internal_revenue_service number release date index number --------------------------------------- ------------------------------------------- ---------------------------------------------------- ---------------------- -------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-121908-09 date date ------------------------------------------- x -------------------------------------------------- country date ------------- -------------------------- dear ------------ this responds to a letter dated date submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an entity classification election the information submitted states that x was formed under the laws of country x represents that x is a foreign_entity eligible to be treated as a disregarded_entity but that it failed to timely file a form_8832 entity classification election 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 any 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 internal_revenue_code sec_301_7701-3 provides guidance on the classification of a foreign_entity for federal_income_tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if the foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 plr-121908-09 sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center and that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards 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 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 based solely on the information submitted and representations made we conclude that the 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 a form_8832 with the appropriate service_center and elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-121908-09 in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely curt g wilson associate chief_counsel office_of_chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c date office_of_chief_counsel number info release date index no the honorable paul sarbanes united_states senate washington d c dear senator sarbanes this letter is in response to your correspondence of her former employer recently told her that it could constituent not rehire her as a part-time_employee after her retirement if she takes a distribution from would like to know if there is a public law rule or her k account regulation that prevents her from taking a distribution from her k account upon retirement and then being rehired immediately as a part-time_employee without benefits on behalf of your there is no definitive rule prohibiting the rehiring of an employee who has received a distribution from her k account however certain sections of the internal_revenue_code the code as well as case law and revenue rulings impose restrictions on distributions from k plans that would explain the reluctance of former employer to rehire her if she takes such a distribution the underlying issue in her inquiry is whether she will have experienced a bona_fide separation_from_service if she retires from full-time employment but returns to work as was intended before she retired as a part-time_employee the following authorities should help you to respond to her inquiry distribution rules for qualified k plans a qualified 401_k_plan must meet the requirements of sec_401 of the code which lists the circumstances under which distributions can be made from the plan a qualified 401_k_plan may not distribute amounts attributable to the participant’s elective contributions earlier than cid the employee’s separation_from_service death or disability or cid an event described in sec_401 which does not apply here in addition if the plan document so provides distributions can be made from certain but not all types of k plans under the following circumstances cid the employee’s attainment of age ½ or cid cid the employee’s hardship see sec_401 of the code determining if a participant has experienced a separation_from_service based on the information treating her request for a distribution as due to her separation_from_service the plan_administrator or the employer has also apparently concluded that she will not have experienced a qualifying separation_from_service if the employer rehires her as a part- time employee after she retires has provided the plan_administrator is apparently the term separation_from_service is not defined by either the code or regulations however its meaning has been explained in revenue rulings and case law the basic rule is that to receive a distribution from a 401_k_plan on account of a separation_from_service the participant must have experienced a bona_fide termination of employment in which the employer employee relationship is completely severed see eg revrul_56_214 c b see also barrus v united_states aftr 2d dc nc finding the participant had a true separation_from_service even though he returned to employment with his former employer five months after he retired because at the time of his retirement he had no intention of returning to work and was only able to return to employment following an unforeseen change_in_circumstances though relatively few authorities have considered whether a participant has experienced a separation_from_service when she changes from full-time to part-time employment with one employer such a change apparently would not qualify as a separation_from_service this is because the employer employee relationship is not completely severed but is simply modified when the employee changes her work schedule 1to find out if her 401_k_plan allows distributions upon reaching age ½ or experiencing a hardship the plan document or its summary_plan_description should ask the plan_administrator or review a copy of 2the rulings and cases cited analyze the meaning of separation_from_service for a code provision other than k b but the irs has applied these analyses of separation_from_service to k b see eg revrul_2000_27 cid situation compare for example the in applying the above rule to discussion in edwards v commissioner t c memo 57_tcm_1217 stating that the statute leaves no room for a finding or conclusion that the reduction in a participant’s work schedule from full-time to part-time constitutes a separation from the service with the conclusion in revrul_69_647 1969_2_cb_100 holding that a participant sustained a separation_from_service upon retiring from the service of his former employer even though he subsequently performed services for the same employer on a part-time basis because he performed those part-time services as a bona_fide independent_contractor and not as an employee of the employer former employer may be reluctant to rehire her as a part-time_employee after she takes a distribution from the 401_k_plan as they had previously discussed because she may not have had a bona_fide separation_from_service as a result failing to enforce the separation_from_service requirement if a participant takes a plan distribution could be very serious if a 401_k_plan makes a distribution to a participant due to a separation_from_service and it is determined that a separation_from_service did not actually occur the 401_k_plan may be disqualified under a and 401_k_plan disqualification results in adverse tax consequences to the employees participating in the plan and to their employer finally a participant may be able to qualify for a distribution from a 401_k_plan without there having been a separation_from_service distribution upon reaching age ½ as discussed above sec_401 of the code permits but does not require certain k plans to allow a participant to take a distribution upon reaching age ½ even if the participant continues to work for the employer 401_k_plan permits her to receive a distribution from her k account due to the fact she has reached age ½ even if she does not separate from service because she returns to part-time employment with the employer alternatively she may review a copy of the 401_k_plan document or its summary_plan_description to determine if she may take a distribution under these circumstances should ask the plan_administrator whether her hardship_distribution although nothing in her letter indicates she is experiencing a may also want to explore whether her 401_k_plan allows hardship distributions for a hardship even if she has not experienced a separation_from_service and whether she meets the plan’s requirements for receiving a hardship_distribution in general subject_to the terms of the plan document a hardship_distribution will only be made if at all for an immediate and heavy financial need of the employee and only to the extent necessary to satisfy that need cid cid i hope this information will help you to respond to questions or need further information please contact me at or sara schumacher at if you have additional sincerely michael j roach chief qualified_plans branch office of division counsel associate chief_counsel tax exempt government entities


internal_revenue_service p o box cincinnati oh number release date date date legend t scholarship u city state v school w dollars amount dear department of the treasury employer_identification_number contact person - id number contact telephone number uil you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request your letter indicates you will operate a scholarship program called t the purpose of t is to promote technical education for low-income high school graduates in the u area scholarships will be awarded for approved two-year technical degree letter catalog number 58263t programs or certifications at u area community colleges approved programs include various career pathways scholarship amounts will be approximately w dollars per semester amounts awarded will cover the entire cost of tuition books and equipment required for educational courses you will publicize the scholarship program on your website and via distribution of applications to principals counselors teachers and administrators in the v district eligibility requirements for the scholarship program include e e e e e must be a citizen or legal permanent resident_of_the_united_states must meet federal definition of low socio-economic status or eligible for free or reduced lunch must have achieved minimum gpa grade point average requirements must plan to enroll in a two-year technical program at local community college must complete the fafsa free application_for federal student aid application and submit sar student aid report scholarships will be awarded on an objective and nondiscriminatory basis the selection criteria will include but not be limited to the applicant’s prior academic performance character good citizenship economic necessity and commitment toward completing the desired two-year technical degree program the selection committee will be composed of your board_of directors they will determine the number of scholarships that will be funded annually they may also request community volunteers to join the selection committee relatives of members of the selection committee or officers or directors or any disqualified_person s in relation to you will not be eligible to apply under the program scholarships will be renewed each semester for a maximum of two years provided the student maintains a minimum gpa and is making satisfactory progress toward completion of the two-year program progress reports must be submitted each semester and the information will be verified with the educational_institution upon completion of the degree or certification a final report is required if the terms of the scholarship are violated by the recipient you will withhold further payments until it is determined that the scholarship recipient is once again complying with the terms if the recipient does not comply the scholarship will be forfeited and reasonable steps taken to recover grant funds you represent that you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes and take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees’ assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversions from occurring letter catalog number 58263t you represent that you will maintain the following all records relating to individual grants including information to evaluate grantees identify a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you undertook the supervision and investigation of grants described above basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 e other conditions that apply to this determination e e e e e e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary letter catalog number 58263t please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements letter catalog number 58263t


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-163228-04 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities -------------------------------------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act effective ---------------------- -------------------------------------------------- --------------------------------------------------------------- ------------------------------------------------ ---------------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that the ------------------------------------------------------------- became an employer under the railroad retirement act effective ---------------------- please take the appropriate action regarding this business _____________________________ janine cook-


internal_revenue_service number release date index numbers ----------------------------------- ------------------------------ ----------------------------------- ----------------------------------------- ---------------------------------------------- department of the treasury washington dc person to contact ------------------ id no ------------- telephone number --------------------- refer reply to cc fip b03 - plr-141554-07 date date ------------------------- legend company a ------------------------------------------------------ company b ------------------------------------------------------------- state x ------------ accounting firm ------------------------------------------ date date date dear ---- ---------- requesting an extension of time under sec_301_9100-1 of the procedure and administration regulations to make an election under sec_856 of the internal_revenue_code to treat company b as a taxable_reit_subsidiary of company a this responds to a letter dated date on behalf of company a -------------------------- --------------- facts company a a state x corporation was formed on date it has elected to be taxed as a real_estate_investment_trust reit company b is a state x corporation and a wholly-owned subsidiary of company a it was formed on date and began its business operations on date at the time of company b’s formation accounting firm plr-141554-07 advised company a and company b to file form_8875 in order to elect to treat company b as a taxable_reit_subsidiary of company a under sec_856 of the code company a and company b agreed with the accounting firm’s advice secretary of both company a and company b prepared and signed form_8875 electing to treat company b as a taxable_reit_subsidiary of company a and directed his staff to mail the completed form_8875 to the service within the required two month and fifteen day period to make the election effective on date when company b began business operations on date several months after the form_8875 should have been filed and received by the service secretary realized that neither company a nor company b had received confirmation of the filing of the election from the service upon inquiry the service indicated that there was no record of receiving form_8875 immediately upon discovering the failure_to_file form_8875 secretary contacted accounting firm to discuss options for remedying the failure consequently company a and company b submitted a request for a private_letter_ruling under sec_301_9100-1 of the regulations requesting a reasonable extension of time to file the form_8875 to elect to treat company b as a taxable_reit_subsidiary of company a company a and company b make the following additional representations the request for relief was filed by company a and company b before the failure to make regulatory elections was discovered by the service granting the relief requested will not result in company a and company b having a lower tax_liability in the aggregate for all years to which the regulatory election applies then that they would have had if the election had been timely made taking into account the time_value_of_money company a and company b did not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of the code at the time they requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences company a and company b did not choose to not file the election law and analysis the ticket to work and work incentives improvement act of p l included a change for tax years beginning after date to the reit provisions of sec_856 this change allows a reit to form a taxable_reit_subsidiary that can perform activities that otherwise would result in impermissible_tenant_service_income the election under sec_856 is made on form_8875 taxable_reit_subsidiary election officers of both the reit and the taxable_reit_subsidiary must jointly sign the form which is filed with the irs service_center in ogden ut plr-141554-07 sec_856 of the code provides that a reit and a corporation other than a reit may jointly elect to treat such corporation as a taxable_reit_subsidiary to be eligible for treatment as a taxable_reit_subsidiary sec_856 provides that the reit must directly or indirectly own stock in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition sec_856 specifically provides that the election and any revocation thereof may be made without the consent of the secretary in announcement i r b the service announced the availability of new form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for tax years beginning after for eligible entities to elect treatment as a taxable_reit_subsidiary the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the tax_year however the effective date of the election depends upon when the form_8875 is filed the instructions further provide that the effective date on the form cannot be more than months and days prior to the date of filing the election or months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service sec_301_9100-1 of the regulations provides 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 or by a revenue_ruling a revenue_procedure a notice or an 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 sets forth rules that the internal_revenue_service generally will use to determine whether under the particular 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 plr-141554-07 conclusion based on the information submitted and representations made we conclude that company a and company b have satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to treat company b as a taxable_reit_subsidiary of company a accordingly company a and company b will be granted a period of time not to exceed calendar days from the date_of_issuance of this letter to file the form_8875 to treat company b as a taxable_reit_subsidiary of company a this ruling is limited to the timeliness of the filing of the form_8875 this ruling’s application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether company a qualifies as a reit under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of company a and company b is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect except as expressly provided herein no opinion is expressed or implied 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 concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the code provides that it may not be used or cited as precedent letter is being sent to your authorized representatives this ruling is directed only to the taxpayer requesting it sec_6110 of in accordance with the power_of_attorney on file with this office a copy of this sincerely alice m bennett chief branch office of associate chief_counsel financial institutions products plr-141554-07 enclosures copy of this letter copy for sec_6110 purposes cc


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 b05 plr-131122-11 date date legend distributing ------------------ ----------------------- ------------------------------- controlled ------------------------------------ ----------------------- ------------------------------- controlled --------------- ----------------------- ------------------------------- shareholder -------------- ------------------------- shareholder ------------------- ------------------------- shareholder ---------------- ------------------------- shareholder ---------------- ------------------------- business a ------------- business b -------------------------------------------- plr-131122-11 business c -------------------------------------------- property a property b -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- ------------ -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- ------------------------------- property c -------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ a b c d e f g h i j k l -------- --------- -------- --------- -------- --------- -- -- ------- ----------- -------- ----------- dear ------------ plr-131122-11 this letter responds to your date request for rulings on certain federal_income_tax consequences of a series of proposed transactions the information submitted in that letter and in subsequent correspondence is summarized below the rulings contained in this ruling letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by the appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process in particular this office has not reviewed any information pertaining to and has made no determination regarding whether the distribution described below i satisfies the business_purpose requirement of sec_1_355-2 ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled corporations or any see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or a controlled_corporation see sec_355 and sec_1_355-7 facts distributing has two classes of common_stock outstanding class a common_stock and class b common_stock class a and class b have equal rights to operating and liquidating distributions and differ only with respect to vote class a is voting_stock class b is non-voting stock distributing is owned by shareholder shareholder shareholder and shareholder the shareholders with each holding the following share interests shareholder shareholder shareholder shareholder class a a shares c shares e shares g shares class b b shares d shares f shares h shares all shareholders are u s residents for federal_income_tax purposes distributing has organized two wholly-owned subsidiaries controlled and controlled in anticipation of the distribution defined below both controlled and controlled have a single class of common_stock outstanding distributing controlled and controlled all use a cash_method_of_accounting distributing is engaged in business a directly and in business b and business c through controlled and controlled distributing has submitted financial information indicating that business a business b and business c have had gross_receipts and plr-131122-11 operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years significant disagreements have developed between the shareholders concerning the management operation and strategic vision of distributing these disagreements have resulted in a breakdown in communications among the shareholders and an inability to carry on the business effectively accordingly to resolve or avoid further disputes avoid litigation and continue operation of the businesses currently conducted by distributing together the business purposes the shareholders have agreed to separate their interests in distributing through the proposed transaction proposed transaction for what have been represented to be valid business purposes the following series of transactions has been proposed some of which have already occurred i ii iii iv v distributing formed controlled and transferred to it property b and all of the business b assets in exchange distributing received all of controlled 1’s outstanding_stock distributing formed controlled and transferred to it property c and all of the business c assets in exchange distributing received all of controlled 2’s outstanding_stock steps i and ii the incorporations after the incorporations business b has been conducted by controlled and business c has been conducted by controlled shareholder purchased i shares of class b stock from shareholder for shareholder 3’s promissory note with a face value of dollar_figurej and k shares of class b stock from shareholder for shareholder 3’s promissory note with a face value of dollar_figurel both notes are secured_by property owned personally by shareholder outside of distributing distributing will distribute to shareholder all of the stock of controlled in exchange for all of shareholder 1’s stock in distributing distributing will distribute to shareholder all of the stock in controlled in exchange for all of shareholder 2’s stock in distributing steps iv and v the distributions after the distributions shareholder and shareholder will hold all of the stock of distributing which will conduct business a and hold property a and all of the business a assets representations plr-131122-11 a b c d e f g h i j any indebtedness owed by controlled or controlled to distributing after the distributions will not constitute stock_or_securities neither controlled nor controlled will transfer any property or assets to distributing in the proposed transaction except for their own stock the fair_market_value of controlled stock and controlled stock to be received by each shareholder of distributing will be approximately equal to the fair_market_value of the distributing stock surrendered by such shareholder in the exchange no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing the years of financial information submitted on behalf of distributing controlled and controlled is representative of the corporations’ present operations and with regard to such corporations there have been no substantial operational changes since the date of the last financial statements submitted following the distributions distributing controlled and controlled will each continue the active_conduct of its business independently and with its separate employees the distribution of the stock of controlled and controlled is carried out for the business purposes the distribution of the stock of controlled and controlled is motivated in whole or substantial part by one or more of these corporate business purposes the distributions are not used principally as a device for the distribution of the earnings_and_profits of distributing controlled controlled or any combination thereof the liabilities assumed as determined under sec_357 in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred the income_tax_liability for the taxable_year in which investment_credit_property including any building to which sec_47 applies is transferred will be adjusted pursuant to sec_50 or a or sec_47 as in effect before the amendment by public law title 104_stat_1388 if applicable to reflect an early disposition of the property plr-131122-11 k l m n o p q r distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction no intercorporate debt will exist between or among distributing controlled or controlled at the time of or subsequent to the distributions payments made in connection with all continuing transactions if any between or among distributing controlled and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arms’ length no two parties to the transaction are investment companies as defined in sec_368 and iv the distributions are not part of a plan or series of transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing controlled or controlled including any predecessor or successor of any such corporation immediately after the transaction as defined in sec_355 either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in distributing controlled or controlled ii if any person holds a percent or greater interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person will have held such interest in such corporation immediately before the transaction or iii neither distributing controlled nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 for purposes of sec_355 immediately after the distributions no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of distributing stock entitled to vote or or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the distributions for purposes of sec_355 immediately after the distributions no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of controlled stock entitled to vote or or more of the total value of shares of all classes of controlled stock that was acquired by purchase as defined in section plr-131122-11 s t u v w x d and during the 5-year period determined after applying sec_355 ending on the date of the distributions for purposes of sec_355 immediately after the distributions no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of controlled stock entitled to vote or or more of the total value of shares of all classes of controlled stock that was acquired by purchase as defined in sec_355 and during the 5-year period determined after applying sec_355 ending on the date of the distributions the total adjusted_basis of the assets transferred by distributing to controlled and controlled respectively will equal or exceed the sum of the total amount of liabilities assumed as determined under sec_357 by controlled and controlled respectively the total fair_market_value of the assets transferred by distributing to controlled and controlled respectively in the contributions will exceed the sum of i the amount of any liabilities assumed as determined under sec_357 by each of controlled and controlled respectively in connection with the contributions and ii the amount of any liabilities owed to each of controlled and controlled respectively by distributing that are discharged or extinguished in connection with the contributions the fair_market_value of the assets of controlled and controlled will each equal or exceed the amount of the liabilities of each immediately after the distributions the liabilities of distributing assumed by controlled and controlled plus the liabilities if any to which the transferred assets were subject were incurred by distributing in the ordinary course of its business and are associated with the assets transferred controlled controlled distributing and the shareholders of distributing will each pay their respective expenses if any incurred in connection with the proposed transaction rulings based solely on information submitted and representations set forth above this office rules as follows the transfer by distributing to controlled of part of its assets in exchange for all of the controlled stock followed by the distribution of all of the controlled stock to shareholder will constitute a reorganization within the plr-131122-11 meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 the transfer by distributing to controlled of part of its assets in exchange for all of the controlled stock followed by the distribution of all of the controlled stock to shareholder will constitute a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing on the contributions sec_361 and sec_357 no gain_or_loss will be recognized by controlled or controlled on the contributions sec_1032 controlled 1’s basis and controlled 2’s basis in each asset received from distributing in the contributions will equal the basis of such asset in the hands of distributing immediately before the transfer sec_362 controlled 1’s and controlled 2’s holding_period in each asset received from distributing in the contributions will included the holding_period during which distributing held such asset sec_1223 no gain_or_loss will be recognized by distributing on the distributions sec_361 shareholder and shareholder will not recognize gain_or_loss and will include no amount in income upon their receipt of controlled and controlled stock respectively from distributing sec_355 the basis of controlled stock in the hands of shareholder and the basis of controlled stock in the hands of shareholder will respectively equal the basis of distributing stock surrendered in exchange thereof as adjusted under sec_1_358-1 sec_358 the holding_period of the controlled and controlled stock to be received by shareholder and shareholder respectively will include the holding_period during which shareholder and shareholder respectively held the distributing stock exchanged therefor provided that the distributing stock is held as a capital_asset on the date of the distributions sec_1223 earnings_and_profits will be allocated between distributing controlled and controlled in accordance with sec_312 and sec_1 a caveats plr-131122-11 except as expressly provided herein no opinion is expressed about the tax treatment of the proposed transaction or any other transaction or item mentioned in this letter under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the foregoing that are not specifically covered by the above rulings in particular no opinion is expressed regarding i whether the distribution satisfies the business_purpose requirement of sec_1_355-2 ii whether the distribution is used principally as a device for the distribution of the earnings_and_profits of distributing controlled or both or iii whether the distribution is part of a plan or a series of related transactions under sec_355 procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely _isaac w zimbalist_______________ isaac w zimbalist senior technical reviewer branch office of associate chief_counsel corporate cc


t c summary opinion united_states tax_court john william barck janie r barck petitioners v commissioner of internal revenue respondent docket no 3170-99s filed date john william barck and janie r barck pro sese charles m berlau for respondent dinan special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subseguent section references are to the internal_revenue_code in - effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies in petitioners’ federal income taxes of dollar_figure dollar_figure and dollar_figure and accuracy-related_penalties of dollar_figure dollar_figure and dollar_figure for the taxable years and after concessions the issues for decision are whether petitioners are entitled to charitable_contribution deductions in excess of the amounts allowed and conceded by respondent for and whether petitioners recognized unreported gain on the sale of certain property in whether petitioners made deductible_interest payments in and that were not claimed as deductions on their returns and whether petitioners are liable for the accuracy-related_penalties under sec_6662 some of the facts have been stipulated and are so found the stipulations of fact and the attached exhibits are incorporated herein by this reference petitioners resided in ashland missouri on the date the petition was filed in this case ‘with respect to issues one and two respondent concedes petitioners are entitled to an additional deduction for charitable_contributions in and a reduction in the amount of the gain recognized as discussed below we treat determinations made in the notice_of_deficiency but not addressed here as having been conceded by petitioners because they were not disputed either in the petition or at trial - - the first issue for decision is whether petitioners are entitled to charitable_contribution deductions in excess of the amounts allowed by respondent for and a taxpayer is required to maintain records sufficient to establish the amount of his deductions see sec_6001 sec_1_6001-1 and e income_tax regs in the event that a taxpayer establishes that a deductible expense has been paid but is unable to substantiate the precise amount we generally may estimate the amount of the deductible expense bearing heavily against the taxpayer whose inexactitude in substantiating the amount of the expense is of his own making see 39_f2d_540 2d cir we may estimate a deductible expense only where the taxpayer presents evidence sufficient to provide some basis upon which an estimate may be made see 85_tc_731 certain expenses related to travel entertainment gifts and listed_property as defined in sec_280f are additionally subject_to the strict substantiation requirements of sec_274 see sec_274 sec_1_274-5t temporary income_tax regs fed reg date sec_170 allows a deduction for charitable_contributions made during the taxable_year to certain listed types of organizations if the deductions are verified under regulations prescribed by the secretary see sec_170 sec_1_170a-13 income_tax regs to be deductible contributions must be made to or for_the_use_of organizations listed in sec_170 - sec_170 the phrase for_the_use_of was added by congress to allow a deduction for gifts made in trust for a charitable_organization or under a similar legal arrangement creating rights which may be legally enforced by the organization gifts made to an individual for_the_use_of a charity do not meet the requirements for deductibility in the absence of such an arrangement see 495_us_472 in petitioners claimed a deduction of dollar_figure for charitable_contributions respondent allowed dollar_figure of this amount in the notice_of_deficiency and has since conceded an additional dollar_figure in petitioners claimed a deduction of dollar_figure for charitable_contributions respondent allowed dollar_figure of this amount petitioner husband petitioner testified that the amounts disallowed and not conceded by respondent for were contributions made by him in cash primarily when attending church petitioner has no written records evidencing such contributions without written records a deduction for charitable_contributions generally is not allowed see sec_1_170a-13 income_tax regs in certain circumstances however we have applied cohan v commissioner supra to allowa deduction even without written records where a taxpayer provides a sufficient basis to estimate the amount of the contributions such as showing regular church attendance and regular cash contributions thereto see eg fontanilla v commissioner tcmemo_1999_156 meeks v commissioner tcmemo_1998_109 affd 208_f3d_221 9th cir drake v commissioner tcmemo_1997_487 petitioner attended church every sunday and often donated cash even when he traveled however he failed to establish any regularity in occurrence or extent of the donations from which we could estimate an amount thus petitioners are not entitled to a charitable_contribution_deduction for in excess of dollar_figure the amounts disallowed in all relate to contributions made to eugene brown mr brown served as president of the full gospel business men’s fellowship international fgbmfi the disallowed contributions consist of an automobile which they valued at dollar_figure and cash of dollar_figure in the form of checks made payable to the order of gene brown petitioners testified that the car was given to fgbmfi however the car was titled solely in mr brown’s name in addition mr brown provided a handwritten statement that the car was given to him as a gift by petitioner despite petitioners’ testimony it is clear that the car was transferred from petitioners to mr brown individually and not to the charitable_organization thus the disallowed -- - contributions in were not made to a qualified_organization and they were not made for_the_use_of such an organization within the meaning of the statute because there was no trust-like arrangement creating legally enforceable rights for the organization see davis v united_states supra although petitioners’ actions may have been entirely altruistic and intended to benefit fgbmfi the contributions are not deductible for federal_income_tax purposes petitioners are not entitled to a charitable_contribution_deduction for in excess of dollar_figure the second issue for decision is whether petitioners must include in income gain on the sale of certain property in under sec_61 and sec_1001 taxpayers generally must recognize in the year_of_sale all gain_or_loss realized upon the sale_or_exchange of property respondent determined that petitioner recognized gain of dollar_figure on the sale of a kenworth tractor and transcraft flatbed trailer according to respondent’s trial memorandum the gain was determined as follows petitioner disputes this calculation tractor trailer sales_price dollar_figure dollar_figure cost dollar_figure dollar_figure depreciation big_number big_number adjusted_basis big_number big_number recognized gain big_number big_number thus respondent determined the total sales_price for tractor and trailer to be dollar_figure respondent has conceded that the total - j- gain be reduced by dollar_figure to reflect the cost of an engine overhaul for the tractor respondent offers the following three checks as the basis of his determination of the purchase_price each check is a cashier’s check drawn on london bank trust of london kentucky with gary and fairy smith the purchasers of the tractor and trailer as remitters number check date amount payment_date payee indorser dollar_figure gary or fairy smith gary smith big_number petitioner petitioner’ big_number petitioner petitioner ‘blank indorsement blank indorsement indorsed for petitioner by petitioner wife for deposit only at trial petitioners disputed receiving two of these checks---- numbers and evidence received into the record however shows that check number was received by petitioners because it was indorsed for deposit only will barck by janie barck the purpose of the other disputed check number is unclear why the purchasers would obtain a cashier’s check payable to themselves is unknown respondent argues that this check was used by the purchaser as a retainer in a good-faith effort in the sale although there is no evidence that petitioners received the cashier’s check itself the proximity of the check number check date and payment_date of the disputed check to those of the other checks indicates that this amount was most likely given to petitioners in cash for a --- - down payment or for a similar purpose as respondent argues we therefore uphold respondent’s determination of the amount of gain recognized on this transaction as modified by the concession the third issue for decision is whether petitioners made deductible_interest payments in and that were not claimed as deductions on their returns interest is allowed as a deduction to non-corporate taxpayers under sec_163 only if it is not personal_interest as defined under sec_163 see sec_163 interest which is not personal_interest and therefore may be deducted unless otherwise not allowed includes interest_paid or accrued on indebtedness properly allocable to a trade_or_business other than that of performing services as an employee any investment_interest and any interest which is taken into account under sec_469 in computing income or loss from a passive_activity of the taxpayer see sec_163 h a b and c petitioners argue that petitioner borrowed dollar_figure from his sister for use in starting a rental real_estate business ’ petitioners made this argument for the first time at trial but respondent did not object either to petitioners’ argument or to their presentation of supporting evidence we therefore treat this issue as having been properly pled see rule b when issues not raised by the pleadings are tried by express or implied consent of the parties they shall be treated in all respects as if they had been raised in the pleadings parekh v commissioner tcmemo_1998_151 rule b was satisfied continued --- - petitioner testified that he paid dollar_figure in interest per year in and in monthly payments of dollar_figure each however he only established that he made the monthly payments in february march may and july through date and january through date petitioner repaid the principal in two payments of dollar_figure each one in date and the other in date petitioners filed schedules c profit or loss from business for an unnamed business in and in the notice_of_deficiency respondent determined that petitioners improperly reported income and claimed expenses on these schedules c and instead should have used schedules e supplemental income and loss because the income and expenses were related to rental activities although significant deductions were allowed by respondent in connection with thi sec_2 continued when the parties introduced the issue at trial and acquiesced in the introduction of evidence on that issue without objection nearly all the payments were in the form of checks drawn on accounts in the name of will or janie barck however the payment made in date was drawn on an account in the name of barck inc whether such a corporation actually existed is unclear from the record if it did not this account was most likely used by petitioner informally for individual business purposes in any event we accept petitioner’s testimony that he intermingled funds between his accounts and that he used individual funds deposited into the barck inc account to make the interest payment petitioners also filed a schedule c in for a business involved in mobile home rent it is unclear if this is the same rental_activity as that in which petitioners were engaged in and -- - activity for mortgage interest in each year no deductions were allowed for other interest the schedule e rental income and expense deductions set forth in the notice_of_deficiency were as follows income dollar_figure dollar_figure expenses advertising dollar_figure dollar_figure car truck big_number big_number cleaning maintenance -o- legal professional -o- mortgage interest big_number big_number repairs maintenance big_number big_number supplie sec_592 --o- taxes license sec_582 big_number utilities big_number big_number lot rent big_number big_number wages -o- big_number insurance big_number big_number depreciation big_number other -0- total big_number big_number sch e rental income loss big_number we accept petitioner’s testimony concerning the existence and nature of the dollar_figure loan corroborated by the above detailed payments and respondent’s determination that petitioners were conducting a rental_activity in and we hold that petitioners are entitled to rental expense deductions for interest payments of dollar_figure in and dollar_figure in we briefly note that respondent has not argued that petitioner’s rental_activity was either passive or related to property_held_for_investment see sec_163 sec_469 nothing in the record indicates that the additional deductions allowed by our holding in this case are limited under either sec_163 or sec_469 and we so hold the final issue for decision is whether petitioners are liable for the accuracy-related_penalties under sec_6662 sec_6662 imposes a 20-percent penalty on the portion of an underpayment attributable to any one of various factors including negligence or disregard of rules or regulations and any substantial_understatement_of_income_tax see sec_6662 b and respondent determined that petitioners are liable with respect to each year in issue for an accuracy- related penalty due to one or both of these factors for an underpayment equal to the total amount of the deficiency negligence includes any failure to make a reasonable attempt to comply with the provisions of the internal_revenue_code see sec_6662 including any failure to keep adequate books_and_records or to substantiate items properly see sec_1_6662-3 income_tax regs disregard includes any careless reckless or intentional disregard see sec_6662 a substantial_understatement exists where the amount of the understatement exceeds the greater of percent of the tax reguired to be shown on the return or dollar_figure see sec_6662 d a for purposes of this computation the amount of the understatement is reduced to the extent attributable to an item if there exists or existed substantial_authority for the taxpayer’s treatment of the item or if the relevant facts affecting the treatment of the item are adequately disclosed on the taxpayer’s return or an attached statement and there is a reasonable basis for the taxpayer’s treatment of the item see sec_6662 d b sec_6664 provides that the penalty under sec_6662 shall not apply to any portion of an underpayment if it is shown that there was reasonable_cause for the taxpayer’s position and that the taxpayer acted in good_faith with respect to that portion the determination of whether a taxpayer acted with reasonable_cause and in good_faith is made on a case-by-case basis taking into account all the pertinent facts and circumstances see sec_1_6664-4 income_tax regs the most important factor is the extent of the taxpayer’s effort to assess his proper tax_liability for the year see id petitioners dispute the assertion of the accuracy-related_penalties but have not presented any evidence or arguments specifically addressing this issue we find that the record in its entirety supports respondent’s assertion of the penalties in this case and we therefore uphold respondent’s determination in this regard as modified by respondent’s concessions and our holding on the other issues in this case reviewed and adopted as the report of the small_tax_case division to reflect the foregoing decision will be entered under rule


internal_revenue_service number info release date index number date xxxxxxx x xxxx xxxxxxxxxxxx xxxxxxx xxxxx xxxxxx - xxxxx xxxxxxx post office box xxxx xxxxxxx xxxxxxx xxxxx dear mr xxxx application_for recognition of exemption under sec_501 of the internal_revenue_code you asked whether a determination_letter and user_fee is required of a religious_organization to receive or maintain public recognition of tax-exempt status you also asked whether public recognition would be denied or lost as a result of an organization’s inability to comply with the service’s income_tax regulations the regulations for obtaining a determination_letter a church a convention or association of a church or an integrated_auxiliary_of_a_church that meets the requirements of sec_501 of the internal_revenue_code is not required to file a form_1023 application with the service to be exempt from federal_income_tax under sec_501 as such they are not required to pay a user_fee however under sec_1_508-1 of the regulations to receive official recognition of its status an organization excepted from the notice requirement should file form_1023 and pay the applicable user_fee filing form_1023 is the only method by which an organization can be officially recognized as exempt under sec_501 xx xxxxxx xxxxxxxxxx id xx-xxxxx in this office at xxx xxx-xxxx thank you for your letter dated date with regard to filing irs form_1023 i hope this information is helpful if you have any further questions please call sincerely gerald v sack gerald v sack manager exempt_organizations technical group


department of the treasury u u z i u ad ls a internal_revenue_service washington d c uniform issue list war - e f o k c i v y a tax_exempt_and_government_entities_division legend taxpayer a yaxpayer b taxpayer c taxpayer d individual e individual f company aa date date date date date date date date date designated age a_trust t amount fund f page court v county b state s ira x dear this is in response to the date letter submitted on your behalf by your authorized representative as supplemented by correspondence dated date in which you request several letter rulings under sec_401 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a and taxpayer b created trust t a revocable_trust on date trust t was restated restated trust in its entirety on date article of the restated trust provides for the creation of various trusts upon either the death of taxpayer a or taxpayer b whomever is the first deceased article of the restated trust provides for the creation of a survivor's trust article of the restated trust provides for the creation of a bypass_trust named beneficiary of ira x the bypass_trust is disposed of under the provisions of sec_9_2 of the restated trust article of the restated trust provides for the creation of a marital_deduction_trust article of the restated trust provides for a disclaimed property trust article of the restated trust provides for the administration and distribution of the trusts created under article article explains in relevant part that the beneficiary surviving trust creator of the survivor's trust shall receive income from the trust as long as he she is competent if incompetent the trustee shall distribute such amounts as the trustee determines appropriate for the health care maintenance support and welfare of the beneficiary of the trust article provides in relevant part that the trustee shall distribute income from the bypass_trust in installments at least quarterly for the health care 2vive iv oo page maintenance support and welfare of the beneficiary of the trust but only if other resources are clearly inadequate or not reasonably available to meet the needs of the beneficiary the beneficiary of the bypass_trust shall retain the power to allocate principal from the trust to secondary beneficiaries of the bypass_trust and their descendants as long as the grantor beneficiary is competent and exercises the power in writing to the extent that the beneficiary of the bypass_trust does not effectively exercise this power_of_appointment the balance of the bypass_trust shall be disposed of under article x article x of the restated trust applies when both of the creators of trust t subsequently the restated trust are deceased article of the restated trust provides for specific bequests set forth on schedules e and f thereof article of the restated trust allocates a formula amount to fund f amount on or about date amount was paid to fund f fund f was then immediately terminated and amount was divided equally between individuals e and f the grandchildren of taxpayers a and b articles and of the restated trust create and provide for the administration of two separate protective trusts further described below article further describes taxpayers c and d as the secondary beneficiaries article of the restated trust provides in relevant part that the trustee is to distribute appropriate amounts of income and principal for the health care maintenance support and education of the beneficiary of a protective trust and if a special independent_trustee is appointed by the beneficiary to the descendants of the beneficiary article of the restated trust gives each of the beneficiaries of the protective trusts who has attained designated age a a lifetime power_of_appointment over the assets of his her protective trust which power extends to charities article of the restated trust provides in relevant part that a beneficiary of a protective trust who dies after attaining designated age a may appoint in writing including by will any protective trust assets to persons and entities iicluding charities with certain exceptions specifically referenced therein article xi of the restated trust provides that any trust assets not disposed of under article x shall be disposed of as provided therein article of the restated trust provides for specific bequests to persons named or described in schedule h attached thereto uv page article of the restated trust provides that the residue shall be divided among the persons named or described in schedule attached thereto article provides that a charity or other non-natural person was eligible to be a contingent beneficiary schedule however does not reference any charity on date taxpayer a and taxpayer b amended the restated trust the first amendment inserted a new section section that provides in relevant part that with respect to any ira 401k or other retirement_plan payable to the trust on the death of either trust creator it is the trust creators’ desire that the trustee utilize the minimum_distribution_rules described in the internal_revenue_code irc and applicable regulations when making withdrawals from said retirement account in particular the trustee should be guided by the following a the trustee should first determine whether the custodian allows for long-term deferral of income taxes by the trustee c the trustee should determine what requirements exist if any in order to elect the longest tax-deferral period d having made the appropriate election in order to elect the longest tax-deferral period of time the trustee should withdraw funds from the retirement_plan in the minimum amounts required under irc and applicable regulations without penalty additional_amounts should be withdrawn only if the trustee determines that a need exists f the provisions of this instrument are intended to inform the trustee of the trust creators’ desire that the rules commonly known as the stretch_ira rules should be applied to all retirement plans it is the trust creators’ hope that the trustee will use his or her best efforts to minimize income taxes on these assets for the maximum duration permitted by law for purposes of qualifying as a designated_beneficiary under irc and applicable regulations each beneficiary may amend the terms of the trust which govern the distribution of his or her trust at death in the absence of a complete and effective exercise of any applicable power_of_appointment taxpayer a died on date upon the death of taxpayer a several trusts were created under the terms of the restated trust as stated above taxpayer a was survived by her husband taxpayer b and two children taxpayer c and taxpayer d taxpayer b became the sole trustee of the trusts administered under the terms of the restated trust upon the death of taxpayer a taxpayer b exercised his power as sole trustee to appoint his daughters taxpayer c and taxpayer d as co-trustees of the above-referenced bypass_trust putco iu b48 page taxpayer b maintained an individual_retirement_account ira ira x with company aa ira x was intended to satisfy the requirements described in sec_408 of the code during his life taxpayer b named the trustee of the bypass_trust as the beneficiary of his ira x taxpayer b died on date date was after taxpayer b’s required_beginning_date as that term is defined in sec_401 of the internal_revenue_code when taxpayer b died the restated trust and all the trusts administered under it became irrevocable as of date and date both taxpayer c and taxpayer d had attained designated age a after the death of taxpayer b pursuant to article x of the restated trust cument all the trusts administered under the restated trust instrument were consolidated and equally divided into the above described two protective trusts created for the benefit of taxpayer c and taxpayer d one protective trust was created for the benefit of taxpayer c and one for taxpayer d taxpayer c and taxpayer d was each individually appointed as trustee of his her respective protective trust on date taxpayer c and taxpayer d acting as trustees of the bypass_trust filed for a declaratory_judgment in court v which is located in county b of state s taxpayer c and taxpayer d asked court v to modify the restated trust to comply with certain requirements under sec_1 a of the income_tax regulations regulations on date court v issued an order modifying the restated trust retroactively to taxpayer b’s death as requested the court order which modified the restated trust provided in relevant part as follows all amounts received from the custodian of ira x are to be distributed to the beneficiaries of the protective trusts the trustee is authorized to arrange direct distributions from the ira to the beneficiary if a special independent_trustee is selected distributions to descendents of beneficiaries born before are prohibited descendents of beneficiaries born before contingent beneficiaries and charities are removed as potential appointees of a beneficiary's lifetime power_of_appointment any individual born before is removed as a potential appointee of a beneficiary's testamentary_power_of_appointment taxpayer c the oldest lineal descendant of taxpayer b is named as the designated_beneficiary under sec_1_401_a_9_-4 q a-4 and the trust is to be administered so that all beneficiaries following zyivee wiv j page taxpayer c and taxpayer d are successor beneficiaries as defined in sec_1_401_a_9_-5 a-7 c and the trustee is directed to use ira proceeds to pay debts administration_expenses or taxes of taxpayer b’s estate only after other assets are exhausted and is prohibited from using any ira proceeds to make such payments after date based on the above you through your authorized representative request the following letter rulings that ira x be distributed as though the beneficiaries of the bypass_trust administered under the restated trust as amended by the first amendment and judgment entry were named beneficiaries of ira x thereby satisfying the guidance set forth in sec_1_401_a_9_-4 questions answers-4 and of the income_tax regulations that taxpayer c is the designated_beneficiary as that term is used in sec_401 of the code of ira x based on the judicial modification of the restated trust retroactively to taxpayer b’s death which modification is valid under state s’s revised code alternatively that taxpayer c is the designated_beneficiary as used in sec_401 of the code of ira x as a result of removing certain discretionary distributees and potential objects of powers of appointment before date through the judicial modification of the restated trust under state s’s revised code and that the applicable distribution period as used in sec_1_401_a_9_-5 a-5 c of the regulations for the applicable calendar_year i sec_30 years reduced yearly which is taxpayer c’s life expectancy based upon her current_year birthday with respect to your ruling requests code sec_401 a a provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee -- i will be distributed to such employee not later than the required_beginning_date or ii will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary sec_401 of the code provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the ira holder attains age sec_401 of the code provides that when an employee dies before their entire_interest has been distributed but after distributions have begun under subparagraph of a ii the remaining portion of such interest will be distributed page at least as rapidly as under the method being used under subparagraph a ii as of the date of death sec_401 of the code provides that for the purpose of sec_401 the term designated_beneficiary means any individual designated as a beneficiary by ine employee sec_1_401_a_9_-4 of the income_tax regulations question and answer a-1 provides in relevant part that a designated_beneficiary is an individual who is a ‘lesignated as a beneficiary under the plan an individual may be designated as a beneficiary under the plan either by the terms of the plan or if the plan so provides by an affirmative election by the employee or the employee’s surviving_spouse specifying the beneficiary under these regulations a designated_beneficiary need not be specified in the name of the plan in order to be a ‘iesignated beneficiary so long as the individual who is to be the beneficiary is identifiable under the plan the member of a class of beneficiaries capable of contraction or expansion will be treated as being identifiable if it is possible to identify the class member with the shortest life expectancy further the passing of an employee's interest to an individual under a will or otherwise under applicable state law will not make that individual a designated_beneficiary under sec_1 a e unless that individual is designated as a beneficiary under the plan sec_1_401_a_9_-4 of the regulations q a-3 provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate or a charitable_organization may not be a designated_beneficiary if a person other than an individual is designated as a beneficiary of an employee’s benefit the employee will be treated as having no beneficiary for purposes of sec_401 even if there are also individuals designated as beneficiaries sec_1_401_a_9_-4 of the regulations q a-5 provides that beneficiaries of a_trust with respect to the trust's interest in an employee's benefit may be treated as designated beneficiaries if the following requirements are met the trust is valid under state law or would be but for the fact there is no corpus the trust is irrevocable or will by its terms become irrevocable upon the death of the employee the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee's benefit are identifiable within the meaning of a-1 of this section from the trust instrument relevant documentation has been timely provided to the plan_administrator page sec_1_401_a_9_-4 of the regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee’s death generally an employee’s designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of the date of death sec_1_401_a_9_-5 of the regulations q a-7 b provides in short that except as provided in paragraph c of amployee’s benefit after the employee's death is a contingent right such contingent beneficiary is nevertheless considered to be a beneficiary for purposes of determining who if anyone is the employee's designated_beneficiary this a-7 if a beneficiary's entitled to an sec_1_401_a_9_-5 of the regulations q a- a provides in summary that if an employee dies on or after his required_beginning_date without having designated a beneficiary then post-death distributions must be made over the remaining life expectancy of the employee determined in accordance with paragraph c of a-5 sec_1_401_a_9_-5 of the regulations q a- c provides in general that with respect to a non-spouse designated_beneficiary of a plan or ira the applicable distribution period measured by the beneficiary's remaining life expectancy is determined using the beneficiary's age as of the beneficiary's birthday in the calendar_year immediately following the calendar_year of the employee’s death reduced by one for each subsequent calendar_year sec_1_401_a_9_-5 of the regulations q a- c provides in general that with respect to an employee who does not have a designated_beneficiary the applicable distribution period measured by the employee's remaining life expectancy is the life expectancy of the employee using the age of the employee as of the employee's birthday in the calendar_year of the employee's death in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after the calendar_year of the employee's death sec_1_401_a_9_-5 of the regulations q a- b provides in general that contingent beneficiaries must be considered in determining who if anyone is the designated_beneficiary of a plan or ira a successor beneficiary defined in q a-7 c of the regulations as one who merely takes as the successor of a prior beneficiary after the death of said prior beneficiary is not a contingent oeneficiary generally the reformation of a_trust instrument is not effective to change the tax consequences of a completed transaction for example in 98_tc_294 the trustees retroactively reformed a governing instrument solely for the purposes of qualifying the bequest for the 2vive page astate tax charitable deduction the tax_court held that the retroactive reformation undertaken solely for tax considerations was not effective for federal tax purposes in estate of la meres the tax_court stated this and other courts have generally disregarded the retroactive effect of state court decrees for federal tax purposes see 397_f2d_443 cir straight trust v com245_f2d_327 cir affg 24_tc_69 94_tc_666 79_tc_680 affd without published opinion 749_f2d_37 cir 75_tc_271 affd without published opinion 673_f2d_1333 cir hile we will look to local law in order to determine the nature of the interests provided under a_trust document we are not bound to give effect to a local court order which modifies the dispositive provisions of the document after respondent has acquired rights to tax revenues under its terms as the court_of_appeals explained in van den wymelenberg v united_states supra pincite were the law otherwise there would exist considerable opportunity for collusive state court actions having the sole purpose of reducing federal tax_liabilities furthermore federal tax_liabilities would remain unsettled for years after their assessment if state courts and private persons were empowered to retroactively affect the tax consequences of completed transactions and completed tax years estate of la meres v commissioner t c pincite generally the service will treat a state court order as controlling with respect to a reformation if the reformation is specifically authorized by the internal_revenue_code such as under sec_2055 which allows the parties to reform a split- interest charitable_trust in order that the charitable interest will qualify for the charitable deduction as authorized under that statute there is no applicable federal statute which authorizes taxpayer c’s or taxpayer d’s retroactive reformation of trust t or the later restated trust accordingly absent specific authority in the code or regulations the modification of the restated trust will not be recognized for federal tax purposes in this instance the efforts undertaken to modify the terms of the restated trust will not be given retroactive effect for federal tax purposes and the designated_beneficiary of ira x must be determined under the terms of the restated trust as it existed at the time of taxpayer b’s death the bypass_trust created under the terms of the restated trust was named as the veneficiary of taxpayer b’s ira x provided said trust meets the requirements set forth in sec_1_401_a_9_-4 of the regulations q a-5 it is permissible to look 2zviveiv as page through the trust in order to determine who if anyone is the designated_beneficiary in the situation described above there was no identifiable designated_beneficiary of ira x at the time of taxpayer b’s death the relevant terms of the restated trust specifically the terms of the bypass and related trusts do not require or authorize either taxpayer c or taxpayer d to receive all amounts that are distributed from ira x the terms of the restated trust authorize only income and principal subject_to a standard to be paid to or for the benefit of either taxpayer c or taxpayer d the relevant restated trust terms also do not require that amounts distributed from ira x based on the life expectancy of taxpayer c be paid either to taxpayer c taxpayer d or any other natural_person human being relevant restated trust terms permit either taxpayer c or taxpayer d to appoint income or principal to descendants or charities because the terms of the restated trust allow for the accumulation of amounts distributed from ira x the remainder beneficiaries must be considered beneficiaries of ira x for purposes of determining who if anyone was is the designated_beneficiary of ira x charitable organizations are clearly authorized to be potential contingent beneficiaries under relevant provisions of the restated trust instrument however only individuals may be designated beneficiaries for purposes of satisfying the requirements of code sec_401 and related_income tax regulations as a result taxpayer b is treated as having designated no beneficiary of his ira x for purposes of sec_401 of the code potential beneficiaries may be eliminated after the date of death of a taxpayer and prior to september of the calendar_year following the calendar_year of death of a taxpayer for purposes of determining who is the designated_beneficiary of a plan ira for purposes of code sec_401 a however beneficiaries may not be added during this same period furthermore a designated_beneficiary must be in existence as of an ira holder's date of death a designated_beneficiary cannot be created after the date of death by means of a state court order even if said order is valid under state law in this case due to the language of relevant terms of the controlling restated trust document there is no designated_beneficiary for purposes of a sec_401 a analysis subsequent efforts to obtain a post-mortem judicial modification had the effect of creating a designated_beneficiary after the death of the taxpayer said efforts will not be given effect for purposes of code sec_401 a thus with respect to your ruling requests we conclude as follows ira x is to be distributed as if taxpayer b’s ira x had no designated_beneficiary in short because entities ineligible to be treated as designated beneficiaries were eligible to receive amounts from taxpayer b’s ira x said entities charities constituted contingent beneficiaries as that term is used in the income_tax regulations promulgated under code sec_401 thus taxpayer b is treated page as having designated no beneficiary within the meaning of code sec_401 and the relevant regulations with respect to his ira x the requested response to this second ruling_request cannot be provided as a result of our response to your first requested ruling taxpayer c cannot be treated as the designated beneficiary’ of taxpayer b’s ira x based on the above-referenced state s court order since said order created a designated_beneficiary of ira x where none existed prior to the entry of the court order as described above said creation of a designated_beneficiary after the death of the ira x owner taxpayer b does not comply with the requirements of code sec_401 since taxpayer b had attained his code sec_401 required_beginning_date prior to his death the applicable required_distribution period with respect to his ira x is the remaining life expectancy of taxpayer b in accordance with paragraph c of sec_1_401_a_9_-5 q a-5 of the regulations no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office you are receiving the original of this letter_ruling and your representative is receiving a copy of the letter if you wish to inquire about this ruling please address all correspondence to se t ep ra t3 _ frances v sloan manager employee_plans technical group fr of