tcmemo_2012_305 united_states tax_court bruce gunkle and sherilyn s gunkle petitioners v commissioner of internal revenue respondent docket no filed date scott w gross for petitioners brooke s laurie for respondent memorandum findings_of_fact and opinion cohen judge respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax for and a penalty of dollar_figure under sec_6662 the issues for decision are whether petitioners’ taxable_income includes deposits into two bank accounts whether they are entitled to charitable contribution deductions and whether they are liable for the penalty all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact petitioners resided in texas at the time they filed their petition bruce gunkle earned a bachelor of science degree from the u s naval academy and a master’s degree in theology from antioch university sherilyn gunkle attended one year of college at the university of south carolina during petitioners served as pastors and conducted religious worship services and performed sacerdotal functions for the city of refuge christian fellowship city of refuge cf the city of refuge christian fellowship inc city of refuge inc was formed as a domestic nonprofit corporation on date by filing articles of incorporation with the secretary of state for texas in the internal_revenue_service irs granted city of refuge inc exempt status under sec_501 in petitioner bruce gunkle attended a church leadership conference elizabeth gardner and fredrick ric gardner were invitees to the conference and elizabeth gardner was a speaker at the conference petitioners requested that the gardners help them establish bruce w gunkle a religious corporation sole and his successors for the governance of the city of refuge cf thereafter petitioner bruce gunkle concluded that he did not wish to continue operating as a nonprofit corporation or to continue the sec_501 status previously acknowledged by the irs for city of refuge inc because of concern that such status might allow government interference with the organization that the business model of a corporation allowed the directors a say in the operations and that continuity of the organization would be aided by a new format on date the office of presiding pastor bruce w gunkle and his successors a corporation sole was formed in nevada on date petitioners each signed a document entitled vow of poverty by a resolution dated date the city of refuge cf resolved in part that the church accepts their confirmation and city of refuge christian fellowship will provide all their needs as apostle and as pastors of this church ministry a check will be placed in the church pastoral account every two weeks according to all the needs of the pastors petitioners executed a deed transferring their residence to the city of refuge cf on date the city of refuge inc was dissolved by articles of dissolution signed by bruce gunkle and filed with the secretary of state for texas on date the irs notified the city of refuge inc and bruce gunkle that the organization’s sec_501 status was terminated and that contributions to it were no longer tax deductible during a checking account was held at wells fargo bank in the name of the city of refuge christian fellowship pastoral expense account pastoral account petitioners each had signature_authority for the pastoral account petitioners’ daughter theresa r gunkle and sylvia crutchfield office administrator and children’s pastor for the city of refuge cf also had signature_authority on the pastoral account however neither petitioners’ daughter nor the office administrator signed any checks to withdraw funds from the pastoral account during bank statements for the pastoral account were mailed to petitioners’ residence deposits into the pastoral account during included payments by church members and nonmembers as well as social_security payments to bruce gunkle electronically deposited pursuant to directions of bruce gunkle during all checks written to make withdrawals from the pastoral account were written by one of petitioners petitioners used the funds in the pastoral account to purchase groceries for their personal consumption to make payments on a ford explorer and a lincoln lt truck that they owned personally to pay other vehicle expenses and to pay their household and living_expenses and other personal expenses payments for the mortgage as well as payments for utilities and repairs and maintenance on petitioners’ residence were made from the pastoral account sherilyn gunkle had signature_authority on an account at randolph brooks federal credit_union rbfcu account during the rbfcu account was in the names of sherilyn gunkle theresa gunkle and lisa sue blasco bank statements for the rbfcu account were sent to petitioners’ residence deposits into the rbfcu account during consisted of dollar_figure transferred from the pastoral account cash and dividends earned on the account all cash deposits into the account were made by petitioners on their jointly filed form_1040 u s individual_income_tax_return petitioners reported dollar_figure the amount of bruce gunkle’s military pension as wages they also reported dollar_figure of social_security_benefits received and that dollar_figure was the taxable_amount of those benefits they did not report any income from the city of refuge cf they claimed a deduction of dollar_figure for charitable_contributions of which dollar_figure was claimed for contributions to the city of refuge cf the tax_return was prepared and signed by frederick gardner on date an injunction was entered in the u s district_court for the district of arizona in civil_action no cv05-3073-pct-ehc enjoining frederick gardner and elizabeth gardner from activities including promotion of corporations sole because among other things the district_court found that they had participated in an abusive tax program promising unwarranted tax benefits from a corporation sole bruce gunkle received a copy of the injunction in date and read it the notice_of_deficiency was based on analysis of bank accounts over which petitioners maintained control to wit the pastoral account and the rbfcu account by this method respondent determined that petitioners had unreported income of dollar_figure but respondent has made concessions reducing the unreported income amount to dollar_figure respondent also disallowed all of petitioners’ claimed charitable_contribution deductions and adjusted the taxable_amount of social_security_benefits to reflect the increased income determined in the notice unreported income opinion petitioners contend that deposits into the pastoral account were nontaxable gifts by various donors to the city of refuge cf and that their vows of poverty insulate them from taxation on the compensation they received for their services to that church in very similar circumstances we have held that deposits made into the account of a purported church were includable in the taxpayers’ gross_income where the taxpayers were the owners of the bank accounts exercised complete control_over the funds in the accounts and used those funds for personal expenditures see woods v commissioner tcmemo_1989_611 aff’d without published opinion 929_f2d_702 6th cir see also chambers v commissioner tcmemo_2011_114 in woods we stated it is not necessary to disregard the separate existence of the church or to challenge the tax status of the church as an entity in order to sustain respondent’s determinations in this case whether they were entitled to the funds or embezzled the funds from the church petitioners exercised complete dominion and control_over deposits into the various bank accounts that were the basis of respondent’s determination taxpayers may not self-declare an exemption from income_tax by the simple expediency of taking a vow of poverty see 76_tc_468 aff’d without published opinion 720_f2d_664 3d cir payments or benefits received in exchange for services rendered by individuals and not on behalf of a separate and distinct principal are taxable to the individuals see 786_f2d_1063 11th cir aff’g tcmemo_1984_536 79_tc_995 aff’d 748_f2d_331 6th cir mcgahen v commissioner t c pincite yoshihara v commissioner tcmemo_1999_375 petitioners in their reply brief deny that there is an entity named the city of refuge and simultaneously assert that bruce gunkle formed the city of refuge cf their claims that the payments deposited into the pastoral account were for a church for which petitioners were merely agents is unsupported inexplicable and unpersuasive here payment of their personal living_expenses from funds of the city of refuge cf was by the agreement reflected in the resolution accepting petitioners’ vows of poverty in exchange for services petitioners performed as pastors thus the payment of their personal expenses was compensation they received in addition petitioners exercised complete dominion and control_over all of the funds in the pastoral account without any restriction by the city of refuge cf or any other person one of bruce gunkle’s stated reasons for dissolving the corporation known as city of refuge inc was his belief that such an entity allowed the directors of the corporation to control management of the entity city of refuge cf was controlled only by petitioners they did not receive payments as agents of city of refuge cf to the contrary payments made to the city of refuge cf pastoral account were solely for their benefit although petitioners claim to be members of a religious_order they have not shown that the city of refuge cf has any characteristics of a religious_order see eg 872_f2d_1014 fed cir 88_tc_1341 85_tc_9 revproc_91_20 1991_1_cb_524 thus they are not entitled to rules applicable to payment of expenses on behalf of members of a religious_order petitioners identify the rbfcu account as a savings account which they also used as their own and have not shown that any other person had an interest in or control_over the account respondent has conceded that transfers from the pastoral account into the rbfcu account are not taxable but petitioners have not shown that the cash deposits into the rbfcu account or the interest earned on the account are not their income see 335_f2d_671 5th cir chambers v commissioner tcmemo_2011_114 yoshihara v commissioner tcmemo_1999_375 we conclude that respondent’s determination of petitioners’ unreported income as reduced by the concessions in respondent’s brief properly included amounts deposited into the pastoral account and the rbfcu account charitable_contribution deductions respondent asserts that the amounts claimed for contributions to the city of refuge cf were not deductible because petitioners did not give up control_over those amounts which ultimately were used for their benefit see sec_170 moreover argues respondent there is no evidence that city of refuge cf qualified under sec_501 to receive deductible contributions once the exempt status of city of refuge inc was terminated respondent also disallowed deductions for alleged contributions to john p kelly ministries inc dba l e a d and international christian wealthbuilders foundation and argues that there is no evidence in the record establishing the eligibility of these organizations to receive tax-deductible contributions under sec_170 finally respondent argues that there is no evidence that petitioners actually made the claimed charitable_contributions because the bank records reviewed by respondent do not show the source of the claimed charitable_contributions to the extent the court finds that the income deposited into the pastoral account is the taxable_income of petitioners respondent concedes that any amounts paid from the pastoral account should be treated as amounts paid_by petitioners petitioners have the burden of proving their entitlement to deductions claimed rule a 292_us_435 petitioners have presented only purported receipts for the contributions and no evidence regarding the charitable or church status of the entities issuing the receipts see eg stephenson v commissioner t c pincite to get a charitable deduction petitioner s must prove that the recipient organization qualified under sec_170 for a church to so qualify it must meet the sec_501 organizational and operational tests they have not addressed in their briefs respondent’s contentions concerning entities other than city of refuge cf and have made only generalized and unsupported assertions concerning the status of city of refuge cf under the circumstances of this case petitioners have not satisfied the burden_of_proof and have not presented credible_evidence under sec_7491 to shift the burden to respondent sec_6662 penalty sec_6662 and b and imposes a accuracy-related_penalty on any underpayment of federal_income_tax attributable to a taxpayer’s negligence or disregard of rules or regulations or substantial_understatement_of_income_tax sec_6662 defines negligence as including any failure to make a reasonable attempt to comply with the provisions of the code and defines disregard as any careless reckless or intentional disregard disregard of rules or regulations is careless if the taxpayer does not exercise reasonable diligence to determine the correctness of a tax_return position that is contrary to the rule_or_regulation sec_1_6662-3 income_tax regs an understatement of income_tax is substantial if it exceeds the greater of of the tax required to be shown on the return or dollar_figure sec_6662 under sec_7491 respondent has the burden of producing evidence that the sec_6662 penalty is appropriate see 116_tc_438 respondent has met this burden by evidence of unreported income and improper deductions that resulted in a substantial_understatement_of_income_tax petitioners have not addressed the reasonable_cause or good-faith defenses to the sec_6662 penalty see sec_6664 higbee v commissioner t c pincite they do not claim to have relied on anyone with respect to the omissions of income or claimed deductions for obvious reasons in view of his history petitioners do not claim to have relied on frederick gardner the preparer of their tax_return they simply claim that they did not have unreported income and that they substantiated their deductions claims that we have rejected for the reasons stated above we have considered the other arguments of the parties in their poorly organized and less than satisfactory briefs they are lacking in merit or irrelevant to our conclusions to reflect respondent’s concessions decision will be entered under rule


t c memo united_states tax_court mehran etesam petitioner v commissioner of internal revenue respondent docket no filed date mehran etesam pro_se gwendolyn c walker for respondent memorandum opinion powell special_trial_judge this case was heard pursuant to sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined a deficiency and an addition_to_tax under sec_6651 in petitioner's federal_income_tax in the respective amounts of dollar_figure and dollar_figure at the time the petition was filed petitioner resided in swainsboro georgia all section references are to the internal_revenue_code in effect for the year at issue and rule references are to the tax_court rules_of_practice and procedure the only issue is whether petitioner is entitled to a joint filing_status the facts may be summarized as follows prior to petitioner and maliheh chasevi ms chasevi were married lived together in florida and had filed joint federal_income_tax returns in the previous years in date they separated and petitioner moved to georgia in late or early ms chasevi inquired whether petitioner would file a joint_return with her for the taxable_year petitioner agreed and ms chasevi sent her form_w-2 from her employer to him in date petitioner could not pay the amount due and requested an extension of time for filing the return sometime later ms chasevi questioned him about whether a return had been filed petitioner got upset but did tell her that he had not filed and then told her to file her own return ms chasevi filed a separate_return for the taxable_year in date shortly thereafter petitioner filed a purported joint_return for the taxable_year ms chasevi did not sign the return petitioner signed her name to the return ms chasevi did not know that the purported joint_return had been filed until date and she has not ratified the purported joint_return in any fashion upon examination of the purported joint_return filed by petitioner respondent disallowed the dependency_exemption claimed for ms chasevi removed her income from the gross_income reduced the standard_deduction and determined the tax on the basis of the filing_status of married-filing-separately if we determine that petitioner was not entitled to use the joint filing_status he does not dispute the other adjustments sec_6013 allows a husband and wife to file a joint_return both the husband and wife must intend that a return filed be treated as a joint_return and the question of their intent is a question of fact 56_tc_1 springmann v commissioner tcmemo_1987_474 while ms chasevi may have intended to file a joint_return for at some time during or early by the time petitioner filed the return in she clearly did not intend that return to be a joint_return indeed she had already filed a separate_return petitioner argues that the communications between his wife and him during late or early gave rise to a binding contract with ms chasevi to the effect that they would file a joint_return while we have grave doubts concerning the existence of any such contract under the circumstances here even if ms chasevi breached that contract the fact remains that when the purported joint_return was filed she did not intend that return to be a joint_return if there were a contract that would be a matter between petitioner and ms chasevi whatever the resolution of that dispute it would not affect the result here petitioner is not entitled to claim the joint filing_status and respondent's determinations are sustained decision will be entered for respondent


internal_revenue_service department of the treasury number release date index number washington dc attn person to contact telephone number refer reply to cc te_ge eb hw-plr date date legend fund city statute dear this responds to a ruling_request dated date submitted on behalf of the fund by its authorized representative concerning whether certain cost-of-living adjustments received under the statute are excludable from gross_income under sec_104 of the internal_revenue_code the code the fund is a statutory retirement fund for the payment of retirement death and disability benefits to firefighters employed by the city you represent that the service has previously held certain benefits to which this statute applies are excludable from the firefighters’ gross_income under sec_104 of the code you request a ruling concerning the tax treatment of the cost-of-living adjustments paid under the statute to disabled firefighters receiving excludable service connected disability benefits the statute provides the board_of trustees shall be authorized to use interest earnings on investments of the system in excess of normal requirements as determined by the actuary to provide an annual cost-of-living increase in benefits for members who have retired and widows of members who have retired in an amount not to exceed three percent of the original benefit such benefits shall be paid only when funds are available from this source from funds appropriated for this purpose by the city or from other sources designated for this purpose and payments shall be made in plr-126951-01 such manner and in such amount as may be determined by the board_of trustees based on funds available sec_61 of the code provides that except as otherwise provided by law gross_income means all income from whatever source derived including compensation_for services sec_104 of the code provides that gross_income does not include amounts received under workmen’s compensation acts as compensation_for personal injuries or sickness sec_1_104-1 of the income_tax regulations states that sec_104 of the code excludes from gross_income amounts received by an employee under a workmen’s compensation act or under a statute in the nature of a workmen’s compensation act that provides compensation to the employee for personal_injury_or_sickness incurred in the course of employment sec_104 also applies to compensation which is paid under a workmen’s compensation act to the survivor or survivors of deceased employees sec_104 does not apply to a retirement pension or annuity to the extent it is determined by reference to the employee’s age or length of service or the employee’s prior contributions even though the employee’s retirement is occasioned by an occupational injury or sickness sec_104 also does not apply to amounts which are received as compensation_for a non-occupational injury or sickness nor to amounts received as compensation_for an occupational injury or sickness to the extent that they are in excess of the amount provided in the applicable workmen’s compensation act or acts rev_rul 1980_1_cb_35 considers a situation in which a statute in the nature of a workmen’s compensation act provides benefits in the event of work-related injury and also provides that whenever any member dies after retirement a pension based on the average salary of the member at the time of his death will be paid to survivors revrul_80_84 states if a los angeles fireman or policeman suffers a service-related injury or illness necessitating the employee’s retirement the compensation_for that injury or illness is two-fold - - because of that injury the employee may retire and receive lifetime benefits and because that injury qualifies the employee for retirement the employee’s survivors qualify for survivors’ benefits whenever any member dies after retirement the retirement provision benefits paid under this provision to survivors of employees are thus part of the compensation_for the employee’s service-related injury or illness these benefits therefore are treated as a continuation of the employee’s lifetime sec_104 benefits similarly when firefighters in the instant case suffer service-related injury or illness that qualifies them to receive excludable benefits they also qualify for cost-of-living increases under the statute accordingly the cost-of-living increases are treated as a plr-126951-01 continuation of the employee’s excludable benefits based on the information submitted representations made and authorities cited we conclude as follows cost-of-living adjustments under the statute are a continuation of the benefits to which they relate and do not refer to age length of service or prior contributions accordingly cost-of-living adjustments to a firefighter’s benefits will be excluded from gross_income under sec_104 of the code to the same extent that the benefits to which they relate are excludable if only a portion of the firefighter’s benefit qualifies for exclusion under sec_104 only the pro-rata portion of the cost-of-living adjustment attributable to the excludable_portion of the benefit is excludable 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 s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely felix j zech assistant chief health welfare branch office of division counsel associate chief_counsel tax exempt government entities enclosure copy for section purposes cc


t c memo united_states tax_court glenn s hodges petitioner v commissioner of internal revenue respondent docket no filed date p filed no income_tax return for and r determined a deficiency in tax and additions to tax on account thereof p disputes his obligation to file an income_tax return and pay tax on constitutional grounds disputes r’s disallowance of basis in various securities sold by p and challenges the additions to tax held p’s claim that he has no obligation to file a tax_return and pay tax is without merit held further p has failed to prove that his basis in any of the securities is greater than zero held further p is liable for an addition_to_tax under sec_6651 i r c for failure_to_file a return held further p is liable for an addition_to_tax under sec_6654 i r c for failure to pay estimated_tax held further p is penalized dollar_figure under sec_6673 i r c because his position in this proceeding is frivolous glenn s hodges pro_se john w sheffield iii for respondent memorandum findings_of_fact and opinion halpern judge by notice_of_deficiency dated date respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure and additions to tax of dollar_figure dollar_figure and dollar_figure under sec_6651 and and a respectively petitioner assigns error to all of those determinations by the answer respondent concedes the addition_to_tax determined under sec_6651 and claims an increase in the addition_to_tax determined under sec_6651 of dollar_figure for a total addition under that section of dollar_figure taking into account certain concessions made by petitioner the issues remaining for decision are petitioner’s constitutional challenge to the income_tax petitioner’s gain if any from certain_sales of securities the additions to tax and our imposition of a penalty upon petitioner under sec_6673 unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended and all rule references are to the tax_court rules_of_practice and procedure for convenience monetary amounts have been rounded to the nearest dollar amount findings_of_fact some facts are stipulated and are so found the stipulation of facts with accompanying exhibits is incorporated herein by this reference at the time he filed the petition petitioner resided in duluth georgia petitioner did not file a form_1040 u s individual_income_tax_return tax_return for nor did he file any_tax return from through he did file tax returns from to during petitioner received proceeds of dollar_figure from the sale of securities the securities as follows date of sale unknown security sold proceeds sbc communications inc dollar_figure big_number at t corp avaya inc big_number at t corp at t corp at t corp big_number bell atlantic corp big_number big_number bellsouth corp big_number honeywell intl inc big_number lucent technologies inc mediaone group inc big_number big_number mediaone group inc mediaone group inc big_number qwest communications intl sbc communications inc sbc communications inc sbc communications inc sbc communications inc u s west inc big_number big_number big_number petitioner also received ordinary dividends and capital_gains in the amounts of dollar_figure and dollar_figure respectively i introduction opinion we first address petitioner’s constitutional challenge to the income_tax we then determine petitioner’s gain from the sale of the securities finally we address the additions to tax and sec_6673 penalty ii petitioner’s constitutional challenge to the income_tax in the amended petition in support of his assignments of error petitioner claims that he has books_and_records substantiating his deductions business_expenses credits and charitable_contributions at the trial of this case petitioner conceded that during the sale of the securities produced proceeds of dollar_figure and he received ordinary dividends and capital_gains in the amounts of dollar_figure and dollar_figure respectively he offered nothing to show any business_expenses credits or charitable_contributions he conceded that he did not file a tax_return for his wife apparently speaking for him claimed that even if the court were to find that he had income in the amount determined by respondent he was not obligated to file an income_tax return or pay any_tax we petitioner and his wife didn’t file a return because we feel like we are not liable to file a return just based on research and the taxation clauses in the constitution that specifically address how taxes can be taken and based on supreme court cases after the 16th amendment that says that it didn’t grant congress any more taxing authority its our position our good_faith position as citizens that we are not liable to file for this income on brief petitioner restates his claim that he has no obligation to file an income_tax return after careful study and review of the constitution of the united_states and the internal revenue laws petitioner has been brought clearly to the conclusion that the internal revenue laws pertain to taxpayers and not to non-taxpayers if one searches the index of the irc under heading of liability for tax one finds listed different taxes none of which refer to an income_tax all tax returns filed by petitioner prior to were filed due to lack of wisdom knowledge and understanding the enormity and ambiguity of the internal revenue codes sic combined with a service that has operated with intimidation and fear tactics hinders the common man or woman from question sic the legality sec_6012 requires every individual having gross_income exceeding certain minimum amounts to file an income_tax return for petitioner’s gross_income exceeded the applicable sec_6012 minimum for filing a return the case sec_1 during petitioner received ordinary dividends and capital_gains in the amounts of dollar_figure and dollar_figure respectively both dividends and gains derived from dealings in property are items of gross_income see sec_61 and together the two items total dollar_figure which is above the continued are legion that individuals required by the internal_revenue_code to file a return must file a return and pay tax e g 67_f3d_29 2d cir affg 100_tc_650 797_f2d_936 11th cir 712_f2d_195 5th cir affg tcmemo_1983_12 529_f2d_1236 5th cir 68_tc_895 hicks v commissioner tcmemo_1992_649 zegel v commissioner tcmemo_1989_522 petitioner’s claim that he has no obligation to file a return or pay any_tax is without merit and we reject it iii petitioner’s gain at issue is the amount of petitioner’s gain from the sale of the securities at trial petitioner conceded that during his brokerage account at solomon smith barney smith barney was credited with dollar_figure the proceeds from sales of the securities he claimed however that the securities were sold at a net_loss of dollar_figure and taking into account fees in the amount of dollar_figure he paid smith barney his total loss on the sales of the securities was more than dollar_figure petitioner determines that he suffered a net_loss on the sales of the continued threshold for which a return was required from an individual for no matter what the individual’s filing_status single married_filing_jointly etc see instructions accompanying form_1040 u s individual_income_tax_return p securities by comparing the sales_price of each security with its tax basis as he computes those bases with one exception ie shares of stock in honeywell intl inc the honeywell shares he computes the tax basis of each of his various security holdings as being the fair_market_value of the security on date the date he claims is the date of his grandmother’s death petitioner’s wife testified that to the best of her recollection petitioner’s grandmother died on date she testified that except for the honeywell shares all of the securities were received by petitioner on account of his grandmother’s death she testified that the honeywell shares were a gift to petitioner from his mother petitioner did not testify to those matters there is in evidence a letter from smith barney that for some of the securities states prices for the securities on date sec_1001 deals with the computation of gain_or_loss on the sale_or_other_disposition without distinction sale of property gain is the excess of the amount_realized on the sale of property over the property’s adjusted_basis basis for determining gain id loss is the excess of the property’s basis for determining loss over the amount_realized on its sale id the basis_of_property may be different for purposes of determining whether property is sold at a gain or whether it is sold at a loss see eg sec_1015 which provides that the basis_of_property acquired by gift is the same in the hands of the donee as it was in the hands of the donor except that if such basis exceeds the fair_market_value of the property at the time of the gift then for purposes of determining loss the basis shall be such fair_market_value in general the basis_of_property received by bequest is the fair_market_value of the property on the date of death of the decedent see sec_1014 the basis_of_property received by purchase is its cost see sec_1012 for the reasons that follow we do not find petitioner’s wife’s testimony as to the origin of the securities in petitioner’s hands to be credible and we give it no weight first her testimony was self-serving in that we assume as petitioner’s wife she has an economic stake in the outcome of this case we need not accept self-serving testimony even if unopposed 403_f2d_403 2d cir affg tcmemo_1967_85 see also 87_tc_74 under all the circumstances we are not required to accept the self-serving testimony of petitioner or that of his mother as gospel second with respect to the securities that she testified were received by bequest from petitioner’s grandmother her testimony involved two crucial facts one the fact of the grandmother’s death on or about date and two the transfer of the securities on account of her death death is not exclusively a private event it is usually accompanied by public recognition in the form of a death certificate and sometimes court records evidencing the administration or probate of the decedent’s estate often there is a will and there are newspaper articles reporting the decedent’s death there is a substantial amount of money involved here and the lack of any evidence supporting petitioner’s wife’s testimony on crucial points causes us to distrust that testimony as to the fact or date of the grandmother’s death with respect to the fact of the transfer of the securities stock transfers especially of the stock of traded companies are evidenced by record entries the securities in question here were sold by smith barney who we assume would not have sold them and deposited the proceeds to petitioner’s account unless smith barney was satisfied petitioner owned the securities petitioner produced no evidence of the transfer of any of the securities from his grandmother to him we cannot therefore conclude that petitioner acquired securities from his grandmother or that even if he did he acquired them on or about date we have similar difficulty with the petitioner’s wife’s testimony about the gift of the honeywell shares petitioner bears the burden of proving his basis in the securities see rule a petitioner has failed to prove that the securities other than the honeywell shares were acquired from his grandmother on or about date or that the honeywell shares were received from his mother by gift since petitioner has failed to prove that the securities have any basis in excess of zero we sustain respondent’s adjustment including in full the proceeds from the sale of the securities in petitioner’s gross_income iv additions to tax a respondent's sec_6651 determination sec_6651 provides for an addition_to_tax in the event a taxpayer fails to file a timely return determined with regard to any extension of time for filing unless it is shown that such failure is due to reasonable_cause and not due to willful neglect the amount of the addition is equal to percent of the amount_required_to_be_shown_as_tax on the delinquent_return for each month or fraction thereof during which the return remains delinquent up to a maximum addition of percent for returns more than months delinquent reasonable_cause contemplates that the taxpayer exercised ordinary business care and prudence and was nonetheless unable to file a return within the prescribed time 469_us_241 sec_301_6651-1 proced admin regs willful neglect means a conscious intentional failure or reckless indifference boyle supra pincite petitioner failed to file a tax_return for and thus is liable for the addition_to_tax imposed by sec_6651 unless the failure was due to reasonable_cause and not due to willful neglect petitioner had sufficient gross_income for so that he was required to file a return he had filed tax returns from to when he stopped because as his wife testified they had done research and realized that there had been a lot of unconstitutional things happening in the tax laws and we decided that we weren’t going to be robbed anymore as the cases we cited above show petitioner’s reasons for not filing are spurious petitioner’s failure in his duty to file a tax_return for was both conscious and intentional a person with gross_income equal to petitioner’s gross_income for exercising ordinary business care and prudence would have filed a tax_return for petitioner consciously and intentionally failed to file a tax_return for petitioner was willfully neglectful in failing to do so and we so find we sustain an addition_to_tax under sec_6651 in the amount of dollar_figure see supra note b respondent's sec_6654 determination sec_6654 provides for an addition_to_tax in the event of an underpayment of a required_installment of individual estimated_tax sec_6654 and b as relevant to this case each required_installment of estimated_tax is equal to percent of the required_annual_payment which in turn is equal to the lesser_of percent of the tax shown on the individual's return for that year or if no return is filed percent of his or her tax for such year or if the individual filed a return for the immediately preceding_taxable_year percent of the tax shown on that return sec_6654 and b i and ii the due dates of the required installments for a calendar taxable_year are april june and september of that year and january of the following year sec_6654 petitioner filed no return for or petitioner’s required_annual_payment of estimated_tax was therefore equal to percent of his tax for petitioner paid none of the required installments of that amount we sustain an addition_to_tax under sec_6654 in the amount of dollar_figure petitioner does not challenge the computation of the sec_6654 addition_to_tax which we have not computed v sec_6673 penalty sec_6673 authorizes the tax_court to impose a penalty on a taxpayer not to exceed dollar_figure if the court finds among other things that the taxpayer’s position is frivolous or groundless sec_6673 the purpose of sec_6673 is to compel taxpayers to think and to conform their conduct to settled principles before they file returns and litigate 119_tc_285 a taxpayer's position is frivolous if it is contrary to established law and unsupported by a reasoned colorable argument for change in the law e g 115_tc_523 we need not find specific damages to invoke sec_6673 rather that section is a penalty provision intended to deter and penalize frivolous claims and positions in proceedings before this court 102_tc_596 petitioner does not here argue for any change in the law and there is no plausible argument that he did not have to file a tax_return for petitioner’s argument to the contrary is frivolous and we so find the court twice warned petitioner--at a pretrial conference in date and at trial in date-- that the argument he was advancing was of the sort that might subject him to a penalty under sec_6673 we have little sympathy for petitioner’s obstinacy in the face of our warnings we believe that petitioner is deserving of a substantial penalty under sec_6673 we therefore impose on him under that section a penalty of dollar_figure vi conclusion we shall enter decision for respondent reflecting the deficiency in tax determined by respondent the increased addition_to_tax asserted by respondent under sec_6651 respondent’s concession of the addition_to_tax determined under sec_6651 the addition_to_tax determined by respondent under sec_6654 and the penalty we imposed under sec_6673 to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number -------------------------------------------- ------------------------------------------------------------ --------------------------------------------- -------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b03 plr-111671-16 date date legend x ------------------------------------------ ----------------------------------------------- y z ----------------------------------- ------------------------ ----------------------------------------------------- ------------------------ country -------- date ------------------------ n1 n2 ---- ---- 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 to file an election under sec_301_7701-3 to be treated as a partnership for federal tax purposes the information submitted states that x was organized under the laws of country on date x has been and is currently owned by y which holds an n1 percent ownership_interest in x and z which holds an n2 percent ownership_interest in x x represents that it is a foreign_entity eligible to elect to be classified as a partnership effective date plr-111671-16 however x failed to timely file form_8832 entity classification election to be treated as a partnership for federal tax purposes effective date 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 elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides the default classification for an eligible_entity that does not make an election sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability under sec_301_7701-3 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 sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date the election is filed sec_301_9100-1 provides the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides 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 a taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the plr-111671-16 commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and 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 a form_8832 with the appropriate service_center to elect to be treated as a partnership for u s income_tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on x and its owners filing within days of this letter to the extent necessary or appropriate all required federal_income_tax returns and information returns including amended returns consistent with the relief granted in this letter a copy of this letter should be attached to any such returns except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts discussed above under any other provision of the code and the regulations thereunder in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent 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 ruling_request it is subject_to verification on examination plr-111671-16 in accordance with the power_of_attorney on file with this office a copy of this letter_ruling will be sent to your authorized representative sincerely associate chief_counsel passthroughs special industries by _____________________________ richard t probst senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


internal_revenue_service appeals_office watt avenue sa sacramento ca department of the treasury employer_identification_number date oc t person to contact number release date certified mail dear employee id number tel fax uil this is a final adverse determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code the code sec_501 as an organization described in code sec_501 the adverse determination was made for the following reason s your organization does not qualify for exemption under section sec_501 of the code because your organization under sec_1_501_c_4_-1 operates for the benefit pleasure or recreation of its members or is carrying on a business with the general_public similar to organizations operated for profit your organization does not meet the three requirements of revrul_74_99 you are required to file federal_income_tax returns on forms file your return with the appropriate internal_revenue_service center per the instructions of the return for further instructions forms and information please visit www irs gov we will make this letter and the proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information we have provided to you in a separate mailing notice notice of intention to disclose please review the notice and the documents attached that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition or complaint in one of these three courts must be filed within days from the date this determination_letter was mailed to you please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory_judgment by referring to the enclosed publication you may write to the courts at the following addresses united_states tax_court second street nw washington dc us court of federal claims madison place nw washington dc u s district_court for the district of columbia constitution ave n w washington dc processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the code you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels get prompt and proper handling if you want taxpayer_advocate assistance please contact the taxpayer_advocate for the irs office that issued this letter you may call toll-free for the taxpayer_advocate or visit www irs gov advocate for more information if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours appeals team manager enclosure publication department of the treasury internal_revenue_service irs p o box cincinnati oh legend x date of formation y state city dear date nov l employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issues do you qualify for exemption under sec_501 of the code no forthe reasons stated below facts you were incorporated on x in the state of y to function as a homeowners’ association your articles of incorporation in part states that you were formed to provide for the maintenance and preservation of the properties and to promote the health safety and welfare of the residents including maintaining the common facilities you maintain a residential development with approximately acres in the city of z you do not maintain the exterior of any of the residences you indicate that you provide a substantial social benefit to the community the city of z and the world-at-large single family units located on approximately owners of each and every lot within the subdivision shall automatically be and must at all times remain your members in good standing class a members shall include all owners of residential lots and shall be entitled to one vote per lot owned class b members shall be the owner or owners of the office tract and shall be entitled to cast that number of votes equal to of the votes which class a members are entitled to cast your bylaws state that each and every owner of a residential lot in good standing with you shall have a non- exclusive right and easement of enjoyment in and to the tract a and tract b common properties it further states that if the owner or owners of the office tract is or are in good standing with you shall have a non- exclusive right all residents in good standing with you shall have a non-transferable non-exclusive privilege to use and enjoy all common properties for so long as they are members in good standing your bylaws also indicate that the tract a common properties shall be used exclusively by the owners of residential lots and their guests and invitees and access thereto shall be prohibited to any other person access to the tract a common properties may be restricted by gating and fencing to all other persons the owners of the residential lots shall be responsible for all assessments associated with the costs of the maintenance including landscaping where applicable of i the streets and alleys situated within the development tract ii manned and unmanned gated areas serving the development tract accessible by the owners residential lots only iii the creek easement areas as hereinafter defined and iv the balance of the tract a common properties including amenities constructed or installed in the tract a common properties accessible only by owners of the residential lots such as pools hike and bike trails fountains and other amenities located within the tract a common properties likewise your bylaws state that the tract b common properties shall be subject_to the use and enjoyment of residential lot owners and their guests and invitees and the employees guests and invitees of the owner or owners of the office tract the board shall have the right to restrict the usage of the common properties by the owners of the residential lots and the office tract however any restriction shall be imposed on a uniform basis on the owners of residential lots and the owner or owners of the office tract access to the tract b common properties may be restricted by gating and fencing to all other persons the owners of residential lots and the owner or owners of the office tract shall be responsible for all assessments relating to or associated with the tract b common properties including the access road easement area and the maintenance including landscaping where applicable of i the tract b common properties including the streets located within the access road easement area ii the perimeter screening wall in the buffer area along certain streets iii the screening walls constructed along the common property lines between the office tract the development tract and the common properties iv landscaping in the buffer area and medians along certain streets as required by the zoning ordinance v amenities such as hike and bike trails tennis courts exercise stations fountains and other amenities constructed and installed within the tract b common properties accessible to both the owners of residential lots and the owner or owners of the office tract and vi manned and unmanned gated entries if any serving both the development tract and the office tract manned gatehouses that provide a level of security for the community safe clean groomed you provide and visually appealing public areas of the neighborhood adequate lighting in the recreation areas and street lights to enhance the security and safety of the community water for irrigation to the common areas to maintain the physical attraction of the community upkeep and maintenance of the common areas including community wide extermination help prevent the increase in mosquitoes and other pests all of these services are to areas that are within the gated community and can only be accessed by members guests and employees of the owner of the office tract of your time and revenue is expended for the purposes of security and management you indicated that your on-site manager and a management company are responsible for the oversight and compliance of contractors as well as the bookkeeping of the financial records this allows you to fulfill your obligations to maintain the public areas of the neighborhood security is provided by the gate staff _ of your time and revenue involves landscaping and grounds maintenance you employ by an additional contract a landscaping service to provide periodic landscape and tree trimming services to all public area within the community sprinkler system repair and costs associated with irrigation of the public areas are included in this category the community in total consists of approximately acres of park-like grounds filled with letter rev catalog number 47628k winding creeks lakes and waterfalls the employment of landscaping services allows you to provide safe clean groomed and visually appealing public areas of the neighborhood you expend another of your time and revenue on utilities electricity and water are needed to maintain the common areas in the community adequate lighting is provided in the recreation areas and street lights enhance the security and safety of the community water is used for irrigation to the common areas to maintain the physical attraction of the community of your time and revenue involves many amenities that are maintained and serviced by additionally specialized professionals the amenities include the almost space walking and jogging trails a dog park swimming center with pools and pavilion tennis courts and picnic areas contractors are used to provide safety and services to these amenities and the surrounding area the upkeep and maintenance of the common areas enhances and beautifies the community it is necessary to maintain these areas for public safety and health reasons the maintenance is performed by specialized contractors that are supervised by you community-wide extermination is also provided to help prevent an increase in mosquitoes and other pests this is a benefit not only to the community but also to the surrounding areas _acres of the park-like grounds expansive green the final of your time and revenue is expended for activities that contribute to your daily and periodic operations and fulfilment of your purposes these costs include social expenses newsletter publication and other professional fees you also have periodic book clubs poker clubs and wine clubs the annual holiday decorations attract the community and another holiday party is open to anyone that rsvps for the event you allow employees of the office building located in the office tract a class b member to use any facility and amenity except for the pool due to liability concerns approximately of your revenue is categorized as other income and interest_income of your revenue is received from the assessment of dues of your members the remaining you submitted a map and photographs of the development which show that the property is fenced-in and there gates have manned gate houses and one is a sliding gate are gate houses located at each access point individuals that are not guests are not allowed to enter to gain entrance individuals must prove they are a resident guest of an owner employee of the owner of the office tract or a contractor working on the property law sec_501 of the code provides for the exemption of civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare or local associations of employees the membership of which is limited to the employees of a designated person or persons in a particular municipality and the net_earnings of which are devoted exclusively to charitable educational or recreational purposes sec_1 c -l a i provides that an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community an organization embraced within this section is one that is operated primarily for the purpose of bringing about civic betterments and social improvements letter rev catalog number 47628k in revrul_72_102 1972_1_cb_149 an organization that was formed to preserve the appearance of a housing development and to maintain streets sidewalks and common areas for use of the residents in the development was determined to qualify for exemption under sec_501 of the code revrul_74_99 1974_1_cb_131 modified revrul_72_102 and held that a homeowners_association in order to qualify for exemption under sec_501 of the code must in addition to otherwise qualifying for exemption under sec_501 satisfy the following requirements it must engage in activities that confer benefit on a community comprising a geographical unit which bears a reasonably recognizable relationship to an area ordinarily identified as a governmental subdivision or a unit or district thereof it must not conduct activities directed to the exterior maintenance of private residences and it owns and maintains only common areas or facilities such as roadways and parklands sidewalks and street lights access to or the use and enjoyment of which is extended to members of the general_public and is not restricted to members of the homeowners’ association revrul_80_63 1980_1_cb_116 clarifies revrul_74_99 1974_1_cb_131 and provides answers to specific questions as to whether the conduct of certain activities will affect the exempt status under sec_501 of the code of otherwise qualifying homeowners' associations the ruling states that the term ‘community’ does not embrace a minimum area or a certain number of homeowners a homeowners'_association may not receive an exemption if it represents an area that is not a community and it restricts the use of its recreational facilities to only members of the association an affiliated recreational organization operated totally separate from the homeowners'_association may be exempt so long as there is no benefit flowing back to any member and a homeowners'_association cannot own and maintain parking for the sole use of its members if it is not a community in 305_f2d_814 the case involved a nonprofit membership housing cooperative that provided low cost housing to its members in denying exemption the court stated that the organization was not organized exclusively for the promotion of social welfare the court found that although its activities were available to all citizens eligible for membership its contribution is neither to the public at large nor of a public character the court looked to the benefits provided and not to the number of persons who received benefits through membership in lake petersburg association v c lr t c memo 33_tcm_259 t c m p-h p big_number ph tc memo big_number the association was an idea presented by the petersburg chamber of commerce to help stimulate the economy in the surrounding area a group of businessmen contributed capital and acquired capital from other sources such as the city the chamber and two banks to obtain funding to purchase property and develop it they formed an association which required prospective owners to become dues-paying members the dues helped finance the development of the lake and recreational facilities on said property use of the assets was limited to members and their guests the association's basis for their argument is that the organization was created to stimulate the economy and make it a better place to live thereby fulfilling the requirement of a social_welfare_organization under sec_5 c the respondent argued that it was operated primarily for the benefit of its members and therefore did not qualify the court found that regardless letter rev catalog number 47628k of the original intent the actual benefit went to the members and any economic benefits to the petersburg citizens were indirect and remote exemption was denied in 589_fsupp_54 s d cal the court held that a homeowners’ association representing property owners within an independent community was exempt under sec_501 of the code despite closing certain recreational facilities for use by the general_public the association existed to enforce protective covenants designed to preserve the character of the community of rancho santa fe the property contained in the development consisted of big_number acres the association owned acres outright the remainder was owned by the individual members of the acres owned by the association acres are dedicated to parkland and open space acres are improved as playgrounds athletic fields a public parking lot a community clubhouse and hiking and bridle trails the remaining acres comprise an 18-hole golf course and eight tennis courts of the lands directly under the ownership of the association the parklands and open space playgrounds and athletic fields public parking lot community clubhouse and the commercial areas are open to the public the golf course and tennis courts are less freely accessible they may be used by the general_public only to the extent that members of the public are guests of the privately-owned inn located in rancho santa fe otherwise only members of the association may use these facilities rancho santa fe has its own post office and zip code in 868_f2d_108 circuit the court confirmed the denial of sec_501 status to a homeowners'_association that maintained a private lake accessed by a private road open only to lot owners in a 375-lot residential subdivision surrounding the lake citing revrul_74_99 the court stated that clearly congress believed that an organization cannot serve social welfare if it denies its benefits to the general_public wholly private activity however meritorious confers no such benefit which would render exemption appropriate in indian lake property owners association v director of revenue s w 2d the supreme court of missouri held that homeowners'_association that enforced subdivision covenants maintained subdivision roads and provided security and trash collection services to residences within subdivision was not a civic organization entitled to sales and use_tax exemption and to qualify as a civic organization the organization's purposes and functions must be concerned with and relate to citizenry at large further the judge discusses flat top lake within the text stating clearly congress believed that an organization cannot serve social welfare if it denies its benefits to the general_public implicitly congress recognized that a true community functions within a broader national fabric service to such a community thereby furthers the national interest by expanding potential by opening opportunities to all citizens who may find themselves within the bounds of that particular community exemption denied affirmed application of law you are not described under sec_501 of the code because you are not operated exclusively for the promotion of social welfare rather you were formed to provide maintenance of common areas in a residential development whose use is strictly limited to members and their guests you do not meet the requirements of sec_1_501_c_4_-1 because your primary purpose is not that of social welfare but rather for the operation of a homeowners’ association for the benefit of your members although you claim to be open to the general_public all of your common areas and facilities such as roadways parklands sidewalks and street lights are enclosed within the gated community access to the property and all of the amenities are restricted to members of the association their guests and the employees of letter rev catalog number 47628k the owner or owners of the office tract manned gate houses prevent the general_public from accessing the grounds you are not like the organization described in revrul_72_102 because you are not serving a community by maintaining streets sidewalks and other common areas that used only by your members and their guests also you are distinguished from this case because your housing development is gated and access is strictly limited to members and their guests you are not a community as described in revrul_74_99 and revrul_80_63 in these rulings the general_public significantly benefited from the organizations operations the housing development that you maintain which consists of a few hundred homes and less than _ acres of open space does not bear a recognizable relationship to an area ordinarily identified as a governmental subdivision also the enjoyment of your public area is not extended to the members of the general_public as evidenced by the gates preventing access by non- members your bylaws confirm your assertion that the use of the common property is strictly for the enjoyment of your members and their guests as discussed in commissioner v lake forest when public benefit is insignificant it may warrant a loss in exempt status similarly your benefit to the general_public is insignificant you do not provide any access to roads trails parks recreation equipment or the like to the general_public beyond your members and their guests you are similar to flat top lake association indian lake property owners association and lake petersburg association where the general_public did not significantly benefit from the activities of the organizations the association in the court case rancho santa fe association was found to operate according to the exempt_purpose of a sec_501 organization rancho santa fe provided vast amounts of parkland open space facilities and equipment to the public in contrast you only provide the usage of your facilities parks and roads to members and guests your housing development is not open in any way to the general_public your position you indicated that with nearly yourself as in the case of rancho santa fe association restrictions must be placed in order to maintain and promote the safety and welfare of the residents it is not feasible for your amenities to be available and provided to the world-at-large you indicated you are a quasi-governmental entity and provide a multitude of city-like services in the same manner that a city would ie landscape street maintenance parks and playgrounds swimming pool and trails acres of land you are a community within homes located on almost you indicated that only members and guests of members are permitted to use the massive amount of amenities in your development you believe you qualify as a sec_501 entity because you benefit the community as in the case of rancho santa fe association it was established that the concept of community did not include the benefit to the world-at-large you believe that you closely resemble rancho santa fe association in that you do benefit the community even though there is restricted access as described in this case unlimited access to the amenities beyond the community it serves to the world-at-large in order to obtain the exemption at issue is a neither necessary nor mandated condition to impose such a requirement would defeat the statutory purpose of the exemption which encourages the provision of services to communities in that requiring unlimited access to these facilities would necessarily lessen the benefit to the community which you represent congress did not require that in order to obtain this exemption an association must serve an entire city or even letter rev catalog number 47628k several communities service to a single community was viewed as sufficient rancho santa fe association by serving well their community was entitled to this exemption our response to your position unlike rancho santa fe association all of your amenities are not available to the neighborhood community beyond your members and their guests you havé for members and their guests to enter and use the property while rancho santa fe association served the community by loaning out its facilities free of charge to various public service organizations as well as to the schools you did not provide any information that you had any similar type committees or participate in any similar activities to serve the community outside of the residents gates to the community that do not allow anyone except the court also determined that rancho santa fe association was not the ordinary residential grouping of tract homes but was an independent community separated geographically from the central area of the city of san diego of which rancho santa fe was a sub-part rancho santa fe had its own post office and zip code the information you provided does not support that you are an independent community that comprises a geographical unit which bears a reasonably recognizable relationship to an area ordinarily identified as a governmental subdivision or a unit or district thereof all of your amenities are within the gated area and none of your amenities are open to the general_public accordingly you are not operated for social welfare purposes because you do not benefit the community as a whole and you operate for the private benefit of your members conclusion based on the facts presented above you are not operated for the promotion of social welfare accordingly you do not qualify for exemption under sec_501 of the code if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include e e e e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with an explanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative e one of the following declarations for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete letter rev catalog number 47628k for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we'll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we’ll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail internal_revenue_service eo determinations quality assurance room p o box cincinnati oh street address for delivery service internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements letter rev catalog number 47628k you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter we sent a copy of this letter to your representative as indicated in your power_of_attorney sincerely jeffrey i cooper director exempt_organizations rulings and agreements enclosure publication cc letter rev catalog number 47628k


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 psi - plr-109762-06 date date -------------------------------------- -------------------------------------------- -------------------- x ----------------------------------------- a ----------------------------------------- b ------------------------------------------- state d1 d2 dear ------------------ ------------------------ ------------------------ --------- this letter responds to a letter dated date and subsequent correspondence written on behalf of x requesting a ruling under ' and of the procedure and administration regulations that x be granted an extension of time to file an election to be classified as a partnership under ' facts according to the information submitted x was formed on d1 as a limited_liability_company under the laws of state x has two members a and b x elected to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d1 on d2 x intended to elect to be classified as a partnership for federal tax purposes however a form_8832 entity classification election electing to be treated as a partnership was not timely filed plr-109762-06 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes as provided in ' under sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides that unless an entity elects otherwise a domestic eligible_entity is a partnership if it has two or more members sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in ' b or to change its classification by filing a form_8832 with the service_center designated on the form_8832 sec_301_7701-3 provides that an election made under ' c i will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_7701-3 provides in relevant part that if an eligible_entity makes an election under sec_301_7701-3 to change its classification the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election however an election by a newly formed eligible_entity that is effective on the date of formation is not considered a change for purposes of sec_301_7701-3 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but 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 making certain elections not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will sec_301_9100-2 provides the rules governing automatic extensions of time for sec_301_9100-3 provides extensions of time for regulatory elections that do plr-109762-06 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 conclusion based on the facts submitted and the representations made we conclude that the requirements of and 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 with the appropriate service_center and elect to be classified as a partnership for federal tax purposes effective d2 a copy of this letter should be attached to the form_8832 except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed or implied as to whether x is otherwise eligible to make the election 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 in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x s authorized representative sincerely s william p o'shea associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes