office_of_chief_counsel internal_revenue_service memorandum cc pa cbs b03 ------------- postn-111815-04------------- uilc date date to randall b pooler general attorney jacksonville criminal tax from joseph w clark number release date branch chief collection bankruptcy summons branch procedure administration subject fees and costs for witnesses this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent issues may a third party witness recover compliance costs for a third party summons in excess of the reimbursement amounts provided for in sec_7610 and sec_301_7610-1 when the third party uses an independent storage_facility to search reproduce and transport the summoned records conclusions sec_301_7610-1 provides specific reimbursement rates for a third party’s compliance costs that are necessary and directly related to compliance payments to an independent storage_facility to comply with a summons are deemed directly incurred by the summoned party and reimbursed as if the summoned party had retrieved the documents itself the regulation permits the service to reimburse a taxpayer at the following rates dollar_figure and hour for search costs dollar_figure a copy for general reproduction costs the actual amount for transportation costs the actual amount for copying film or photographs and the actual cost for computer searches for electronically stored files so long as the documents are normally produced in an electronic format the service should not reimburse the summoned party at a higher rate simply because the storage_facility charged a higher rate for its research reproduction and transportation costs postn-111815-04 facts the service served a summons on a bank pursuant to an investigation of an unrelated taxpayer the service initially limited the summoned production to monthly bank statements over a specified period the bank complied with the request after reviewing the statements the agent conducting the investigation determined that the service needed additional records and asked the bank for copies of specific items on the statements the bank indicated that the requested documents were stored at an independent storage company the bank estimated that under its contract with the storage company it would have to pay a substantial sum to comply with the summons given the rates established in the service’s reimbursement schedule for third-party’s summons compliance costs the bank would absorb a large portion of these actual compliance costs accordingly the bank requested assurances that the service would reimburse it for the total amount that the storage_facility billed the bank the service refused stating that it would only reimburse the bank for the storage facility’s research reproduction and transportation costs at the same rates it would reimburse the bank had the bank retrieved the records itself the bank insisted that it was entitled to full reimbursement for the amount the storage_facility billed the bank reasoning that the storage facility’s production of records fell under the definition of directly incurred costs that the bank was entitled to recover unless the service assures the bank it will pay the entire amount the bank indicated that it would not release the records law and analysis sec_7610 grants the service regulatory authority to establish reimbursement rates for costs reasonably necessary and directly incurred by third party witnesses when complying with the service’s requests for information pursuant to that authority the service adopted sec_301_7610-1 subsection a of that regulation provides that the service generally will not reimburse third parties for their actual compliance expenses rather third parties are reimbursed at the designated rates sec_301_7610-1 establishes rates for production pursuant to a summons subsection c establishes the general rules that payment will be made only for those costs that are both directly incurred and reasonably necessary it is assumed that the storage facility’s retrieval costs in your case are reasonably necessary sec_301_7610-1 defines directly incurred costs as costs incurred solely immediately and necessarily as a consequence of searching for reproducing or transporting records in order to comply with a summons they do not include a proportionate allocation of fixed costs such as overhead equipment depreciation etc however where a third party's records are stored at an independent storage_facility that charges the third party a search fee to search for reproduce or transport particular records requested these fees are considered to be directly incurred by the summoned third party postn-111815-04 since the storage facility’s search costs are by definition directly incurred costs as well as reasonably necessary they are recoverable by the summoned party at the rates established by the regulation sec_301_7610-1 establishes the following basic rates for retrieving documents search costs - dollar_figure per person hour reproduction costs - dollar_figure per page for copies of documents transportation costs - actual cost since sec_301_7610-1 only permits the service to reimburse the bank for its compliance costs at the above rates regardless of whether the bank or the third party storage_facility retrieves the documents the bank must provide an itemized breakdown of the third party storage facility’s search reproduction and transportation costs before they are entitled to payment furthermore the third party is only entitled to payment after the documents are produced sec_301_7610-1 production cannot be conditioned on an assurance of payment id we recommend that you inform the bank that reimbursement cannot be made at a rate higher than that provided for in the regulation if they fail to comply we recommend immediate referral of the summons for enforcement case development hazards and other considerations although the service is only required permitted to reimburse the bank at the rates established in the regulation we note that the tenth circuit upheld a lower court order requiring the service to pay a summoned party at a rate higher than that stated in sec_301_7610-1 u s v community bank and trust co 768_f2d_311 10th cir the tenth circuit reasoned that sec_7610 did not remove the court’s jurisdiction to review irs reimbursement rates id the court based its ruling on lines of cases that hold that courts are allowed to scrutinize modify and even refuse to enforce administrative summonses and to protect parties from burdens imposed by federal agencies id citing 420_us_141 95_sct_915 43_led_88 648_f2d_118 3d cir 693_f2d_994 10th cir and 584_f2d_1018 d c cir cer439_us_1071 99_sct_841 59_led_37 we agree with the tenth circuit that a court could refuse to enforce a summons on an unrelated third party if production would be extremely burdensome however because sec_301_7610-1 is a legislative_regulation the tenth circuit was wrong to adjust those rates as the supreme court recognized congress may either explicitly or implicitly delegate rule-making authority to an administrative agency 467_us_837 if congress has explicitly left a gap for the agency to fill there is an express delegation of authority to sec_301_7610-1 provides limited situations where different amounts may be recovered for each category of expense for example actual costs for computer time and necessary supplies may be recovered for computer searches if the information stored on the computer is normally produced in an electronic format postn-111815-04 the agency to elucidate a specific provision of the statute by regulation id pincite legislative regulations are given controlling weight unless they are arbitrary capricious or manifestly contrary to the statute id since the rates established by the service were neither arbitrary capricious nor manifestly contrary to the statute the tenth circuit should have upheld them --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ------------------------------------------------- this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions


internal_revenue_service number release date index no department of the treasury washington dc person to contact plr-131538-01 cc intl b01 telephone number refer reply to date date a date b country c dear this is in response to your letter dated date requesting a ruling under sec_877 of the internal_revenue_code_of_1986 code that a’s loss of u s citizenship will not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by penalty of perjury statements 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 the information submitted for consideration is substantially as set forth below a was a united_states citizen by naturalization a has been residing in country c since and relinquished his united_states citizenship on date b a has become a naturalized citizen of country c as have his wife and mother sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be taxed under sec_877 and the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal plr-131538-01 page purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former citizen or former long term-resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual’s average income_tax_liability or the individual’s net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen or former long term-resident whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 notice_98_34 requires that certain information be submitted with a request for a ruling that an individual’s expatriation did not have for one of its principal purposes the avoidance of u s taxes a submitted all the information required by notice_98_34 including any additional information requested by the service after review of the submission a’s net_worth exceeded the sec_877 amount on date b a is eligible to request a ruling because he is a long-term foreign resident sec_877 based solely on the information submitted and the representations made a has made a complete and good_faith submission in accordance with sec_877 however because the information submitted does not clearly establish either the existence or lack of a principal purpose to avoid taxes under subtitle a or b of the code no opinion is expressed as to whether a's expatriation had for one of its principal purposes the avoidance of such taxes while this ruling rebuts the presumption of tax_avoidance under sec_877 it is not conclusive as to whether a subsequently may be found to have a principal purpose of tax_avoidance under sec_877 sec_2107 and sec_2501 based on all the facts and circumstances see sec_877 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition no opinion is expressed as to a's u s tax_liability for taxable periods prior to his loss of permanent residence status or for taxable periods after his loss of permanent residence status under sections of the code other than sec_877 sec_2107 and sec_2501 plr-131538-01 page a copy of this letter must be attached to a’s u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to a’s representative sincerely yours w edward williams senior technical reviewer branch office of the associate chief_counsel international


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number tax_exempt_and_government_entities_division release number release date date date uil legend company country university program1 program2 foundation x dear this is in response to your letter in which you requested certain rulings with respect to sec_501 sec_170 and sec_511 background you are an organization described in sec_501 and classified as a public charity under sec_509 and sec_170 you were originally founded by company a for-profit company founded in country but company no longer maintains control_over you though its employees do constitute a minority of your board your mission is to contribute to human and economic development by educating and training individuals to be effective knowledge-based leaders in an increasingly interdependent global economy in addition to your programming in conjunction with university one of two primary programs you offer you also offer independent classes and seminars open to the general_public or to organizational clients seeking programs for its employees your other primary program is program1 a three month global business curriculum delivered at your facilities you are responsible for the admission policy candidate selection and tuition collection as well as choosing the instructors and curriculum for the program you are now hoping to alter the structure of program’ such that it will now be program2 program2 will be a three-plus month multi-network program that will be delivered twice a year on campuses in four countries program2 will be headquartered and managed by foundation a foreign non-profit organization that is controlled by company foundation’s employees will be mostly employees seconded from company students in program2 will spend six weeks of the program at your facilities where you will be responsible for the curriculum the professors the materials for each course and the grading of the students for the portion of the overall program that is conducted by you for these activities foundation will pay you dollar_figurex per student that is enrolled in the program the admission criteria student selection and tuition collection will all be handled by foundation rulings requested following the operational modifications outlined above you will continue to be exempt from taxation under sec_501 following the operational modifications outlined above you will continue to qualify as an educational_organization under sec_170 and therefore a public charity under sec_509 following the operational modifications outlined above amounts received by you from foundation in connection with program2 will not constitute unrelated_business_taxable_income under sec_511 law sec_170 describes an educational_organization that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on ilr c sec_501 provides that organizations may be exempted from tax if they are organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_509 states that an organization described in c is a private_foundation unless it is described in sec_170 sec_511 imposes a tax on unrelated_business_taxable_income of every organization described in sec_501 sec_512 defines unrelated_business_taxable_income as the gross_income derived from any unrelated_trade_or_business that is regularly carried on by an organization sec_513 defines unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need for income or funds or the use made of the profits derived to the exercise or performance by an organization of its charitable educational or other purpose or function constituting the basis for its exemption under sec_501 sec_1 b i defines educational_organization as one whose primary function is the presentation of formal instruction and which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on sec_1_501_c_3_-1 states an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes 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 defines educational as the instruction or training of the individual for the purpose of improving or developing his capabilities and the instruction of the public on subjects useful to the individual and beneficial to the community sec_1_501_c_3_-1 example states that an organization such as a primary or secondary school which has a regularly scheduled curriculum a regular faculty and a regularly enrolled body of students in attendance at a place where the educational activities are regularly carried on is an educational_organization sec_1_513-1 provides that for purposes of sec_513 the term trade_or_business has the same meaning it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services also producing or distributing goods or performing services from which a particular amount of gross_income is derived do not lose identity as trade_or_business merely because they are carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which may or may not be related to the exempt purposes of the organization sec_1_513-1 provides that specific business activities of an exempt_organization will ordinarily be deemed to be regularly carried on if they manifest a frequency and continuity and are pursued in a manner generally similar to comparable commercial activities of nonexempt organizations sec_1_513-1 provides that a trade_or_business is related in the relevant sense only where the conduct of the business activities has causal relationship to the achievement of exempt_purpose and the relationship to be substantial the performance of the trade_or_business must contribute importantly to the accomplishment of the organization’s exempt_purpose sec_1_513-1 provides that in determining whether an activity contributes importantly to the accomplishment of an exempt_purpose the size and extent of the activities involved must be considered in relation to the nature and extent of the exempt_function which the organization purports to serve revrul_73_434 1973_2_cb_71 describes an organization whose only activity was the conducting of courses designed to teach young people how to survive in a natural environment the courses are conducted on an island and most of the classes are conducted out-of-doors rather than in classrooms a regularly enrolled student body attends the courses the organization conduct sec_12 courses a year and each class term lasts for a period of days the organization has a faculty of full-time instructors who present a course of instruction in survival skills through lectures demonstrations and various practical exercises instruction is given in such subjects as water survival seamanship first aid fire fighting climbing and rescue operations the organization's income is from contributions and tuition payments and its expenditures are for the operation of the school the ruling concludes that this organization is an educational_organization described in sec_170 analysis ruling sec_1 and in order to be operated for an exempt_purpose you must not have as part of your operations a substantial non-exempt purpose sec_1_501_c_3_-1 your primary purpose is educational education is an exempt_purpose and is defined in the internal_revenue_code as the instruction or training of individuals for the purpose of improving or developing an individual’s capabilities sec_1_501_c_3_-1 additionally the examples in the regulations provide that an educational_organization is an organization similar to a primary or secondary school a college or a professional or trade school which has a regularly scheduled curriculum a regular faculty and a regularly enrolled body of students in attendance at a place where the educational activities are regularly carried on sec_1_501_c_3_-1 example your new program program2 anticipates continuing your mission for global learning in order to create knowledge-based leaders the program will consist of traditional in- person classes where one of your instructors will teach a curriculum determined by you in order to advance the student’s leadership and management skills program2 furthers your educational purpose program2 does not alter your similarity to the organization described in sec_1_501_c_3_-1 example in that you will continue to be an organization described in sec_170 sec_170 requires that an organization be one where its primary function is the presentation of formal instruction and which normaily maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on sec_1 b i in addition to your other educational programs program2 will provide formal courses taking place within a classroom with all participants present in a building rented by you you are in charge of the curriculum instructors and grading for the portion of program2 that will occur at your facilities additionally the instructors for your courses are your employees also admission to the program will be open to the general_public and students will enroll for the entire program requiring attendance at each session the fact that the students only participate in your section of the program for six weeks and complete the entire program over four countries does not remove you from being described in sec_170 revrul_73_434 supra with the addition of program2 you will continue to be described within sec_170 ruling sec_512 provides that unrelated taxable_income is the gross_income from an unrelated_trade_or_business as defined in sec_513 sec_513 provides that an unrelated_trade_or_business is any trade_or_business that is actively carried on and is not substantially related to the exempt_purpose of the organization the regulations under sec_513 provide that a trade_or_business is an activity that is carried on for the production_of_income and which otherwise possesses the characteristics required to be a trade_or_business under sec_162 sec_1_513-1 a trade_or_business does not lose its character as such even if id a trade_or_business will be considered to be regularly carried on if it manifests a frequency and continuity and is pursued in a manner similar to comparable commercial activities of non- exempt_organizations sec_1_513-1 finally a trade_or_business will be considered to be substantially related only where the conduct of the business activities has a causal relationship it is an aggregate of some larger activity to the achievement of exempt_purpose and for the relationship to be substantial the performance of the trade_or_business must contribute importantly to the accomplishment of the organization’s exempt_purpose sec_1_513-1 program2 will be conducted as a portion of a larger program conducted by foundation in return for the portion of the program under your control you will be compensated by foundation per each student that is enrolled in the program even if we consider your program to be a regularly carried-on trade_or_business within the meaning of sec_513 you are not conducting an unrelated_trade_or_business since program2 is substantially related to your educational purpose your mission is to provide a global perspective within creating knowledge-based leadership program2 will further this exempt_purpose by providing a traditional educational program with a curriculum designed by you and taught by your instructors since program2 furthers your exempt_purpose the money received in the performance of program2 is not unrelated_business_taxable_income sec_1_513-1 and ruling following the operational modifications outlined above you will continue to be exempt from taxation under sec_501 following the operational modifications outlined above you will continue to qualify as an educational_organization under sec_170 and therefore a public charity under sec_509 following the operational modifications outlined above amounts received by you from foundation in connection with program2 will not constitute unrelated_business_taxable_income under sec_511 this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make if you disagree with our proposed available for public inspection is attached to notice deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described specifically this ruling does not address any private benefit concerns that may be present with your operations because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely ronald shoemaker manager exempt_organizations technical group enclosure notice


internal_revenue_service department of the treasury index no washington dc number info release date dear person to contact sean m dwyer id no telephone number refer reply to cc ita - cor-114233-01 date date this letter responds to your letter dated date inquiring about the availability of head_of_household filing_status for unmarried co-habitants while it is the policy of this office to refrain from commenting on constitutional or state law issues we are pleased to provide the following general information regarding the requirements for head_of_household filing_status and dependency_exemptions under federal tax law the rules for head_of_household filing_status and for dependency_exemptions are related in that head_of_household filing_status involves an individual who is the taxpayer’s dependent but not every dependent qualifies the taxpayer for the head_of_household filing_status there is a five-part test to determine is an individual is a dependent the elements of this test are found in sec_151 and sec_152 briefly the individual must be sufficiently related to the taxpayer or be a member of the taxpayer’s household the individual must be a citizen or a resident of the u s the individual must not have filed a joint_return with another taxpayer the individual must have gross_income less than dollar_figure finally the individual must have received more than half his support from the taxpayer these rules are explained more thoroughly by publication exemptions standard_deduction and filing information which is enclosed under the first requirement an individual must either be sufficiently related to the taxpayer or be a member of the taxpayer’s household so an individual unrelated to the taxpayer may be a dependent under sec_152 if his or her principal_place_of_abode is the taxpayer’s home and he or she is a member of the taxpayer’s household sec_152 provides that an individual is not a member of the taxpayer’s household if the relationship between such individual and the taxpayer violates local law if an individual qualifies as your dependent you may be entitled to an exemption under sec_151 unless an exemption for such individual may be claimed by another taxpayer an individual may qualify for the head_of_household filing_status under sec_2 if such individual is not married at the close of his taxable_year is not a surviving_spouse and maintains as his home a household which constitutes the principal_place_of_abode of any person who is a dependent of the taxpayer under sec_151 cor-114233-01 however sec_2 provides that a taxpayer shall not be considered to be a head_of_household by reason of an individual who would not be a dependent but for sec_152 as stated above sec_152 permits an individual who is not related to the taxpayer to qualify as a dependent if the other elements of the test are satisfied thus even if an unrelated_person is the taxpayer’s dependent the taxpayer may not use head_of_household filing_status if the unrelated_person is the only other person in the household i hope this information is helpful please call sean dwyer at the number above if you have any questions enclosure sincerely associate chief_counsel income_tax accounting by george baker assistant to branch chief branch


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp plr-127310-00 date date distributing sub sub sub sub controlled controlled sub controlled sub controlled sub merger sub business a business b date m n o p state r this letter responds to your date in which rulings were requested as to the federal_income_tax consequences of a proposed transaction additional information was submitted in letters dated march march april may may may and date the information submitted for consideration is summarized below distributing is an accrual basis state r corporation and the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return distributing is indirectly engaged through its direct and indirect subsidiaries in business a distributing wholly owns sub sub and sub sub wholly owns sub sub sub and sub are engaged directly in business a as of date distributing had outstanding m shares of a single class of voting common_stock the distributing common_stock which is widely held and publicly traded on a national exchange attached to each share of distributing common_stock are purchase rights entitling the holder thereof to a right to purchase distributing stock at less than market_value under certain circumstances as a means of responding to unsolicited offers to acquire distributing the distributing rights controlled is an accrual basis state r corporation controlled is indirectly engaged through its direct subsidiaries in business b controlled wholly owns controlled sub controlled sub and controlled sub each of which is directly directly engaged in business b as of date controlled had outstanding n shares of a single class of voting common_stock controlled common_stock distributing owns o shares of controlled common_stock representing p an amount less than of the vote and value of controlled the historic shares the remaining controlled stock is publicly held attached to each share of controlled common_stock is a purchase right the controlled rights similar to the distributing rights financial information has been received which indicates that distributing's business a and controlled's business b each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years business a and business b are substantially different businesses and their present relationship creates managerial systemic and other problems that can be resolved only through a separation of those two businesses thus the management of distributing has decided to separate business a and business b to accomplish this separation distributing proposes the following series of transactions i the historic shares will be converted into a new class of shares of controlled common_stock the class b controlled common_stock as follows a distributing will form a new state r corporation the merger sub b distributing will transfer the historic shares to merger sub in exchange for all of the merger sub stock and c merger sub will merge with and into controlled in exchange for the issuance of class b controlled common_stock to distributing on a share-for-share basis altogether the recapitalization the controlled common_stock other than the historic shares will remain issued and outstanding following the recapitalization the class b controlled common_stock will have the right to elect at least of controlled’s board_of directors and will represent o of the fair_market_value of controlled ii distributing will distribute the class b controlled common_stock pro_rata to the distributing shareholders the distribution in lieu of distributing fractional shares of class b controlled common_stock the distribution agent will aggregate all such share interests sell the aggregated shares and remit the proceeds to the distributing shareholders entitled to fractional shares the taxpayer has made the following representations with respect to the transactions described in subparagraph i above a the fair_market_value of the controlled stock held by each controlled shareholder immediately following the recapitalization will approximately equal the fair_market_value of the controlled stock held by such shareholder immediately before the recapitalization b controlled is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 c the management of controlled has no plan or intention to and for a period of five years beginning on the date of the distribution will not propose or support any plan or recapitalization or amendment to controlled's organic documents or other action providing for i the conversion of shares of any class of controlled stock into a different class of controlled stock ii any change in the absolute or relative voting rights of any class of controlled stock from the rights existing at the time of the distribution iii any change in the manner of election or duties and responsibilities of the controlled board_of directors from those existing at the time of the distribution or iv any_action having an effect similar to i ii or iii d the recapitalization is a single isolated transaction and is not part of a plan to periodically increase the proportionate interest of any shareholder in the assets or earnings_and_profits of controlled the taxpayer has made the following representations with respect to the transactions described in subparagraph ii above f no part of the consideration to be distributed by distributing will be received by a distributing shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing g the indebtedness owed by controlled to distributing after the distribution if any will not constitute stock_or_securities h the five years of financial information submitted on behalf of the active businesses of distributing and controlled represents the present operations of each business and with regard thereto there have been no substantial changes since the date of the last financial statements submitted i immediately after the distribution the gross assets of business a directly conducted by sub sub and sub and the gross assets of business b directly conducted by controlled sub controlled sub and controlled sub will each have a fair_market_value of at least of the total fair_market_value of each corporation’s respective gross assets j immediately after the distribution at least of the fair_market_value of the gross assets of distributing sub and controlled will each consist of the stock and securities of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 k following the distribution distributing and controlled through their wholly owned subsidiaries will each continue the active_conduct of its business independently and with its separate employees l the distribution is being carried out for the corporate business_purpose of alleviating certain fit and focus problems that currently threaten the optimal development of business a and business b the distribution is motivated in whole or substantial part by this corporate business_purpose m there is no plan or intention by any shareholder who own sec_5 or more of the stock of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of either distributing or controlled after the distribution n there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the distribution other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 o there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the distribution except in the ordinary course of business p distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the distribution q no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution except for any indebtedness incurred pursuant to any indemnification payments under a tax_sharing_agreement r immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations s payments made in connection with all continuing transactions between distributing and controlled if any will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length t the distributing rights and the controlled rights are each of the type described in revrul_90_11 1990_1_cb_10 u cash distributed in lieu of fractional shares will be provided through a sale by a distribution agent of aggregated fractional shares of class b controlled common_stock the sale of fractional shares i is merely a method of rounding off fractional share interests ii is undertaken solely for the purpose of avoiding the expense and inconvenience of issuing and transferring fractional shares and iii does not represent separately bargained for consideration the method used for handling fractional share interests is intended to limit the amount of cash received by any one shareholder to less than the value of one full share of class b controlled common_stock v the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing or more of the total combined voting power of all classes of stock of either distributing or controlled entitled to vote or stock possessing or more of the total value of all classes of stock of either distributing or controlled based solely on the information submitted and the representations set forth above we rule as follows the recapitalization will be treated as an exchange by distributing of its shares of controlled common_stock for shares of class b controlled common_stock and will qualify as a reorganization defined in sec_368 controlled will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by controlled on the issuance of shares of class b controlled common_stock in the recapitalization sec_1032 no gain_or_loss will be recognized by distributing upon the exchange of its shares of controlled common_stock for shares of class b controlled common_stock sec_354 the basis of the shares of class b controlled common_stock received by distributing will equal the basis of its shares of controlled common_stock surrendered in exchange therefor sec_358 the holding_period of the shares of class b controlled common_stock received by distributing will include the period during which distributing held its shares of controlled common_stock surrendered in exchange therefor sec_1223 no gain_or_loss will be recognized by distributing on the distribution of the class b controlled common_stock to the distributing shareholders sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of the distributing shareholders on their receipt of the class b controlled common_stock sec_355 the aggregate basis of the distributing common_stock and the class b controlled common_stock held by each distributing shareholder will equal the aggregate basis of such shareholder's distributing common_stock immediately before the distribution allocated between the distributing common_stock and the class b controlled common_stock in proportion to the fair market values of each in accordance with sec_1_358-2 sec_358 and b the holding_period of the class b controlled common_stock received by each distributing shareholder will include the holding_period of the distributing common_stock on which the distribution is made provided that such distributing common_stock is held as a capital_asset on the date of the distribution sec_1223 as provided in sec_312 proper adjustment of the earnings_and_profits of distributing and controlled will be made in accordance with sec_1_312-10 if a distributing shareholder receives cash as the result of an independent distribution agent's sale of a fractional share of class b controlled common_stock gain_or_loss will be recognized by the shareholder measured by the difference between the basis of the fractional share interest and the amount of cash received if the fractional share interest is a capital_asset in the hands of the shareholder the gain_or_loss will be capital_gain or loss subject_to the provisions and limitations of subchapter_p of chapter of the code sec_1221 and sec_1222 no opinion is expressed about the tax treatment of the transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated the rulings contained in this letter are predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by the appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as part of the audit process pursuant to the power_of_attorney on file in this office a copy is being sent to the taxpayer sincerely associate chief_counsel corporate by michael j wilder senior technician reviewer branch


internal_revenue_service department of nee ot washington dc person to contact telephone number terry date jun uics i legend company a state b partnership c individual d individual e individual f federal_agency g plan xx settlement y court z consent order aa month date sec_2 month month date date date amount amount amount number gentlemen this is in response to the authorized representative in which you request several letter rulings under sec_162 sec_401 sec_402 sec_404 sec_415 and sec_4972 of the internal_revenue_code the following facts and representations support your ruling_request request for letter_ruling submitted on your behalf by your company a which has its principal office in state b adopted plan x effective date plan x is a defined_contribution_plan that provides for elective_deferrals under sec_401 of the internal_revenue_code and for discretionary employer contributions which your authorized representative asserts is qualified within the meaning of code sec_401 and its trust exempt from tax pursuant to code sec_501 a during month individual d the president of company a individual e the vice president of company a and individual f the director of finance of company a acting as management of company a directed the trustee of plan x to purchase number units of partnership c for a total cost of amount payable in eight installments over seven years plan x paid a total of amount which was less than amount prior to determining that the purchase was not economically feasible on one of the dates referenced in date sec_2 federal_agency g commenced an audit of plan x which resulted in its filing suit against company a with court z the suit alleged that company a individual d individual e and individual f breached their fiduciary duty with respect to plan x by purchasing units of partnership c for plan x the suit also indicated that company a was the administrator of plan x and that individuals d e and f were members of the plan x investment committee after discovery during month the parties to the above-referenced suit agreed to a settlement settlement y in which company a would make a restorative payment in the amount of amount to plan x on or before date amount is less than amount the settlement provided that amount would be credited on a pro_rata basis to the accounts of individuals who were plan x participants on date and who had interests in partnership c in their plan x account balances count z approved the settlement referenced above on the first day of month by entering consent order aa consent order aa provided in pertinent part that the amount restorative payment wouid be allocated on a pro_rata basis to the individual accounts of individuals who were plan participants on date consent order aa further provided that individuals d e and f were not to have any portion of amount allocated to their plan x accounts the amount restorative replacement payment has been made to plan x based on the above facts and representations you through your authorized representative request the following letter rulings 2d that the restorative replacement payment described above will not constitute a contribution or other payment subject_to the provisions of either code sec_404 or code sec_4972 will not adversely affect the qualified status of plan x pursuant to either code sec_401 or code sec_415 did not when made to plan x result in taxable_income to affected plan x participants or beneficiaries and will be deductible in full by company a pursuant to code sec_162 sec_404 of the code generally provides that contributions paid_by an employer to or under a plan if otherwise deductible are deductible under sec_404 subject_to the limitations under a sec_401 of the code generally provides that the contributions or benefits provided under a qualified_plan may not discriminate in favor of highly compensated employees whether or not contributions under a defined_contribution_plan are discriminatory is generally determined by comparing the amount of contributions allocated to accounts of highly compensated employees with the amount of contributions allocated to the accounts of nonhighly compensated employees sec_415 of the code generally limits the amount of contributions and other additions under a qualified defined contribution pian or tax deferred_annuity plan with respect to a participant for any year sec_4972 of the code imposes a ten percent excise_tax on the amount of the nondeductible_contributions made to any qualified_employer pian including a plan qualified under sec_401 on an employer an excise_tax on nondeductible_contributions to a qualified_plan sec_402 of the code generally provides that any amount actually distributed to any distributee by an employees’ trust described in sec_401 which is exempt from tax under sec_501 shall not be taxable to a participant until actually distributed to the participant generally amounts contributed to a qualified_retirement_plan are subject_to code sec_401 a and however payments to a defined_contribution_plan are not so subject if they are made by the employer in order to restore value to the plan that was lost due to actions which place the employer under a reasonable risk of liability for breach of fiduciary duty payments to a plan made by an employer pursuant to a department of labor order or to a court-approved settlement to restore lost value would generally be treated as restorative payments and not subject_to the code sections cited above however in general payments made by an employer to a plan to make up for lost value due to general market fluctuations would not be treated as restorative payments also payments made by an employer to a plan which result in different treatment for similarly situated plan participants would not be treated as restorative payments a determination as to whether plan payments in other circumstances may be treated as restorative payments will be based on all the facts presented as indicated above the restorative payment in this case was made by company a in response to the court z approved settlement of a suit filed against it by federal_agency g furthermore the restorative payment which company a made to plan x referenced above was allocated in a pro_rata manner as a result it both ensured that all of the affected participants in plan x recovered a portion of their account balances arid also placed them in a position similar to that in which they would have been in the absence of the actions referenced above in which plan x and individuals d e and f allegedly breached their fiduciary responsibility with respect to plan x by purchasing units of partnership c thus based on the facts and circumstances present in this case the service has determined that the payment made by company a constituted a restorative payment thus based on the above we conclude as follows with respect to your first three ruling requests that the restorative payment described above _ will not constitute a contribution or other payment subject_to the provisions of either code sec_404 or code sec_4972 will not adversely affect the qualified status of plan x pursuant to either code sec_401 or code sec_415 and did not when made to plan x result in taxabie income to affected plan x participants or their beneficiaries with respect to your fourth ruling_request code sec_162 provides that there shall be allowed as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business in general payments made in settlement of lawsuits or potential lawsuits are deductible if the acts that give rise to the litigation were performed in the ordinary conduct of the taxpayer's business see eg revrul_78_210 1978_1_cb_39 and rev rui 1969_2_cb_22 also see 276_us_145 vil-2 c b in which the taxpayer claimed entitlement to deduct dollar_figure in attorney fees as a business_expense because they were incurred to defend a lawsuit brought by a former partner for an accounting the court held the attorney fees deductible because the lawsuit proximately resulted from the taxpayer's business to determine whether the acts that gave rise to the litigation were ordinary thus giving rise to deductibie payments one must look to the origin and character of the claim with respect to which a settlement is made rather than to the claim's potential consequences on the taxpayer's business operation see 397_us_580 397_us_572 and 427_f2d_429 7th cir cert_denied 401_us_908 see also 372_us_39 in which the court held that the origin and character of the claim with respect to which an expense was incurred is the controlling test of whether the expense was a deductible business_expense the deductibility of an expense depends not on the consequences that may or may not result from the payment but on whether the claim arises in connection with a taxpayer's business or profit-seeking activities in general all facts pertaining to the controversy are examined to determine the true nature of the settlement payments 59_tc_708 under the origin of the claim test it may be proper to allocate a portion of the settlement payment to claims that were only threatened as well as those claims that were actually advanced in litigation no court case has been found which deais with the treatment of payments by an employer to reimburse a defined_contribution_plan for losses suffered by the plan arising from breach of fiduciary responsibility however there have been many cases with similar fact patterns in which business_expense deductions were allowed to taxpayers in 17_tc_675 acq 1952_1_cb_1 an officer and director of a bankrupt corporation was allowed to deduct a payment in settlement of a suit arising out of profits made by his wife from sales of the corporation's bonds the court held that the payment by the taxpayer of attorney fees and an additional_amount to a bondholders committee pursuant to the consent judgment was deductible the payment was made to avoid unfavorable publicity and protect the payor's business reputation see also revrul_69_581 1969_2_cb_25 which concluded that payment of liquidated_damages and attorney fees under the fair labor standards act were deductible by the employer in the present case the facts indicate that the restorative payment made to plan x by company a was made to resolve potential claims by federal_agency g against company a and individuals d e and f for breach of fiduciary duty incurred in the ordinary course of its trade_or_business there is no serious question of its business origin accordingly with respect to your fourth ruling_request we conclude as follows that the proposed replacement payment described above will be deductible in full by company a pursuant to code sec_162 as a result of its being paid to plan x this ruling letter is based on the assumption that plan x meets the applicable sec_401 of the code qualifications and that its related trust is tax-exempt within the meaning of sec_501 of the code no opinion is expressed as to the federal tax consequences of the transactions described above under any other provisions of the code additionally this ruling letter is based on company a's representations made herein that it entered into settlement agreement y and made the replacement payment described in this letter_ruling in order to resolve the claims of federal_agency g against company a and individuals d e and f the replacement payment company a becomes entitled to reimbursement for all or a portion of the replacement payment from an insurer or any other source then company a should include in income the amount of the reimbursement in accordance with its method_of_accounting if subsequent to the representations herein like all factual representations made to the internal_revenue_service in applications for rulings are subject_to verification on audit by service field personnel furthermore no opinion is expressed as to the federal tax treatment of the above referenced proposed transaction under other sections of the code and regulations additionally no opinion is expressed as to the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by this ruling letter a copy of this ruling letter should be attached to the appropriate federal_income_tax return s for the taxable_year s in which the transaction is consummated finally in your ruling_request you referenced a civil penalty imposed by federal_agency g as a result of the actions described herein which civil penalty if waived by federal_agency g will be contributed to pian x this ruling_request does not address said civil penalty with respect to the civil penalty you are directed to revrul_79_148 1979_1_cb_93 which held under the origin of claim doctrine that the amount paid_by a taxpayer to a charitable_organization in satisfaction of a judgment condition of probation by a federal district was not deductible under sec_162 because the amount_paid was a fine for purposes of sec_162 pursuant to a power_of_attorney on file with this office a copy of this jetter ruling is being sent to your authorized representative sincerely yours ons manager technical group tax_exempt_and_government_entities_division enclosures deleted copy of letter_ruling form_437


department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c o f f i c e o f t h e c h i e f c o u n s e l date cc tege eb qp4 ------------- conex-129738-15 number release date uil the honorable charles e grassley united_states senator federal building walnut street des moines ia attention ------------------ dear senator grassley i am responding to your letter dated date on behalf of your constituent ----- ------- who had concerns about the number of rollovers that can be made between roth iras in any 1-year period the limit on the number of ira_rollovers including roth_ira rollovers is in sec_408 of the internal_revenue_code this section provides that an individual may make only one ira rollover in any 1-year period the irs had interpreted this limitation to apply on an ira-by-ira basis so that if an individual had rolled over a distribution from one ira to another ira no more rollovers of distributions from these iras could be made for a year nonetheless rollovers of distributions from the individual’s other iras would not be affected however in the u s tax_court ruled in bobrow v commissioner tcmemo_2014_21 that the irs’s interpretation was incorrect and that the limitation applied on an aggregate basis meaning that a rollover could not be made if the individual had made an ira rollover involving any of the individual’s iras in the prior months in announcement we said we would apply the tax court’s ruling to ira_distributions that occur on or after date sec_408 only applies to rollovers and does not affect the number of trustee- to-trustee transfers an individual can make between iras a trustee-to-trustee transfer can be accomplished not only by transferring funds directly from one trustee to another but also by giving the ira owner a check made out to the new ira trustee conex-129738-15 i hope this information is helpful if you have questions please call me or -------- ---------- ----------- at -------------------- sincerely joyce kahn acting branch chief qualified_plans branch employee_benefits tax exempt and government entities


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division sep tep ra ul uniform issue list xxxxxkkxxxkkkkkk xxxxxkxkxkxkkxkxkkkk xxkxxxxkxkxkxkkkkkkxk legend taxpayer a individual b ira x xxkxxxkkkkkkxkkkkkkkkkkk financial_institution m xxxkxxkxkxxkkxkkkkkkkkkkkk account y amount d bank z date date date dear xxxxxxxxxxxxx this is in response to your letter dated date and supplemented by letters dated date date and date as submitted by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested xxxxxxxxxxxxkxx page taxpayer a age represents that she received a distribution from ira x totaling amount d taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to the deteriorating physical and mental condition of her husband individual b for whom she had become the sole caregiver taxpayer a further represents that amount d has not been used for any other purpose taxpayer a represents that on date she requested and received a distribution of amount d from ira x held by financial_institution m on date amount d was deposited into account y a non-ira account at bank z during the period preceding the distribution and through the end of the 60-day rollover period individual b was suffering from a variety of medical issues including gall bladder disease and cancer as a result of which he underwent multiple medical treatments including various tests an operation radiation treatment and chemotherapy he was also hospitalized during part of that time during this time taxpayer a was individual b’s sole non-institutional caregiver and she was under considerable duress as a result of her husband’s deteriorating health taxpayer a represents that in addition to individual b’s physical conditions he was also suffering from increasing memory loss and was diagnosed with alzheimer's shortly after the end of the 60-day rollover period taxpayer a has provided documentation showing that individual b was treated for these physical and mental health conditions during the period taxpayer a asserts that as a result of individual b’s medical_condition and taxpayer a being his sole caregiver amount d was deposited into account y instead of a rollover ira taxpayer a did not become aware that a timely rollover had not been made of amount d until date while consulting with her tax accountant based on the facts and representations a ruling is requested that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount d sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the account is maintained if xxxxxxxxxxxkxxx page i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which he receives the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the one-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408i of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408i of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover within the 60-day rollover period prescribed by sec_408 of the code was due to the deterioration of individual b's health and his hospitalization during the 60-day rollover period and due to her increased responsibilities as his sole caregiver therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira y xxxxxxxxxxxxxxx page taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount d into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution amount d will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed solely to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this ruling is being sent to your authorized representative in accordance with a power_of_attorney on file with this office if you wish to inquire about this ruling please contact xxxxxxxxx se t ep ra t4 d no x0ooooox at x00ooooxoxxk kk kkokkkkkk sincerely yours vhuw banka laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date uil conex-124682-07 the honorable brad sherman u s house of representatives washington dc dear mr sherman thank you for your letter of date and your suggestion that we interpret persons serving in state-appointed positions such as the california probate referees as qualified appraisers under sec_170 of the internal_revenue_code the code as enacted by congress in section of the pension_protection_act of pub_l_no 120_stat_780 the ppa last fall we issued notice_2006_96 2006_46_irb_902 which provided transitional guidance about the new definitions of qualified_appraisal and qualified_appraiser in the ppa and asked for suggestions for future guidance under sec_170 we have received many comments in response we appreciate your suggestion and will give it serious consideration i hope this information is helpful if we can further assist you please call me or ----------- ----- of this office at --------------------- sincerely christopher f kane branch chief branch income_tax accounting


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 ita b03 plr-146700-07 date date --------------------------- ------- ------- ------------------- ------------------------------ ----------------------------------------- legend taxpayer year year date x member a member b accounting firm a --------------------------------------- accounting firm b ------------------------------------------ dear --------------- this responds to your letter dated date submitted by your authorized representatives requesting an extension of time under sec_301_9100-1 and -3 of the procedure and administration regulations the regulations for taxpayer to make an election under sec_198 of the internal_revenue_code the code to deduct qualified_environmental_remediation_expenditures qer expenditures_for year facts plr-146700-07 taxpayer is a limited_liability_company treated as a partnership for federal_income_tax purposes taxpayer uses a calendar taxable_year and an overall accrual_method of accounting taxpayer is engaged in the business of developing commercial real_estate during year taxpayer discovered ground contamination on a property it previously purchased in cooperation with the governing state_agency and upon the agency’s approval taxpayer began remediation of the ground contamination during year and completed remediation of the ground contamination and demolition of the existing structures on the property during year taxpayer elected to deduct the costs of the qer expenditures incurred during year on taxpayer’s income_tax return for year taxpayer has represented that it incurred qer expenditures during year but the sec_198 election was not made due to a ministerial error since taxpayer’s inception outside accountants always have prepared taxpayer’s income_tax returns for several years extensions of time for filing form_1065 u s return of partnership income have not required taxpayer signatures and it has become routine practice for cpas to file extensions without any instruction from taxpayer for all periods prior to year member a a member of taxpayer was responsible for the books_and_records of taxpayer as well as the preparation and filing of the federal and state tax returns of taxpayer for the income_tax returns for year and the year prior to year member a hired accounting firm a to prepare taxpayer’s tax returns for each of those years accounting firm a filed the appropriate federal and state forms on behalf of taxpayer to extend the time for filing taxpayer’s income_tax returns during year member b another member of taxpayer took over maintenance of the books_and_records of taxpayer the controller of member a informed accounting firm a that accounting firm a would not be preparing taxpayer’s returns or extensions for year but did not communicate this information to the controller of member b after date x when the deadline for filing an extension for taxpayer’s year return had passed the controller of member b learned that an extension had not been filed until then the controller of member b believed that accounting firm a was engaged to file the necessary extensions on behalf of taxpayer for year as a result the time for making an election under sec_198 of the code to deduct qer expenditures_for year had expired afterwards the controller of member b retained accounting firm b to prepare taxpayer’s income_tax returns for year accounting firm b recommended to the controller of member b that taxpayer should request relief under sec_301_9100-1 and -3 of the regulations to make a late sec_198 election statement of law sec_198 of the code provides in part that a taxpayer may elect to treat any qer expenditure which is paid_or_incurred by the taxpayer as an expense which is not chargeable to capital_account any expenditure which is so treated shall be allowed as a deduction for the taxable_year in which it is paid_or_incurred plr-146700-07 under sec_198 a qualified_environmental_remediation_expenditure means any expenditure which is otherwise chargeable to capital_account and which is paid in connection with the abatement or control of hazardous substances at a qualified_contaminated_site revproc_98_47 1998_2_cb_319 provides the procedures for taxpayers to make the election under sec_198 to deduct any qer expenditure under section dollar_figure of revproc_98_47 the election must be made on or before the due_date including extensions for filing the income_tax return for the taxable_year in which the qer expenditures are paid_or_incurred in addition persons other than individuals are required to make the election by including the total amount of sec_198 expenses on the line for other deductions on their appropriate federal tax_return on a schedule attached to the return that separately identifies each expense included in other deductions the taxpayer must write sec_198 election on the line on which the sec_198 expense amounts separately appear see sec_3 of revproc_98_47 section dollar_figure of revproc_98_47 provides that if for any taxable_year the taxpayer pays or incurs more than one qer expenditure the taxpayer may make a sec_198 election for any one or more of such expenditures_for that year thus the taxpayer may make a sec_198 election with respect to a qer expenditure even though the taxpayer chooses to capitalize other such expenditures whether or not they are of the same type or paid_or_incurred with respect to the same qualified_contaminated_site further a sec_198 election for one year has no effect for other years thus a taxpayer must make a sec_198 election for each year in which the taxpayer intends to deduct qer expenditures sec_301_9100-3 of the regulations generally provides extensions of time for making regulatory elections for this purpose sec_301_9100-1 defines the term regulatory election to mean an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides that requests for extensions of time for regulatory elections will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 states that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer -- i requests relief under this section before the failure to make the regulatory election is discovered by the internal_revenue_service plr-146700-07 ii failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the internal_revenue_service or v 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 a taxpayer will not be considered to have reasonably relied on a qualified_tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or aware of all relevant facts sec_301_9100-3 under sec_301_9100-3 a taxpayer is deemed to have not acted reasonably or in good_faith if the taxpayer -- i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief taking into account any qualified_amended_return filed within the meaning of sec_1_6664-2 of the income_tax regulations and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the due_date for making the election that make the election advantageous to a taxpayer the internal_revenue_service will not ordinarily grant relief in such a case the internal_revenue_service will grant relief only when the taxpayer provides strong_proof that the taxpayer’s decision to seek relief did not involve hindsight sec_301_9100-3 provides in part that the commissioner will grant a reasonable extension of time to make a regulatory election only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides in part that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money plr-146700-07 sec_301_9100-3 provides in part that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under sec_301_9100-3 analysis based on the facts of the present case taxpayer acted reasonably and in good_faith the affidavits made by the controllers of member a and member b demonstrate that taxpayer reasonably relied on those two qualified_tax professionals the time for making an election under sec_198 to deduct qer expenditures_for year had simply expired because the transfer of taxpayer’s accounting and tax responsibility from one tax professional to another was poorly executed during year given the fact that the sec_198 election was made on taxpayer’s income_tax return for year taxpayer had no reason in year to know that the tax professionals were not competent to render advice on the regulatory election or aware of all relevant facts additionally the three specified circumstances provided in sec_301_9100-3 where a taxpayer is deemed to have not acted reasonably or in good_faith are not applicable in this case taxpayer is not requesting relief using hindsight or with an intent to avoid accuracy-related_penalties in fact it was the intent of taxpayer to have eligible qer expenditures in year and any later years be the subject of an election under sec_198 but the sec_198 election for year was simply not made due to inadvertence further based on the facts provided the interests of the government will not be prejudiced by granting relief in this case granting relief will not result in taxpayer having a lower tax_liability for year than taxpayer would have had if the election had been timely made taxpayer is requesting relief contemporaneously with filing its original income_tax return for year which but for the absence of an extension would be timely thus the tax_liability here will be identical to that of a timely made election in addition the taxable_year for which taxpayer is requesting relief is not a closed_year nor will any closed taxable years be affected by the making of the election for year ruling because taxpayer acted reasonably and in good_faith and the interests of the government will not be prejudiced if the request for relief is granted taxpayer has met the requirements for an extension under sec_301_9100-3 for making the sec_198 election for its year taxable_year accordingly taxpayer is granted an extension of days from the date of this ruling letter to make the sec_198 election by filing an amended federal_income_tax return for its year taxable_year taxpayer must comply with all the requirements of revproc_98_47 for the manner of making such an election upon its amended_return a copy of this letter_ruling must be attached to its amended_return to which it is relevant plr-146700-07 caveats this ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by penalty of perjury statements executed by appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed as to whether the expenditures discussed in this ruling constitute qer expenditures under sec_198 this ruling simply extends the period of time in which the taxpayer may make an election under sec_198 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative who is first listed enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 of the code sincerely christopher f kane branch chief branch office of associate chief_counsel income_tax accounting enclosure


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi b09-plr-130737-02 date date re legend taxpayer date trust son spouse x year year year year dear this is in response to your letter dated date on behalf of taxpayer requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an allocation of generation-skipping_transfer gst_exemption the facts and representations submitted are summarized as follows pursuant to an estate plan developed by her advisors on date taxpayer established the trust an irrevocable_trust for the benefit of son son’s wife spouse and their descendants plr-130737-02 article ii paragraph a of the trust provides the trustee with discretion to distribute the principal and income of the trust to son during his life for his health support in reasonable comfort and education article ii paragraph b of the trust provides that upon son’s death the trustee shall distribute to spouse during her life provided she is married to son at the time of his death as much of the net_income and principal of the trust as the trustee believes desirable for spouse’s health support in reasonable comfort and education article ii paragraph c of the trust generally provides that upon the death of son and spouse or upon son’s death if spouse is not married to son at the time of his death the principal of the trust shall be distributed to son’s then living descendants or if none to the then living descendants of taxpayer’s other children per capita on date taxpayer transferred dollar_figurex to the trust taxpayer reported the transfer to the trust on a timely filed year form_709 united_states gift and generation- skipping transfer_tax return that was prepared by an accountant the accountant was unaware of the need to allocate taxpayer’s gst_exemption to the trust therefore no allocation of taxpayer’s gst_exemption was made on the year gift_tax_return for the date transfer to the trust son died in year and spouse died in year son had no living descendants at the time of his death pursuant to the terms of the trust the principal of the trust is to be distributed to the descendants of taxpayer’s other children taxpayer’s grandchildren in year new accountants determined that a taxable_termination had occurred upon spouse’s death in year the new accountants also discovered that none of taxpayer’s gst_exemption had been allocated to the trust no additional transfers have been made to the trust taxpayer has requested the following rulings an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-1 and sec_301_9100-3 to make an allocation of taxpayer’s gst_exemption for the transfer to the trust in year and as a result of such allocation the trust will have an inclusion_ratio of zero sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2612 provides generally that for purposes of chapter the term taxable_termination means the termination by death lapse of time release of power or otherwise of an interest in property held in a_trust unless a immediately after such termination a non-skip_person has an interest in such property or b at no time after such termination may a distribution including distributions on termination be made from such trust to a skip_person plr-130737-02 sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor 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_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 estate_tax_inclusion_period its value at the time of the close of the estate_tax_inclusion_period and such allocation shall be effective on and after the date of such transfer or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period 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 such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted into law on date sec_2642 provides that in determining whether to grant relief under this paragraph 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 under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 plr-130737-02 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 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to make an allocation of taxpayer’s available gst_exemption with respect to taxpayer’s transfer to the trust in year the allocation will be effective as of date the date of the transfer to the trust and the gift_tax value of the transfer to the trust will be used in determining the amount of gst_exemption to be allocated to the trust provided the amount of gst_exemption allocated to the trust is equal to the value of the property transferred to the trust for federal gift_tax purposes the trust will have an inclusion_ratio of zero the allocation should be made on a supplemental form_709 united_states gift and generation-skipping_transfer_tax return and filed with the internal_revenue_service center cincinnati oh a copy of this letter should be attached to the supplemental form_709 a copy is enclosed for this purpose 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-130737-02 except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in addition we express or imply no opinion regarding the value of the property transferred to the trust in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter