t c memo united_states tax_court santar s yei and grace h yei petitioners v commissioner of internal revenue respondent docket no filed date santar s and grace h yei pro sese dale a zusi and andrew p crousore for respondent memorandum opinion jacobs judge respondent determined a dollar_figure deficiency in petitioners' federal_income_tax and a dollar_figure accuracy-related_penalty under sec_6662 following concessions by respondent two issues remain for decision from respondent's notice_of_deficiency whether petitioners properly claimed a dollar_figure capital_loss as a result of petitioner santar yei's surrender of big_number shares of stock in cirtex inc cirtex to cirtex and whether petitioners are liable for the accuracy-related_penalty under sec_6662 we must also decide the following matters which petitioners raised in their petition whether petitioners may reclassify as a repayment of loans and treat as nontaxable dollar_figure of the dollar_figure they reported as wage income whether petitioners are entitled to an dollar_figure deduction in to offset dividend income that they received from cirtex and reported in whether petitioners may claim bad_debt deductions for a a dollar_figure payment they made to albert chang on behalf of cirtex to purchase his stock in cirtex b a dollar_figure loan they made to cirtex to permit that company to purchase shares of its stock that were owned by ba cac luong c a dollar_figure loan they made on cirtex's behalf to esstec and d dollar_figure reported as income from the sale of an automobile that petitioners claim they never received whether petitioners are entitled to a dollar_figure deduction as an unreimbursed business_expense for the purchase of cirtex stock held by katherine cunningham and whether petitioners may reduce the amount of gain they reported from the sale of solectron corporation solectron stock by dollar_figure which amount petitioners gave to family members all section references are to the internal_revenue_code for the year under consideration all rule references are to the tax_court rules_of_practice and procedure for convenience and clarity we have combined our findings_of_fact and opinion with respect to each issue some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference general findings petitioners husband and wife resided in milpitas california at the time they filed their petition petitioners timely filed a joint federal_income_tax return for the year under consideration they filed an amended_return for on date petitioner wife grace yei has a bachelor's degree from taiwan university and a master's degree in business administration from golden gate university she passed the written portion of the c p a examination following completion of her course work at golden gate university but did not pursue certification petitioner husband santar yei completed years of college in taipei taiwan majoring in mathematics he obtained a master's degree in computer engineering from san jose state university mr yei worked for solectron located in san jose california while obtaining his master's degree in he purchased big_number shares of solectron stock from that company for dollar_figure with money from his father in he tendered big_number shares of solectron stock to solectron pursuant to solectron's offer to purchase and received dollar_figure therefor in mr yei acquired a controlling_interest in cirtex a circuit board manufacturer located in santa clara california and became its president mrs yei maintained the company's books_and_records cirtex had approximately employees in the mid-1980's but that number fell to less than by because of financial difficulties the company's problems including environmental contamination at the company's manufacturing plant brought about several lawsuits cirtex was dissolved on date we note that for all of the issues petitioners have the burden of proving error in respondent's determinations rule a 290_us_111 moreover deductions are a matter of legislative grace and petitioners bear the burden of proving they are entitled to any deductions claimed see 503_us_79 issue stock sale pursuant to a written_agreement dated date mr yei surrendered for cancellation big_number shares of cirtex stock to cirtex he received no money in connection with this transaction according to the date agreement mr yei surrendered although the record is far from clear with respect to this matter it appears that from the time mr yei acquired the big_number shares of solectron stock in to the date he tendered his stock to solectron there had been a for stock split or dividend and a subsequent for reverse downward stock split hence we believe that in mr yei owned big_number shares of solectron stock all of which he tendered to the company at dollar_figure a share the tender price the big_number shares so that a like amount could be subsequently sold by the corporation in order to ease the cash_flow problem caused by buying back from old investor mr chang dollar_figure worth of common_stock petitioners claimed a dollar_figure capital_loss on schedule d of their return as a result of the surrender of the cirtex stock respondent determined that sec_267 precluded the deductibility of the claimed loss we agree with respondent's determination that petitioners are not entitled to the claimed loss but not for the reason stated by respondent it is settled law that a dominant controlling shareholder who voluntarily surrenders a portion of his stock to the corporation and continues to retain control does not sustain an immediate loss deductible for income_tax purposes as a result of the surrender of stock rather the surrendering shareholder must reallocate his basis in the surrendered stock to the stock retained 483_us_89 on the date that mr yei surrendered his cirtex stock he and members of his family owned more than percent of the corporation's stock there is nothing in the record to indicate although the record is not clear with respect to this matter it appears that in cirtex sold big_number shares of its stock to a mr albert chang for dollar_figure dollar_figure per share the dollar_figure received from mr chang was used by the corporation in part to redeem its stock from other individuals and in part to fund payment of a corporate dividend apparently mr chang complained that the corporation improperly used his money and in cirtex purchased the stock mr chang owned for dollar_figure as follows dollar_figure in cash and a dollar_figure interest-bearing corporate note that after the surrender of the cirtex stock mr yei and members of his family did not retain control of cirtex indeed cirtex's corporate_income_tax returns forms for the corporation's fiscal years ended date and reflect that mr yei owned more than percent of cirtex's stock petitioners claim in the alternative that they are entitled to a dollar_figure loss deduction under sec_165 contending that the cirtex stock became worthless in sec_165 permits the deduction of any loss sustained during the taxable_year that is not_compensated_for_by_insurance_or_otherwise sec_165 provides that if a security which is a capital_asset becomes worthless during the taxable_year the loss is treated as a loss from the sale_or_exchange of a capital_asset on the last day of the taxable_year worthlessness of stock is determined both by lack of liquidating value and the absence of any reasonable expectation that the stock will become valuable in the future 38_bta_1270 affd 112_f2d_320 7th cir certain events such as bankruptcy cessation of business liquidation of the corporation or appointment of a receiver may foreclose an expectation of future value id see also 71_tc_955 in the instant case no evidence was presented indicating that cirtex was insolvent in nor was any evidence presented as to the occurrence of an identifiable_event in that would foreclose the expectation of future value with respect to the cirtex stock although mrs yei testified that the company had not been profitable since her testimony is contradicted by mr yei's statements made in a stockholders' report that cirtex had an dollar_figure profit in in his report given at a stockholders' meeting on date mr yei stated for our new philosophy becomes more conservative the objective is to give stockholders some returns especially those who had invested for more than three years if we can maintain a profit level pincite- our stock price per share shall have a market_value between dollar_figure to dollar_figure in any event fink contemplated that no loss deduction is available to a controlling shareholder who voluntarily surrenders a portion of his stock before the corporation fails commissioner v fink u s pincite accordingly respondent's disallowance of the claimed dollar_figure capital_loss is sustained issue wage income petitioners reported combined wages of dollar_figure from cirtex in they contend that dollar_figure of the dollar_figure reported as wages represent the repayment of loans they made in and in the alternative they claim entitlement to a dollar_figure bad_debt deduction under sec_166 respondent contends that the dollar_figure in payments that petitioners made to cirtex constitute capital contributions not loans and that the entire dollar_figure constitutes wages as reported on petitioners' return petitioners claim they advanced cirtex a total of dollar_figure in and dollar_figure in according to petitioners these payments were made because the company had cash_flow problems the payments made in are evidenced by demand notes the payment made in is not evidenced by any note mrs yei's notation on one of the promissory notes states treat it the amount of the payment as paid in capital mrs yei testified that the payments were treated as capital at the recommendation of the corporation's outside accountant in order to make cirtex's financial statements look better cirtex treated the dollar_figure paid to petitioners as salaries and reported such amount on forms and as business_expenses we find that the dollar_figure petitioners received from cirtex was wage income indeed the wage amount in was in line with the amount reported in dollar_figure we now turn to petitioners' alternative position sec_166 permits as a deduction any debt that becomes worthless within the taxable_year only a bona_fide debt can be deducted a bona_fide debt is a debt that arises from a debtor-creditor relationship based upon a valid and enforceable obligation to pay a fixed or determinable sum of money a contribution of capital is not considered a debt for sec_166 purposes sec_1_166-1 income_tax regs whether a transfer of money creates a bona_fide debt depends upon the intent of the parties involved in the transaction 54_tc_1287 petitioners failed to prove that the dollar_figure they transferred to cirtex in and was intended to or did create a bona_fide debt cirtex owed them the promissory notes by themselves are insufficient to prove the existence of a bona_fide debt especially in view of mrs yei's notation on one of the notes that it is to be treated as capital and her testimony to a similar effect moreover we are mindful that cirtex's corporate returns failed to include any loans to shareholders in the appropriate space we conclude that the dollar_figure constitutes a contribution by petitioners to the capital of cirtex and is not allowable to petitioners as a bad_debt deduction issue dividend income petitioners claim they are entitled to an dollar_figure deduction in to offset a distribution from cirtex that they contend was erroneously reported as a dividend on their return petitioners' reasoning with respect to this issue is difficult to comprehend as best we can understand petitioners they received an dollar_figure payment from cirtex in and reported it as a dividend on their return for that year they now contend that cirtex did not have earnings_and_profits in and should not have paid a dividend even though mr yei stated at the stockholders' meeting that the company had profits of dollar_figure that year petitioners argue that the payment cirtex made was funded by a capital petitioners claim that the dollar_figure referred to at the meeting was earnings before depreciation contribution from albert chang which they now apparently claim was improper see infra note whether the payment was properly reported in is outside our jurisdiction in this case we do not have jurisdiction to consider a claimed overpayment on petitioners' return because the notice_of_deficiency at issue covers only see sec_6213 320_us_418 petitioners' reporting of the payment as a dividend for does not entitle them to an offset against their income for issue bad_debt deductions petitioners claim they are entitled to bad_debt deductions in for a a dollar_figure payment they made to albert chang on behalf of cirtex to purchase his cirtex shares b a dollar_figure loan they made to cirtex to permit that company to purchase shares of its stock owned by ba cac luong c a dollar_figure loan they made on cirtex's behalf to esstec and d dollar_figure reported as income from the sale of an automobile that they never received the basis for the first two items involves the purchase of cirtex stock from two separate investors albert chang and ba cac luong mr yei testified that he felt responsible for any losses the investors sustained and agreed to repurchase personally or have the company repurchase the stock when an investor complained that the value of the stock fell below the original purchase_price as best we can determine from the record mr chang demanded that cirtex purchase his cirtex shares after his employment with the company terminated mr chang's accountant advised mr chang that cirtex improperly used his dollar_figure investment to pay a dividend to existing stockholders and to purchase shares held by some of them cirtex agreed to purchase from mr chang the cirtex stock he owned mr chang received cash and a corporate note for his cirtex stock because of a lack of corporate funds petitioner paid mr chang in dollar_figure that cirtex owed him pursuant to the corporate note petitioners were not legally obligated to make any payments to mr chang on behalf of cirtex they were neither the makers nor the guarantors of the note obligation a corporation's business is distinct from that of its stockholders here petitioners' payment to mr chang helped to discharge the obligation of cirtex to mr chang and was in the nature of a capital_contribution petitioners have not shown that the payment created a bona_fide debt from the corporation to petitioners thus petitioners' claim of entitlement to a bad_debt deduction with respect to the payment to mr chang is incorrect petitioners claim that they advanced cirtex dollar_figure in date in order for the company to purchase big_number shares of its stock held by ba cac luong the only evidence with respect to the dollar_figure is a piece of paper containing a photostat of a checkbook register and a handwritten statement paid to ba cac luong for dollar_figure for cirtex--dollar_figure was never reimbursed there is no indication that any of the dollar_figure was a loan from petitioners to cirtex assuming that the dollar_figure was a loan and not a capital_contribution petitioners offered no evidence to prove that the unreimbursed portion dollar_figure became worthless petitioners failed to satisfy their burden_of_proof establishing the existence of the claimed loan as well as the year in which the purported loan became worthless they are thus not entitled to a bad_debt deduction with respect to this purported loan petitioners claim they paid dollar_figure to esstec a nonincorporated business on behalf of cirtex the owner of esstec stephen williams also was a cirtex employee and had rented space in cirtex's building cirtex did not provide a note to evidence petitioners' payment on its behalf the only evidence presented was petitioners' check dated date made payable to esstec the notation at the bottom of the check stated esstec loan mrs yei testified that esstec went out of business in but her testimony in this regard was not credible petitioners did not satisfy their burden_of_proof to establish the identity of the borrower the existence of a loan or the year in which the purported loan became worthless thus they are not entitled to a bad_debt deduction with respect to this purported loan petitioners sold an automobile to stephen williams for dollar_figure in reporting dollar_figure in income on their return and dollar_figure in income on their return petitioners claim that they did not receive the dollar_figure from mr williams in and thus are entitled to a bad_debt deduction mrs yei testified that she did not ask her husband about the receipt of the payment until preparing their petition which was filed with the court on date we accept mrs yei's testimony and find that petitioners erroneously reported dollar_figure as income on their return correction of this mistake should be made in the rule computation issue unreimbursed expense mr yei gave big_number shares of his cirtex stock to katherine cunningham cirtex's quality control manager as a bonus allegedly the stock was given rather than cash due to cirtex's cash_flow problems when ms cunningham left the company's employ in petitioners paid her dollar_figure per share for the stock again due to the fact that cirtex did not have funds to purchase the stock and mr yei's perceived personal obligation to compensate ms cunningham with cash petitioners contend they are entitled to a deduction for the dollar_figure given ms cunningham as an unreimbursed business_expense under sec_162 respondent contends that the cirtex stock petitioners acquired is a capital_asset for which petitioners are not entitled to a deduction sec_162 permits the deduction of ordinary and necessary expenses paid_or_incurred in carrying_on_a_trade_or_business bonuses to employees will constitute allowable deductions from gross_income when such payments are made as additional compensation_for services actually rendered by the employees sec_1_162-9 income_tax regs ms cunningham was a cirtex employee and rendered services to the company not to petitioners although petitioners were corporate officers their personal payment of an employee bonus would not be an ordinary_and_necessary_expense of their office see grossman v commissioner tcmemo_1974_269 further petitioners received stock from ms cunningham in exchange for their dollar_figure payment accordingly we hold that petitioners may not deduct the cost of the stock purchase issue solectron stock basis on their return petitioners reported a dollar_figure basis in their solectron stock they now contend that their basis in the solectron stock which mr yei sold for dollar_figure in should be increased from dollar_figure to dollar_figure to reflect dollar_figure in payments petitioners made to family members as best we can understand petitioners' position they claim that mr yei's father in effect owned the solectron stock because he loaned the money for its purchase to petitioners they further claim that the dollar_figure in payments to family members represents part of the cost of their debt to mr yei's father respondent takes the position that the basis of petitioners' stock remains dollar_figure as reported on petitioners' tax_return there is no question but that the cost of the stock is dollar_figure the stock was issued to mr yei and he used the stock to secure a lease on the building cirtex used mr yei's father did not own the stock the basis_of_property acquired through purchase generally is its cost sec_1012 sec_1_1012-1 income_tax regs there is nothing about the dollar_figure in payments to family members to suggest that such payments be allocated to the cost_basis of the stock the dollar_figure was paid to family members who had no ownership interests in the solectron stock accordingly we hold that the solectron stock basis is dollar_figure as reported on petitioners' tax_return issue accuracy-related_penalty respondent determined an accuracy-related_penalty under sec_6662 sec_6662 imposes a penalty equal to percent of the portion of the underpayment that is attributable to negligence or disregard of rules or regulations sec_6662 b negligence is defined as the failure to exercise the due care that a reasonable prudent person would exercise under similar circumstances 731_f2d_1417 9th cir affg 79_tc_714 85_tc_934 a taxpayer has the burden of proving that respondent's determination is in error 79_tc_846 petitioners each have graduate college degrees mrs yei who prepared petitioners' tax_return while not a c p a passed the written portion of the c p a examination mrs yei testified that their income_tax returns contain so many mistakes that she did not want them admitted into evidence her casual approach to tax_return preparation is illustrated by her testimony concerning the cirtex corporate returns there's a lot of hiding figure or hiding fact elicited in this return we have to file so we file something based on the record before us we conclude that petitioners were negligent and disregarded rules or regulations in preparing their return accordingly petitioners are liable for the accuracy-related_penalty on the entire underpayment for to reflect concessions by respondent as well as the foregoing decision will be entered under rule


date cor-115825-00 internal_revenue_service number info release date uil the honorable kay granger u s house of representatives washington d c dear ms granger thank you for your letter of date signed by you and a number of your colleagues encouraging the internal_revenue_service to immediately readjust the business standard mileage rate to reflect the recent increase in gasoline prices you note that the increased cost has particularly burdened self-employed taxpayers who use automobiles for business purposes gasoline prices we realize increased gasoline prices are an economic burden however the cost of gasoline is only one part of the business standard mileage rate which includes fixed and operating automobile costs these costs include depreciation or lease payments maintenance and repairs insurance and license and registration fees in addition to gasoline and oil less than one-third of the cents per mile rate comes from the cost of gasoline and oil thus an immediate adjustment in the rate taking into account the recent increase in gasoline prices might not be significant setting the business standard mileage rate the rate is a national average amount determined by an annual study performed by an independent_contractor who is an expert in the cost analysis of business use of automobiles the contractor uses recent data from each state on the component costs of operating the most popular automobiles the contractor then combines this data to achieve a national composite cents-per-mile rate advantages of using the business standard mileage rate reducing a taxpayer’s record-keeping burden is the principal advantage of using the rate gasoline prices rise and fall during the year but taxpayers may continue to use the same rate without having to keep records of actual expenses although rising gasoline prices can be a disadvantage for taxpayers who use the rate falling prices can work to their advantage for example although gasoline prices fell in for all of and through date taxpayers were able to use the rate that reflected the earlier higher prices taxpayer’s options to deduct the ordinary and necessary expenses of using an automobile for business purposes a taxpayer must substantiate the cost date place and business_purpose of each use of the automobile by adequate_records for the cost the taxpayer has two options cid substantiate actual cost by keeping records or by other_sufficient_evidence cid use the business standard mileage rate using the rate gives approximate not actual costs taxpayers can deduct the actual business_expenses of using a personally-owned automobile and this may be advantageous when automobile costs are rising publication travel entertainment gift and car expenses contains further information on how taxpayers should substantiate expenses i have enclosed the relevant pages from that publication i am sending a similar letter to your colleagues i hope this information is helpful please call me at or robert a berkovsky at if you have any questions sincerely charles o rossotti enclosure


internal_revenue_service number info 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 b01 genin-118524-05 date date ---------------------- ----- taxpayer dear ---------------- we are responding to your letter on behalf of taxpayer dated date requesting an extension of time to file form_8832 entity classification election to treat taxpayer as an association_taxable_as_a_corporation for federal tax purposes effective date although we are unable to respond to the request as submitted this letter provides useful information relating to the request since taxpayer is ineligible for relief under revproc_2002_59 you may request a private_letter_ruling to obtain an extension of time to file form_8832 under ' and ' of the procedure and administration regulations the procedures for requesting a private_letter_ruling are set out in revproc_2005_1 copy enclosed in addition revproc_2005_1 requires taxpayers to submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their last- filed tax_return qualify for a reduced user_fee in the amount of dollar_figure if you are eligible to use the reduced fee provision you must include the statement described in ' b b of appendix a with your request please review appendix b for a sample format for requesting a private_letter_ruling if you decide to submit a formal request for a private_letter_ruling please include the proper user_fee if applying under the reduced fee provisions send a statement certifying gross_income and refer your request to our office by adding the following to the address genin-118524-05 attn cc pa t p o box ben franklin station washington dc direct to cc psi room by way of introduction the irs has a small_business website which provides information and various useful links visit this special site at www irs gov smallbiz additionally you can order a single free copy of the small_business resource guide cd-rom by calling the cd-rom provides critical tax information including forms instructions and publications as well as valuable information from a variety of government agencies non-profit organizations and educational institutions we hope that the above information proves helpful s dianna k miosi sincerely yours dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures revproc_2005_1


internal_revenue_service department of the reasury index no 468a washington dg i oi pareon ta cantact teleohone numher- est refer realy pate oft plr-107160-98 re revised schedule of ruling amounts taxpayer plant location commission district fund l u dear this letter responds to the request of taxpayer dated for a revised schedule of ruling amounts pursuant marcn to sec_1_468a-3 of the income_tax regulations commission has increased the amount of decommissioning costs to be included in taxpayer's cost of service for ratemaking purposes amounts on june sec_1_468a-3 taxpayer was last issued a revised schedule of ruling information was submitted pursuant to the we understand the facts as presented by taxpayer to be as follows taxpayer directly owns ‘ of the plant which is situated in location the plant began sommercial operation on the plant's operating license expires on taxpayer is under the audit jurisdiction of the district_director of the district decommissioning the plant is prompt removal dismantling the proposed method of plr-107160-98 the commission in decommissioning costs for the plant to be included in taxpayer's cost of service for ratemaking purposes in the amounts of orovides for the total cost of decommissioning the plant as estimated by the commission is taxpayer's share is escalated at future cost of share is this total estimated cost annually results in a total estimated of which of which taxpayer's the funding_period and the level_funding limitation period began on estimated period for which the fund will be in effect is ‘ useful_life of the plant is and the estimated the therefore the qualifying percentage is the after-tax rate of return to be earned on the assets percent of the fund is estimated to be not take into account the provisions of the energy policy act of the commission did there are no proceedings currently pending before the commission that may result in an increase or decrease in the amount of decommissioning costs to be included in taxpayer's cost of service for ratemaking purposes sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund limits the amount_paid into the fund for any_tax year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount however sec_468a applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts year is defined under sec_468a secretary determines to be necessary to fund that portion of the ruling_amount for any_tax as the amount which the plr-107160-98 nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is bears to the estimated_useful_life of the plant further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate this term is in effect sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year and is made within months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code defined under sec_1_468a-1 of the regulations is taxpayer that has a qualifying interest in among other things a direct ownership_interest an eligible_taxpayer as a sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made toa nuclear decommissioning fund during any_tax year shall not exceed the lesser_of the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or the ruling_amount applicable to the nuclear decommissioning fund for such tax_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is over the tax years remaining in the funding_period as date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to amount of decommissioning costs allocable to the fund a ruling specifying annual payments that and in no event more than of the the sec_1_468a-3 of the regulations provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes the internal_revenue_service shall provide a schedule of ruling under sec_1_468a-3 plr-107160-98 amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the under sec_1_468a-3 ruling_amount specified in a schedule of ruling amounts for any_tax year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier tax_year limitation period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the tax_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes the level_funding sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount plr-107160-98 sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a tax_year in response to a request for a schedule of ruling amounts that is filed after the deemed deadline date for such tax_year such a section of the energy policy act of public law eliminated for tax years beginning after december sec_468a sec_468a nuclear decommissioning fund of the code by lowering the tax_rate applicable to a the investment restrictions contained in that section also revised we have examined the representations and data submitted by you your authorized representative in relation to the requirements set forth in the code and the regulations solely on these representations of the facts we reach the following conclusions based the taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations the commission has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations a and of the regulations the taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by the commission and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund the to the fund during any_tax year is the maximum amount of cash payments made deemed made restricted to the lesser amount of the decommissioning costs applicable to such fund or the ruling applicable to this fund as set forth under sec_1 468a- b of the regulations or plr-107160-98 taxpayer has previously determined under sec_1_468a-3 of the regulations that the qualifying percentage is percent based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts with regard to the commission satisfies the requirements of sec_468a of the code approved schedule of ruling amounts tax years year the approved schedule of ruling amounts for the commission the elimination of the by the commission which based its determinations as to is being limited to a five year period as a result of the statutory changes made by the act investment restrictions and the reduction of the tax_rate applicable to income earned by the fund may result in a greater after-tax of return than was estimated prior to the enactment of the act the approved after-tax rate of return on restricted investments and a higher tax_rate this increased after-tax rate of return would over the life of the fund result in a balance in the fund on the last day of the funding_period that would exceed the amount of decommissioning costs allocable to the fund to prevent the excess accumulation in the fund this schedule of ruling amounts is limited to a five year period for the commission be approved after a determination by the commissions of an after-tax rate of return that accounts for the reduced_tax_rate and unrestricted investments a revised schedule of ruling amounts may approval of in order approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued events described in sec_1_468a-3 regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective iii of the when no such if any of the plr-107160-98 the taxpayer must file a request for a revised event occurs schedule of ruling amounts on or before the deemed payment the tax_year deadline of the 10th tax_year following the close of in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to payments allocable to any funds those payments made to the fund other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated earlier payments made to such fund can gualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested of the code provides it may not be used sec_6110 it or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each year in which the taxpayer claims a deduction for payments to the fund pursuant to sec_1_468a-7 of the sincerely yours ch aba r keusyfhte charles b ramsey chief branch office of assistant chief_counsel passthroughs and special industries


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-132597-06 date november legend legend new parent ---------------------------------------------------------------------------- --------------------------------------------------------------------- corp c -------------------------- --------------------- ---------------------------------- holdco ------------------------------ ---------------------------------------------------------------------------- -------------------------------------------------------------------- merger sub ---------------------------------------------------------------------------- ------------------------------------- ----------------------- ---------------- ------------------- ---------------- ------------------ ----------------- country x date e date f date g date h plr-132597-06 x dear ---------------- ----------------- this letter responds to your date request that we supplement our letter_ruling dated date plr-143446-05 the prior letter_ruling the information submitted for consideration is summarized below capitalized terms not defined in this ruling have the meanings assigned to them in the prior letter_ruling the ruling contained in this letter is based on information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the information submitted in support of the request for rulings it is subject_to verification on examination the prior letter_ruling addresses the federal_income_tax consequences of certain reorganizations under sec_368 and an exchange under sec_351 following date e the effective date of the transactions in the prior letter_ruling new parent consummated the secondary offering as defined below and executed an agreement to engage in the restructuring as defined below on date f new parent’s board_of directors adopted a resolution to remove the stock transfer restrictions in place on date e to permit holders of new parent common_stock to sell a portion of their shares in a public offering the secondary offering on date g x shares of new parent common_stock were sold in the secondary offering merger sub corp c is a country x corporation whose stock is publicly traded on date h new parent holdco merger sub and corp c entered into an agreement to combine their businesses pursuant to this agreement the following transactions will occur the restructuring new parent owns all of the stock of holdco and holdco owns all of the stock of i ii holdco will acquire the outstanding_stock of corp c in exchange for holdco common_stock and cash new parent will merge with merger sub in a transaction intended to qualify as a reorganization under sec_368 each share of new parent common_stock will be converted into the right to receive one share of holdco common_stock the secondary offering and the restructuring are collectively referred to as the subsequent transactions plr-132597-06 representations in connection with its request for a supplemental ruling new parent reaffirms all of the representations contained in the prior letter_ruling as of date e ruling based solely on the information and representations submitted with the original and supplemental requests we rule as follows the subsequent transactions will not adversely affect the prior letter_ruling and the prior letter_ruling will retain full force and effect caveats except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the subsequent transactions under any other provision of the internal_revenue_code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the subsequent transactions procedural statements this ruling letter is directed only to the taxpayer s requesting it section each taxpayer involved in the transaction should attach a copy of this ruling letter k provides that it may not be used or cited as precedent to the taxpayer’s federal_income_tax return for the taxable_year in which the transaction is completed 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 ruling letter in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely _richard k passales_________ richard k passales senior counsel branch associate chief_counsel corporate


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 b02 plr-131229-07 date november legend x ------------------------------------- ----------------------------- trust ---------------------------------------------------------------------------------------- ----------------------------------------------------- ---------------------------------- a ------------------------------ b -------------------------- a --- date1 ------------------------- date2 ---------------------- date3 ----------------------- date4 ----------------------- year1 ------- year2 ------- dear ------------------- plr-131229-07 this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x elected to be an s_corporation effective date1 a and b husband and wife each owned a of the stock of x on date2 b died trust was created under the will of b which named a the sole income and principal beneficiary of trust during a’s lifetime on date3 the stock of x owned by b was transferred to trust from b’s estate pursuant to the terms of b’s will these shares of x are the only assets held by trust x represents that trust is qualified to be treated as a qualified_subchapter_s_trust qsst described in sec_1361 except that a failed to make the election under sec_1361 therefore trust ceased to be an eligible s_corporation shareholder on date4 pursuant to sec_1361 and x’s s_corporation_election terminated on date4 x represents that for the tax years year1 to year2 x and x’s shareholders have filed tax returns consistent with x being an s_corporation x further represents that the circumstances resulting in the termination of x’s s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive tax planning x and each person who was or is a shareholder of x at any time since date4 agree to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to such period sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that a small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be an s_corporation shareholder sec_1361 provides that for purposes of sec_1361 in the case of a_trust described in sec_1361 the deemed owner shall be treated as the shareholder sec_1361 provides that for purposes of sec_1361 a_trust with respect to stock transferred to it pursuant to the terms of a will but only for the year period beginning on the day on which such stock is transferred to it may be an s_corporation shareholder sec_1361 provides that for purposes of plr-131229-07 sec_1361 in the case of a_trust described in sec_1361 the estate of the testator shall be treated as the shareholder sec_1361 provides that in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 such trust shall be treated as a_trust described in sec_1361 and for purposes of sec_678 the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1362 provides that a beneficiary of a qsst or his legal_representative may elect to have sec_1361 apply sec_1361 provides that an election under sec_1362 shall be effective up to days and months before the date of the election sec_1_1361-1 of the income_tax regulations provides that the current income_beneficiary of the trust must make the qsst election under sec_1361 by signing and filing with the service_center with which the corporation files its income_tax return the applicable form or statement including the information listed in sec_1 j ii sec_1361 provides that the term qualified_subchapter_s_trust means a_trust a the terms of which require that i during the life of the current income_beneficiary there shall be only one income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of such beneficiary’s death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to that beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to one individual who is a citizen or resident_of_the_united_states sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation a termination of an s_corporation_election under sec_1362 is effective on or after the date of cessation sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a plr-131229-07 reasonable period of time after discovery of the circumstances resulting in the termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified under sec_1362 agrees to make the adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary for that period then notwithstanding the circumstances resulting in such termination the corporation shall be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election terminated on date4 resulting from the failure of a as the beneficiary of trust to make the election under sec_1361 we further conclude that the termination was inadvertent within the meaning of sec_1362 in addition we conclude that pursuant to the provisions of sec_1362 x will be treated as an s_corporation from date4 and thereafter provided that trust qualifies as a qsst and x’s election to be an s_corporation was otherwise valid and was not terminated under sec_1362 accordingly the shareholders of x must include in income their pro_rata share of the separately_stated and nonseparately computed items of x as provided in sec_1366 make any adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 for this purpose a as the current income_beneficiary of trust shall be treated as the shareholder of x with respect to the stock of x held by trust beginning date4 if x or its shareholders fail to treat x as described above this letter_ruling shall be null and void this ruling is conditioned on a filing a qsst election under sec_1361 with respect to trust effective date4 with the appropriate service_center within days from the date of this letter a copy of this letter should be attached to the qsst election except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 whether trust is a qsst within the meaning of sec_1361 or whether x’s s_corporation_election may have terminated under sec_1362 for having passive_investment_income exceeding percent of gross_receipts for consecutive taxable years when x had accumulated_earnings_and_profits this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent plr-131229-07 letter is being sent to x’s authorized representative in accordance with the power_of_attorney on file with this office a copy of this sincerely j thomas hines chief branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b1-plr-163693-01 date date legend x y country date state dear this letter responds to a letter dated date submitted on behalf of y requesting a ruling that it be granted an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations in which to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes under sec_301_7701-3 facts according to the information submitted y was validly formed as an llc under state law on date x a privately held joint_stock_company organized under the laws of country has been the sole shareholder of y since its inception y and its shareholder intended from inception to elect to classify y as an association_taxable_as_a_corporation for federal tax purposes however y inadvertently failed to timely file a form_8832 entity classification election law and analysis sec_301_7701-3 provides 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 a business_entity is an entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code sec_301_7701-2 an eligible_entity with a single owner can elect either to be classified as an association and thus a corporation under sec_301 b or to be plr-163693-01 disregarded as an entity separate from its owner sec_301_7701-3 provides that unless a domestic eligible_entity elects otherwise the entity is disregarded as an entity separate from its owner if it has a single owner to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center sec_301_7701-3 an election can be effective on the date specified on the form_8832 or on the date filed if no such date specified the effective date specified on the form_8832 cannot be more than days prior to the date the election is filed sec_301_7701-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time to make an election sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions for time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely on the facts submitted and the representations made we conclude that y has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 as a result y is granted an extension of time for making the election to be classified as an association_taxable_as_a_corporation for federal tax purposes until days following the date of this letter the effective date of the election will be date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election a copy is enclosed for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent plr-163693-01 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury index no washington dc number info release date dear person to contact john t sapienza jr id no telephone number refer reply to cc dom it a - cor-112251-00 date date commissioner rossotti asked me to respond to your letter concerning obesity and weight-loss programs you asked the internal_revenue_service to issue a revenue_ruling allowing obese individuals to deduct the costs of weight-loss programs as medical_care expenses under sec_213 of the internal_revenue_code the current irs position on weight-loss programs is stated in revrul_79_151 1979_1_cb_116 this ruling holds that if participation in the program was to improve the participant’s appearance general health and sense of well-being the expenses of the program are not for medical_care and therefore are not deductible of course the expenses of a weight-loss program prescribed to treat a specific disease are for medical_care and are deductible we appreciate your suggestion and the references you provided to studies on obesity each year the irs and the department of the treasury review the many suggestions for revenue rulings and other forms of guidance to be published the projects selected are announced in the annual priority guidance plan input such as you have provided is helpful to us in selecting projects for the priority guidance plan i hope this information is helpful please call john t sapienza jr at the number above if you have any questions sincerely associate chief_counsel income_tax accounting by robert a berkovsky chief branch


department of the treasury internal_revenue_service washington d c dates eke agy contact person identification_number telephone number employer_identification_number legend m dear sir or madam this is in reply to your letter of date concerning the payment of certain fees to disqualified persons for services they are providing you and n you were established as a charitable_lead_trust under the will of m under the will you n has been recognized as exempt under section received a percent of the assets of o c of the internal_revenue_code and is a private_foundation within the meaning of sec_509 of the code you are to provide annual annuity payments to support n and at the end of the annuity n term you will terminate and your remaining assets will be distributed to m's then living issue also received a separate bequest from m through o and p hold through various partnerships limited_liability companies and corporations certain interests in rental real properties the properties include operating_lease properties and net_lease properties in many instances independent third parties hold substantial interests in these properties r is a property management company it is an s corp all the shares of which are owned r provides various management services for the properties held by o and p these by p services include collecting rent paying property expenses seeking new tenants for vacancies negotiating leases and amendments and renewals of leases arranging for repairs bookkeeping and computer services and arranging for property services from unrelated persons for insurance or pest control you have submitted a copy of the proposed management agreement you will enter into with r re t one of the current property interests is to transfer its property holdings to a new o is to have the majority interest in u the remaining interests in u are held by partnership u p and a related company owned by p's children o is to partially fund you with its interest in u it is contemplated that r will manage the rental property under the proposed management agreement r will solicit and negotiate leases locate tenants collect rent arrange for the employment and engagement of independent contractors arrange for insurance arrange for utility and tax_payments and other services the management agreement spells out in detail how r's compensation will be determined and has clauses prohibiting conflicts of interests as a general_rule r will not contract for any services from a related_person or contract for any services pursuant to an arrangement under which such services are also provided for the operation of other real properties owned by related_persons however there will be two first for convenience insurance polices will be obtained covering exceptions to this policy both u's properties and properties of related_persons with all parties paying their allocable share of the premiums the second exception is that r will retain persons to prepare rent registration forms for u and other properties it manages as represented in your letter of date no charges will be allocated to u for the preparation of these forms thus u will merely be paying the rent registration fees attributable to its properties directly to an agency of the local_government it has been represented that all fees charged will be reasonable furthermore you have represented that the issuance of insurance policies that cover both u's properties and properties owned by related_persons will not result in lower insurance costs for such persons compared to finally none of the properties held having such properties insured through individual policies by u are debt financed properties within the meaning of sec_514 of the code you have requested a ruling that your payments to r for personal services to be rendered by its employees on your behalf will not be considered an act of self-dealing as that term is described in sec_4941 of the code sec_501 of the code provides in part for exemption from federal_income_tax for a corporation organized and operated exclusively for charitable purposes sec_509 of the code provides that unless specifically excepted a domestic or foreign organization described in sec_501 is a private_foundation and subject_to the excise_taxes of chapter sec_4941 imposes a tax on each act of self-dealing between a private_foundation and a disqualified_person as defined in sec_4946 sec_4941 of the code provides that the term self-dealing includes any direct or indirect transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation re sec_4941 d e of the code provides that the payment of compensation by a private_foundation to a disqualified_person for personal services which are reasonable and necessary to carry out the exempt_purpose of the foundation shall not be an act of self-dealing if the compensation is not excessive sec_53_4941_d_-1 of the foundation and similar excise_tax regulations provides that for purposes of sec_4941 the term self-dealing means any direct or indirect transaction described in sec_53_4941_d_-2 for purposes of this section it is immaterial whether the transaction results in a benefit or detriment to the private_foundation sec_53 d -2 d of the regulations provides that the furnishing of goods services or facilities by a disqualified_person to a private_foundation shall not be an act of self- dealing if they are furnished without charge sec_53 d -2 f of the regulations provides in part that the fact that a disqualified_person receives an incidental or tenuous benefit from the use by a foundation of its income or assets will not by itself make such use an act of self-dealing sec_53_4941_d_-3 of the regulations provides that the payment of compensation and the payment or reimbursement of expenses including reasonable advances for expenses anticipated in the immediate future by a private_foundation to a disqualified_person for the performance of personal services which are reasonable and necessary to carry out the exempt purposes of the private_foundation shall not be an act of self-dealing if such compensation or payment or reimbursement is not excessive for purposes of this subparagraph the term personal services includes the services of a broker serving as agent for the private_foundation but not the services of a dealer who buys from the private_foundation as principal and resells to for the determination whether compensation is excessive see section of third parties the regulations this paragraph applies without regard to whether the person who receives the compensation or payment or reimbursement is an individual sec_4946 defines the term disqualified persons with respect to a private_foundation as including a substantial_contributor to the foundation a foundation_manager and an owner of more than percent of the total combined voting power of a corporation which is a substantial_contributor to the foundation it also includes a member_of_the_family of any individual described above sec_4946 provides that the term a member_of_the_family of a disqualified_person include the spouse children of and grandchildren of a disqualified_person sec_4947 of the code provides that certain trusts which are not exempt under sec_501 of the code are treated as private_foundations and with certain exceptions are subject_to the excise_taxes imposed by chapter such trusts include split interest trusts which are described in sec_4947 as a_trust not all of the unexpired interests in which are devoted to one or more purposes described in sec_170 and which has amounts in trust for which a deduction was allowed under sec_170 sec_545 sec_556 sec_642 a or re sec_7701 of the code defines the term person as including an individual a_trust estate partnership_association company or corporation revrul_74_287 1974_1_cb_327 provides that the employees of a bank designated as the trustee of a private_foundation who have been delegated the responsibility for the day-to- day administration and distribution of the trust funds are foundation managers within the meaning of sec_4946 of the code and are disqualified persons as defined in sec_4946 even though they are ultimately responsible to the bank directors and officers for their actions with respect to the trust you are a charitable_lead_trust and are subject_to the sec_4941 excise_tax imposed on acts of self-dealing r is a disqualified_person within the meaning of sec_4946 with respect to both you and n by reason of its relationship to p and p's relationship to you and n r is to provide various services to you and manage your real_estate interest in u pursuant to the terms of a proposed management agreement you have submitted as a general_rule it will not contract for any services from a related_person or contract for any services pursuant to an arrangement under which such services are also provided for the operation of other real_property owned by related_persons however insurance policies are to be obtained covering both u's properties and properties of related_persons under the terms of these agreements all parties will pay their allocable share of the premiums r will also prepare rent registration forms for u but there will be no charges for this service generally an act of self dealing may be present where the assets of a private_foundation are transferred to or used by or for a disqualified_person it is not pertinent whether the transaction is beneficial or detrimental to the private_foundation however the provision of personal services by a disqualified_person which are reasonable and necessary to carrying out the exempt purposes of a private_foundation shall not be an act of self-dealing if such compensation or payment or reimbursement is not excessive see sec_53 d -3 c of the regulations in addition a transaction does not result in an act of self-dealing where any benefit to a disqualified_person is incidental or tenuous see sec_53 d -2 f of the regulations the information you have submitted establishes that the services you are to receive from r through this management_contract are excepted from the definition of self-dealing because they are reasonable and necessary to the carrying out of your exempt purposes therefore as long as the payment for these services is reasonable as you have represented an act of self- dealing is not present further any benefit received by disqualified persons through the inclusion of u's properties in an insurance_policy with the other related property interests is merely for convenience and is incidental and tenuous and hence not considered an act of self- dealing this is based on your representation that the combining of properties in the policy would not result in a lower insurance cost compared to having such properties insured through individual policies sunt marsunpramfveutemeurtbtneteraruenstsanieasytigpieatsetessssbaretertyinastssn eee on re finally as represented in your letter of date no charges will be allocated to u for the preparation of certain rental forms accordingly an act of self-dealing will not be present because the provision of services by a disqualified_person to a private_foundation at no cost is not an act of self-dealing accordingly based on the information submitted and the representations you have made we conclude that your payments to r for personal services to be rendered by its employees on your behalf will not be considered an act of self-dealing as that term is described in sec_4941 of the code furthermore the payment of u's allocable portion of an insurance_policy which is also insuring properties held by disqualified persons will not constitute an act of self-dealing this ruling is based on the understanding that there will be no material changes in the facts upon which it is based any such change should be reported to the service office because this letter could help resolve any questions concerning your federal_income_tax status it should be kept in your permanent records te_ge customer except as specifically ruled upon above no opinion is expressed concerning the federal_income_tax consequences of the transactions described above under any other provision of the code n addition we express no opinion concerning whether the payments to r are reasonable in amount this ruling is directed only to the organization that requested it the code provides that it may not be used or cited as precedent sec_6110 of if you have any questions about this ruling please contact the person whose name and for other matters including questions telephone number are shown in the heading of this letter concerning reporting requirements please contact the te_ge customer service office at a sincerely yours j2 joseph chasin acting manager exempt_organizations technical group


internal_revenue_service number release date index number ------------------ ---------------------- ------------------------- ------------- ------------------------ - department of the treasury washington dc person to contact --------------------------- id no ------------- telephone number --------------------- refer reply to cc fip b01 - plr-169503-03 date date legend taxpayer date date year year year month dear --------------- ----------------------------------------------- -------------------------- ----------------- ------- --------- ------- ----------- this ruling is in reply to a letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an election under sec_475 of the internal_revenue_code to use the mark-to-market method_of_accounting for the year ending date facts taxpayer was formed as a limited_partnership on date during taxpayer’s initial year year its activities consisted of both investing and trading activities during year taxpayer began to change its investment strategy to short-term trading by plr-169503-03 year substantially_all of taxpayer’s activities consisted of trading in securities to make a profit from short-term swings in the market taxpayer represents that since year it has been engaged in the trade_or_business of being a trader in securities trader also represents that on or about the time for filing taxpayer’s year tax_return taxpayer decided to adopt the mark-to-market method_of_accounting for year the accounting firm preparing taxpayer s federal_income_tax return informed taxpayer that it would take the necessary action to make the election under sec_475 during month of year the accounting firm advised taxpayer that the time for making the sec_475 election for year had passed accordingly taxpayer has requested an extension of time under sec_301_9100-3 to make a timely sec_475 election for the tax_year ending date law and analysis sec_475 provides that a taxpayer engaged in a trade_or_business as a trader in securities may elect to apply the mark-to-market accounting_method to securities held in connection with such trade_or_business see sec_475 sec_7805 provides that except to the extent otherwise provided by the code any election shall be made at such time and in such manner as the secretary shall prescribe on date the internal_revenue_service published revproc_99_17 1999_1_cb_503 section superseded by revproc_99_49 1999_2_cb_725 which was clarified modified amplified and superseded by revproc_2002_9 c b revproc_99_17 provides the exclusive procedure for traders in securities to make an election to use the mark-to-market method_of_accounting under sec_475 sec_5 of revproc_99_17 provides in relevant part that taxpayers other than a taxpayer for which no federal_income_tax return was required to be filed for the taxable_year immediately preceding the election_year make an election under sec_475 for a tax_year beginning on or after date by filing a statement no later than the due_date without regard to extensions of the original federal_income_tax return for the taxable_year immediately preceding the election_year the statement must be attached to either that return or to a request for an extension of time to file that return section dollar_figure of revproc_99_17 the statement must describe the election being made the first taxable_year for which the election is effective and the trade_or_business for which the election is made section dollar_figure of revproc_99_17 sec_4 of revproc_99_17 states that the election under sec_475 determines the method_of_accounting an electing trader is required to use for federal_income_tax purposes for securities subject_to the election a method_of_accounting for securities subject_to the election is impermissible unless the method is in accordance with sec_475 and the regulations thereunder if an electing trader s method_of_accounting for its taxable_year immediately preceding the election_year is inconsistent plr-169503-03 with sec_475 the taxpayer is required to change its method_of_accounting to comply with its election thus a taxpayer that makes a sec_475 election but fails to change its method_of_accounting to comply with that election is using an impermissible method section dollar_figure of revproc_99_17 provides that a taxpayer that changes its method_of_accounting pursuant to revproc_99_17 must take into account the net amount of the sec_481 adjustment sec_301_9100-1 of the regulations provides in part that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations published in the federal_register or by a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 through c i set forth rules that the internal_revenue_service generally will use to determine whether under the facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides in part that a taxpayer is deemed to have not acted reasonably and in good_faith if the taxpayer uses hindsight in requesting relief if specific facts have changed since the due_date for making the election that make the election advantageous to the taxpayer the service will not ordinarily grant relief in such a case the service will grant relief only when the taxpayer provides strong_proof that the taxpayer's decision to seek relief did not involve hindsight sec_301_9100-3 provides special rules for accounting_method regulatory elections this section provides in relevant part that the interests of the government are deemed to be prejudiced by granting an extension of time except in unusual and compelling circumstances if the accounting_method regulatory election is subject_to the procedure described in sec_1_446-1 requiring the advance written consent of the commissioner or if the accounting_method regulatory election for which relief is plr-169503-03 requested requires an adjustment under sec_481 or would require an adjustment under sec_481 if the taxpayer changed to the method_of_accounting for which relief is requested in a taxable_year subsequent to the taxable_year the election should have been made as noted above sec_4 of revproc_99_17 states that the election under sec_475 determines the method_of_accounting an electing trader is required to use for federal_income_tax purposes for securities subject_to the election if an electing trader s method_of_accounting for its taxable_year immediately preceding the election_year is inconsistent with sec_475 the taxpayer is required to change its method_of_accounting to comply with its election a taxpayer that makes a sec_475 election but fails to change its method_of_accounting to comply with that election is using an impermissible method because the election is integrally related to the change in accounting_method to mark-to-market it is an accounting_method regulatory election subject_to sec_301_9100-3 revproc_2002_9 provides procedures by which a taxpayer may obtain automatic consent to change to the mark-to-market accounting_method however the automatic change applies to a taxpayer only if the taxpayer has made a valid election under sec_475 and is required to change its method_of_accounting to comply with the election section 10a a i of the appendix to revproc_2002_9 taxpayer requests an extension of time to make an accounting_method regulatory election that is subject_to the provisions of sec_301_9100-3 because taxpayer failed to make a timely sec_475 election pursuant to revproc_99_17 the accounting_method regulatory election is subject_to sec_301 c i further because the accounting_method regulatory election requires a sec_481 adjustment it is also subject_to sec_301_9100-3 therefore under sec_301_9100-3 absent unusual and compelling circumstances a grant of relief is deemed to prejudice the interests of the government based on the facts and representations submitted we conclude that taxpayer has not satisfied the requirements for our granting a reasonable extension of time to make an election under sec_475 to use the mark-to-market method_of_accounting taxpayer has failed to demonstrate unusual and compelling circumstances regarding his failure to make a timely election sufficient to overcome the presumption of prejudice to the government s interests conclusion taxpayer s request for an extension of time to make the sec_475 election for year is denied because taxpayer s request for relief is denied pursuant to sec_301_9100-3 for lack of unusual and compelling circumstances it is plr-169503-03 unnecessary for us to consider taxpayer s assertion that he acted reasonably and in good_faith under sec_301_9100-3 without using hindsight in requesting relief no opinion is expressed as to the tax treatment of the transaction under the provisions of any other sections of the code and regulations which may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from the transaction which are not specifically set forth by the above ruling this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer's authorized representatives sincerely yours kathleen a sleeth assistant to the chief branch office of associate chief_counsel financial institutions products enclosures copy of this letter sec_6110 copy


internal_revenue_service number release date index number ------------------- ------ ----------------------------------- ------------------------- --------------------------------- in re ---------------------------- --------- -------------------------------- ----------- ---------- - department of the treasury washington dc person to contact ----------------------- ---------------------- telephone number --------------------- refer reply to cc intl br1 - plr-133373-03 date date ------------ ty ------- --------------------- ------------------------------- a ------------------------------------------------------------------------------ date b country c date d dear ------------------ this is in response to a letter dated date requesting a ruling that a’s loss of u s citizenship expatriation did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination --------------------- sec_877 generally provides that a citizen who loses u s citizenship or a u s a was born to a u s citizen on date b in country c a is a citizen of country c plr-113345-03 where she now lives a expatriated on date d a will be subject_to country c tax on her worldwide income on the date of a's expatriation her net_worth exceeded the applicable_amount set forth in sec_877 long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be subject_to the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former u s citizen or former u s long-term_resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual's average income_tax_liability or the individual's net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary's determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 former long-term_resident whose net_worth or average tax_liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax_avoidance if that former resident is described within certain categories and submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes notice_98_34 requires that certain information be submitted with a request for a ruling that an individual's expatriation did not have for one of its principal purposes the avoidance of u s taxes and resident fully subject_to tax in country c the country in which she was born under notice_98_34 1998_2_cb_29 modifying notice_97_19 1997_1_cb_394 a a is eligible to request a ruling pursuant to notice_98_34 because she is a citizen a former u s citizen whose net_worth or average tax_liability exceeds these except as expressly provided herein no opinion is expressed or implied a submitted all of the information required to be submitted by notice_97_19 as plr-113345-03 modified by notice_98_34 including additional information requested by the service after review of the submission accordingly based solely on the facts submitted and the representations made we conclude that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 therefore a will not be presumed under sec_877 to have had as one of her principal purposes for expatriating the avoidance of u s taxes we further conclude that the taxpayer will not be treated under sec_877 as having had as one of her principal purposes for expatriating the avoidance of u s taxes because the information submitted clearly establishes the lack of a principal purpose to avoid taxes under subtitle a or b of the code concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition no opinion is expressed as to a's u s tax_liability for the taxable years prior to or after her expatriation under sections of the code other than sec_877 sec_2107 and sec_2501 which a obtained the ruling whether or not a is otherwise required to file a return the code provides that it may not be used or cited as precedent will be sent to a and an additional copy will be sent to one of her authorized representatives a copy of this letter must be attached to a's u s income_tax return for the year in in accordance with a power_of_attorney on file in this office a copy of this letter this ruling is directed only to the taxpayer requesting it sec_6110 of sincerely ________________ w edward williams senior technical reviewer cc intl br--


number release date internal_revenue_service index numbers - ---------------------------------------- ----------------------------------------- ------------------------- ------------------------- --------------------- department of the treasury washington dc person to contact ----------------------------------------------------- -------- telephone number -------------------- refer reply to cc psi - plr-100334-06 date date legend x ----------------------------------------- --------- ----------- ----- ---------- ------------------ d1 country dear -------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an election to be treated as a disregarded_entity under the laws of country was acquired by a single owner with limited_liability on d1 x intended to be treated as a disregarded_entity for federal tax purposes effective d1 however x did not timely file a form_8832 entity classification election according to the information submitted all of the interest in x an entity formed sec_301_7701-3 provides 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 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes under sec_301_7701-3 except as provided in sec_301 b unless it elects otherwise a foreign eligible_entity is classified as an association if all members have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a sec_301_7701-3 provides that an election under sec_301_7701-3 member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member will be effective on the date specified on form_8832 or on the date filed if no such date is specified on the form the effective date specified on form_8832 cannot be more than days prior to the date the form is filed and cannot be more than months after the date on which the form is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 sets forth the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief 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 granting relief will not prejudice the interests of the government requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 and elect to be treated as a disregarded_entity for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 based on the facts submitted and representations made we conclude that the except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the transaction described above under any other provision of the code sec_6110 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer on whose behalf it was requested in accordance with the power_of_attorney on file with this office a copy of this sincerely letter is being sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes heather c maloy associate chief_counsel passthroughs and special industries