internal_revenue_service number release date index number --------------------------- --------------- --------------------------- --------------------------- in re ------------------------------------- department of the treasury washington dc person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc corp b01 - plr-111214-04 date date ------------------------------------- legend parent ------------------------------------------------------------------------------- ---------------------------------------------------------------------------- purchaser ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------- u s seller -------------------------------- ------------------------------------------------------------------------------------ ---------------------------------------------------------------------------- target --------------------------------------------------------------- ----------------------------------------------------------------------------------- target sub ------------------------------------------------------------------------------------- target sub ------------------------------------------------------------------------------------ ---------------------------------------------------------------------------- target sub ----------------------------------------------------------------------------- target sub -------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------- ------------------------------------------ ----------------------------------------- ----------------------------------------- ------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- plr-111214-04 ------------------- ------------------- --------------------- ----------------------------------------- ----------------------------------------------- ------------------------------------------------------------- target sub -------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------- target ---------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------- ---------------------------------------------------------------------------- target sub ----------------------------------------------------------------------------- ---------------------------------------------------------------------------- date a date b country e country f country g country h state i state j in-house tax professional -------------------------------------------------------------------------- outside tax professional dear --------------- requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election parent on its own behalf and as united_states_shareholder of the foreign purchasing_corporation is requesting the extension of time to file a sec_338 election under sec_338 of the internal_revenue_code with respect to parent’s and purchaser’s acquisitions of the stock of target and this is in response to your authorized representative’s letter dated february ------------------------------------------------------------- ------------------------------------------------- --------------------------- -------------- ------------- ------------ -------- plr-111214-04 target a country f corporation was wholly owned by u s seller target parent a state i corporation is the common parent of a consolidated_group of target respectively and the deemed acquisitions of the stock of target sub target sub target sub target sub target sub hereinafter collectively referred to as the target affiliates and target sub hereinafter referred to as the target affiliate on date a sometimes hereinafter referred to as the election additional information was received in letters dated april may and date the material information is summarized below corporations purchaser a country e corporation is a wholly owned subsidiary of parent wholly owned the following subsidiaries target sub a country g corporation target sub a state j corporation target sub a country e corporation target sub a country h corporation and target sub a country h corporation target a country e corporation was wholly owned by u s seller target sub a country e corporation was wholly owned by target on date a pursuant to a purchase agreement parent acquired all of the stock of target which included target affiliates in exchange for cash pursuant to the same contract and on the same date purchaser acquired all of the stock of target which included target affiliate in exchange for cash it has been represented that these acquisitions of the stock of target and target each qualified as a qualified_stock_purchase as defined in sec_338 target and target affiliate the controlled subs were each a controlled_foreign_corporation within the meaning of sec_957 the controlled subs were not passive foreign investment companies for which an election under sec_1295 was in effect foreign_corporations the stock ownership of which is described in sec_552 nor required under sec_1_6012-2 to file a united_states income_tax return target and target affiliate were not foreign_personal_holding_companies within the meaning of sec_552 foreign investment companies within the meaning of sec_1246 or passive foreign investment companies within the meaning of sec_1297 account sec_953 and is not required under sec_1_6012-2 other than sec_1 g i b to file a united_states income_tax return for its taxable_year that includes the acquisition_date parent intended to file the election the election was due on date b but for various reasons a valid election was not filed after the due_date for the election it prior to their acquisitions target target affiliates except for target sub purchaser is a controlled_foreign_corporation as defined in sec_957 taking into prior to the acquisitions target target affiliates except for target sub plr-111214-04 sec_301_9100-1 through provide the standards the sec_338 permits certain stock purchases to be treated as asset under sec_301_9100-1 the commissioner of internal revenue has discretion to was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 sec_1_338-2 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent to file the election provided parent acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government professional and outside tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the interests of the government will not be prejudiced if relief is granted see sec_301_9100-3 made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for parent to file the election with respect to the acquisition of stock of target and target and the deemed acquisitions of the target affiliates and target affiliate as described above in this case the time for filing the election is fixed by the regulations ie information affidavits and representations submitted by parent in-house tax based on the facts and information submitted including the representations plr-111214-04 within days of the date on this letter parent must file the within days of the date on this letter all relevant parties the above extension of time is conditioned on the taxpayers' tax_liability if any election on form_8023 executed on or after the date of this letter in accordance with sec_1_338-2 and e and the instructions to the form a copy of this letter must be attached to form_8023 notice of the election must also be provided to u s seller and any other u_s_person described in sec_1 e including u s seller must file or amend as applicable all returns and amended returns if any necessary to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year a copy of this letter and a copy of form_8023 or form_8883 if appropriate must be attached to the returns being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director's office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers' tax_liability is lower sec_301_9100-3 we express no opinion as to whether the acquisitions of the target and target stock ie the direct acquisitions of target and target stock and or the deemed acquisitions of the stock of target affiliates and target affiliate qualify as qualified_stock purchases under sec_338 or any other tax consequences arising from the election also no opinion is expressed concerning the application of sec_1248 sec_951 and sec_338 to u s seller because of the deemed sale of target 1’s target affiliates’ target 2’s and target affiliate’s assets pursuant to the sec_338 election see sec_1_338-9 election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling also except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any transaction or item discussed or referenced in this letter statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply in addition we express no opinion as to the tax consequences of filing the for purposes of granting relief under sec_301_9100-3 we relied on certain plr-111214-04 pursuant to the power_of_attorney on file in this office the original of this letter is this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent being sent to parent's authorized representative with copies to parent and a second authorized representative cc ken cohen ken cohen senior technician reviewer branch office of associate chief_counsel corporate sincerely


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc te_ge eb hw plr-127930-02 date legend statute plan dear this letter responds to a letter from your authorized representative dated date requesting a ruling on the proper federal_income_tax treatment of certain disability retirement benefits paid to members of the plan under the statute the term duty disability is defined in section of the statute if a member shall become totally incapacitated for duty by reason of injury illness or disease resulting from performance of duty and if the board_of trustees shall find such injury illness or disease to have resulted from the performance of duty on written application to the board_of trustees by or on behalf of such member or by the head of his or her department such member shall be retired notwithstanding that during such period of notification the member may have separated from service provided that the medical director after examination of such member shall certify to the board_of trustees his or her total incapacity if said member was separated from service after filing of the written application and had attained twenty-five years or more of service prior to the date of separation the board_of trustees shall retire said member under this section and under sections and of this code plr-127930-02 sections a and a of the statute provides each such member shall receive a disability pension of fifty percent or such other higher percentage that is in effect and applies to such member the percentage payable upon age and years_of_service retirement at the earlier of age or years_of_service of the member's average final compensation at the time of disability retirement on the date that a member who retired under section of this code would have accrued twenty-five years of creditable service had the member continued in active_service or on the date that the member reaches age sixty whichever comes first the member shall be eligible for optional benefits as provided in city charter as amended sections a and a of the statute provides in addition to the disability pension provided for in section a or13 a of this code any member who receives a disability pension pursuant to section s a or a of this code and has not accrued a total of twenty-five years of creditable service as of the date of the member's disability retirement shall receive a supplemental disability payment in the amount of sixteen and two-thirds percent b of the member's average final compensation at the time of disability retirement this supplemental payment shall terminate upon the expiration of the period when a member who retired under section of this code and who receives benefits under section s a or a of this code would have accrued twenty-five years of creditable service had the member continued in active_service or on the date that the member reaches age sixty whichever comes first the effective date of the subject statutes is date sec_61 of the internal_revenue_code provides that except as otherwise provided by law gross_income means all income from whatever source derived including compensation_for services sec_104 of the code provides that gross_income does not include amounts received under workmen's_compensation acts as compensation_for personal injuries or sickness sec_1_104-1 of the income_tax regulations states that sec_104 of the code excludes from gross_income amounts received by an employee under a workmen's_compensation_act or under a statute in the nature of a workmen's_compensation_act that provides compensation to the employee for personal_injury_or_sickness incurred in the course of employment sec_104 also applies to plr-127930-02 compensation which is paid under a workmen’s compensation act to the survivor or survivors of a deceased employee sec_104 does not apply to a retirement pension or annuity to the extent it is determined by reference to the employee's age or length of service or the employee's prior contributions even though the employee's retirement is occasioned by an occupational injury or sickness sec_104 also does not apply to amounts which are received as compensation_for a non-occupational injury or sickness nor to amounts received as compensation_for an occupational injury or sickness to the extent that they are in excess of the amount provided in the applicable workmen's_compensation_act or acts sec_3405 of the code applies the withholding rules applicable to pensions or annuities to a payor of any periodic_payment sec_3405 defines the term periodic_payment as a designated_distribution which is an annuity or similar periodic_payment an individual may elect under sec_3405 not to have amounts withheld from a periodic_payment sec_3405 provides that the term designated_distribution does not include the portion of a distribution or payment which is reasonable to believe is not includible in gross_income the subject statute provides that a disabled retiree will receive a disability pension of of his or her average final compensation at the time of disability retirement for life in addition the statute also provides that the disabled retiree will receive an additional disability pension of b of his or her average compensation at the time of disability retirement until the employee attains or would have attained years of credited service if benefits are computed by a formula that does not refer to the employee's age length of service or prior contributions and are provided to a class that is restricted to employees with service-incurred injuries sickness or death then the statute under which the benefits are paid qualifies as a statute in the nature of a workmen's_compensation_act see revrul_80_84 1980_1_cb_35 revrul_83_77 1983_1_cb_37 revrul_80_44 1980_1_cb_34 the fact that the amount received is based on a percentage of the employee's salary on the date of the disability does not disqualify the payment from qualifying as one in the nature of workmen's_compensation see revrul_68_10 1968_1_cb_50 based on the information submitted representations made and authorities cited above we conclude as follows sections and of the statute restrict benefits to a class of employees with service-incurred injuries or diseases resulting in disabilities and constitute statutes in the nature of workmen's_compensation acts sections and provide for the payment of a percentage of the injured employee's final compensation at the time of the plr-127930-02 occurrence of the disability based upon the retirement benefit payable for life plus an additional 16b payable until the earlier of age or when the employee would have had years_of_service without regard to the employee's actual age length of service or prior contributions thus sections and of the statute constitute statues in the nature of a workmen's_compensation_act and disability benefits paid under sections and to a disabled member are excludable from gross_income under sec_104 of the code sec_3405 of the code provides that the term designated_distribution does not include the portion of a distribution or payment which it is reasonable to believe is not includible in gross_income therefore there is no obligation to report on form w-2p disability payments paid under sections and of the statute except as specifically ruled upon above no opinion is expressed or implied with respect to the application of any other provisions of the code or the regulations to the benefits described this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely enclosure copy for section purposes harry beker chief health welfare branch office of division counsel associate chief_counsel tax exempt government entities


internal_revenue_service number release date index number -------------- -------------------------------------- ------------------------------------------- -------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-112124-08 date september legend x -------------- ---------------------------------------------- ----------------------- ------------------------- ------------------------------ --------------------- a b c country --------- d1 d2 --------------------- --------------------- dear ------------ this letter responds to a letter dated date and subsequent correspondence written on behalf of x requesting a ruling under sec_301_9100-3 of the procedure and administration regulations facts x was formed under the laws of country x represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes x was a wholly-owned subsidiary of a a country corporation b a country corporation acquired a through a subsidiary entity c on d1 upon b’s acquisition of a it was plr-112124-08 intended that x would be treated as a disregarded_entity effective d2 however due to inadvertence a form_8832 entity classification election to treat x as a disregarded_entity effective d2 was not timely filed law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an entity separate from its owner sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 entity classification election with the service_center designated on form_8832 sec_301_7701-3 provides that an election under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed if an election specifies an effective date more than days prior to the date on which the election is filed it will be effective days prior to the date it was filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but not more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-2 provides the standards the commissioner will use to determine whether to grant an automatic_extension of time for making certain elections plr-112124-08 sec_301_9100-3 provides the guidelines for granting extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301 a provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301 and sec_301_9100-3 as a result x is granted an extension of sixty days from the date of this letter to file a properly executed form_8832 with the appropriate service_center to elect to be classified as a disregarded_entity effective d2 a copy of this letter should be attached to the form_8832 except as specifically set forth above we express no opinion concerning the federal tax consequences of the above described facts under any other provision of the internal_revenue_code in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely s william p o’shea associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court evelyn m martin petitioner v commissioner of internal revenue respondent docket no filed date stephen g salley and anthony j scaletta for petitioner willie fortenberry jr for respondent memorandum findings_of_fact and opinion gerber judge respondent determined deficiencies in and additions to petitioner’s federal_income_tax for the and taxable years as follows additions to tax sec sec sec year deficiency a a a a b dollar_figure dollar_figure dollar_figure t big_number big_number big_number percent of the interest due on the deficiency all section references are to the internal_revenue_code in effect for the years under consideration and all rule references are to the tax court’s rules_of_practice and procedure unless otherwise indicated the sole issue for consideration is whether petitioner should be relieved of liability for any portion of the income_tax and additions to tax under the provisions of sec_6015 entitlement to relief is in part dependent upon a taxpayer’s knowledge about the questioned item s at the time of signing a joint_return findings_of_fact petitioner and her husband glen h martin filed delinguent joint federal_income_tax returns on date and date for their and tax years respectively at the time of the filing of her petition petitioner’s legal residence was dallas texas petitioner’s husband has been incarcerated in a federal penitentiary since petitioner was born in in canada and was one of six children she discontinued her education at age and entered into a training program with the royal bank of canada she worked at the bank for approximately years advancing from a mail clerk position to that of a teller and thereafter became an administrative office manager of a general insurance agency in the insurance agency transferred her to miami florida where she met her first husband married and had a daughter in shortly thereafter petitioner divorced her first husband and returned to the royal bank of canada for a short time following that she returned to florida and began to work for amicable life_insurance co amicable petitioner met mr martin a part-time insurance salesman at amicable and they were married in and petitioner became a full-time housewife with two additional children born during and mr martin established a very successful insurance agency named insurance agency of america iaa which wrote policies exclusively for amicable generally petitioner’s involvement with iaa was in the role of supporting mr martin’s career as his spouse entertaining business associates and accompanying mr martin on agent recruiting trips in date mr martin formed a florida corporation named glenn h martin and associates inc d b a iaa and named himself board chairman president and treasurer petitioner was named vice president and secretary of the corporation petitioner was not involved in the business of iaa and her designation as an officer of the corporation was in the nature of - a nominee iaa was in effect a holding_company with percent of the shares in another corporation financial security corp of america inc fsca through the end of mr martin held percent of the shares of iaa and the remaining three shareholders were some of the same people who owned the percent of the shares of fsca that were not held by iaa in turn fsca was the parent of eight subsidiary corporations including one named primera development corp inc primera mr martin had been a high school teacher and coach earning extra income by means of part-time insurance sales by employing teacher coaches he was very successful in his insurance agency business and as of had big_number agents under contract in amicable was purchased by another insurance_company which detrimentally affected mr martin and iaa and due to contractual disputes with their agents a suit was filed against the purchaser of amicable mr martin began looking for another insurance_company to underwrite his business and in he acquired twentieth century life_insurance co life and made it a subsidiary of a holding_company named twentieth century financial corp inc financial financial was owned percent by mr martin and he and petitioner were board members petitioner was a minority shareholder of financial petitioner was not involved in the business of financial but she did get involved in public relations such as charitable projects in - connection with the corporation’s public image petitioner was able to pick up a limited amount of business information from her participation on the boards of some of the related corporations but she was generally not involved in or knowledgeable about the day-to-day operations or the details of the business of financial mr martin’s success in the insurance_business permitted the martins during to build a palatial home in the sweetwater estates subdivision from through the success and the guality of the martins’ lifestyle continued unabated including the purchase of rolls royce and lamborghini automobiles a foot yacht several other luxury automobiles airplanes carat and 12-carat diamond rings given to petitioner as gifts by mr martin and rolex watches although the martins reported some net federal_income_tax losses during the period through it was not uncommon for mr martin to receive forms w-2 for amounts in excess of dollar_figure million the martins employed several household staff members and a full-time gardener petitioner was involved in high profile charitable and political fund raisers and threw lavish parties at the martins’ home although petitioner was a member of several of the corporate boards and was involved in the publication of central florida magazine during the period through she was primarily a housewife and mother -- - initially petitioner maintained the martin family’s household finances but after the business growth mr martin’s personal business secretary began maintaining the martin household and family finances for example petitioner maintained a checking account to pay routine bills for doctors groceries etc but mr martin’s personal secretary paid out of mr martin’s corporate shareholder accounts a majority of household bills such as those concerning the mortgage credit cards installment loan payments etc in mr martin hired louis j hevey a certified_public_accountant and he became the chief financial officer for all of mr martin’s businesses mr hevey ensured that there was sufficient cash in the shareholder advance accounts to pay the martins’ expenses petitioner did not exercise any control or direction over mr hevey and she did not review his records or discuss finances with him the amount of money used by mr hevey to cover the martins’ lifestyle remained relatively constant during the period mr hevey worked for mr martin during the period under consideration life advanced substantial funds to fsca in the north carolina insurance department ncid regulators became concerned about the financial stability of life and the large volume of loans to fsca which the regulators did not consider to be assets for statutory accounting purposes without considering the promissory notes - j- for funds due from fsca life would have been statutorily insolvent and or impaired under north carolina law and thereby prohibited from underwriting life_insurance fsca was not capable of repayment and so mr martin and several advisers including mr hevey designed a multistep transaction to bolster life’s assets although petitioner was generally aware of mr martin’s involvement in a transaction involving primera and that the primera land was involved she did not discuss it with mr martin and was not involved or consulted concerning the structuring or execution of the transaction no cash or property inured to the benefit of or was received by the martins due to execution of this transaction mr forness a certified_public_accountant who served mr martin’s business and prepared corporate and individual income_tax returns assisted in attempting to structure the transaction to make it appear that federal tax consequences would be deferred under sec_351 on date mr martin life fsca and its parent entered into a three-step transaction where the primera stock would be contributed to glen h martin and associates inc ghma in exchange for big_number shares of ghma stock ghma would then contribute the primera stock to fsca as paid-in capital fsca in turn would sell the primera shares to life in exchange for loan forgiveness and other consideration primera was valued at dollar_figure as of date and --- - its value was in great part attributable to real_property petitioner did not participate in mr martin’s decision to enter into this complex transaction at a date shareholders’ meeting for financial and attended by petitioner mr martin in connection with the above-described transaction stated that on date the primera property consisting of approximately acres of real_estate had been sold to life for dollar_figure per acre or dollar_figure mr forness prepared the and federal_income_tax returns reflecting the above-described primera transaction for all parties that were involved a form_4797 sales of business property attached to the martins’ joint federal_income_tax return reflected that the primera transaction was subject_to sec_351 and therefore no gain was recognized petitioner now concedes that the primera transaction should have resulted in gain and sec_351 did not apply to cause nonrecognition if petitioner and mr martin had filed separate returns for petitioner would not have been required to report any portion of the gain from the primera transaction in addition to the improper sec_351 transaction respondent made several other adjustments to arrive at petitioner’s and income_tax deficiencies none of which would have been attributable to petitioner but for her filing a joint_return with mr martin extensions were obtained for --- - filing the and joint federal_income_tax returns for petitioner and mr martin and the returns ultimately were not timely filed mr forness did not discuss any position taken on the martins’ income_tax returns with petitioner and she was not in a position to secure records from the various business entities to prepare the and joint returns petitioner did not receive any forms w-2 wage and tax statement for the period under consideration mr forness always presented the joint federal_income_tax returns to mr martin who in turn presented them to petitioner for her execution after the primera transaction ncid and the insurance regulatory authorities of two other states focused on life’s financial situation and imposed restrictions ncid during ordered that life sell primera during life sold primera to a development company for a dollar_figure million promissory note linked to the real_property mr martin did not discuss these difficulties with petitioner and from through there was no change in her lifestyle and petitioner believed that she was a wealthy person although petitioner was generally aware of the primera transaction it was not until a few years after the years in issue sometime in that petitioner became aware of the tax and insurance-related details and financial problems with which her husband and family were confronted - lo - on date ncid seized life and declared it insolvent relieving mr martin of his position as president of life thereafter the martins began selling off or losing their assets to foreclosure in order to pay day-to-day living_expenses by date most of the martins’ assets had either been repossessed or sold to pay their daily living_expenses in july of the martins filed a voluntary liquidating bankruptcy during a 33-count criminal indictment was issued against mr martin and his sister for diverting insurance premiums to hide them from the ncid regulators mr martin was found guilty on date following a 3-month trial petitioner attended the trial each day but was not named as a defendant and had no knowledge of the diversion as of the time of the trial of this case petitioner resided in her children’s homes had no assets and was unable to work due to poor health at that time mr martin remained incarcerated with his prison term to conclude in and the martins remain married opinion petitioner seeks relief under sec_6015 from income_tax deficiency determinations that she now concedes are not in error respondent concedes that petitioner is entitled to separation of liability relief under sec_6015 with respect to three schedule c adjustments as follows dollar_figure for airplane - rental dollar_figure and dollar_figure for insurance sales commission expenses for and respectively sec_6015 provides in certain circumstances for relief from joint liability for tax interest penalties and other_amounts arising from a joint federal_income_tax return see sec_6015 b and c sec_6015 permits taxpayers to seek relief under sec_6015 if they filed a joint_return and if eligible under sec_6015 sec_6015 in pertinent part provides for relief for certain joint filers as follows c procedures to limit liability for taxpayers no longer married or taxpayers legally_separated or not living together in general except as provided in this subsection if an individual who has made a joint_return for any taxable_year elects the application of this subsection the individual’s liability for any deficiency which is assessed with respect to the return shall not exceed the portion of such deficiency properly allocable to the individual under subsection d burden_of_proof except as provided in subparagraph a ii or c of paragraph each individual who elects the application of this subsection shall have the burden_of_proof with respect to establishing the portion of any deficiency allocable to such individual ' sec_6015 was added by sec_3201 of the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_734 sec_6015 is effective with respect to any_tax liability arising after date and any_tax liability arising on or before date that is unpaid on that date blection c election not valid with respect to certain deficiencies if the secretary demonstrates that an individual making an election under this subsection had actual knowledge at the time such individual signed the return of any item giving rise to a deficiency or portion thereof which is not allocable to such individual under subsection d such election shall not apply to such deficiency or portion therefore sec_6015 relieves certain joint-filing taxpayers by making them liable only for those items of which they had actual knowledge rather than being liable for all items reportable on the joint_return in effect this approach is intended to the extent permitted to treat certain spouses as though they had filed a separate_return this is a departure from predecessor sec_6013 and companion sec_6015 b where the intended goal was to permit relief only if the relief- seeking spouse did not know or had no reason to know of an item accordingly taxpayers who are either no longer married separated for months or more or not living together petitioner’s circumstance may elect treatment as though they had separately filed sec_6015 c however does not permit the election of separate treatment for any item where the secretary demonstrates that an individual had actual knowledge of the item at the time such individual signed the return petitioner has elected separate treatment under sec_6015 and accordingly respondent bears the burden of showing - - that petitioner had actual knowledge of any item giving rise to a deficiency or portion thereof which is not allocable to petitioner the concept of actual knowledge under sec_6015 has been addressed by this court in 114_tc_333 where relief was granted and cheshire v commisioner t c __ __ slip op pincite where relief was denied in charlton v commissioner supra a recent application of the innocent_spouse_rule we explained that a sec_6015 election is not valid if respondent shows that the individual making the election had actual knowledge when signing the return of any ‘item’ giving rise to a deficiency or portion thereof which is not allocable to the electing individual id pincite in charlton the taxpayer seeking relief was aware that the source_of_income was his wife’s business but he did not compare records provided him by his wife with other business records to determine whether his wife had accounted for all of the income although mr charlton had actual knowledge of income from a particular source and knew generally of his spouse’s source_of_income he had no knowledge that all income from that source had respondent has agreed that petitioner is entitled to sec_6015 relief with respect to three items other than the primera transaction the only question we consider here is whether petitioner had actual knowledge within the meaning of sec_6015 -- not been accounted for as reported we thus held in charlton that respondent has not shown that charlton had actual knowledge of the item causing the deficiency and that charlton qualifies for relief under sec_6015 id a few months later this court again had the opportunity to consider the sec_6015 relief provisions in cheshire v commissioner supra also an omitted income case petitioner had actual knowledge of the fact of the omitted income as well as the amount of income but submitted that she was entitled to relief because she was unaware of the applicable tax laws specifically petitioner was aware of the amount the source and the date of receipt of the retirement distribution and interest but did not know the tax consequences of the income id slip op pincite in that case we held that knowledge for purposes of sec_6015 relief disqualification does not require actual knowledge on the part of the electing spouse as to whether the entry on the return is or is not correct see id instead the electing spouse must have actual knowledge of the disputed item_of_income as well as the amount thereof that gave rise to the deficiency id slip op pincite thus in cheshire v commissioner supra we concluded that ignorance of the applicable tax law is no excuse and that respondent had met his burden of proving knowledge of the omitted income -- - cheshire v commissioner supra established that actual knowledge of the disputed item_of_income and the amount thereof prevents a taxpayer from claiming innocent spouse relief under sec_6015 with those principles and charlton as our backdrop we must determine whether petitioner is entitled to innocent spouse relief under sec_6015 c petitioner contends that respondent’s showing of her minimal or superficial knowledge about mr martin’s transfer of shares in primera and of the sale of primera land is insufficient to meet the statutory threshold necessary to deny her sec_6015 relief respondent argues that petitioner’s attendance at the shareholders’ meeting year prior to the filing of the return in guestion and learning that the primera property was sold to twentieth century life for dollar_figure constitutes actual knowledge of the item giving rise to the deficiency in charlton v commissioner and cheshire v commissioner supra the nonelecting spouse received an amount of income from a business or as a lump sum from a distribution of retirement benefits of which the electing spouse was aware here petitioner and her spouse did not receive any cash or property the primera transaction involved a complex series of steps that resulted in the transfer of stock and the sale of property which was structured to qualify as a nontaxable_transaction under sec_351 for federal tax purposes without petitioner’s -- - involvement or knowledge mr martin and certain professionals devised this complex and somewhat devious transaction consisting of a series of steps and involving several entities the transaction was primarily intended to deceive state insurance regulators into believing that the asset position or picture of mr martin’s insurance_company was improved the transaction was further complicated because it was structured for tax purposes to appear that the transfer of property to the corporation s was a nontaxable event under sec_351 ultimately the desired results were not achieved mr martin was incarcerated due to his fraudulent deceptions and petitioner was left penniless and bankrupt petitioner knew that mr martin intended to contribute shares in primera to another corporation but she had no actual knowledge of the myriad and complex steps or entities involved in the transaction petitioner’s uncontroverted testimony revealed that she was at most superficially aware of only a small portion of the details in these complex transactions because petitioner had only a superficial awareness of the transaction petitioner did not have actual knowledge of the amount of the financial gain that was misreported nor of the underlying facts that gave rise to the gain based on the facts pertaining to the transactions available to petitioner she would not have known that the stock transfer was not a sec_351 transaction or that the corporate sale of land could have resulted in financial gain or income to her husband like the taxpayer in charlton v commissioner supra petitioner possessed only a part of the information and the information that she did possess was insufficient to supply her with actual knowledge regarding the amount of the financial gain from the transaction if any in sum and in substance petitioner knew only that mr martin had transferred his stock in primera and land was sold without knowledge of additional and complex facts petitioner would not be in a position to actually know the amount of the financial gain from the transaction if any we have difficulty discerning any meaningful differences between the taxpayer in charlton v commissioner supra who knew of the income source and did not verify the total amount reportable and petitioner who knew that her husband transferred stock and sold land but had no knowledge of the amount of the financial gain if any or of most of the facts that gave rise to that gain unlike the taxpayer in cheshire v commissioner supra respondent has not shown that at the time she signed the return petitioner had actual knowledge of items underlying the possibility of any financial gain neither party disputes that any gain arising from the stock transfer and land sale would have been reported solely by petitioner’s husband had petitioner and her husband filed separate tax returns -- - we have considered and compared charlton v commissioner supra and cheshire v commissioner supra to decide whether petitioner is entitled to innocent spouse relief we hold that respondent has not shown that petitioner had actual knowledge of the amount of the item giving rise to a deficiency ’ respondent also determined additions to tax for negligence under sec_6653 a and b and for delinquency under sec_665l1 a because of our holding with respect to sec_6015 relief petitioner’s income_tax deficiency if any for either tax_year would be de_minimis in particular respondent agreed to sec_6015 relief for all of the adjustment items other than the one we have decided in petitioner’s favor in that regard respondent relied on petitioner’s husband’s transactions adjustments to assert that petitioner was liable as a joint_return filer for the negligence addition_to_tax with all of those adjustments either conceded by respondent or decided in petitioner’s favor the predicate for the negligence addition no longer exists accordingly we hold it is unnecessary to consider petitioner’s arguments for relief under other provisions of sec_6015 because we have decided she is not liable for the portion of any deficiency attributable to the primera transaction in that regard in this proceeding petitioner sought relief solely from that transaction it appears that the remaining adjustments are more mathematical in nature and dependant upon the adjustments that have been conceded or determined that petitioner is not liable for the addition_to_tax for negligence for either taxable_year with respect to the delinquency addition petitioner has failed to offer evidence that would relieve her of that obligation and to the extent that the rule computation results in any income_tax deficiency due from petitioner she will be liable for the sec_6651 delinquency addition_to_tax to account for concessions of the parties and to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number ---------------------------------------------- ---------------------- ------------------------------------ ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ---------------- telephone number -------------------- refer reply to cc corp b04 plr-126581-16 date date legend parent ---------------------------------------------------------- --------------------------------------------------------------------- ----------------------------------------------- corp ---------------------------------------------------------- ------------------------------------------- sub ---------------------------- --------------------------------------------------------------- date date ---------------------- -------------------------- company official ------------------------------------------------------------------ ---------------------------------------------------------------------------------- ------------------------ tax professional ------------------ ----------------------------------------------------- ------------------------------------------------------------------------------ dear ------------ this letter_ruling responds to a letter from your authorized representative dated date requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file an election the extension is plr-126581-16 being requested for parent and its affiliated subsidiaries the parent group to make an election to file a consolidated federal_income_tax return with parent as the common parent under sec_1_1502-75 of the income_tax regulations the election for the taxable_year ending date the material information provided in that letter is summarized below on date parent through sub its wholly-owned subsidiary acquired of the outstanding_stock of an unrelated corporation corp before corp was acquired corp filed consolidated_returns with its own affiliated subsidiaries the corp group as a result of parent acquiring corp the corp group terminated at the end of the day on date the members of the corp group then became members of the parent group prior to the taxable_year ending date the parent group did not file a consolidated federal_income_tax return an election for the parent group to file a consolidated_income_tax_return with parent as the common parent for the taxable_year ending date was due on the last day prescribed by law including extensions of time for the filing of parent's return parent intended to file the election but for various reasons a valid election ie the filing of the consolidated_return was not filed by the due_date of parent's return after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for the corp group’s taxable_year ending date the parent group’s taxable_year ending date or any subsequent taxable_year parent has represented that it does not seek to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time parent requested relief taking into account any qualified_amended_return within the meaning of sec_1_6664-2 sec_1_1502-75 of the income_tax regulations provides in part that an affiliated_group_of_corporations which did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation which has been a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents in accordance with sec_1_1502-75 of the regulations to the regulations under sec_1502 if a group wishes to exercise its privilege of filing a consolidated_return such consolidated_return must be filed not later than the last day prescribed by law including extensions of time for the filing of the common parent's return under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i plr-126581-16 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_1502-75 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent to file the election provided parent shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file the election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly provided that the parent group qualifies substantively to file a consolidated_return for the applicable_taxable_year we grant an extension of time under sec_301_9100-3 for sixty days from the date on this letter for parent to file the election by filing a consolidated_return with parent as the common parent and attaching a form_1122 for each of its affiliated subsidiaries for its taxable_year ending date the above extension of time is conditioned on the taxpayers’ parent’s and the members of parent group tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the federal_income_tax returns involved 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 plr-126581-16 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the rulings contained in this letter are based upon information and representations submitted by parent company official and tax professional 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 moreover notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any still apply 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 pursuant to the power_of_attorney on file in this office copies of this letter are being sent to your authorized representatives sincerely __________________ ken cohen chief branch office of associate chief_counsel corporate


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc intl plr-149285-01 date date taxpayer legend date a individual a dear this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file form_8279 election to be treated as a fsc or as a small_fsc pursuant to temp sec_1_921-1t q a effective for the tax_year beginning on date a additional information was submitted in a letter dated date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process individual a is a director and president of taxpayer the affidavit of individual a describes the circumstances surrounding the discovery and failure_to_file form_8279 taxpayer is requesting relief before its failure_to_file form_8279 was discovered by the service sec_301 -1 b defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a in re plr-149285-01 taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation sec_1_921-1t q a fixes the time to elect treatment as a fsc or as a small_fsc thus the commissioner has discretionary authority pursuant to sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to file form_8279 election to be treated as a fsc or as a small_fsc pursuant to temp sec_1_921-1t q a effective for the tax_year beginning on date a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file form_8279 sec_301_9100-1 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being sent to your authorized representatives sincerely s allen goldstein allen goldstein reviewer office of the associate chief_counsel international


internal_revenue_service number release date index number ------------------------- --------------------------- --------------------------------------------- --------------------- ----------- --------------- ---------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-158360-04 date march - company ----------------------------------------------------------------------- ----------------------- --------------------------------------------------- investors ---------------------------------------------------------- a --------------------------- dear --------------- this letter responds to a letter from your authorized representative dated date submitted on behalf of company requesting an extension of time for company to elect under ' c of the procedure and administration regulations to be treated as a disregarded_entity company represents the following facts on a investors directly and indirectly acquired shares of certain u s and foreign subsidiaries of a foreign company it was intended that the foreign subsidiaries including company be disregarded as entities separate from their owners as of the date_of_acquisition however due to inadvertence company did not file form_8832 entity classification election sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity may elect its classification for federal tax purposes as provided in this section an eligible_entity with a single owner may elect to be classified as an association and thus a plr-158360-04 corporation under ' b or to be disregarded as an entity separate from its owner sec_301_7701-3 provides in general that unless it elects otherwise a foreign eligible_entity is an association if all members have limited_liability sec_301_7701-3 provides in general that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the applicable service_center sec_301_7701-3 provides that an election made under ' c i will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under ' c the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of ' requests for relief under ' will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 based on the facts and representations submitted company has established that the requirements of and are satisfied consequently company is granted an extension of days from the date of this letter for electing under ' to be disregarded as an entity separate from its owner effective a company must file form_8832 within the extension period with the appropriate service_center with a copy of this letter attached except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code sec_301_9100-1 provides that the granting of an extension of time for plr-158360-04 making an election is not a determination that the taxpayer is otherwise eligible to make the election in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative this ruling is directed only to the taxpayer on whose behalf it was requested according to ' k of the internal_revenue_code this ruling may not be used or cited as precedent sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc


department of the treasury internal_revenue_service commerce street dallas tx tax_exempt_and_government_entities_division release number release date legend org - organization name xx - date address address org address certified mail dear date date person to contact badge number contact telephone number contact address employer_identification_number deadline to petition_tax_court this is a final notice of adverse determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective january 20xx the following reason s you are not organized and operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you are not and have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 rather your activities further a substantial nonexempt commercial purpose and serve private rather than public interests contributions to your organization are no longer deductible effective january 20xx since your exempt status has been revoked you are required to file form_1120 u s_corporation income_tax return for all years beginning on or after january 20xx income_tax returns for subsequent years are to be filed with the appropriate service_center identified in the instructions for those returns it is further determined that your failure_to_file a written appeal constitutes a failure to exhaust your available administrative remedies however if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment to secure a petition form write to the following address please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due the last day for filing a petition for declaratory_judgment is june 20xx you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely nanette m downing acting director eo examinations enclosures publication err ee ae government entities division org address department of the treasury internal_revenue_service tege eo examination watt avenue sa eo sacramento ca date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary lf you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication publication report of examination sincerely sunita lough director eo examination letter catalog number 34809f 886a eo name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service org 20xx legend org organization name state state date attorney - attorney xx address address president president city - city whether the organization continues to qualify for exemption from income_tax when its president has stated that they have stopped providing credit_counseling_services issue org was incorporated in the state of state on may 20xx facts on january 20xx org was recognized by the service as exempt under sec_501 of the internal_revenue_code effective may 20xx because it was a newly created organization it was presumed to be a public supported_organization described in sec_509 and sec_170 of the code for an advance_ruling period beginning may 20xx and ending december 20xx its application_for recognition of exemption form_1023 dated august 20xx gave the organizations address as address city state the application provided a schedule listing the activities of the organization these were to p o o a provide individual counseling provide credit and financial education assist the consumer with creditors on establishing a reasonable repayment plan provide debt consolidation programs on march 20xx i spoke with the president of the organization by phone he told me that the organization was currently not in business we setup an initial appointment date for march 20xx on march 20xx i received a call from attorney representing the organization he stated that the organization was looking to dissolve and wanted to terminate their exempt status and give up their right to appeal we agreed that the org could mail in the material requested on the idr on june 20xx mailed organization the second idr law to be exempt under sec_501 of the code an organization must be organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition or for the form 886-a rev department of the treasury - internal_revenue_service page -1- erin 886a name of taxpayer explanation of items department of the ‘treasury - internal_revenue_service schedule no or exhibit year period ended 20xx org prevention of cruelty to children or animals and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or operational_test it is not exempt sec_1_501_c_3_-1 of the regulations states an organization will be regarded as operating exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the regulations states in part thus to meet the requirements of this subdivision it is necessary for an organization to establish that it is not organized or operated for the benefit of private interest such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interest revrul_69_441 1969_2_cb_115 holds that a nonprofit organization formed to help reduce personal bankruptcy by informing the public on personal money management and aiding low-income individuals and families with financial problems is exempt under sec_501 of the code the organization provides information to the public on budgeting buying practices and the sound use of consumer credit through the use of films speakers and publications it aids low-income individuals and families who have financial problems by providing them with individual counseling and if necessary by establishing budget plans the funds are kept in a_trust account and disbursed on a partial payment basis to the creditors whose approval of the establishment of the plan is obtained by the organization these services are provided without charge to the debtor the debtor receives full credit against his debts for amounts paid the organization’s receipts are from contributions primarily from the creditors participating in the organization’s budget plans however creditors are not required to make contributions as a condition of participation taxpayer’s position a copy of a draft revenue agents report form 886-a was sent by certified mail to the taxpayer on november 20xx to solicit their response to the proposed revocation the draft report was signed for by the president on november 20xx on november 20xx the agent called the president at her home and at her office and left messages for her to call -- the calls were not returned a form_6018 was signed by president on december 20xx and was form 886-a rrev department of the treasury - internal_revenue_service page -2- 886a eo name of taxpayer explanation of items department of the ‘treasury - internal_revenue_service schedule no or exhibit year period ended 20xx org received by the service on december 20xx no other correspondence was received with the form_6018 governments position based on the president’s statements regarding the organizations operations the organization ceased conducting the activities which were the basis for their exemption sometime during year ending december 19xx therefore they have not qualified for exemption since the day they ceased performing such exempt_activities conclusion based on the foregoing the organization ceased operating as an exempt credit_counseling_organization during 19xx therefore it no longer qualifies as an organization exempt under sec_501 of the code and its tax exempt status should be revoked effective january 20xx if you agree with revocation of your exempt status under sec_501 please sign and return the enclosed form_6018 consent to proposed action - sec_7428 if you disagree please respond in accordance with the filing a formal protest requirements as described in page of publication the examination process if the proposed revocation of your exempt status becomes final the appropriate state official will be notified in accordance with internal_revenue_code sec_6104 in addition you will be required to file form_1120 u s corporate_income_tax returns for all subsequent tax periods as a private_foundation you will continue to be subject_to the provisions of chapter of the code unless you terminate your foundation status under sec_507 of the code attached exhibit record of interviews and attempts to contact form 886-a rev department of the treasury - internal_revenue_service page -3-


t c memo united_states tax_court w august hillenbrand and nancy k hillenbrand petitioners v commissioner of internal revenue respondent docket no filed date larry j stroble and jennifer a seymour for petitioners stewart todd hittinger for respondent memorandum opinion wells chief_judge respondent determined deficiencies in petitioners’ gift_taxes as follows year w august hillenbrand nancy k hillenbrand dollar_figure dollar_figure big_number big_number big_number the issue to be decided is whether the court has jurisdiction to decide whether the deficiencies for the years in - - issue have been paid where in response to the notices of deficiency petitioners sent the internal_revenue_service remittances and directed that the remittances be applied to the deficiencies in issue and subsequently respondent made an erroneous nonrebate refund of those remittances to petitioners all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure background the parties submitted the instant case fully stipulated without trial pursuant to rule the parties’ stipulations of facts are hereby incorporated in this opinion by this reference and are found as facts in the instant case petitioners w august hillenbrand and nancy k hillenbrand are husband and wife when the petition was filed they were residents of batesville indiana during the years in issue petitioner w august hillenbrand was the chief_executive_officer of hillenbrand industries inc during and petitioners made substantial gifts to their children and son-in-law in and petitioners also made contributions to trusts commonly referred to as grantor retained annuity trusts grats petitioners each filed federal gift_tax returns for and respondent examined petitioners’ and federal gift_tax returns for the same periods respondent also examined the gift_tax returns of petitioners’ children and son- in-law petitioners’ gifts to their children and son-in-law were of hillenbrand industries stock interests ina limited_partnership and remainder interests in certain so-called grats on date petitioners’ attorney larry j stroble sent respondent a letter accompanied by six checks remitted by petitioners william a hillenbrand ii theresa a hartmann katherine k crowther richard d hillenbrand ii and martha l tuveson the letter dated date accompanying the six checks stated enclosed are various checks which are to be considered deposits in the nature of cash bonds in accordance with revproc_84_58 the checks are cash bonds related to the tax_deficiency and interest asserted by the internal_revenue_service in connection with gift_tax examinations of the taxpayers for the years reflected below and are intended to halt the accrual of interest on such tax deficiencies and previously accrued interest the six checks totaled dollar_figure the check remitted on behalf of petitioners was in the amount of dollar_figure or dollar_figure on behalf of each petitioner petitioners intended the check to cover their and federal gift_tax years as explained in the letter accompanying the check ‘petitioners’ federal gift_tax year is not before this court in the instant case q4e- on date petitioners and respondent agreed upon certain audit adjustments regarding petitioners’ and federal gift_tax years except for the issue of whether the spousal interests provided for in the grats were qualified interests within the meaning of sec_2702 for petitioners’ and federal gift_tax years the grat issues on date respondent made assessments against petitioners relating to the date agreement covering the adjustments other than those relating to the grat issues respondent assessed dollar_figure in federal gift_taxes against petitioner w august hillenbrand’s dollar_figure deposit and on date sent him an unsolicited refund of dollar_figure respondent assessed dollar_figure in federal gift_taxes against petitioner nancy k hillenbrand’s deposit of dollar_figure and on date sent her an unsolicited refund of dollar_figure the foregoing two checks are collectively hereinafter sometimes referred to as the date refunds the date refunds were not related to the grat issues respondent and petitioners continued to disagree however about the amount of federal gift_taxes due regarding the grat issues on date respondent mailed six notices of deficiency to petitioners covering the grat issues on date in response to the six notices of deficiency - - petitioners’ attorney sent respondent six checks accompanying the checks was a letter dated date which stated in part if it has not already occurred we request that the service apply the cash bonds previously posted on behalf of mr and mrs hillenbrand for and to the tax deficiencies for those years and we request that the enclosed checks be applied as additional payments with respect to those deficiencies the date letter further indicated the following allocations of the funds represented by the checks enclosed with the date letter as to petitioner w august hillenbrand dollar_figure should be applied to dollar_figure should be applied to and dollar_figure should be applied to as to petitioner nancy k hillenbrand dollar_figure should be applied to dollar_figure should be applied to and dollar_figure should be applied to the foregoing specific allocations were further reflected on the lower left-hand side on the face of each of the six checks enclosed with the date letter each check identified the specific individual and tax_year check no for dollar_figure is marked w august hillenbrand check no for dollar_figure is marked w august hillenbrand check no for dollar_figure is marked w august hillenbrand these six checks were different from the six checks remitted to respondent by petitioners and their children on date - - check no for dollar_figure is marked nancy k hillenbrand check no for dollar_figure is marked nancy k hillenbrand check no for dollar_figure is marked nancy k hillenbrand all checks were drawn on the same account at bank one indianapolis n a the foregoing six checks are collectively hereinafter sometimes referred to as the date remittances respondent did not post the date remittances to the years designated by petitioners i1 e petitioners’ and federal gift_tax years rather in error respondent posted the date remittances to petitioners’ federal gift_tax year as reflected on respondent’s accounts for petitioners’ federal gift_taxes respondent refers to these accounts as module accounts and hereinafter those accounts will be referred to as module accounts respondent never issued a notice_of_deficiency for petitioners’ federal gift_tax year and there is no indication in the record that petitioners were liable for any federal gift_taxes for or that such liabilities were ever contemplated by either party respondent’s internally generated module accounts for petitioners’ federal gift_tax year were consistent in amounts with the date remittances that were designated for petitioners’ and federal gift_tax - years respondent’s federal gift_tax module account for petitioner w august hillenbrand indicates that there were three subsequent payments made on date of dollar_figure dollar_figure and dollar_figure similarly respondent’s federal gift_tax module account for petitioner nancy k hillenbrand indicates that there were three subsequent payments made on date of dollar_figure dollar_figure and dollar_figure in their petition petitioners contested respondent’s determinations in the notices of deficiency relating to the grat issues respondent’s determinations adjusted the valuation of the gratss under sec_2702 respondent and petitioners conceded that the substantive issue regarding the grat issues would be decided by a case before this court 115_tc_15 affd 269_f3d_854 7th cir which was subseguently decided in favor of the commissioner accordingly petitioners concede that respondent’s determined deficiencies as stated in the notices of deficiency issued on date reflect the correct deficiencies in the instant case on date respondent erroneously refunded dollar_figure to petitioner w august hillenbrand consisting of a dollar_figure refund and dollar_figure in interest similarly on date respondent erroneously refunded dollar_figure to petitioner nancy k hillenbrand consisting of a refund of dollar_figure and dollar_figure in --- - interest the parties have stipulated that the date refund to petitioner w august hillenbrand and the date refund to petitioner nancy k hillenbrand are erroneous nonrebate refunds hereinafter the erroneous refunds the erroneous refunds were made with respect to petitioners’ federal gift_tax module accounts which were the same module accounts to which respondent posted petitioners’ date remittances petitioners neither solicited the refunds nor recognized that the erroneous refunds represented the agreed-upon amounts plus interest sent to respondent in the date remittances subsequent correspondence between respondent and petitioners’ counsel revealed that respondent believed that petitioners still owed the deficiencies determined in the date notices of deficiency even after petitioners sent respondent the date remittances on date respondent informed petitioners’ counsel that respondent had made the date refunds and that petitioners were still liable for the deficiencies determined on date on date petitioners’ counsel informed respondent that petitioners sent the date remittances to cover the deficiencies determined in the date notices of deficiency in the date --- - letter petitioners’ counsel informed respondent that petitioners had received the date refunds but had also sent the date remittances to respondent to stop the running of interest and pay all outstanding liabilities and interest sometime after date the date of petitioners’ counsel’s letter respondent discovered that the erroneous refunds had been made before the discovery of the erroneous refunds after that date neither counsel for petitioners nor for respondent were aware that the erroneous refunds had been sent to petitioners discussion the parties have stipulated that cook v commissioner supra resolves the substantive issue of petitioners’ federal gift_tax liability in the instant case the parties are bound to that stipulation 118_tc_541 see 99_tc_202 the only issue we must decide is whether we have jurisdiction to decide whether the date remittances paid the deficiencies in issue in the instant case the united_states tax_court is a court of limited jurisdiction in that this court possesses only adjudicatory powers that congress has conferred upon it 85_tc_527 see huramco associates inc v commissioner tcmemo_1991_39 affd sub nom albert j - 938_f2d_78 7th cir that adjudicatory power encompasses the redetermination of deficiencies and the determination of overpayments sec_6214 sec_6512 moreover we have jurisdiction only for taxable years properly before us sec_6214 see 95_tc_437 petitioners initiated the instant case in response to respondent’s determination of deficiencies in the notices sent to petitioners accordingly we may decide the issue of whether the date remittances paid the deficiencies only if the issue properly comes within our deficiency jurisdiction under sec_6214 or our overpayment jurisdiction under sec_6512 we hold that this court lacks jurisdiction to decide the issue for purposes of sec_6214 deficiencies are defined by sec_6211 sec_6211 defines a deficiency as follows sec_6211 definition of a deficiency a in general ---for purposes of this title in the case of income estate_and_gift_taxes imposed by subtitles a and b and excise_taxes imposed by chapter sec_41 sec_42 sec_43 and sec_44 the term deficiency means the amount by which the tax imposed by subtitle a or b or chapter or exceeds the excess of-- the sum of a the amount shown as the tax by the taxpayer upon his return if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon plus b the amounts previously assessed or collected without assessment as a deficiency over-- the amount of rebates as defined in subsection b made in other words the deficiency is the correct_tax minus the tax_shown_on_the_return minus prior assessments or collections without assessment plus rebates sec_6211 see 112_tc_103 n we have said that it is not the existence of a deficiency but the commissioner’s determination_of_a_deficiency that provides a predicate for tax_court jurisdiction 52_tc_787 see 86_tc_1222 payments are not included in determining or redetermining a deficiency simply because they do not fit within the definition of a deficiency sec_6211 see malachinski v commissioner tcmemo_1999_182 affd 268_f3d_497 7th cir see also 112_tc_46 logan v commissioner supra pincite0 clarke v commissioner tcmemo_1999_199 petitioners contend that the date remittances should be treated as amounts collected without assessment for purposes of sec_6211 however it is well established that collected without assessment applies to payments made before the commissioner issues a notice_of_deficiency crawford v commissioner 46_tc_262 see 214_f2d_26 2d cir affg tcmemo_1953_226 see also 199_f2d_892 5th cir applying sec_271 of the internal_revenue_code a predecessor of sec_6211 21_tc_1063 11_tc_841 in those cases this court lacked jurisdiction to redetermine a deficiency because the deficiency had been satisfied by funds collected without assessment before the commissioner sent the taxpayer a notice_of_deficiency crawford v commissioner supra see bendheim v commissioner supra moreover sec_6213 provides that sec_6213 provides sec_6213 exceptions to restriction on assessment --- assessment of amount_paid ---any amount_paid as a tax or in respect of a tax may be assessed upon the receipt of such payment notwithstanding the provisions of subsection a in any case where such amount is paid after the mailing of a notice_of_deficiency under sec_6212 such payment shall not deprive the tax_court of jurisdiction over such deficiency determined under sec_6211 without regard to such continued payments made to this court after the notice_of_deficiency will not deprive this court of jurisdiction to redetermine taxpayers’ deficiencies in other words sec_6213 permits the assessment of a payment made by a taxpayer in response to a notice_of_deficiency but such a payment does not deprive this court of jurisdiction over the deficiency as determined under sec_6211 without regard to the assessment accordingly the date remittances made after the date notices of deficiency were not amounts previously assessed or collected without assessment as a deficiency and thus are not subtracted from the deficiency to be adjudicated by our decision continued assessment emphasis added petitioners contend that revproc_84_58 1984_2_cb_501 would treat the date remittances as payments of tax respondent contends that revproc_84_58 does not bind respondent in the instant case while we do not decide this issue because we hold that we lack jurisdiction to decide it in that regard see 119_tc_157 commissioner is bound to positions stated in commissioner's published guidance petitioners contend that the date remittances extinguished their tax_liability and they cite a number of cases in support of this proposition including 63_f3d_83 1st cir 946_f2d_1143 5th cir and 629_fsupp_333 n d ill those cases state that when a taxpayer tenders payment on an assessment that payment extinguishes the assessment to the extent of the payment clark v united_states supra pincite see o’bryant v commissioner continued petitioners and respondent agree that the erroneous refunds are nonrebate erroneous refunds because they were not created by respondent’s substantive recalculation of petitioners’ federal gift_tax liability the erroneous refunds arose because of respondent’s mistake or error see 49_f3d_340 7th cir because the refunds are considered nonrebate erroneous refunds they do not enter into the determination of deficiencies in petitioners’ federal gift_taxes for and sec_6211 and b see o’bryant v united_states supra see also interlake corp v commissioner supra as we stated above our statutory authorization to decide tax_liabilities extends not only to deficiencies under sec_6214 but also to overpayments subject_to specific limitations not relevant here sec_6512 continued f 3d 7th cir those cases are distinguishable from the instant case in that they arose in federal district_court and under circumstances where the taxpayers had paid their taxes and were seeking a refund thus in those cases the commissioner had made a final assessment sec_6512 provides in part sec_6512 limitations in case of petition to tax_court b overpayment determined by tax_court --- jurisdiction to determine ---except as provided by paragraph and by section continued -- - petitioners do not assert that the differences between the date remittances and the deficiencies in issue constitute overpayments for petitioners’ and federal gift_tax years indeed petitioners contend that no overpayments exist in the instant case we treat as a concession the contention that the date remittances did not create any overpayment in petitioners’ federal gift_tax for the years in issue see schladweiler v commissioner tcmemo_2000_351 n affd 28_fedappx_602 8th cir see wynn v commissioner tcmemo_1996_415 n continued if the tax_court finds that there is no deficiency and further finds that the taxpayer has made an overpayment of income_tax for the same taxable_year of gift_tax for the same calendar_year or calendar guarter of estate_tax in respect of the taxable_estate of the same decedent or of tax imposed by chapter or with respect to any act or failure to act to which such petition relates for the same taxable_period in respect of which the secretary determined the deficiency or finds that there is a deficiency but that the taxpayer has made an overpayment of such tax the tax_court shall have jurisdiction to determine the amount of such overpayment and such amount shall when the decision of the tax_court has become final be credited or refunded to the taxpayer if a notice of appeal in respect of the decision of the tax_court is filed under sec_7483 the secretary is authorized to refund_or_credit the overpayment determined by the tax_court to the extent the overpayment is not contested on appeal -- - if petitioners had contended that an overpayment exists in the instant case due to the date remittances this court would have jurisdiction to decide whether they should be treated as payments of the deficiencies in issue sec_6512 b see 85_tc_527 see also baumgardner v commissioner 85_tc_445 15_tc_947 thus our overpayment jurisdiction is not invoked on the basis of the foregoing we will enter a decision for respondent with respect to the deficiencies in issue without any statement as to whether those deficiencies have been paid ’ we have considered all of the contentions of the parties that are not discussed herein and we find them to be without merit irrelevant or moot to reflect the foregoing decision will be entered for respondent ‘we note that this court might have jurisdiction under sec_6320 and sec_6330 to decide whether the date remittances paid the deficiencies in issue but that jurisdiction has not been invoked in the instant case