t c memo united_states tax_court ronald e byers petitioner v commissioner of internal revenue respondent docket no 3032-10l filed date ronald e byers pro_se melissa j hedtke john schmittdiel douglas c rennie and teresa e mclaughlin for respondent supplemental memorandum opinion colvin judge this case is before the court on remand from the u s court_of_appeals for the district of columbia circuit with instructions to clarify this opinion supplements our previously filed opinion byers v commissioner tcmemo_2012_27 the legal grounds and reasoning underlying this court’s date order issued by judge stephen j swift on behalf of this court denying petitioner’s motion for leave to file out of time motion to vacate order and decision motion for leave if petitioner’s motion for leave had been granted the court would have filed petitioner’s motion to vacate order and decision in which petitioner contended that respondent committed fraud on the court lodged date in response to the question presented by the remand we conclude that denial of petitioner’s motion was justified on the grounds that petitioner’s underlying motion to vacate order and decision lacked merit background respondent filed a motion for summary_judgment in this collection_due_process cdp case on date we granted that motion and upheld the determination of the internal_revenue_service office of appeals allowing collection by levy of petitioner’s unpaid tax_liabilities for tax years byers v commissioner tcmemo_2012_27 swift j aff’d 740_f3d_668 d c cir in accordance with that opinion on date the 1judge swift was appointed by president reagan to serve a 15-year term as a judge of the tax_court beginning on date and was reappointed by president clinton to a second 15-year term beginning on date judge swift retired from active_service on date and from service as a senior judge on date court granted respondent’s motion for summary_judgment and entered decision in this case on date petitioner filed a motion under rule to vacate the order and decision that accompanied judge swift’s opinion judge swift denied that motion on date on date petitioner filed an appeal in the u s court_of_appeals for the district of columbia circuit from the tax court’s date order denying his date motion the court_of_appeals affirmed the order and decision of the court and denied a petition for rehearing en_banc 740_f3d_668 on date petitioner filed a writ of certiorari with the supreme court after the tax_court entered its order and decision respondent filed a notice_of_federal_tax_lien against petitioner to collect the same tax_liabilities which are at issue here petitioner requested a cdp hearing before appeals in a letter dated date petitioner disputed the existence and amount of any late payment additions to tax for by letter dated date settlement officer so joel mansager replied to petitioner’s date letter with the letter so mansager included transcripts and payoff information for each of 2unless otherwise indicated section references are to the internal_revenue_code as amended rule references are to the tax_court rules_of_practice and procedure those tax years the letter also said that the underlying tax_liabilities remained unpaid and that the failure to pay additions to tax had not been included with the original assessment but had accrued because petitioner had failed to pay the tax on date after denial of petitioner’s motion for rehearing en_banc and during the pendency of petitioner’s writ of certiorari petitioner filed the motion for leave and lodged a motion to vacate order and decision in which petitioner alleged that respondent had obtained a favorable decision from the tax_court on respondent’s motion for summary_judgment by fraudulently representing that the failure to pay additions to tax had been assessed and then later disclosing to petitioner that those additions to tax had accrued but had not been assessed the supreme court denied petitioner’s petition for writ of certiorari on date petitioner filed a petition for rehearing from the denial of the writ of certiorari which was denied on date on date judge swift denied petitioner’s date motion for leave without explanation on date petitioner filed with this court a motion for withdrawal of the date order judge swift denied that motion on date on date petitioner appealed to the u s court_of_appeals for the district of columbia circuit this court’s denial of his motion for leave on date the court_of_appeals remanded the case to the tax_court with the following instructions on remand the tax_court is directed to clarify the legal grounds and reasoning underlying its date order denying appellant’s motion for leave to file a motion to vacate discussion a petitioner’s motion to vacate order and decision lacked merit the tax_court has jurisdiction after a decision is final to decide whether a party committed fraud on the court generally the tax_court lacks jurisdiction to vacate a decision once it becomes final 235_f2d_97 9th cir aff’d 352_us_1027 123_tc_15 vacated 429_f3d_533 5th cir 86_tc_1319 aff’d 859_f2d_115 9th cir however the tax_court and 3the remand of this case was not assigned to judge swift who is no longer serving as a judge of this court the remand states that the tax_court shall provide the legal grounds and reasoning underlying its date order we take the use of a neuter pronoun by the court_of_appeals to mean that it is requesting this court’s explanation from the court for the denial of petitioner’s motion for leave that explanation appears herein we disagree with petitioner’s contention that the remand can be satisfied only by providing the personal views of retired judge swift some courts of appeals recognize an exception to the finality rule if there has been fraud on the court see eg 113_f3d_670 7th cir aff’g tcmemo_1995_209 142_tc_413 to establish that this exception applies a party must show that the other party engaged in fraudulent conduct that was intended to mislead the court and that the fraudulent conduct materially affected the outcome of the case drobny v commissioner f 3d pincite see also 478_f2d_588 d c cir although courts must normally adhere to statutory commands of finality such commands are normally read in the light of an overriding interest of correcting injustice whenever there is fraud on the court or the integrity of the judicial process or functioning has been undercut fn refs omitted citing 132_f2d_243 1st cir 387_f2d_689 7th cir and 463_f2d_268 d c cir in order to find fraud on the court the party alleging fraud must show that the alleged improper conduct was an unconscionable plan or scheme that was designed to 4for an example of a case reopened because of fraud on the court see merriam v commissioner tcmemo_2005_17 supplementing tcmemo_1995_432 improperly influence the court in its decision drobny v commissioner f 3d pincite quoting kenner v commissioner f 2d pincite as of date when the tax_court denied petitioner’s motion the case had become final however according to the caselaw just cited we may consider petitioner’s fraud on the court claim after the case is final prima facie case for the underlying motion in deciding whether to grant a motion for leave to file a motion to vacate the court may look through that motion to the underlying motion to decide whether the movant has established a prima facie case in favor of granting the underlying motion 511_f2d_929 2d cir 52_tc_295 vacated by 441_f2d_930 9th cir lewis v commissioner tcmemo_2005_205 reconsidered and superseded by hartman v commissioner tcmemo_2008_124 campbell v commissioner tcmemo_1988_105 pulitzer v commissioner tcmemo_1987_408 thus we next decide whether petitioner has made a prima facie case that the motion underlying his motion for leave filed date in which he contends respondent committed fraud on the court should be granted respondent did not commit fraud on the court in his motion filed date petitioner contends that respondent’s summary_judgment motion constituted fraud on the court petitioner contends that respondent represented in the declaration of so lupe silva filed date which accompanied respondent’s motion for summary_judgment that the commissioner had assessed the sec_6651 additions to tax when petitioner claims those additions to tax had not been assessed petitioner relies on a date letter that he received from an appeals so in a companion cdp hearing involving petitioner’s tax years which states that respondent had not assessed those additions to tax petitioner contends that respondent’s attempt to collect the additions to tax under sec_6651 without assessment amounted to a fraud on the court sec_6665 provides the general_rule that additions to tax additional_amounts and civil penalties shall be assessed collected and paid in the same manner as taxes although sec_6651 requires the use of deficiency procedures for some additions to tax sec_6665 contains an exception to that general_rule it provides that deficiency procedures shall not apply to any addition_to_tax under sec_6651 sec_6654 or sec_6655 instead these additions to tax are summarily assessed meyer v commissioner 97_tc_555 if the additions to tax under sec_6651 can be summarily assessed the fact that they were not assessed along with the deficiency amounts does not constitute fraud on the court in the answer to amended petition filed in this case respondent denied petitioner’s allegations regarding the assessments and stated that the assessments petitioner had the right to challenge did not include interest nor sec_6651 so silva’s certification in the motion for summary_judgment certified the assessment of only the deficiency amounts it did not refer to the additions to tax respondent sent the final notice_of_intent_to_levy to petitioner on date this is apparently what petitioner refers to as a statutory collection notice a table in this notice includes one column stating that respondent had assessed amounts of tax_liability for various years and other columns stating amounts of penalty and interest for which respondent states petitioner is liable petitioner contends that respondent represented through this table that the penalty and interest had been assessed we disagree because the 5however deficiency procedures apply to the portion of a sec_6651 penalty which is attributable to a deficiency sec_6655 headings above the interest and penalty amount columns do not include the word assessed so mansager sent petitioner a letter dated date which stated in part the payoff information indicates that the failure_to_pay_tax penalty was not included with the assessment however it has accrued since you have failed to pay the taxes petitioner alleges that so mansager’s letter informed him for the first time that the additions to tax had not been assessed to the contrary respondent has been consistent in communicating to petitioner that the additions to tax had not been assessed for example respondent disclosed this fact in the answer to the amended petition and the headings on the account summary attached to the notice_of_intent_to_levy do not refer to interest and late-payment additions to tax as having been assessed further to the extent petitioner reads our opinion to say that the commissioner had assessed the additions to tax he is mistaken the notice_of_determination dated date to which petitioner refers does not explicitly state that the additions to tax had been assessed it states i verified through transcript analysis that assessment was made on the applicable cdp_notice periods per sec_6201 and the notice_and_demand for payment letter was mailed to the taxpayer’s last_known_address petitioner points out that respondent’s counsel represented in respondent’s motion for summary_judgment that she had searched the entire record before concluding that there was no genuine issue of any material fact for trial petitioner alleges that respondent’s counsel overlooked respondent’s formal responses to petitioner’s admission requests and that in one admission response respondent said the additions had been assessed petitioner contends that this what petitioner calls misinformation provided by respondent caused the court to overlook that there was a material dispute of fact and constituted fraud on the court petitioner has not provided the court with any documents or plausible information contradicting the statement by respondent’s counsel that counsel had reviewed the administrative file the pleadings and all written proof submitted and had concluded that there is no genuine issue of any material fact for trial the request for admission and the response are as follows petitioner had the right at his cdp hearing to challenge his liability for the addition_to_tax assessed against him under sec_6651 admits the admission request discusses petitioner’s right to challenge his liability for the additions to tax assessed there is no separate admission request stating that the additions to tax had been assessed petitioner alleges in his date motion that appeals’ verification in the notice_of_determination which respondent cited in support of respondent’s motion for summary_judgment found that respondent had assessed the amounts shown on the final notice_of_intent_to_levy and notice of your right to a hearing and that all the assessments shown on that notice were legally valid however neither the final notice_of_intent_to_levy nor the notice_of_determination states that respondent assessed additions to tax under sec_6651 b conclusion petitioner has not shown that respondent intended to conceal information or mislead the court or that respondent committed fraud on the court thus petitioner failed to establish a prima facie case for granting the motion underlying his motion for leave and the motion for leave was properly denied to reflect the foregoing an appropriate order will be issued


internal_revenue_service number release date index number ---------------------------- ---------------------------- -------------------------------- legend trust department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b07 plr-139976-06 date date --------------------------------------------------------------------------------------------------- ----------------------- -------- ------------------------------------------------ state grantor --------------------- date ---------------- court date ------------------ child -------------------------- date ----------------------- child --------------------------------- date ------------------ date ----------------------- date --------------------------- statute ------------------------------------------------------------------------------------- dear ----- correspondence requesting income gift and generation-skipping_transfer gst tax rulings with respect to the proposed conversion of trust to a total_return_trust under state law on date at the request of the trustees court divided the irrevocable_trust into four separate trusts on date trust is one of the four trusts created by the date court order and is held for the benefit of child and his descendants at the request of the this letter responds to your letter dated date and subsequent the facts and representations are as follows grantor created an irrevocable_trust under the terms of the original trust agreement and the date court order after under the terms of the original trust agreement and the date court order trust plr-139976-06 trustees court modified the trustee succession provisions with respect to trust on date date date and date are before date no additions actual or constructive have been made to trust since date trust is governed by state law child 1’s death child may direct the payment of up to one-third of the net_income in his last will and testament to his surviving_spouse the balance of the net_income or all of the net_income if none becomes payable to a surviving_spouse shall be paid to child 1’s issue from time to time surviving per stirpes child may by will change the proportion in which his issue shall share in the net_income by exercise of a limited_power_of_appointment if child dies without issue before the termination of trust the trust assets shall be added to the shares of the remaining children in the same proportion that such shares bear to each other shall continue until twenty years after the death of the last surviving of eight named individuals child was the last surviving named individual child died on date upon termination of trust the trust estate shall be paid to the person s then in receipt of the income if a spouse is currently receiving income a share of trust necessary to produce such income shall continue to be held in trust during the spouse’s life but the person s who would have received the income shall immediately have a vested interest in the principal withheld the trustees may choose to purchase an annuity for the spouse and make immediate distribution of the entire trust estate child exercised his right to change the percentage of net_income paid to his issue but did not direct payment of any net_income to a surviving_spouse trust income is currently distributed in accordance with the percentages set out in child 1’s will state statute permits a court to convert a_trust to a total_return_trust or unitrust if the court determines that the conversion will enable the trustee to better carry out the purposes of the trust and that the conversion is in the best interests of the beneficiaries statute provides that following conversion of a_trust to a total_return_trust income in the governing instrument means an annual amount equal to a percentage of the net fair_market_value of the total trust assets averaged over a three-year period finally statute provides that a court has the power to determine the percentage of the total value of the trust assets to be distributed from a total_return_trust trust to a total_return_trust under statute and that court approve a distribution percentage from trust after the conversion the complaint further requests the court the trustees have filed a complaint in court requesting that the court convert child died on date under article three of his will executed on date sec_2511 provides that the tax imposed by sec_2501 applies whether the sec_2501 of the internal_revenue_code imposes a tax on the transfer of plr-139976-06 declare that on termination the trust assets will be distributed to the persons then in receipt of a portion of the unitrust_amount in the same proportions as the unitrust_amount is then being paid after the conversion the unitrust_amount will be divided among the beneficiaries as directed in child 1’s will the trustees have requested rulings that the proposed conversion of trust to a total_return_trust will not cause trust to lose its status as exempt from the gst tax will not cause any beneficiary to have made a gift_for gift_tax purposes and will not cause trust or any beneficiary to realize capital_gain from an exchange of a_trust interest for income_tax purposes ruling sec_1 and property by gift by an individual transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible the date of the gift shall be considered the amount_of_the_gift distribution a taxable_termination and a direct_skip under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date however this exemption does not apply if additions actual or constructive are made to the trust after date regulations provides that any trust in existence on date will be considered an irrevocable_trust except as provided in sec_26_2601-1 or c which relate to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or sec_2512 provides that if a gift is made in property the value thereof at sec_2611 defines the term generation-skipping_transfer as a taxable sec_26_2601-1 provides rules for determining when a modification sec_26_2601-1 of the generation-skipping_transfer_tax sec_2601 imposes a tax on every generation-skipping_transfer sec_26_2601-1 provides that a modification of the governing plr-139976-06 hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of gain for purposes of sec_1001 instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust in addition administration of a_trust in conformance with applicable local law that defines the term income as a unitrust_amount or permits a right to income to be satisfied by such an amount or that permits the trustee to adjust between principal and income to fulfill the trustee’s duty_of impartiality between income and principal beneficiaries will not be considered to shift a beneficial_interest in the trust if applicable local law provides for a reasonable apportionment between the income and remainder beneficiaries of the total return of the trust and meets the requirements of sec_1_643_b_-1 of the income_tax regulations that is otherwise exempt from the gst tax because it was irrevocable prior to sec_26_2601-1 example considers a situation where a_trust sec_26_2601-1 provides that for purposes of this section a the trustees represent that trust was irrevocable on date and the facts in this case are similar to those set forth in example of sec_26 plr-139976-06 date provides that trust income is payable to a for life and upon a’s death the remainder is to pass to a’s issue per stirpes state x the situs of the trust then amends its income and principal statute to define income as a unitrust_amount of of the fair_market_value of the trust assets valued annually the example concludes that the administration of the trust in accordance with the state statute defining income to be a unitrust_amount will not be considered to shift a beneficial_interest in the trust therefore the trust will not be subject_to the provisions of chapter further under the facts of the example no trust_beneficiary will be treated as having made a gift_for federal gift_tax purposes and neither the trust nor any trust_beneficiary will be treated as having made a taxable_exchange for federal_income_tax purposes that there were no additions to trust after date b i e which provides that the conversion of an income_interest to a unitrust_interest pursuant to state statute will not be considered to shift a beneficial_interest in a_trust for gst purposes example further concludes that no trust_beneficiary will be treated as having made a gift_for federal gift_tax purposes and neither the trust nor any trust_beneficiary will be treated as having made a taxable_exchange for federal_income_tax purposes provided the proposed conversion meets the requirements of state statute and an order from state court approving the conversion is obtained we conclude that the conversion of the income_interest in trust to a unitrust_interest will not be considered to shift any beneficial_interest in trust and therefore will not cause trust to lose its status as exempt from the gst tax we further conclude that the proposed modification will not result in any beneficiary being treated as having made a taxable gift_for federal gift_tax purposes ruling whatever source derived including gains derived from dealings in property and income from an interest in an estate_or_trust shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in such section for determining loss over the amount_realized under sec_1_1001-1 of the income_tax regulations the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially in_kind or in extent is treated as income or loss sustained under sec_1001 of the code gain from the sale_or_other_disposition of property sec_61 and provides that gross_income means all income from sec_1001 provides that the amount_realized from the sale or other sec_1_1001-1 provides that a loss is not ordinarily sustained prior to the plr-139976-06 disposition of property shall be the sum of any money received plus the fair_market_value of the property other than money received under sec_1001 except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sale_or_other_disposition of the property for the reason that until such sale_or_other_disposition occurs there remains the possibility that the taxpayer may recover or recoup some of the adjusted_basis of the property until some identifiable_event fixes the actual sustaining of a loss and the amount thereof the loss is not taken into account an exchange of property results in the realization of gain_or_loss under sec_1001 if the properties are materially different 499_us_554 properties exchanged are materially different if the properties embody legal entitlements different in_kind or extent or if the properties confer different rights and powers id pincite in cottage savings the supreme court held that mortgage loans made to different obligors and secured_by different homes embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans id in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent id pincite sec_1_643_b_-1 provides a comprehensive definition of income as that term applies to trusts_and_estates it provides in part that items such as dividends interest and rents are generally allocated to income and proceeds from the sale_or_exchange of trust assets are generally allocated to principal however an allocation of amounts between income and principal pursuant to applicable local law will be respected if local law provides for a reasonable apportionment between the income and remainder beneficiaries of the total return of the trust for the year including ordinary and tax- exempt_income capital_gains and appreciation for example a state statute providing that income is a unitrust_amount of no less than and no more than of the fair_market_value of the trust assets whether determined annually or averaged on a multiple year basis is a reasonable apportionment of the total return of the trust sec_1_643_b_-1 further provides that a switch between methods of determining trust income authorized by state statute will not constitute a recognition event for purposes of sec_1001 beneficiaries of the trust will have the same property interests and legal entitlements as a result of the proposed conversion under state statute a conversion to a total_return_trust may be made upon the court's determination that the conversion will enable the trustee to better carry out the purposes of the trust in addition and under the facts in the present case the preliminary question is whether the trustees and except as expressly provided herein no opinion is expressed or implied plr-139976-06 presented there is to be no material_change in property interests or legal entitlements for trust the trustees or the beneficiaries if the conversion to a total_return_trust does not result in a material_change in property interest or legal entitlements there is no occasion for realizing taxable gain_or_loss under sec_1001 therefore under the facts presented the conversion will not trigger realization of gain_or_loss for the taxpayers for federal_income_tax purposes concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 provides that it may not be used or cited as precedent being sent to the taxpayer’s representatives pursuant to the power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer s requesting it sec_6110 the rulings contained in this letter are based upon information and sincerely melissa c liquerman melissa c liquerman senior technician reveiwer branch passthroughs special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number - ------------------------------------ -------------------------------- ------------------------ ---------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- ------------------- telephone number -------------------- refer reply to cc psi b02 plr-125074-08 date november legend x ------------------------------------------------------------------------------------------------------ ---------------------- state ------------- d1 ------------------------ dear -------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x's authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on d1 it was intended for x to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x accordingly x requests a ruling that it will be treated as an s_corporation effective d1 sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election plr-125074-08 is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning d1 a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representative sincerely melissa liquerman senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ----------------------- ------------------------------------ ------------------------------------- ------------------------------------------------ --------------------------------------- legend controlled distributing distributing state a shareholder a entities shareholder b investment_advisor investment_advisor investment_advisor date a date b date c department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc corp plr-101305-19 date august --------------------------------------------------------------------- --------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------------------------------- ------------------------------------ ------------------------------------------ --------------------------------------------------------------- ------------------------------------------------- ------------------------------------------------------- -------------- ----------------------------------------------------------------------------- --------------------------------------------- ---------------------------------------- -------------- ----------------------------- ---------------------------------------------- ---------------------- --------------------------- ------------------------ plr-101305-19 date d date e date f date g date h date i a percent b percent c percent d percent e percent f percent g percent h percent i percent dollar_figurea ---------------------- -------------------- ---------------------------- ----------------- --------------------------- -------------------- ------------------ ------------------ --------------------- -------------------- ------------------ ------------------ ---------------- -------------------- ------------------ ----------------- dear --------------- this letter responds to your date request submitted by your authorized representatives for rulings under sec_355 relating to the share repurchases defined below the material information provided in that request and in subsequent correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by penalties of perjury statements executed by an appropriate party this office has not verified any of the materials submitted in support plr-101305-19 of the request for rulings verification of the information representations and other data may be required as part of the audit process this letter is issued pursuant to section dollar_figure of revproc_2018_1 2018_1_irb_1 regarding significant issues presented in a transaction described under sec_355 of the internal_revenue_code the code the rulings contained in this letter only address one or more discrete legal issues in the transaction this office expresses no opinion as to the overall tax consequences of the transactions described in this letter or as to any issue not specifically addressed by the rulings below summary of facts distributing a state a corporation was the parent of a worldwide group of domestic and foreign entities distributing was the common parent of an affiliated_group_of_corporations that joined in filing a consolidated federal_income_tax return distributing had a single class of common_stock outstanding which was publicly traded pursuant to transactions described in plr-130090-15 issued on date distributing effectuated the distribution of the stock of distributing and controlled each a state a corporation with a single class of common_stock to distributing 2’s shareholders together the distributions the distributions were intended to qualify under sec_355 the distributions were accomplished on or before date a before date b approximately a percent of distributing 2’s outstanding common_stock was owned by affiliated entities the shareholder a entities the shareholder a entities sold approximately b percent of distributing 2’s outstanding common_stock in a public offering on date b and disposed of an additional approximately c percent of such stock shortly thereafter pursuant to a stock purchase agreement entered into on date c the shareholder a entities sold approximately d percent of the outstanding shares of common_stock of each of distributing distributing and controlled to an unrelated party shareholder b on date d a date that occurred after date a following the distributions the shareholder a entities sold approximately e percent of controlled’s outstanding common_stock in a public offering on date e and disposed of an additional approximately f percent of such stock shortly thereafter on date f the shareholder a entities sold approximately g percent of controlled’s outstanding common_stock in a privately negotiated transaction following these sales the shareholder a entities did not own any of controlled’s outstanding common_stock during date g shareholder b sold approximately h percent of the outstanding common_stock of controlled in a secondary public offering and controlled redeemed an additional approximately i percent of such stock following these transactions shareholder b did not own any of controlled’s outstanding common_stock plr-101305-19 following the distributions on date h controlled’s board_of directors approved a new share repurchase plan of up to dollar_figurea the share repurchases on date i controlled’s board_of directors authorized additional share repurchases of up to an additional dollar_figurea controlled had not repurchased any of its shares prior to implementing the share repurchases and controlled may engage in additional share repurchases in the future certain share repurchases will be made through i open market purchases ii one or more accelerated share repurchase asr programs iii one or more tender offers open to all public holders of controlled common_stock or iv a combination thereof it is anticipated that the only participants in the share repurchases will be public shareholders ie shareholders who are not a controlling shareholders or percent shareholders within the meaning of sec_1_355-7 and respectively public shareholders it is expected that under an asr program controlled would purchase a specified number or dollar amount of its shares from a third-party investment bank at a price per share that is determined over a specified calculation period which often may be terminated early at the bank’s option and may be subject_to certain caps and or floors controlled would pay for the shares upfront and the bank would obtain shares that it delivers upfront by borrowing shares eg from customers or mutual funds then the bank would buy shares generally in the open market over time to return the borrowed shares and to obtain any additional shares it owes to controlled with a possible true-up adjustment as between controlled and the bank at maturity of the asr program the timing and total amount of the share repurchases will ultimately be dependent upon business considerations and market factors among other factors prior to date h investment_advisor sec_1 and filed schedules 13g reporting beneficial_ownership of more than ten-percent or more than five-percent of controlled’s total outstanding common shares item on each schedule 13g stated that no one person's interest in the common_stock of controlled was more than five-percent of the total outstanding common shares representation sec_1 the share repurchases are motivated by a business_purpose and the stock to be repurchased in the share repurchases will be widely held the share repurchases are not motivated to any extent by a desire to increase or decrease the ownership percentage of any particular shareholder or group of shareholders at the time that a share repurchase is consummated controlled will not know the identity of any beneficial shareholder i from which controlled stock is repurchased in the open market ii in the case of an asr program from which the third-party investment bank borrows controlled stock or purchases controlled stock to fulfill the plr-101305-19 bank’s obligation to return borrowed shares or iii that participates in a tender offer except to the extent that the shareholder is the record holder of tendered shares or provides an identifying tax-related form or statement to controlled in connection with such participation rulings based solely on the information submitted and representations made we rule as follows to the extent the share repurchases are treated as part of a plan or series of related transactions with the distributions for purposes of sec_355 the share repurchases will be treated as being made from all public shareholders of controlled common_stock on a pro_rata basis for purposes of testing the effect of the share repurchases on the distributions under sec_355 for purposes of this ruling each controlled common_stock shareholder will be treated as a public shareholder with respect to any share repurchases that occur on or prior to five business days after either i actual knowledge of the vice president of investor relations the general counsel or a functionally similar position at controlled of the existence of a non-public shareholder or ii the filing of a schedule 13d schedule 13g form_3 or form_4 indicating the shareholder holds enough shares to be considered a five-percent shareholder within the meaning of sec_1 h and such shareholder actively participates in the management or operation of controlled as described in sec_1_355-7 or a ten-percent shareholder within the meaning of sec_1_355-7 for purposes of determining whether a five-percent shareholder within the meaning of sec_1_355-7 or a ten-percent shareholder within the meaning of sec_1_355-7 exists controlled may disregard a schedule 13g unless item reports such a shareholder or is left blank or the filer discloses its status as a five-percent shareholder within the meaning of sec_1_355-7 or a ten-percent shareholder within the meaning of sec_1_355-7 on form_3 or form_4 any increase directly or indirectly in the percentage of either voting power or value of the stock of controlled owned by a shareholder by virtue of the share repurchases or acquisitions of the stock of controlled if any as part of a plan or series of related transactions with the distributions will be taken into account for purposes of sec_355 only after reducing such increase for any reduction in such percentage interest directly or indirectly resulting from the share repurchases and any disposition of stock of controlled by such shareholder or issuance of stock by controlled if any as part of a plan or series of related transactions with the distributions plr-101305-19 the effect of the share repurchases will be taken into account under sec_355 and these rulings only to the extent such share repurchases are otherwise treated for purposes of sec_355 as part of a plan or series of related transactions with the distributions caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely robert m rhyne assistant to the branch chief branch office of associate chief_counsel corporate cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jun uniform issue list tep rats legend taxpayer a individual c company w company x company y division a plan x month month2 date date date date dear this is in response to your letter dated representative on your behalf requests a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code in which your authorized vuvu634024- the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a had been an employee of company w for a number of years company w sponsors plan x which it is represented is qualified within the meaning of sec_401 of the code it has been represented that plan x does not permit employee contributions thereto division a of company w advised taxpayer a that he would be eligible to on date receive a diversification distribution from company w during calendar_year would be eligible to diversify up to of the shares in his employee stock ownership esop account in plan x _ and that he individual c of company x gave a presentation to taxpayer a and on or about date other similarly situated taxpayers regarding the diversification distribution option and associated federal tax consequences it has been represented that individual c is qualified as an investment_advisor in the area of retirement plans during his presentation individual c advised taxpayer a and other similarly situated taxpayers that net_unrealized_appreciation nua ’ treatment described in sec_402 of the internal_revenue_code was available to them if they received partial distributions of their plan x esop account balances additionally it has been represented that a month summary_plan_description spd applicable to plan x provides that nua treatment would be available to any distribution of esop_stock made from plan x after the above referenced presentation during calendar_year partial_distribution of stock from his esop account under of plan x on the understanding said distribution would be eligible for nua tax treatment taxpayer a received a during month taxpayer a became aware that the information provided during taxpayer c’s presentation and in the plan x spd might be inaccurate on or about date company w e-mailed taxpayer a and other affected plan x participants advising them that individual c’s information concerning the availability of nua treatment was incorrect on or about date company w sent a letter to taxpayer a acknowledging errors made by individual c during his date presentation it has been represented that company y has issued forms 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc to taxpayer a and other affected plan x participants which forms in some cases were erroneous however errors in said forms have been corrected and taxpayer a as of the date of this ruling_request was aware that the plan x distribution he received during calendar_year nua treatment was not eligible for zuu63402 it has been represented that taxpayer a lacked the financial knowledge or experience to know the tax consequences associated with the distribution he received from plan x and for that reason relied upon individual c and on plan x’s spd as to the availability of nua treatment this request for letter_ruling was filed with the internal_revenue_service shortly after the occurrence of the last of the above-referenced actions based on the facts and representations you request that the service waive the 60-day rollover requirement with respect to the distribution taxpayer a received during calendar yeat such requirement would be a hardship and against equity or good conscience and from plan x because the failure to waive that taxpayer a be granted a period a time not to exceed days as measured from the date of this ruling letter to either contribute the stock he received during calendar_year from plan x or in the alternative if applicable to roll over the proceeds of sale of said stock into an ira set up and maintained in his name with respect to your ruling requests sec_402 of the code provides that except as otherwise provided in sec_402 any amount distributed out of an employees’ trust described in sec_401 that is exempt from tax under sec_501 shall be taxable to the distributee in the taxable_year of the distributee in which distributed in the manner provided under sec_72 of the code relating to annuities sec_402 of the code provides rules governing rollovers of amounts from exempt trusts to eligible retirement plans including iras code sec_402 provides that except as provided in subparagraph b paragraph whioch excludes rolled over amounts from gross_income shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed code sec_402 provides that the transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution code sec_402 provides that the excess of the fair_market_value of property on sale over its fair_market_value on distribution shall be treated as property received in the distribution code sec_402 provides that no gain_or_loss shall be recognized on any sale described in subparagraph a to the extent that an amount equal to the proceeds is transferred pursuant to paragraph 4uv634021 - sec_402 of the code provides that the secretary may waive the 60-day requirement under sec_402 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_402 of the code sec_402 of the code provides that an eligible_rollover_distribution shall not include any distribution to the extent such distribution is required under sec_401 sec_401 of the code provides that a_trust shall not constitute a qualified_trust under this section unless the plan of which such trust is a part provides that if the distributee of any eligible rollover distribution- i elects to have such distribution paid directly to an eligible_retirement_plan and ii specifies the eligible_retirement_plan to which such distribution is to be paid in such form and at such time as the plan_administrator may prescribe such distribution shall be made in the form of a direct trustee-to-trustee transfer to the eligible_retirement_plan so specified sec_401 of the code provides that for purposes of code sec_401 a the term eligible_retirement_plan has the meaning given such term by sec_402 with an exception not pertinent to this ruling_request thus a direct transfer defined in code sec_401 may be made into an ira sec_1_401_a_31_-1 of the income_tax regulations question and answer-5 provides in relevant part that a direct_rollover described in code sec_401 is a distribution and rollover of the eligible_rollover_distribution and not a transfer of assets and liabilities thus for example the consent and requirements of code sec_401 sec_411 and sec_417 apply to transactions described in code sec_401 revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 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 taxpayer a submits that his failure to accomplish a timely rollover was caused both by his reliance on advice given him by individual c to the effect the company w stock he received from plan x was eligible for nua tax treatment and by his reliance on plan x’s spd which it has been asserted on his behalf contained similar information however in this case there was no intent to rollover nor was the erroneous advice given regarding a rollover transaction itself rather taxpayer a deliberately chose not to roll over his the portion of his plan x distribution which consisted of shares of company x stock on the mistaken belief that net_unrealized_appreciation was available we do not believe that congress intended to permit the service to retroactively correct_tax treatment choices which do not produce the expected benefits even though in this case these choices were the result of erroneous advice provided to taxpayer a by individual c and arguably also the result of incorrect information found in plan x’s spd thus based on the above pursuant to code sec_402 the service hereby declines to waive the 60-day rollover period found in code sec_402 with respect to the shares of company w stock distributed during calendar_year from plan x to taxpayer a furthermore the service concludes as follows with respect to your additional ruling_request that taxpayer a is not granted any period of time either to contribute either the stock he received during calendar_year roll over the proceeds of sale of said stock into an ira set up and maintained in his name from plan x or in the alternative if applicable to 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 letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with the service the original of this letter_ruling is being sent to you and a copy to your authorized representative if you wish to inquire about this ruling please contact d at please address all correspondence to se t ep ra t3 sincerely yours doe vl frances v sloan manager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose


internal_revenue_service number release date index number -------------------------------------------------- -------------------------------------- ----------------------------- ---------------------- ----------------------------------- attn ------------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc psi b04 plr-133562-18 date date re --------------------------------------------------------------------- legend decedent trust --------------------------------------------------------------------------------------------------------------- --------------------------- --------------------------------------------------------------------------------- ---------------------------- ------------------------- -------------------------- ------------------------------- -------------------------------- --------------------------------------------------------------------------------- ------- ------------------ ------------------ -------------------- ------------------------ ------------------------ ------------------- beneficiary son grandson granddaughter court year year date date date date date dear --------------- this letter responds to your letter dated date submitted by your authorized representative requesting generation-skipping_transfer gst tax rulings with respect to a judicial construction and modification of trust decedent died testate on date a date prior to date under the terms of decedent’s last will and testament a_trust trust was created for the primary benefit of decedent’s son beneficiary under the terms of trust all the trust income plr-133562-18 was to be distributed to beneficiary for life and upon beneficiary’s death to beneficiary’s living issue per stirpes distributions of principal were not permitted trust terminates upon the earlier of two dates the date that i sec_21 years after beneficiary’s death or the date that the youngest of beneficiary’s issue reach the age of upon trust’s termination the trustee is to distribute the trust corpus to beneficiary’s then-living issue per stirpes in year beneficiary and the trustee of trust petitioned court to modify trust at that time beneficiary had one son son and two grandchildren grandson and granddaughter all of whom were over the age of accordingly under the terms of trust as of year trust was to terminate upon beneficiary’s death and the assets of trust were to be distributed outright to son if living pursuant to a court order dated date trust was modified and any outright distribution to son upon termination was instead to be held in further trust for son’s lifetime benefit under the new terms of trust the trustee had absolute discretion to pay income or corpus to or for the benefit of son and at the death of son distribute one half of the trust to grandson if living in a separate trust otherwise to his estate and one half to granddaughter if living in a separate trust otherwise to her estate_trust as modified also directed the trustee to consider before making a distribution whether a beneficiary was a substance abuser and if the trustee so suspects to request that the beneficiary submit to testing and treatment any treatment costs are to be charged first against income and then principal beneficiary died on date survived by son son died on date survived by grandson and granddaughter in year the trustee petitioned court to further construe trust to clarify that son has a general_power_of_appointment over the assets in trust such clarification ensures that the assets of trust will be taxed as part of son’s gross_estate and that there will be no extension of the time for vesting under the original terms of trust pursuant to a court order dated date trust was clarified to state that son has a general_power_of_appointment over the assets of trust it has been represented that no additions have been made to trust after date you have requested a ruling that after the judicial construction and modifications to the administrative and dispositive provisions of trust trust remains exempt from the application of the gst tax and that no distributions during the term of trust or upon final termination will be subject_to gst tax law and analysis plr-133562-18 sec_2601 imposes a tax on every gst made after date a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2612 provides that the term taxable_termination means a termination by death lapse of time release of a 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 sec_2612 provides that the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip under sec_2612 a direct_skip is a transfer subject_to federal estate or gift_tax of an interest in property to a skip_person under a of the tax_reform_act_of_1986 act and sec_26_2601-1 the gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 the gst tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in this paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes thus unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of gain for purposes of sec_1001 sec_26_2601-1 provides that a judicial construction of a governing instrument to resolve an ambiguity in the terms of the instrument or to correct a scrivener’s error will not cause an exempt trust to be subject_to the gst provisions if plr-133562-18 the judicial action involves a bona_fide issue and the construction is consistent with applicable state law that would be applied by the highest court of the state sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraph sec_26_2601-1 b or c by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust sec_26_2601-1 provides that for purposes of this section a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust in sec_26_2601-1 example considers the following situation in grantor established an irrevocable_trust for the benefit of grantor's issue naming a bank and five other individuals as trustees in the appropriate local court approves a modification of the trust that decreases the number of trustees which results in lower administrative costs the modification pertains to the administration of the trust and does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification in addition the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the trust will not be subject_to the provisions of chapter in 387_us_456 the court considered whether a state trial court’s characterization of property rights conclusively binds a federal court or agency in a federal estate_tax controversy the court concluded that plr-133562-18 the decision of a state trial_court as to an underlying issue of state law should not be controlling when applied to a federal statute rather the highest court of the state is the best authority on the underlying substantive rule_of state law to be applied in the federal matter if there is no decision by that court then the federal authority must apply what it finds to be state law after giving proper regard to the state trial court’s determination and to relevant rulings of other courts of the state in this respect the federal_agency may be said in effect to be sitting as a state court in this case an examination of the documents together with state law confirms that decedent intended to give son a power_of_appointment and the date order clarified such right because the assets are to be included in son’s gross_estate son is now treated as the owner for gst purposes accordingly after the judicial construction and modifications to the administrative and dispositive provisions of trust trust remains exempt from the application of the gst tax and no distributions during the term of trust or upon final termination will be subject_to gst tax in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 sincerely leslie h finlow leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures


internal_revenue_service number info release date index number ---------------------------------- ------------------------------ ---------------------------- - department of the treasury washington dc person to contact ----------- id no ------------- telephone number --------------------- refer reply to cc psi b01 - genin-150273-03 date oct ------------------------------------------ taxpayer dear ------------- we are responding to a letter on behalf of the taxpayer dated date requesting a late s election effective date according to the records at the service_center the taxpayer has an s election effective date as requested we hope that the above information proves helpful s dianna k miosi sincerely yours dianna k miosi chief branch associate chief_counsel passthroughs and special industries


t c summary opinion united_states tax_court robert matthew donohoe and jane haregewoin donohoe petitioners v commissioner of internal revenue respondent docket no 8075-0o1s filed date robert matthew donohoe pro_se trent d usitalo for respondent powell special_trial_judge this case was heard pursuant to the provisions of sec_7463' of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority ' unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and rule references are to the tax_court rules_of_practice and procedure - - respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax the issue is whether petitioners’ may exclude from gross_income payments received for unused vacation and sick leave petitioners resided in penn valley california at the time the petition was filed the facts are not in dispute and the issue is primarily one of law petitioner terminated his employment with the county of los angeles in date for a new position as a pilot for skywest airlines because of the suddenness of his employment change petitioner was unable to use accrued vacation and sick leave he had earned as an employee of the county of los angeles thus he received a dollar_figure cash payment for the unused benefits as reported on their forms w-2 wage and tax statement petitioners received dollar_figure of taxable wages petitioner earned dollar_figure and dollar_figure from the county of los angeles and skywest airlines respectively and petitioner jane haregewoin donohoe earned dollar_figure from the state of california petitioner jane haregewoin donohoe did not appear at the trial and did not execute the stipulation of facts with respect to her we will dismiss this case for failure to prosecute see rule b the decision when entered will be in the same amount as ultimately determined against petitioner robert matthew donohoe in the opinion references to petitioner are to robert matthew donohoe sec_7491 concerning burden_of_proof has no bearing on this case - - in preparing their joint federal_income_tax return petitioners reported dollar_figure of taxable wages petitioners excluded dollar_figure representing the amount petitioner received from the county of los angeles for unused vacation and sick leave sec_61 provides in part sec_61 gross_income defined a general definition ---except as otherwise provided in this subtitle gross_income means all income from whatever source derived including but not limited to the following items compensation_for services including fees commissions fringe_benefits and similar items sec_1 61-l1 a income_tax regs further provides that gross_income means all income from whatever source derived unless excluded by law specifically wages and salaries x are income to the recipients unless excluded by law sec_1_61-2 income_tax regs gross_income is an inclusive term with broad scope designed by congress to exert ‘the full ay measure of its taxing power ’ 348_us_426 quoting 309_us_331 a taxpayer’s accession of wealth is gross respondent in our proposed changes to your form_1040 issued to petitioners with the notice_of_deficiency asserted that dollar_figure of taxable wages was reported to respondent as a result respondent determined an increase of dollar_figure to petitioners’ gross_income respondent does not dispute the difference of dollar_figure and does not intend to deviate from the statutory_notice_of_deficiency q4e- income unless some provision of the code or of law excepts exempts or excludes it from gross_income 35_tc_685 furthermore exemptions from taxation are not to be implied they must be unambiguously proved 485_us_351 it is against this backdrop that petitioner begins his herculean journey to establish that the dollar_figure received as payment for his unused vacation and sick leave is nontaxable petitioner argues that sec_457 applies to exclude his compensation_for unused vacation and sick leave from gross_income congress enacted sec_457 by the revenue act of publaw_95_600 92_stat_2782 sec_457 a provides that if a taxpayer participates in an eligible_deferred_compensation_plan any amount of compensation deferred shall be includible in gross_income only for the taxable_year in which such compensation or other income is paid or otherwise made available to the taxpayer an eligible_deferred_compensation_plan is a plan that meets the requirements of sec_457 and is maintained by an eligible_employer sec petitioner bases his argument on a newspaper article he read petitioner was unable to identify the source and publication_date of the article we have repeatedly held that the authoritative sources of federal tax law are the statutes regulations and judicial caselaw zimmerman v commissioner 71_tc_367 affd without published opinion 614_f2d_1294 2d cir 59_tc_456 - - b an eligible_employer is a state political_subdivision of a state and any agency_or_instrumentality of a state or political_subdivision of a state sec_457 e a initially we note that while it may be arguable that the vacation and or sick leave could be considered a deferred_compensation plan sec_457 would only defer the income to the taxable_year in which such compensation or other income is paid sec_457 petitioner received the payment in the year before the court but that is not the only problem with petitioner’s sec_457 argument sec_457 provides that any bona_fide vacation_leave sick leave compensatory time severance_pay disability pay or death_benefit plan is not a plan that provides for the deferral of compensation sec_457 a i although the county of los angeles is an eligible_employer under sec_457 the compensation petitioner received for unused sick and vacation_leave fits squarely within the exemption of sec_457 as a result petitioner’s compensation_for unused vacation and sick leave is not a deferred_compensation plan and sec_457 cannot apply therefore we respondent issued notice_88_8 1988_1_cb_477 and notice_88_68 1988_1_cb_556 which congress later codified in sec_457 e by the technical_and_miscellaneous_revenue_act_of_1988 publaw_100_647 102_stat_3700 -- - hold that petitioner’s compensation_for unused vacation and sick leave is taxable wages under sec_61 reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


t c memo united_states tax_court larry g and helen m horst petitioners v commissioner of internal revenue respondent docket no filed date larry g and helen m horst pro_se bradley c plovan for respondent memorandum opinion panuthos chief special_trial_judge respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax for the taxable_year unless otherwise indicated section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure - - the issues for decision are whether and to what extent payments received by petitioner larry g horst from the railroad retirement board in constitute taxable_income and whether petitioners failed to report taxable dividend and interest_income received in at the time of filing the petition petitioners resided in sharpsburg maryland background petitioner larry g horst petitioner was employed by csx transportation csx on date petitioner ceased work with csx due to injuries sustained in his employment petitioner filed a claim for disability annuity payments with the u s railroad retirement board rrb prior to petitioner received interim payments totaling dollar_figure pending resolution of the claim on date petitioner was advised by the rrb that he was entitled to receive an annuity the monthly annuity payments were classified by the rrb as follows effective date tier i tier ii total dollar_figure dollar_figure dollar_figure big_number dollar_figure dollar_figure big_number dollar_figure dollar_figure in petitioner received dollar_figure dollar_figure less the interim payments of dollar_figure from the rrb the annuity benefits were allocated as follows date tier i tier ii total dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number total dollar_figure dollar_figure dollar_figure the rrb submitted forms 1099-ssa and 1099-r to the internal_revenue_service irs reporting that rrb paid tier i and tier ii benefits to petitioner in in the amounts of dollar_figure and dollar_figure respectively csx submitted a form 1099-div to the irs reporting that csx paid dollar_figure in dividends to petitioners in and hagerstown trust submitted a form 1099-int to the irs reporting that hagerstown trust paid dollar_figure in interest to petitioners in petitioners did not report any of the above amounts on their federal_income_tax return in the notice_of_deficiency respondent determined that petitioners were required to report tier i benefits in the amount of dollar_figure and tier ii benefits of dollar_figure received from the rrb and dividend and interest_income as noted above received from csx and hagerstown trust discussion i rrb payments the first issue for decision is whether petitioners were required to include in income dollar_figure in tier i benefits and dollar_figure in tier ii benefits received from the rrb in at q4e- trial respondent conceded that dollar_figure in tier i benefits represented payment for a disability and is therefore nontaxable with respect to the tier ii benefits respondent conceded that the taxable benefit should be reduced by dollar_figure an amount received by petitioner prior to and by dollar_figure an amount which represents petitioner’s contribution therefore respondent’s position at trial was that dollar_figure of tier il benefits is taxable_income in petitioner did not present any legal or factual argument in opposition to respondent’s position since benefits received by railroad retirees have been divided into two programs identified as tier i and tier ii benefits tier i benefits are essentially the equivalent of social_security_benefits and are distributed in the same amount as social_security_benefits tier i benefits are taxed under the provisions of sec_86 if however tier i benefits are paid as compensation_for injuries or sickness the payments are not taxable pursuant to sec_104 tier ii benefits which are in the nature of pension benefits are taxed under the provisions of sec_72 see 875_f2d_228 9th cir 847_f2d_1279 7th cir bradley v commissioner tcmemo_1991_578 analyzing the corresponding amounts of payments received by petitioner as listed above we note that petitioner’s tier ii - - payments consist of dollar_figure percent of the total amount received applying this percentage to the amounts received by petitioner in we conclude petitioner received dollar_figure in tier ii payments dollar_figure x dollar_figure subtracting from this amount dollar_figure for contributions made by petitioner we conclude petitioner received dollar_figure in taxable tier ii benefits in and respondent is sustained on this issue to the extent of dollar_figure il dividend and interest_income the next issue for decision is whether petitioners were required to include in income dividends and interest received in gross_income includes all income from whatever source derived including interest and dividends see sec_61 it is not entirely clear from this record whether petitioners dispute the omitted dividend and interest_income issue since no evidence was presented by petitioners we sustain respondent on this issue see rule a to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court wayne curtis mckee petitioner v commissioner of internal revenue respondent docket no filed date wayne curtis mckee pro_se christal w hillstead for respondent memorandum opinion dinan special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined deficiencies in petitioner's federal_income_tax and additions to tax as follows year deficiency ______additions to tax_______ sec_6651 sec_6654 dollar_figure big_number big_number dollar_figure dollar_figure --- the issues for decision are whether petitioner is liable for federal income taxes on wages received during the years in issue whether sec_6501 bars the assessment and collection_of_taxes when a taxpayer fails to file returns whether petitioner is liable for additions to tax pursuant to sec_6651 and whether petitioner is liable for additions to tax pursuant to sec_6654 some of the facts have been stipulated and are so found the stipulations of fact and attached exhibits are incorporated herein by this reference petitioner resided in sumner washington on the date the petition was filed in this case petitioner failed to file federal_income_tax returns for the taxable years and despite having received wages in the amounts of dollar_figure dollar_figure and dollar_figure for those years respectively respondent determined deficiencies in unless otherwise indicated all section references are to the internal_revenue_code in effect for the taxable years in issue all rule references are to the tax_court rules_of_practice and procedure petitioner's federal income taxes and additions to tax based on forms w-2 filed by petitioner's employer in his petition petitioner raised traditional tax_protester type arguments he maintains that reporting and paying income taxes is strictly voluntary that the 5th amendment to the constitution of the united_states prevents respondent from requiring him to provide the information called for on an income_tax return and it is the government's responsibility to calculate his taxes and send him a bill within days of the year's end the first issue for decision is whether petitioner is liable for federal income taxes on his wages respondent's determinations as to petitioner's tax_liability is presumed to be correct and petitioner bears the burden of proving otherwise rule a 290_us_111 sec_61 defines gross_income as all income from whatever source derived included within the definition of gross_income is compensation_for services sec_61 during the taxable years and petitioner received taxable wages sec_61 all of petitioner's arguments have been rejected repeatedly by the courts there is no doubt that petitioner was required to file income_tax returns for the years in issue and that he was required to pay taxes on his wages see sec_1 a petitioner is a classic tax_protester raising traditional protester arguments see 737_f2d_1417 5th cir in crain v commissioner supra pincite when a tax_protester raised similar arguments the court_of_appeals for the fifth circuit opined we perceive no need to refute theses arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit we agree this court as well as the ninth circuit have held petitioner's arguments to be nothing more than tax_protester rhetoric and legalistic gibberish see 786_f2d_1437 9th cir 766_f2d_1288 9th cir 76_tc_1027 affd 696_f2d_1234 9th cir 640_f2d_1014 9th cir 91_tc_88 82_tc_403 rowlee v commissioner 80_tc_111 snyder v commissioner tcmemo_1995_405 devon v commissioner tcmemo_1995_206 mcganty v commissioner tcmemo_1995_178 diehl v commissioner tcmemo_1990_48 the next issue for decision is whether the statute_of_limitations bars assessment where petitioner has failed to file returns petitioner contends that the tax_liability for the taxable years in issue are uncollectible because respondent failed to make an assessment within days of the end of the taxable_year respondent contends otherwise pursuant to sec_6501 in the case of the failure_to_file a return the tax may be assessed or a proceeding in court for the collection of such tax may be begun without assessment at any time accordingly respondent is sustained on this issue the third issue for decision is whether petitioner is liable for sec_6651 additions to tax sec_6651 imposes an addition_to_tax for failure to timely file a return unless the taxpayer establishes the failure did not result from willful neglect and the failure was due to reasonable_cause willful neglect has been interpreted to mean a conscious intentional failure or reckless indifference 469_us_241 reasonable_cause requires the taxpayer to demonstrate that he exercised ordinary business care and prudence and was nonetheless unable to file a return within the prescribed time united_states v boyle supra pincite sec_301_6651-1 proced and admin regs the addition_to_tax equal sec_5 percent of the tax required to be shown on the return for the first month with an additional percent for each additional month or fraction of a month during which the failure_to_file continues not to exceed a maximum of percent sec_6651 petitioner made no attempt to comply with the law accordingly respondent's determinations with respect to the additions to tax under sec_6651 are sustained the final issue for decision is whether petitioner is liable for the additions to tax imposed under sec_6654 respondent determined that petitioner was liable for additions to taxes under sec_6654 for failure to pay estimated income_tax for the years in issue where payments of tax either through withholding or by making estimated quarterly tax_payments during the course of the year do not equal the percentage of total liability required under the statute imposition of the addition_to_tax under sec_6654 is automatic unless petitioner shows that one of the statutory exceptions apply 99_tc_202 75_tc_1 petitioner bears the burden to show qualification for such exception 78_tc_304 petitioner has not sustained this burden petitioner's employer did not withhold any federal income taxes from petitioner's or wages because petitioner filed exempt status petitioner did not make any estimated_tax payments for the years in issue accordingly we hold that petitioner is liable for the additions to tax under sec_6654 for the years in issue to reflect the foregoing decision will be entered for respondent


internal_revenue_service p o box cincinnati oh date number date legend x name of organization y name of selection committee department of the treasury employer identification contact person - id number contact telephone number uil of the code and that itis classified as a private dear we have considered your request for advance approval of your grant-making program under sec_4945 of the internal_revenue_code dated date with a postmark date of date our records indicate that x was recognized as exempt from federal_income_tax under sec_504 c foundation as defined in sec_509 your letter indicates that x will provide grants to individuals for travel study or education ta accomplish a goal that is meaningful to the grantee and to his her surrounding community after individuals are identified as potential grant recipients they are asked to provide information regarding their financial need as well as the proposed goal purpose of the grant qualified applicants would be children who have demonstrated a unique aptitude for or interest in a particular activity such as swimming dancing music or climbing determines that these children cannot afford lessons and further determines that such lessons would benefit the children by developing their talent increasing their self-esteem and encouraging productive activities outside of their schools then x may provide direct financial assistance to these children for the purpose of paying far the lessons x may leam of children who have exhibited talent in a particular area but cannot afford access to necessary facilities or equipment - in this event x may take steps to fund the availability of facilities or equipment for this group of children x also may learn that an educational trip is available for a particular group of children or young adults serve a significant educational purpose for the children and x determines that some of all of the children in the group cannot afford to pay for the trip x may provide financial assistance to these children for the purpose of participating in if x believes that the trip would if x the trip x_may learn that a particular child has shown significant and ongoing learning difficulties upon confirming these difficulties and upon making a determination that the child's family cannot pay for additional schooling or educational_assistance x may provide financial assistance to the family for the purpose of providing a special tutor for the child x will select volunteers called y who are individuals within the community who are in the best position to understand and address particular community needs including the needs of children and young adults these individuals will identify potential grantees collect information regarding potential grantees and make recommendation to x's board_of trustees x's board is made up of individuals who have significant and ongoing interest in promoting the well-being talents education and overall happiness of children and young adults x does not make any of the grants to family members or relatives of x's officers or trustees furthermore x_does not make any of the grants to any family members of the board_of selection or to any individuals that have a past or present business relationship with x’s officers or trustees after individuals are identified by the y as potential grant recipients they are asked to provide information to x regarding their level of financial need as well as the proposed goal purpose of the grant if an individual proposes a particular trip lesson or activity x makes an objective determination of the inherent educational and or community value of the proposed activity and its end result if x's board_of trustees determines that a particular grant and the resulting activities will have a significant positive and meaningful impact on the individual and the community and the individual has demonstrated legitimate financial need then x will make a grant to that individual under the terms of the grant the individual is only able to use the grant funds for the particular activity approved by x x may require any individual who receives a grant or family whose child receives a grant to produce one or more interim reports to x during the course of the designated activity x will have the discretion to require any individual who receives a grant to produce a summary report after the completion of the designated activity the summary report will require detailed explanations of the activities undertaken and how they enhanced the education talents or skills of the intended individual upon learning of any possible misuse of funds x will investigate such possible misuse for any situation where x is making periodic grant payments x will cease disbursement of additional funds during its investigation of possible misuse and will attempt to recover any funds that are ultimately determined to have been misused by the grant recipient or his her family where all grant funding has taken place at the onset of a trip or activity and x leams of misuse of funds x will take legal action to retrieve the funds awarded x agrees to maintain records that include the qualifications of potential grantees financial need intent to pursue approved activities the identification of the grantees and their families the amount and purpose of each grant all follow-up information received by x and all grantee reports and other follow-up data obtained in administering x's grant program sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g section q of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nendiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 b1 a ii the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report of similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that its grant procedure includes an objective and nandiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance i ii based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that effective date your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 it is further conditioned on this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based the premise that no grants wil be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in section c b of the code the approval of your award program procedures herein effective date constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 g of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request we have not considered whether grants made under your procedures are excludable from the gross_income of recipients under sec_117 of the code any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letier in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours robert choi director exempt_organizations rulings and agreements