under the program does not constitute an identifiable_event under sec_1_6050p-1 of the income_tax regulations as a result the bank is not subject_to information_return reporting under sec_6050p of the internal_revenue_code this ruling is based on the facts presented and the applicable law in effect on the date of this letter if there is a change in material fact or law local or federal before the transactions considered in this ruling take effect the ruling will have no force or effect except as specifically ruled herein no opinion is expressed as to the federal tax treatment of any issue addressed in this ruling under other provisions of the internal_revenue_code and regulations that may be applicable pursuant to the power_of_attorney on file in this office the original of this letter is being sent to you as the bank’s authorized representative this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely pamela w fuller senior technician reviewer branch office of the assistant chief_counsel administrative provisions and judicial practice enclosures copy of this letter copy for sec_6110 purposes cc


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 plr-131130-10 date date legend parent taxpayer date1 date2 date3 date4 dear ------------- ------------------------------------------------ ------------------------------- ------------------------ ------------------------------------------ ------------------------------- ------------------------ ---------------------- -------------------------- ------------------ -------------------------- this letter responds to a letter dated date requesting the consent of the commissioner to file a consolidated_return under sec_1_1502-75 of the income_tax regulations additional information was received subsequently the material information submitted for consideration 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 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 plr-131130-10 facts on date1 a newly formed corporation parent acquired all of the stock of taxpayer the common parent of an affiliated_group_of_corporations within the meaning of sec_1504 of the internal_revenue_code the code parent’s only direct subsidiary has been taxpayer beginning with the taxable_year ending date2 parent has filed a consolidated_return as the common parent of an affiliated_group that included taxpayer and taxpayer’s affiliates the parent group parent is a holding_company with minimal or no activities of its own all operations are conducted by taxpayer or taxpayer’s affiliates as the result of a modification of preferred_stock of taxpayer and a decline in the value of its common_stock taxpayer and taxpayer’s affiliates deconsolidated from the parent group on date3 the deconsolidation however went undiscovered due to inadvertence until recently consequently parent continued to file consolidated_returns and included taxpayer and taxpayer’s affiliates as members of the parent group and neither taxpayer nor taxpayer’s affiliates filed separate returns parent has represented that on or before date4 parent will file amended returns for those taxable years for which the period of limitations on assessment has not expired to remove the income gain deduction loss and credit attributable to taxpayer and taxpayer’s affiliates ruling based solely on the information provided and the representations made we rule as follows the filing of a consolidated_return by taxpayer and taxpayer’s affiliated_group_of_corporations the taxpayer group beginning after the taxpayer group ceased to be members of the parent group is permitted sec_1_1502-75 caveat 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 procedural matters 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 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 plr-131130-10 requirement by attaching a statement to their return that provides the date and control number of the letter_ruling 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 t ian russell senior counsel branch office of associate chief_counsel corporate


internal_revenue_service appeals_office watt avenue sa sacramento ca number release date date certified mail dear department of the treasury employer_identification_number person to contact employee id number fax uil oot sdollar_figure this is a final adverse determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code the code sec_501 as an organization described in sec_501 we made the adverse determination for the following reasons organizations described in sec_501 on the internal_revenue_code and exempt from tax under sec_501 must be both organized and operated exclusively for exempt purposes you have failed to produce documents or otherwise establish that you are operated exclusively for exempt purposes and that no part of your net_earnings inure to the benefit of private shareholders or individuals your activities more than insubstantially further non-exempt purposes and you operate primarily for the benefit of private rather than public interests furthermore you fail the organizational_test for exemption because your articles of incorporation do not limit your activities to one or moré exempt purposes and your dissolution clause does not ensure that assets will be dedicated exclusively to the c purposes you're required to file federal_income_tax returns on forms u s_corporation income_tax return mail your form to the appropriate internal_revenue_service center per the form’s instructions you can get forms and instructions by visiting our website at www irs gov forms-pubs or by calling 800-tax-form we'll make this letter and the proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information we have provided to you in a separate mailing notice notice of intention to disclose please review the notice and the documents attached that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in either e e united_states tax_court the united_states court of federal claims the united_states district_court for the district of columbia you must file a petition or complaint in one of these three courts within days from the date we mailed this determination_letter to you contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory_judgment you can write to the courts at the following addresses united_states tax_court second street nw washington dc us court of federal claims madison place nw washington dc u s district_court for the district of columbia constitution ave n w washington dc note we will not delay processing income_tax returns and assessing any taxes due even if you file petition for declaratory_judgment under sec_7428 of the code please refer to the enclosed publication how to appeals an irs determination on tax -exempt status for more information about the appeals process you also have the right to contact the taxpayer_advocate_service tas tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs for tas assistance please contact the taxpayer_advocate for the irs office that issued this letter if you qualify for tas assistance which is always free tas will do everything possible to help you visit www taxpayeradvocate irs gov or call tas assistance is not a substitute for established irs procedures such as the formal appeals process tas cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court if you have any questions contact the person at the top of this letter sincerely appeals team manager enclosure publication how to appeal an irs determination on tax-exempt status department of the treasury internal_revenue_service irs p o box cincinnati oh legend b date of formation c state d individual e brand f organization g individual h type of company j dollars amount dear date oct employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issues do you qualify for exemption under sec_501 of the code no for the reasons described below facts you were incorporated on b as a non-profit corporation under c law your articles of incorporation are silent regarding your purpose but state that upon dissolution you will gift your assets to f a potential non-profit organization that you are planning as a spin off if f doesn’t exist you will gift your assets to a specifically named organization which is exempt under sec_501 of the code you submitted supplemental provisions to your articles of incorporation which were not filed with the state those provisions indicate that you are formed exclusively to promote the freedom of speech through outdoor broadcasts the provisions continue by stating that you are organized and operated exclusively for development and management of outdoor broadcast space educational and charitable purposes which qualify for exemption under sec_501 of the code your form_1023 states that you are dedicated to promoting free speech to this end you will develop and manage outdoor digital broadcast space specifically you will create e displays g is your president and ceo you state that g is a former billboard operator who is trying to get back into the outdoor advertising industry d the son of g plans to develop outdoor broadcast sites as one of your independent contractors you explained that like all operators he will have his own business that operates completely independently of you other than following your rules since your inception you have been leasing or gaining easements to place your displays and soliciting businesses to broadcast on the e displays you state these displays conflict with local ordinances statues that you believe are unconstitutional once a non-permitted model of free speech using e displays is created and defended then your activities will switch to solicitation of members of h companies and creation of a social movement to support your activities you will then become an overseer for the industry and provide validation and management services any business that wants to broadcast with you must adhere to the state rules and pay your membership fee members are contractually obligated to use every eleventh message on each display for non-profit use and will return a percentage of gross broadcast revenues to you you did not indicate anywhere in your application whether these non-profit organizations will be tax exempt or not once you are fully functional independent contractors will have the opportunity to fulfill sales of broadcast space and administrative functions for you rates will be commensurate with the industry and approved by your board independent contractors may earn percent of the contract they will develop broadcast sites that adhere to your rules and quotas you receive contracts from independent sites contracts will be open for public bid operators who do not convert their broadcasts to your standards will utilize percent of their display faces for non-profit use within ten years of membership and percent of their display faces within years for their converted billboards you receive broadcast space from independent_contractor members with excess funds distributed to other non-profits via a budget approval process again it was not stated whether the non-profits are exempt_organizations the property owned by g includes two lease locations for the e displays the rights to these display locations if developed as outdoor advertising displays would yield over j dollars each one percent of gross revenue from broadcast space will be returned to g for his existing leases trademarks and intellectual_property rights he will receive this income for his life and that of his immediate_family you will receive real properties easements and or leases in exchange for gross revenue which secures the right to develop broadcast sites on those properties currently you do not make payments for services however you intend to approve a clerical rate for services provided to you and a sales commission for services sold to businesses you said the going rate in the industry for sales commissions is ten percent of gross board members may be compensated for providing services to catalog number 47630w letter rev you an additional one percent is collected from everyone using the property for the individuals that facilitate bringing the property to the industry once you expand from your own displays to those of for-profit operators there may be additional legal challenges all independent contractors will have an equal opportunity to develop e displays under equal obligations to you you will seek independent contractors to fulfill sales of broadcast space and administrative functions at rates commensurate with the industry a one percent fee is in accordance with industry standards regarding an aggregator of contracts you are designed to be an aggregator of all digital displays of e independent operators and legacy billboard operators in the country by creating a national registry of outdoor displays the operators can increase their revenue and preserve the industry in accordance with reasonable rules and quota for development based on population rather than zoning business gets an organized assembly of digital broadcast sites the community gets public notices and noncommercial use of the displays your model is to create a standard for outdoor broadcasts that bypasses the permitting process in conjunction with a proven model that will evolve it is hoped that a social movement will create pressure to support the standard if the people support businesses that support the movement then everyone wins it is hoped that the government will respond by supporting the system through legislation non-profits and political candidates will benefit from free space on e displays or they can obtain broadcasts as a paid supporter non-profits will apply for broadcasts within an established radius all non-profits will have an opportunity to broadcast on e displays and they will be rotated through the list of non-profits to be broadcast from any given site during election periods free broadcast space for political candidates will be gifted to f the organization you plan to create as a spin off f is not currently a legal entity all candidates willing to adhere to f’s rules will receive broadcast space you will extend one or more e leases with a percent lease cost which will fund f you said that percent of the revenue will go to the landowner and percent will be donated to f once operational f will provide display space to all candidates who agree to a campaign expense cap that is percent less than the last campaign filed the expense caps continue to decrease until the people or the current candidates file to raise the cap local candidates will be required to represent constituents within the same geographic boundary as the display you submitted copies of your website pages your website includes details regarding your rules point system quotas pricing and application process you charge an application fee for an e as well as a membership fee to h companies the membership fee revenue will be used to sponsor and defend as necessary the two initial broadcast sites owned by g sponsoring businesses will have their sponsorship broadcast on the initial two sites once you are launched the membership fee will be increased by percent you plan to use quotas to control the number of displays in a geographic area based on population a point rating system will be used to keep value in the e sites by limiting space between them and providing adherence to safety while providing a harmonious environment between the public sponsors and your members businesses that sponsor broadcasts must review the point system to ensure that broadcasts will add productive marketing to the businesses as well as keep the value of the e system the independent e displays owned by property owners operators will be sponsored by businesses for their cost of development and upkeep of the non-profit broadcast faces you will be funded by membership fees and contracts with independent billboard operators excess funds will be distributed to community non-profits the expense of sponsoring each eleventh message free to non-profits letter rev catalog number 47630w and political candidates will be absorbed in the cost of the sponsorships for the remaining sponsors of the broadcast site one percent of gross revenue collected will be distributed back to the public through various games that bring awareness to the broadcast site law sec_501 of the code provides that corporations may be exempted from tax if they are organized and operated exclusively for charitable or educational_purposes and no part of their net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 provides that to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 provides that an organization is organized exclusively for one or more exempt purposes only if its articles of organization limit the purposes of such organization to one or more exempt purposes and do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities that in themselves are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 provides that an organization's assets must be dedicated to an exempt_purpose either by an express provision in its governing instrument or by operation of law sec_1_501_c_3_-1 provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 provides that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest and specifically that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests to meet this requirement it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests sec_1_501_c_3_-1 provides that the term charitable is used in sec_501 in its generally accepted legal sense and includes relief of the poor and distressed or of the underprivileged advancement of religion advancement of education or science erection or maintenance of public buildings monuments or works lessening of the burdens of government and promotion of social welfare by organizations designed to accomplish any of the above purposes or i to lessen neighborhood tensions ii to eliminate prejudice and discrimination iii to defend human and civil rights secured_by law or iv to combat community deterioration and juvenile delinquency revrul_73_285 1973_2_cb_174 states that freedom of religion is one of the fundamental freedoms guaranteed by the united_states constitution the first amendment to the constitution as made applicable to the states by the fourteenth amendment specifically forbids the states from enacting laws prohibiting the free letter rev catalog number 47630w exercise of religion therefore by providing funds for the defense of prosecutions which involve substantial constitutional issues of state abridgment of religious freedom the organization is promoting social welfare by defending human and civil rights secured_by law in 326_us_279 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy a claim for exemption regardless of the number or importance of truly exempt purposes in 70_tc_352 the court found that a corporation formed to provide consulting services did not satisfy the operational_test under sec_501 of the code because its activities constituted the conduct_of_a_trade_or_business that is ordinarily carried on by commercial ventures organized for profit its primary purpose was not charitable educational or scientific but rather commercial in addition the court found that the organization's financing did not resemble that of the typical sec_501 organizations it had not solicited nor had it received voluntary contributions from the public its only source_of_income was from fees from services and those fees were set high enough to recoup all projected costs and to produce a profit moreover it did not appear that the corporation ever planned to charge a fee less than cost and finally the corporation did not limit its clientele to organizations that were sec_501 exempt_organizations in 487_fsupp_801 aftr 2d dc nc the court stated that the organization’s activities were charitable and that the constitution recognizes the right to work as a human and civil right secured_by law therefore defense of this right was beneficial to the community and was charitable in nature in easter house v u s cl_ct affid 846_f2d_78 fed cir cert_denied 488_us_907 109_sct_257 102_led_246 the court found an organization that operated an adoption agency was not exempt under sec_501 of the code because a substantial purpose of the agency was a nonexempt commercial purpose the court concluded that the organization did not qualify for exemption under sec_501 because its primary activity was placing children for adoption in a manner indistinguishable from that of a commercial adoption agency the organization's sole source of support was the fees it charged adoptive parents rather than contributions from the public the court also found that the organization competed with for- profit adoption agencies engaged in substantial advertising and accumulated substantial profits accordingly the court found that the business_purpose and not the advancement of educational and charitable activities purpose of plaintiffs adoption service is its primary goal and held that the organization was not operated exclusively for purposes described in sec_501 application of law organizational_test your articles of incorporation do not include a clause limiting your purposes to one or more exempt purposes additionally your dissolution clause is too narrow as stated in sec_1_501_c_3_-1 and sec_1_501_c_3_-1 to demonstrate that it is organized exclusively for exempt purposes thus satisfying the organizational_test an organization must have a valid purpose clause and a valid dissolution clause you do not have a proper_purpose or dissolution clause therefore you are not organized for exempt purposes as described in sec_501 of the code letter rev catalog number 47630w operational_test you were formed primarily to develop and manage outdoor digital broadcast space for a fee you will operate your own billboards and maintain a network of independent operators with whom you contract these are not exclusively charitable educational or religious purposes consistent with sec_501 of the code or sec_1_501_c_3_-1 therefore you fail the operational_test the presence of a single non-exempt purpose if substantial in nature precludes exemption regardless of any valid exempt purposes as described in better business bureau you plan to engage in substantial non-exempt activities by providing outdoor digital advertising space to for-profit businesses and political candidates during election cycles while you do plan to provide free advertising space to non-profits it is not clear if these non- profits will be exempt_organizations even if the organizations are exempt the free space will constitute a minimal amount of the total display time available in addition your plans to distribute funds to community organizations is not a substantial activity accordingly you are not operated exclusively for one or more exempt purposes as described in sec_1_501_c_3_-1 and are not exclusively charitable as described in sec_1_501_c_3_-1 like the organizations in b s w group inc and easter house you are in direct competition with and your activities are almost indistinguishable from commercial billboard businesses your activities are neither exclusively charitable nor educational rather your activities further substantial non-exempt purposes you will pay a one percent fee to g for his and his immediate family’s lifetime for_the_use_of the two billboard locations sec_1_501_c_3_-1 provides that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest any benefit you provide to non-profits in the community or to the public is incidental providing g and his family with a percentage of your revenue with no stated limit provides a substantial private benefit and precludes exemption under sec_501 of the code you are unlike the organizations in revrul_73_285 and national right to work legal defense and education foundation the organizations in both cases provided funds or legal representation to protect the civil rights of individuals while the initial two billboards conflict with local ordinances statutes that you believe are unconstitutional your plans to operate a billboard network in a non-exempt manner overshadows any potential connection to the defense of freedom of speech any relationship to the defense of the right to freedom of speech is tenuous at best your position you referenced two court cases which involved the constitutionality of local ordinances regulating outdoor displays in one case it was determined by the court that a prohibitive ordinance would unconstitutionally restrict noncommercial use of display space in the second case the court indicated that before restricting free speech an authority must prove there is a value gained by the restriction both cases were remanded you believe these decisions create an opportunity for a non-profit to assert that they only intend to use the displays for partial use and that the remainder would enable commercial use local and state ordinances and statutes restrict billboards and the off-premise display of non-profit speech similar to what you are proposing since the displays restrict the use of public space you said it appears to be in violation of the precedents set in the referenced cases some local authorities have further restricted billboard use to the extent of denying all letter rev catalog number 47630w billboards you will specifically target overlapping jurisdictions where small prohibitive ordinances are subject_to challenge because they violate multiple precedents you said no one wants to support your idea but that everyone will win in the end if someone goes to the trouble of preserving the space in the name of the people then al will benefit the outdoor operators will have the ability to increase their revenue and preserve the industry in accordance with reasonable rules and quota for development based on population rather than zoning business gets a distributed and organized assembly of digital broadcast sites the community gets public notices and noncommercial use of the displays you went on to say that although everyone benefits no one wants to begin the process of change the people don’t really want outdoor displays but they are protected free speech outdoor operators have negotiated monopolies and reduced competition business is reluctant to create any activity which would challenge their standing in the communities they sell to and to the authorities which regulates their businesses our response to your position the two court cases you cited to support your position do not apply to this determination rather they related to the constitutionality of local ordinances we are not ruling on local ordinances regarding outdoor displays the determination being made here is whether you qualify as an organization described in sec_501 of the code creating outdoor digital displays in the manner described above furthers substantial non-exempt purposes and precludes exemption under sec_501 for the reasons described above conclusion based on the facts and information provided you are neither organized nor operated exclusively for exempt purposes within the meaning of sec_501 of the code you provide a substantial private benefit to g and his family your operation and management of digital billboards is a substantial non-exempt purpose therefore you are precluded from exemption under sec_501 if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with anexplanation of why you disagree including any supporting documents the law or authority if any you are relying on e e e e e the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative letter rev catalog number 47630w one of the following declarations e for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we’ll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we’ll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements letter rev catalog number 47630w you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements enclosure publication letter rev catalog number 47630w


internal_revenue_service number release date index number --------------------------------- ------------------------------ ------------------------------------------- in 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-123432-18 date april legend taxpayer spouse parent child x trust a_trust trust trust trust trust trust date date date date date date date date year year year ----------------------------- ------------------------------- ------------------- --------------------------------------------------------------------------------- --------------------------- -------------------------------------- --------------------------- ---------------------------------------------- ------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- ----------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------- -------------------------------------------------------------- -------------------------- --------------------------- --------------------------- ------------------------ ------------------------ ----------------------- --------------------------- ----------------------- --------------------------- ------- ------- ------- plr-123432-18 attorney accounting firm ----------------------------------- ---------------------------------------------- dear ---------------------- this letter responds to your authorized representative’s letter of date and subsequent correspondence requesting an extension of time under sec_2642 of the internal_revenue_code and sec_301 of the procedure and administration regulations to elect out under sec_2632 of the automatic allocation of generation- skipping transfer gst tax exemption facts the facts submitted and the representations made are as follows on date parent created trust a for the benefit of taxpayer article v of trust a provides that taxpayer shall have the testamentary power to appoint part or all of trust a property to the creditors of taxpayer’s estate article iv paragraph b grants taxpayer the power exercisable during life or by will to appoint trust a property for the benefit of taxpayer’s children born after date on date a date after date taxpayer created trust a_trust having gst tax potential in the same year on date taxpayer exercised the limited power provided in article iv paragraph b of trust a by directing that the amount of dollar_figurex be transferred to and held as part of trust 1’s principal by virtue of the existence of taxpayer’s general testamentary power to appoint trust a property taxpayer’s exercise of the limited power on date resulted in a taxable gift of dollar_figurex in year on date in year also a date after date taxpayer created and funded trust and trust both irrevocable trusts in the same year on date taxpayer created and funded trust and trust also irrevocable trusts each of trust sec_2 through provide for the payment to taxpayer of an annuity for a term of years and upon the earlier of the expiration of such term or taxpayer’s death for the payment of the remainder to trust trust has gst tax potential taxpayer survived the term in trust sec_2 through for gst tax purposes the estate_tax_inclusion_period etip with respect to trust and trust closed on date of year and with respect to trust and trust closed on date of year attorney provided taxpayer with legal and tax_advice in connection with the creation and funding of trust sec_1 through accounting firm was retained to prepare any necessary form sec_709 united_states gift and generation-skipping_transfer_tax return in joint discussions with attorney and members of accounting firm taxpayer was advised of the potential gst tax implications of the transfers with respect to trust taxpayer determined that trust would primarily benefit child and directed that plr-123432-18 no gst tax exemption was to be allocated to trust similarly with respect to trust sec_2 through taxpayer determined that trust sec_2 through would primarily benefit taxpayer spouse and children of taxpayer and spouse and directed that no gst tax exemption was to be allocated to trust sec_2 through for year accounting firm prepared and taxpayer and spouse timely filed form sec_709 reporting gift transfers not the subject of this ruling_request on these form sec_709 taxpayer and spouse consented to treat gifts as made one-half by each under sec_2513 however in preparing the year form sec_709 accounting firm failed to report the transfer to trust that resulted from taxpayer’s exercise of the power_of_appointment provided in trust a and failed to elect out of the automatic allocation of gst tax exemption to trust under sec_2632 further in preparing taxpayer’s year form_709 accounting firm failed to elect out of the automatic allocation of gst tax exemption under sec_2632 as of the close of the etips with respect to the year transfers to trust sec_2 through taxpayer represents that to date no taxable_distributions taxable terminations or any other events have occurred with respect to any of the trusts that would result in a gst tax_liability on the part of any of the trusts or their beneficiaries taxpayer requests an extension of time under sec_2642 and sec_301_9100-3 to elect out of the automatic allocation of gst tax exemption under sec_2632 with respect to the dollar_figurex transfer to trust taxpayer further requests an extension of time under sec_2642 and sec_301_9100-3 to elect out of the automatic allocation of gst tax exemption under sec_2632 with respect to the year transfers to trust sec_2 through law and analysis sec_2601 imposes a tax on every gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax imposed by sec_2601 is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption amount 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 plr-123432-18 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_2632 provides that if any individual makes an indirect_skip during such individual’s lifetime any unused portion of such individual’s gst_exemption shall be allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero sec_2632 provides that the term indirect_skip means any transfer of property other than a direct_skip subject_to the tax imposed by chapter made to a gst_trust sec_2632 provides that for purposes of sec_2632 an indirect_skip to which sec_2642 applies shall be deemed to have been made only at the close of the etip the fair_market_value of such transfer shall be the fair_market_value of the trust property at the close of the etip sec_2632 provides that an individual may elect to have sec_2632 not apply to an indirect_skip or any or all transfers made by such individual to a particular trust sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that a transferor may prevent the automatic allocation of gst_exemption elect out with respect to one or more prior-year transfers subject_to sec_2642 regarding etips made by the transferor to a specified trust or trusts one or more or all current-year transfers made by the transferor to a specified trust or trusts one or more or all future transfers made by the transferor to a specified trust or trusts and all future transfers made by the transferor to all trusts whether or not in existence at the time of the election out sec_26_2632-1 provides that to elect out the transferor must attach an election out statement to a form_709 filed within the time period provided in sec_26 b iii c in general the election out statement must identify the trust and specifically must provide that the transferor is electing out of the automatic allocation of gst_exemption with respect to the described transfer or transfers prior-year transfers that are subject_to sec_2642 and to which the election out is to apply must be specifically described or otherwise identified in the election out statement under sec_26_2632-1 to elect out the form_709 with the attached election out statement must be filed on or before the due_date for timely filing the form_709 for the calendar_year in which for a transfer subject_to sec_2642 the etip closes or for plr-123432-18 all other elections out the first transfer to be covered by the election out was made sec_2513 provides that a gift made by one spouse to any person other than his spouse shall be considered as made one-half by him and one-half by his spouse but only if at the time of the gift each spouse is a citizen or resident_of_the_united_states sec_2513 only applies if both spouses have signified their consent to the application of this section in the case of all such gifts made during the calendar_year by either while married to the other sec_2652 provides 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 such individual such gift shall be so treated for purposes of chapter under sec_26 a in the case of a transfer with respect to which the donor’s spouse makes an election under sec_2513 to treat the gift as made one-half by the spouse the electing spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor regardless of the interest the electing spouse is actually deemed to have transferred under sec_2513 the donor is treated as the transferor of one-half of the value of the entire property 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 or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an etip its value at the time of the close of the etip sec_2642 provides that for purposes of determining the inclusion_ratio if an individual makes an inter_vivos transfer of property and the value of such property would be includible in the gross_estate of such individual under chapter if such individual died immediately after making such transfer other than by reason of sec_2035 any allocation of gst_exemption to such property shall not be made before the close of the etip and the value of such property shall be determined under sec_2642 if such transfer is a direct_skip such skip shall be treated as occurring as of the close of the etip sec_2642 provides that for purposes of sec_2642 the term estate_tax_inclusion_period means any period after the transfer described in paragraph during which the value of the property involved in such transfer would be includible in the gross_estate of the transferor under chapter if he died sec_2642 provides generally 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 plr-123432-18 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 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 gst_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 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin 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 upon the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 are satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to file supplemental form sec_709 to elect out under sec_2632 of the automatic allocation rules of sec_2632 for plr-123432-18 the transfers to trust sec_1 through with respect to the dollar_figurex transfer to trust taxpayer should make the election on a supplemental form_709 for year and with respect to the year transfers to trust sec_2 through taxpayer should make the election on a supplemental form_709 for the year in which the etip closes year the forms should be filed with the internal_revenue_service center cincinnati ohio a copy of this letter should be attached to the supplemental form sec_709 a copy is enclosed for this purpose except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code including whether the retained annuity interest is a qualified_annuity_interest under sec_2702 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 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 sincerely associate chief_counsel passthroughs special industries by karlene m lesho karlene m lesho senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter cc


t c summary opinion united_states tax_court william l and audrey k trace petitioners v commissioner of internal revenue respondent docket no 11657-o0s filed date william l trace pro_se dustin m starbuck for respondent powell special_trial_judge this case was heard pursuant to the provisions of sec_7463 ' the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax the issue is whether petitioners are entitled to deduct the 10-percent additional tax on early subsequent section references are to the internal_revenue_code in effect for the year in issue - - distributions paid pursuant to sec_72 petitioners resided in milford virginia at the time they filed their petition the facts are not in dispute and may be summarized as follows petitioner william l trace received distributions in the amount of dollar_figure from a qualified_retirement_plan to which the additional tax dollar_figure under sec_72 applied petitioners do not dispute that the additional tax applied to the distributions or the amount of the additional tax petitioners contend however that they are entitled to a deduction on their federal_income_tax return in the amount of the additional tax under sec_164 the tax for which the deduction here is claimed arises under sec_72 sec_72 provides that if a taxpayer receives a distribution from a qualified_retirement_plan the taxpayer’s tax under this chapter shall be increased by an amount equal to percent of the portion of such amount which is includible in gross_income the chapter referred to in sec_72 pertains to income taxes sec_164 provides in pertinent part sec_164 general_rule --except as otherwise provided in this section the following taxes shall be allowed as a deduction for the taxable_year within which paid_or_accrued state and local and foreign real_property_taxes state_and_local_personal_property_taxes state and local and foreign_income_war_profits_and_excess_profits_taxes the gst tax imposed on income distributions the environmental_tax imposed by sec_59a in addition there shall be allowed as a deduction state and local and foreign taxes not described in the preceding sentence which are paid_or_accrued within the taxable_year in carrying_on_a_trade_or_business or an activity described in sec_212 relating to expenses for production_of_income sec_164 does not mention federal income taxes on the other hand sec_275 provides inter alia that no deduction shall be allowed for federal income taxes it is therefore clear that petitioners may not deduct the tax imposed by sec_72 see 464_f2d_358 3d cir affg tcmemo_1971_131 white v commissioner tcmemo_1979_6 petitioners claim that the instruction booklet forms and instructions they used in the preparation of their return is misleading putting aside the point that the statute is clear and is controlling the instructions to which petitioners refer clearly provides that a taxpayer may not deduct federal income taxes - - reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


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 psi b06 plr-144391-06 date date re request for extension of time to make the election not to deduct the additional first year depreciation p sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s9 s10 sec_11 a b c date1 date2 date3 sbse official --------------------------------------------------- dear ------------------ ------------------------------------------------- --------------------------------------------------- ----------------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------- -------------------------------------------------------------------- ------------------------------------------ ---------------------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------- ------- ------- --------------------------- --------------------------- --------------------------- this letter responds to a letter dated date submitted by p on behalf of itself and sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s8 s9 s10 and sec_11 hereinafter p sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 s8 s9 s10 and sec_11 will be collectively referred to as taxpayer requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election not to deduct the additional first plr-144391-06 year depreciation under sec_168 of the internal_revenue_code for all classes of qualifying property placed_in_service during the a b and c taxable years facts taxpayer represents that the facts are as follows taxpayer is a calendar year-end affiliated_group_of_corporations that is headed by p and that files consolidated federal_income_tax returns taxpayer is primarily engaged in the business of supplying clean water and treatment and disposal of waste water taxpayer timely filed its consolidated federal_income_tax return for the a taxable_year on date1 for the b taxable_year on date2 and for the c taxable_year on date3 on these returns taxpayer did not deduct the 30-percent additional first year depreciation for all qualified_property and the 50-percent additional first year depreciation for all 50-percent bonus_depreciation property placed_in_service during those taxable years however taxpayer inadvertently failed to attach the statement to elect not to deduct the additional first year depreciation ruling requested accordingly taxpayer requests an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election not to deduct the additional first year depreciation under sec_168 for all property that is placed_in_service during the a b and c taxable years and that qualifies for the additional first year depreciation law and analysis deduction for the taxable_year in which qualified_property is placed_in_service by a taxpayer sec_168 provides a 50-percent additional first year depreciation deduction for the taxable_year in which 50-percent bonus_depreciation property is placed_in_service by a taxpayer sec_168 provides a 30-percent additional first year depreciation sec_168 provides that a taxpayer may elect not to deduct the percent additional first year depreciation for any class of property placed_in_service during the taxable_year the term class of property is defined in sec_1_168_k_-1 of the income_tax regulations as meaning in general each class of property described in sec_168 for example 5-year_property sec_168 provides that a taxpayer may elect to deduct 30-percent instead of 50-percent additional first year depreciation for any class of property that is 50-percent bonus_depreciation property placed_in_service during the taxable_year if this election is made sec_1_168_k_-1 provides that the allowable additional first year plr-144391-06 depreciation deduction is determined as though the class of property is qualified_property under sec_168 sec_1_168_k_-1 further provides that a taxpayer may elect not to deduct both 30-percent and 50-percent additional first year depreciation for any class of property that is 50-percent bonus_depreciation property placed_in_service during the taxable_year sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made by the due_date including extensions of the federal tax_return for the taxable_year in which the property is placed_in_service by the taxpayer sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made in the manner prescribed on form_4562 depreciation and amortization and its instructions the instructions to form_4562 for the a b and c taxable years provided that the election not to deduct the additional first year depreciation is made by attaching a statement to the taxpayer’s timely filed tax_return indicating that the taxpayer is electing not to deduct the additional first year depreciation and the class of property for which the taxpayer is making the election under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in and to make a regulatory election sec_301_9100-1 through 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 elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of ' sec_301_9100-3 provides that requests for relief under ' 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 the grant of relief will not prejudice the interests of the government conclusions based solely on the facts and representations submitted we conclude that the requirements of and have been satisfied accordingly taxpayer is granted calendar days from the date of this letter to make the election not to deduct the additional first year depreciation under sec_168 for all property placed_in_service by taxpayer during the a b and c taxable_year that qualifies for the additional first year depreciation this election must be made by taxpayer by filing an amended consolidated federal tax_return for each of these taxable years with a statement indicating that taxpayer is electing not to deduct the additional first year depreciation for all property placed_in_service during that taxable_year plr-144391-06 except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provisions of the code specifically no opinion is expressed or implied on whether any item of depreciable_property placed_in_service during the a b and c taxable years is eligible for the additional first year depreciation deduction in accordance with the power_of_attorney we are sending copies of this letter to taxpayers authorized representatives we are also sending a copy of this letter to the sbse official this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely william p o’shea william p o’shea associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------------------- ----------------------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------ telephone number -------------------- refer reply to cc psi plr-109845-16 date date legend date grantor spouse trust state state child child trustee ------------------ ---------------------------------------------------------------------------------------- ---------------------------------------- ---------------------------------------------------------------------------------------- ----------------------------------------- ---------------------------------------------------------------------------------------- ----------------------------------------------------------------------------- --------- ------------ ------------------------------------ --------------------------------- ---------------------------- power_of_appointment committee ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- --------------------- x ----------------------------------- plr-109845-16 y -------------------------------- appointer --------------- dear -------------------- this responds to a letter dated date and subsequent correspondence requesting rulings under the internal_revenue_code facts the information and representations submitted are as follows on date grantors grantor and spouse created an irrevocable_trust trust for the benefit of grantors’ issue and charities beneficiaries trust is sited in state and pursuant to the trust agreement is governed by the laws of state a corporate trustee trustee is the sole trustee of trust grantors are married and reside in state a community_property_state trust provides that all transferred property to trust is community_property or will be transmuted into community_property moreover any and all property transferred to trust prior to the death of the first grantor to die predeceased grantor is and shall retain its character as community_property until the death of the survivor of grantors surviving grantor trustee may distribute to beneficiaries such amounts of the net_income or principal of the trust as the trustee determines any net_income not distributed by trustee will be accumulated and added to principal trust provides that at all times the trustees of all trusts created under trust must be independent trustees who are not members of grantors’ family independent_trustee is defined as any bank or individual who is not either of the grantors and who is not related or subordinate within the meaning of sec_672 of the internal_revenue_code to either of the grantors grantors’ family is defined to include grantors grantors’ issue the issue of each of the grantors’ grandparents and all charities as defined in the trust in addition the appointer acting in a fiduciary capacity may appoint to any one or more of the beneficiaries such amounts of the principal including the whole thereof as the appointer deems advisable the appointer cannot be related or subordinate as defined in sec_672 to either of grantors in addition to distributions to be made by the trustee and or appointer the power_of_appointment committee acting in a non-fiduciary capacity may distribute amounts of the net_income to any one or more of the beneficiaries as the power_of_appointment committee deems advisable any appointment by the power_of_appointment committee requires the written consent of the appointer plus a majority of the then plr-109845-16 serving members of the power_of_appointment committee plus the consent of either or both of the grantors grantor’s consent power trust provides that at all times the power_of_appointment committee must consist of at least two members the power_of_appointment committee shall cease to exist upon the first to occur of the date of death of the surviving grantor or the date on which the power_of_appointment committee is reduced to one member the power_of_appointment committee initially consists of x and y who are acting as guardians for child and child respectively as each minor child reaches his or her majority he or she becomes a member of the committee and his or her guardian ceases to serve on the committee each grantor has the power in a non-fiduciary capacity at any time and from time to time to appoint such amounts of principal including the whole thereof to any one or more of the beneficiaries as either deems advisable to provide for the health education maintenance or support of the beneficiaries grantor’s sole power grantors have consented to the exercise of grantor’s sole power by the other all distributions of the net_income and principal from trust to a beneficiary prior to the death of the predeceased grantor will be funded equally from grantors’ respective shares of community_property held in trust at the time of the death of the predeceased grantor you have represented that the predeceased grantor will have a one-half community_property interest in trust upon the death of the predeceased grantor trustee shall distribute the predeceased grantor’s entire_interest in any income accumulated and principal of trust to or for the benefit of any person or persons or entity or entities other than the predeceased grantor’s estate the predeceased grantor’s creditors or the creditors of predeceased grantor’s estate as the predeceased grantor may appoint by will predeceased grantor’s testamentary power upon the death of the predeceased grantor any property remaining of the predeceased grantor’s entire one-half interest in trust that has not been effectively appointed by will shall be distributed per stirpes to the grantors’ issue who are living or if none of the grantors’ issue are then living the trust property is to be divided into two equal parts the first part shall be distributed to the individuals and in the proportions that the property of the predeceased grantor would be distributed according to the applicable laws as if the predeceased grantor died intestate at that designated time domiciled in state unmarried and survived by no issue the second part shall be distributed to individuals and in the proportions that the property of surviving_spouse would be distributed according to the applicable laws as if surviving_spouse died intestate at that designated time domiciled in state unmarried and survived by no issue if none of the individuals designated as distributes is living the trust property is to be distributed to any one or more charities that trustee designates plr-109845-16 upon the death of the surviving grantor trustee shall distribute the balance of any accumulated income to or for the benefit of any person or persons entity or entities other than the surviving grantor’s estate the surviving grantor’s creditors or the creditors of the surviving grantor’s estate as the surviving grantor may appoint by will surviving grantor’s testamentary power upon the death of the surviving grantor any remaining property held in trust that has not been effectively appointed by will shall be distributed per stirpes to the grantors’ issue who are living or if none of the grantors’ issue are then living the trust property is to be divided into two equal parts the first part shall be distributed to the individuals and in the proportions that the property of the surviving grantor would be distributed according to the applicable laws as if the surviving grantor died intestate died intestate unmarried and survived by no issue the second part shall be distributed to individuals and in the proportions that the property of predeceased grantor would be distributed to according to the applicable laws as if predeceased grantor died intestate unmarried and survived by no issue if none of the individuals designated as distributes is living the trust property is to be distributed to any one or more charities that trustee designates no distribution by trustee to a beneficiary and distributions to a beneficiary pursuant to the exercise of a power_of_appointment granted hereunder shall discharge any individual’s legal_obligation to support the beneficiary you requested the following rulings no portion of the items of items of income deductions and credits against tax of trust shall be included in computing under sec_671 the taxable_income deductions and credits of grantors the contribution of property to trust by grantors will not be a completed_gift subject_to federal gift_tax the basis of all community_property in trust on the date of death of the predeceased grantor will receive an adjustment in basis to the fair_market_value of such property at the date of death of the predeceased grantor ruling law and analysis sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust plr-109845-16 there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_672 provides for purposes of subpart e the term adverse_party means any person having a substantial_beneficial_interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust sec_673 provides that the grantor shall be treated as the owner of any portion of a_trust in which the grantor has a reversionary_interest in either the corpus or the income therefrom if as of the inception of that portion of the trust the value of such interest exceeds five percent of the value of such portion sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to the powers described in sec_674 regardless of whom held sec_674 provides that sec_674 shall not apply to a power exercisable only by will other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to a power to distribute corpus to or for a beneficiary provided that the power is limited by a reasonably_definite_standard sec_674 provides that sec_674 shall not apply to a power exercisable without the approval or consent of any other person by a trustee or trustees none of whom is the grantor and no more than half of whom are related or subordinate parties who are subservient to the wishes of the grantor to distribute apportion or accumulate income to or for a beneficiary or beneficiaries or to for or within a class of beneficiaries or to pay out corpus to or for a beneficiary or beneficiaries or to a class of beneficiaries whether or not income beneficiaries plr-109845-16 under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant on its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both sec_677 provides in general that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor's spouse held or accumulated for future distribution to the grantor or the grantor's spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor's spouse based solely on the facts and representations submitted we conclude an examination of trust reveals none of the circumstances that would cause grantors to be treated as the owner of any portion of trust under sec_673 sec_674 sec_676 or sec_677 we further conclude that an examination of trust reveals none of the circumstances that would cause administrative controls to be considered exercisable primarily for the benefit of grantors under sec_675 thus the circumstances attendant on the operation of trust will determine whether grantors will be treated as the owner of any portion of trust under sec_675 this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office with responsibility for such examination ruling sec_2501 provides for the imposition of a gift_tax for each calendar_year on the transfer of property by gift during such calendar_year by any individual sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete as to any property or part thereof or interest therein with respect to which the donor has so parted with dominion and control as to leave the donor with no power to change the disposition of the property whether for the donor's own benefit or for the benefit of another but if upon a transfer of property whether in trust or otherwise the donor plr-109845-16 reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the facts in the particular case accordingly in every case of a transfer of property subject_to a reserved power the terms of the power must be examined and its scope determined sec_25_2511-2 provides an example where the donor transfers property in trust to pay the income to the donor or accumulate it in the discretion of the trustee and the donor retains a testamentary power to appoint the remainder among the donor's descendants the regulation concludes that no portion of the transfer is a completed_gift however if the donor had not retained a testamentary_power_of_appointment but had instead provided that the remainder should go to x or his heirs the entire transfer would be a completed_gift sec_25_2511-2 provides that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title to the property in himself or herself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard under sec_25_2511-2 a donor is considered as possessing a power if it is exercisable by the donor in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom a trustee as such is not a person having an adverse_interest in the disposition of the trust property or its income sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that if a donor transfers property to himself as trustee or to himself and some other person not possessing a substantial adverse_interest as trustees and retains no beneficial_interest in the trust property and no power over it except fiduciary powers the exercise or nonexercise of which is limited by a fixed_or_ascertainable_standard to change the beneficiaries of the transferred property the donor has made a completed_gift plr-109845-16 sec_25_2511-2 does not define substantial adverse_interest sec_25 b provides in part that a taker in default of appointment under a power has an interest that is adverse to an exercise of the power sec_25_2514-3 also provides that a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in 308_us_39 the taxpayer created a_trust for the benefit of named beneficiaries and reserved the power_to_revoke the trust in whole or in part and to designate new beneficiaries other than himself six years later in the taxpayer relinquished the power_to_revoke the trust but retained the right to change the beneficiaries in the taxpayer relinquished the right to change the beneficiaries the court stated that the taxpayer’s gift is not complete for purposes of the gift_tax when the donor has reserved the power to determine those others who would ultimately receive the property accordingly the court held that the taxpayer's gift was complete in when he relinquished his right to change the beneficiaries of the trust a grantor’s retention of a power to change the beneficial interests in a_trust causes the transfer to the trust to be incomplete for gift_tax purposes even though the power may be defeated by the actions of third parties 37_tc_897 see also 51_tc_352 in this case each grantor retained the grantor’s consent power over the income of trust this power is exercised in conjunction with the agreement of a majority of the power_of_appointment committee members and the appointer under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom the power_of_appointment committee members are not takers in default for purposes of sec_25_2514-3 they are merely coholders of the power under sec_25_2514-3 a coholder of a power is only considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in this case the power_of_appointment committee ceases to exist upon the death of the last grantors to die accordingly the power_of_appointment committee members do not have interests adverse to either grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 similarly the appointer does not have any beneficial_interest in the trust the appointer is not a taker in default the appointer is merely a coholder of the power who may not exercise his power after both grantors die in favor of himself his estate his creditors or the creditors of his estate accordingly the appointee does not have an interest adverse to either grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 plr-109845-16 the trustee has the power to distribute income to a beneficiary however the trustee’s power is not a condition_precedent to each grantor’s consent power each grantor’s consent power over income is presently exercisable and not subject_to a condition_precedent thus the trustee’s power to distribute income does not cause the transfer of property to be complete with respect to the income_interest in trust for federal gift_tax purposes therefore each grantor is considered as possessing the power to distribute income to any beneficiary himself or herself because he or she retained the grantor’s consent power each grantor also retained the power to appoint such amounts of principal including the whole thereof to any one or more of the beneficiaries grantor’s sole power under sec_25_2511-2 a gift is incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard in this case the grantor’s sole power gives each grantor the power to change the interests of the beneficiaries finally each grantor consented to allow the other grantor to exercise the grantor’s sole power alone even though each grantor’s power is limited by an ascertainable_standard ie health education maintenance and support grantors’ powers are not fiduciary powers the trustee and appointee in their fiduciary capacity also have the power to distribute principal to one or more beneficiaries trustee is a corporate trustee and under the terms of the trust instrument the appointee cannot be related or subordinated within the meaning of sec_672 to the grantors the powers of the trustee and appointer are not conditions precedent to the grantors powers each grantor’s sole power over principal is presently exercisable and not subject_to a condition_precedent accordingly each grantor retains dominion and control_over the principal of trust until either the trustee or the appointer exercises his or her power to appoint principal see 37_tc_897 thus the trustee’s and appointee’s powers to distribute principal do not cause the transfer of property to be complete with respect to the remainder in trust for federal gift_tax purposes accordingly the retention of grantor’s consent power and grantor’s sole power causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes further each grantor retained either a predeceased grantor’s testamentary power or the surviving grantor’s testamentary power depending on the order of the deaths of grantor and spouse to appoint property in trust to any person or persons or entity or entities other than his or her respective estate his or her respective creditors or the creditors of his or her respective estate under sec_25_2511-2 the retention of a testamentary power to appoint the remainder of a_trust is considered a retention of dominion and control_over the remainder accordingly the retention of this power causes the transfer of property to trust to be incomplete with respect to the remainder in trust for federal tax purposes plr-109845-16 accordingly based on the facts submitted and the representations made we conclude that the contribution of property to trust by the grantors’ will not be completed_gift subject_to federal gift_tax however any distribution made from trust to a beneficiary is a completed_gift at the time of the distribution made one-half by each grantor further upon either grantor’s death the fair_market_value of his or her interest in the property in trust is includible in his or her respective gross_estate for federal estate_tax purposes ruling sec_1014 provides in part that except as otherwise provided in this section the basis_of_property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent will if not sold exchanged or otherwise_disposed_of before the decedent’s death by such person be the fair_market_value of the property at the date of the decedent’s death sec_1014 provides that in the case of decedents dying after date property which represents the surviving spouse’s one-half share of community_property held by the decedent and the surviving_spouse under the community_property_laws of any state is considered for purposes of sec_1014 to have been acquired from or to have passed_from_the_decedent if at least one-half of the whole of the community interest in such property was includible in determining the value of the decedent’s gross_estate sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money or money’s worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2038 provides that the value of the decedent’s gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money or money’s worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the three-year period on the date of the decedent’s death plr-109845-16 grantor and spouse reside in state a community_property_state trust provides that all transferred property to trust is community_property or is being transmuted into community_property moreover any and all property transferred to trust prior to the death of the predeceased grantor is and shall retain its character as community_property as concluded above upon the death of each of grantor and spouse his or her respective interest in trust as either the predeceased grantor or the surviving grantor will be includible in his or her respective gross_estate for federal estate_tax purposes accordingly based upon the facts submitted and representations made we conclude that the basis of all community_property in trust on the date of death of the predeceased grantor will receive an adjustment in basis to the fair_market_value of such property at the date of death of the predeceased grantor except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion on the trust provisions permitting trustee to distribute income or principal to trustees of other trusts decanting or any other trust provisions not referenced in this provisions not referenced in this private_letter_ruling 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 copies of this letter are being sent to the taxpayer's authorized representative sincerely faith p colson faith p colson senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes