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 fip b03 plr-148765-04 date date legend fund ---------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- fund ---------------------------------------------------------------------------------- --------------------------------------- fund ---------------------------------------------------------------------------------- --------------------------------------- fund ------------------------------------------------------------------------ -------------------------------------- - fund -------------------------------------------------------------------- --------------------------------------- fund ---------------------------------------------------------------------------- --------------------------------------- fund ---------------------------------------------------------------------------------- --------------------------------------- fund --------------------------------------------------------------- --------------------------------------- fund -------------------------------------------------------------------------- --------------------------------------- plr-148765-04 fund -------------------------------------------------------------------------------- group ---------------------------------------- year a ------- year b ------- year c ------- year d ------- state x -------------------- dear ------------------ this ruling responds to a letter dated date submitted on behalf of fund sec_1 through collectively referred to as the funds by their authorized representatives each fund requests consent to revoke for tax_year b and subsequent calendar years a previous election made by that fund under sec_4982 of the internal_revenue_code additionally the funds request that the calculation of each of their required distributions of capital_gain_net_income under sec_4982 and e for the calendar_year ending december year b be determined on the basis of capital_gains_and_losses and foreign_currency gains and losses if any realized and recognized during the eleven-month period from december year a through october year b the funds are all managed by group fund sec_1 and are closed- end management investment companies registered under the investment_company act of and organized as state x business trusts funds and are open-end management investment companies registered under the act and organized as state x business trusts each fund has elected to be regulated_investment_company a ric for federal_income_tax purposes under sec_851 of the code the funds use an accrual_method of accounting for tax and financial_accounting purposes and each fund’s taxable_year ends on november pursuant to sec_4982 each of the funds elected to use its tax_year ending on november in lieu of the 1-year period ending on october for purposes of calculating the required_distribution under sec_4982 sec_4982 and sec_4982 at the time the funds originally made their respective elections each believed that the election under sec_4982 would relieve the administrative burdens associated with dual calculations of capital_gains_and_losses under the excise_tax and plr-148765-04 subchapter_m provisions of the code however the funds’ experience has been that the sec_4982 election has created additional administrative complexities primarily due to time constraints in declaring required excise_tax distributions moreover the promulgation of regulations coordinating the excise_tax and subchapter_m provisions has greatly reduced the administrative burden of having a tax_year different from the period used for determining the required distributions under sec_4982 accordingly the funds seek consent to revoke their elections to use the taxable_year for purposes of sec_4982 and sec_4982 permitting the funds to revoke their sec_4982 elections and compute capital_gain_net_income for the tax_year on october rather than november would significantly lessen the administrative burden of computing capital_gain_net_income in an accurate and timely manner additionally the funds represent that the desire to revoke their sec_4982 elections is due to administrative and non-tax related financial burdens caused by the elections they are not seeking to revoke their elections for the purpose of preserving or securing a tax_benefit they will neither benefit through hindsight nor prejudice the interests of the government as a result of being permitted to revoke their elections they will not make any subsequent elections under sec_4982 for five calendar years following the year of the grant of revocation law and analysis sec_4982 which was enacted as part of the tax_reform_act_of_1986 and is sec_4982 defines the term required_distribution to mean with respect effective for tax years beginning after date imposes an excise_tax on every ric for each calendar_year equal to percent of the excess if any of the required_distribution over the distributed_amount for the calendar_year to any calendar_year the sum of percent of the ric’s ordinary_income for such calendar_year plus percent of its capital_gain_net_income for the 1-year period ending on october of such calendar_year sec_4982 provides that if the tax_year of a ric ends with the month of november or december the ric may elect to have its capital_gain_net_income for its tax_year applied in lieu of the 1-year period ending on october of the calendar_year for purposes of satisfying the required_distribution defined in sec_4982 plr-148765-04 sec_4982 provides that once made such election may be revoked only with the consent of the secretary sec_4982 provides that any foreign_currency_gain_or_loss attributable to a sec_988 transaction and which is properly taken into account for the portion of the calendar_year after october shall not be taken into account in determining the ordinary_income of the ric for the calendar_year but shall be taken into account in determining the ric’s ordinary_income in the following calendar_year however if a ric has made an election under sec_4982 the preceding sentence shall be applied by substituting the last day of the ric’s taxable_year for october conclude that each fund’s desire to revoke its election under sec_4982 of the code is because of administrative burdens and not because of any federal tax- related financial burden caused by the election the funds do not seek to revoke their elections for the purpose of preserving or securing a federal tax_benefit additionally the funds will neither benefit through hindsight nor prejudice the interest of the government as a result of being permitted to revoke their elections based upon the information submitted and the representations made we conclusion accordingly based upon the representations made and pursuant to sec_4982 the secretary consents to the revocation of the elections made by the funds under sec_4982 effective for calendar_year b and subsequent years in addition in calculating the required_distribution for calendar_year b for purposes of sec_4982 and e the capital_gain_net_income and foreign_currency gains and losses of the funds will be determined on the basis of the capital_gains_and_losses and foreign_currency gains and losses if any recognized and realized during the 11-month period from december year a through october year b as a condition to the secretary’s consent to the revocation pursuant to sec_4982 none of the funds may make a subsequent election under sec_4982 for a period of five calendar years following the year to which the grant of revocation applies ie year c through year d except as specifically ruled upon above no opinion is expressed or implied as to any other federal excise or income_tax consequences this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent plr-148765-04 it is important that a copy of this letter be attached to the federal income and excise_tax return filed by each of the funds for the year to which this ruling applies sincerely yours __________________________ enclosures copy of this letter copy for ' purposes cc alice m bennett chief branch office of associate chief_counsel financial institutions and products


date internal_revenue_service number info release date uil conex cc tege eoeg et1 the honorable christopher s bond united_states senator east high street suite jefferson city missouri attention janna worsham dear senator bond this letter is in response to your inquiry dated date on behalf of your constituents mr clyde cole and state representative merrill townley they asked for a change in the internal_revenue_code the code to include operators of dog kennels and their employees as agricultural_labor for purposes of the federal_unemployment_tax_act futa state representative townley also sent a letter to you about mr cole’s situation and pointed out that the code does not classify dog breeding as agricultural while the missouri state tax commission does they believe this inconsistent treatment results in additional fees for dog breeders an amendment to change the code would require legislative action by the congress however i can provide some general information to help explain why the irs does not consider these services agricultural_labor the code excludes from wages certain cash payments for agricultural_labor it defines agricultural_labor that is exempt from futa as all services performed on a farm in connection with cultivating the soil or raising or harvesting any agricultural or horticultural commodity including raising shearing feeding caring for training and managing livestock bees poultry and fur-bearing animals and wildlife in the irs published revrul_68_340 to clarify the meaning of agricultural_labor for federal employment_tax purposes copy enclosed including futa the ruling holds that services employees perform in connection with breeding raising and caring for dogs are not agricultural_labor therefore the agricultural_labor exemption would not apply to mr cole the congress has not passed any legislation since that would give us a basis to change our view i hope this information is helpful if you have further questions please call me at or elliot m rogers of my staff at sincerely catherine e livingston assistant chief_counsel exempt_organizations employment_tax government entities enclosure


luterval reveuue serie zuvu0u8034 dec - uniform issue list set epr ra legend taxpayer a decedent b individual g attorney h amount d ira x ira y company a dea in letters dated date date and date your authorized representative on your behalf requested a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a was married to decedent b decedent b died on ie having named taxpayer a as beneficiary of ira x ira x was liquidated on date by individual g who your authorized representative has asserted was purporting to act as taxpayer a’s agent under a durable_power_of_attorney but who was without guvovoi sec_4 authority under state n law to act as such taxpayer a was not told of the liquidation of ira x on date taxpayer a’s attorney attorney h received a check for amount d from company a manager of taxpayer a’s trust and the company to which individual g had delivered the liquidated ira funds however attorney h never received a description of the nature of the amount d funds and had no knowledge that these were ira funds attorney h deposited amount d taxpayer a taxpayer a did not become aware of the liquidation of ira x until her tax preparer notified attorney h attorney h immediately arranged a rollover of the ira x proceeds in amount d minus the yea rollover was completed to ira y on date minimum_required_distribution and a into an account on behalf of based on the facts and representations you request that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount d because the failure to waive such requirement would be a hardship and against equity or good conscience sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - the entire amount received including money and any other_property is paid into i an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or the entire amount received including money and any other_property is paid into ii an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at suuuovvevd4 any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers code sec_408 provides in general that rules similar to the rules of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the trust is maintained code sec_408 provides that paragraph d shall not apply to any amount to the extent such amount is required to be distributed under subsection a sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover was caused by individual g in improperly liquidating ira x of which taxpayer a was beneficiary without her knowledge and consent and in failure to inform taxpayer a that the funds were ira funds furthermore upon learning of the nature of the funds taxpayer a and attorney h took all appropriate action to correct the failure and immediately deposited amount d into ira y therefore pursuant to code sec_408 the service hereby waives the 60-day rollover requirement with respect to the withdrawal of amount d pursuant to this ruling letter the service will treat taxpayer a's date rollover_contribution of amount d into ira y as a valid rollover within the meaning of code sec_408 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_61 k of the code provides that it may not be used or cited as precedent a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office if you wish to inquire about this ruling please contact please address all correspondence to d se t ep ra t3 at sincerely yours frances v sloan manager s technical group enclosures deleted copy of letter_ruling notice of intention to disclose


t c memo united_states tax_court stephen p and sharon l sherwood petitioners v commissioner of internal revenue respondent docket no filed date stephen p sherwood pro_se franklin r hise for respondent memorandum opinion dinan special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 unless otherwise indicated all section references are to the internal_revenue_code in effect for the taxable years in issue all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies in petitioners' federal income taxes additions to tax and penalties for the years and as follows petitioner husband year deficiency sec_6651 sec_6651 sec_6663 additions to tax penalty dollar_figure big_number big_number petitioner wife dollar_figure -- -- -- dollar_figure dollar_figure -- -- penalty year deficiency sec_6651 sec_6651 sec_6663 additions to tax dollar_figure big_number big_number dollar_figure -- -- -- dollar_figure dollar_figure -- -- the issues for decision are whether petitioners failed to report income in amounts determined by respondent for the years and whether petitioners are liable for the sec_6651 addition_to_tax for whether petitioners are liable for the sec_6651 additions to tax for and for failure_to_file due to willful intent to evade income taxes whether in the event it is decided that the failure to timely file was not due to willful intent to evade income taxes petitioners are liable for the delinquency penalty under sec_6651 for and whether petitioners are liable for the sec_6663 fraud_penalty for and whether in the event it is decided the underpayment for was not due to fraud petitioners are liable for the accuracy-related_penalty under sec_6662 some of the facts have been stipulated and are so found the stipulations of fact and attached exhibits are incorporated herein by this reference petitioners resided in round rock texas on the date the petition was filed in this case since the time they were married in and until the years here in issue petitioners had filed joint federal_income_tax returns and paid tax on their community_income as a result of conversations with friends and their own limited research in constitutional and tax law petitioners concluded that they were not citizens of the united_states and were not therefore subject_to the tax laws applicable to united_states citizens relying upon this conclusion petitioners each filed forms 1040-nr as non-resident aliens for the tax years at issue since form nr requires the filing of separate returns for married couples separate deficiency notices were issued by respondent to each petitioner the first issue for decision is whether petitioners failed to report income in an amount determined by respondent the determinations of respondent in the statutory_notice_of_deficiency are presumed to be correct and petitioners bear the burden of proving that respondent erred in her determinations rule a 290_us_111 sec_61 includes as gross_income all income from whatever source derived including but not limited to compensation_for services and interest sec_61 at trial petitioner husband acknowledged the receipt of all items of unreported income determined by respondent for the tax years at issue in doing so it became apparent that petitioners' erroneous interpretation of the internal_revenue_code and claim of foreign citizenship were the only arguments which they were interested in presenting we will not address petitioners' tax-protester ramblings which were presented at trial as was stated by the court_of_appeals for the fifth circuit we perceive no need to refute these arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit 737_f2d_1417 5th cir since petitioners have presented no meritorious arguments disputing respondent's proposed deficiencies we sustain respondent's determinations of deficiencies in petitioners' and federal income taxes the second issue for decision is whether petitioners are liable for the sec_6651 addition_to_tax for sec_6651 provides for an addition_to_tax of percent of the tax required to be shown on the return for each month or fraction thereof for which there is a failure_to_file a return up to percent in the aggregate the addition_to_tax is imposed on the net amount due calculated by reducing the amount_required_to_be_shown_as_tax on the return by any part of the tax which is paid on or before the date prescribed for payment of the tax sec_6651 the flush language of sec_6651 provides that in the case of a failure_to_file within days of the date prescribed for the filing of such return unless it is shown that such failure is due to reasonable_cause and not due to willful neglect the addition_to_tax under sec_6651 shall not be less than the lesser_of dollar_figure or percent of the amount_required_to_be_shown_as_tax on such return see 100_tc_374 petitioners bear the burden of proving that respondent's determinations that they were negligent are incorrect rule a 105_tc_324 petitioners' federal_income_tax returns were due on date sec_6072 sec_1_6072-1 income_tax regs respondent contends that petitioners' submission of forms 1040-nr constituted a filing of their federal_income_tax returns on date petitioners have not offered any evidence to show that their delay in filing their return was due to reasonable_cause rather than their willful neglect accordingly respondent's determinations that petitioners are each liable for a dollar_figure addition_to_tax under sec_6651 are sustained the third and fourth issues for decision are whether petitioners are liable for the sec_6651 addition_to_tax for and respondent determined in the alternative that the sec_6651 addition_to_tax would apply in the event it was decided that the failure_to_file was not fraudulent as noted infra respondent bears the burden of proving fraud issues by clear_and_convincing evidence sec_7454 rule b sec_6651 provides that the sec_6651 addition_to_tax shall be increased to percent of the tax required to be shown on the return for each month or fraction thereof for which there is a failure_to_file a return up to percent in the aggregate where such failure_to_file is fraudulent it would be repetitive to discuss the reasons why we are unconvinced that petitioners acted fraudulently in failing to file their and returns as the reasons enumerated infra in regard to the fraud_penalty are similarly relevant for these taxable years however we must still address respondent's alternative determination that petitioners are liable for the sec_6651 addition_to_tax for and irrespective of the fact that respondent has taken an inconsistent_position with regard to petitioners' forms 1040-nr for respondent accepted petitioners' forms nr as a filing of a return however for and respondent determined that these forms 1040-nr did not constitute a filing respondent's determinations that petitioners failed to file sufficient tax returns are presumed to be correct and petitioners bear the burden of proving her determinations erroneous rule a cluck v commissioner supra pincite sec_6011 requires all taxpayers to make a return or statement according to the forms and regulations prescribed by the secretary a document constitutes a valid_return if it contains sufficient data from which respondent can compute and assess a tax_liability 77_tc_689 respondent's position is that petitioners' submitted forms 1040-nr for and do not constitute valid income_tax returns we agree with respondent petitioners have not proven that the forms 1040-nr sufficiently listed items of gross_income deductions or calculations of taxes by which their proper tax_liability could be ascertained the attachment of forms w-2 does not substitute for information required to be shown on the returns see 82_tc_766 as was the case with their failure_to_file a timely return for petitioners have not shown that such failure was due to reasonable_cause therefore respondent's determinations that petitioners are liable for the sec_6651 addition_to_tax for and are sustained the fifth issue for decision is whether petitioners are liable for the sec_6663 fraud_penalty for in her deficiency_notice respondent determined that the sec_6662 accuracy-related_penalty would apply in the event it was decided that the underpayment was not due to fraud a prerequisite to the applicability of sec_6662 and sec_6663 is that a return of tax other than one prepared by respondent pursuant to sec_6020 is filed sec_6664 102_tc_632 sec_6663 provides that if respondent establishes that any part of any underpayment_of_tax required to be shown on a return is due to fraud the entire underpayment is treated as attributable to fraud and subjected to a 75-percent penalty unless the taxpayer establishes that some part of the underpayment is not attributable to fraud respondent bears the burden to prove by clear_and_convincing evidence an underpayment for each year and that some part of the underpayment for each year was due to fraud sec_7454 rule b clayton v commissioner supra pincite fraud is established by proving that a taxpayer intended to evade tax believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such tax clayton v commissioner supra pincite direct evidence of the requisite fraudulent intent is seldom available but fraud may be proved by examining circumstantial evidence indicative of the taxpayer's motives 91_tc_874 over the years courts have developed various factors or badges which tend to establish the existence of fraud see clayton v commissioner supra pincite respondent argues that petitioners were fully aware of their obligation to pay federal_income_tax on their income for the years at issue since they paid tax on the same type of income in previous years respondent contends that petitioners' underpayment for is attributable to a fraudulent procurement of a refund of withheld taxes respondent further asserts that petitioners' omission of social_security numbers on the submitted forms 1040-nr was intended to mislead respondent we find that the badges_of_fraud are not sufficiently present in the facts of this case first petitioners filed what they believed albeit erroneously to be the proper forms we note that respondent accepted these forms as a valid filing and continues to rely upon such acceptance as a basis for the sec_6651 failure_to_file addition_to_tax for second petitioner husband did not attempt to stop the withholding of taxes from his paychecks third petitioner husband's omission of his social_security_number from his form 1040-nr does not amount to concealment since it was listed on his submitted form_w-2 if his intent was to conceal this information he would not have disclosed it to respondent in this way we recognize that absent respondent's acceptance of this form 1040-nr the mere attachment of a form_w-2 would not remedy a form which was otherwise invalid for lack of sufficient information by which tax_liability could be calculated beard v commissioner supra pincite however noncompliance does not amount to concealment on these facts fourth petitioners maintained continuous correspondence with respondent in regard to their case the facts do not clearly show that petitioners intended to mislead respondent or conceal their tax_liability rather the facts show that they erroneously believed that they did not owe any_tax as this court has previously stated these types of arguments may have been meritless frivolous wrongheaded and even stupid but we cannot hold that they amounted to fraud without something more were we to do so every tax_protester case would be automatically converted into a fraud case 86_tc_1253 we will however address below the consequences of pursuing such erroneous beliefs before this court the sixth issue for decision is whether petitioners are liable in the alternative for the sec_6662 accuracy- related penalty for respondent's determinations are presumed to be correct and petitioners bear the burden of proving that the penalties do not apply rule a 290_us_111 58_tc_757 sec_6662 imposes a 20-percent penalty on the portion of the underpayment attributable to any one of various factors one of which is negligence or disregard of rules or regulations negligence includes a failure to make a reasonable attempt to comply with the provisions of the internal revenue laws or to exercise ordinary and reasonable care in the preparation of a tax_return sec_6662 sec_1_6662-3 income_tax regs disregard includes any careless reckless or intentional disregard of rules or regulations sec_6662 sec_1_6662-3 income_tax regs we find that petitioners have failed to prove that they were not negligent in their underpayment_of_tax although petitioners blame respondent for their lack of knowledge the rules and regulations concerning their proper tax_liability are readily available to the public through various sources therefore we hold that petitioners are liable for the sec_6662 accuracy-related_penalty for we will next determine whether this court should impose sanctions upon petitioners pursuant to sec_6673 whenever it appears to this court that the taxpayer's position in a proceeding before it is frivolous or groundless the court in its discretion may require the taxpayer to pay to the united_states a penalty not in excess of dollar_figure sec_6673 a proceeding in the tax_court is frivolous if it is contrary to established law and unsupported by a reasoned colorable argument for change in the law 791_f2d_68 7th cir sanctions are properly imposed when the taxpayer knew or should have known that his claim or argument was frivolous 820_f2d_1464 9th cir in response to the court's questions the following evidence was introduced at trial the court q are you aware of the provisions of sec_6673 of the internal_revenue_code the damages provision petitioner a i am the court q and are you aware of the many cases that have addressed themselves to various and sundry tax protestor arguments petitioner a your honor respondent's counsel has stated that i am a tax protestor which is a conclusion that has yet to be proved after painstakingly listening to petitioners' groundless arguments at trial and reading through the same in their briefs we conclude that petitioners are indeed tax protesters petitioners' arguments include tax_protester rhetoric and legalistic gibberish which they should have known are frivolous under established law petitioners' frivolous position within the meaning of sec_6673 is that wages are immune from tax in view of the foregoing we will sua sponte exercise our discretion under sec_6673 and require each petitioner to pay a penalty to the united_states in the amount of dollar_figure to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number ------------------- ------------------------------------------------ -------------------------------------- --------------------------- -------------------------------------- ---------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-152101-05 date date ------------------- --------------------- ---------------------- legend legend x --------------------------------------------------- country d dear -------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed 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 elections are necessary only when an plr-152101-05 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 that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the 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 member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii 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 under sec_301_9100-1 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 e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-152101-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code 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 mailed to your authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc


t c memo united_states tax_court david s stout and crystal a stout petitioners v commissioner of internal revenue respondent docket no filed date david s stout and crystal a stout pro sese richard j hassebrock for respondent memorandum findings_of_fact and opinion foley judge after concessions the issues for decision are whether petitioners’ income relating to a stock equivalent plan is properly characterized as ordinary or capital_gain and whether petitioners are liable for a sec_6651 addition_to_tax findings_of_fact from through david stout worked as a software engineer for pole zero corp pole zero an ohio corporation that designs and manufactures radio frequency interference mitigation products in date pole zero authorized and instituted a stock equivalent plan plan pursuant to which it issued stock incentive units sius to full-time salaried employees of the company who have been employed a minimum of three years and serve in key executive administrative professional or technical capacities pole zero credited sius to accounts maintained for the benefit of plan participants the value of each siu was measured by and adjusted to reflect changes in the fair_market_value of a share of pole zero common_stock in addition plan participants received for each siu credits to their plan accounts equal to cash dividends relating to each share of common_stock these dividend equivalents accrued interest the plan provided that amounts credited to a plan participant’s account represent only an unsecured promise to pay in unless otherwise indicated 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 accordance with the terms of the plan plan participants would not pursuant to the plan acquire any right title or interest in any assets of the company upon a merger or acquisition of pole zero plan participants had the right to receive cash payments equal to the value of their plan accounts on date dover electronics a subsidiary of dover corp acquired pole zero on or around date pole zero paid mr stout dollar_figure reflecting the value of his plan account at the time of the acquisition the extended due_date for filing petitioners’ form_1040 u s individual_income_tax_return was date petitioners filed their form_1040 on date and reported the dollar_figure payment relating to the plan as ordinary_income respondent examined petitioners’ tax_return during the examination petitioners contended the payment from pole zero relating to the plan qualified for capital_gain treatment respondent on date sent petitioners a notice_of_deficiency relating to respondent disallowed certain itemized and business_expense deductions and determined that petitioners were liable for a dollar_figure income_tax deficiency and a dollar_figure sec_6651 addition_to_tax on date petitioners while residing in ohio filed a petition with the court opinion capital_gain is gain from the sale_or_exchange of a capital_asset see sec_1222 a right to receive a future payment of ordinary_income is not a capital_asset see 356_us_260 119_tc_1 petitioners contend that the plan pursuant to sec_422 was an incentive_stock_option plan they received stock and the payment received was capital_gain income we disagree the plan provided that mr stout in consideration for his services would receive a cash payment on a future date see sec_61 49_tc_533 holding that compensation received as consideration for services is ordinary_income the plan did not qualify as a sec_422 incentive_stock_option plan and did not grant mr stout an option to buy or sell any pole zero stock see sec_422 providing that an incentive_stock_option is an option granted to an individual to purchase the stock of a corporation indeed it expressly provided that participants would not receive any interest in the assets of pole zero accordingly the payment to mr stout was ordinary_income see sec_1222 commissioner v p g lake inc u s pincite davis v commissioner t c pincite sec_6651 imposes an addition_to_tax for failure to timely file a return unless it is shown that such failure is due to reasonable_cause and not due to willful neglect see 469_us_241 petitioners filed their form_1040 over two years after its due_date but contend that they had reasonable_cause for doing so because mr stout could not find relevant documentation and he did not want to get in trouble for filing false tax records in short petitioners did not exercise ordinary business care and prudence and their failure to find particular documents does not excuse their failure to timely file see sec_301_6651-1 proced admin regs accordingly petitioners are liable for a sec_6651 addition_to_tax contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing decision will be entered under rule respondent bears and has met the burden of production relating to the sec_6651 addition_to_tax see sec_7491 116_tc_438 petitioners bear the burden_of_proof relating to reasonable_cause see higbee v commissioner t c pincite


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-104952-16 date date x -------------------------------------------------- -------------------------------------- y -------------------------------------------------- --------------------------------------------------- date country ------------------------ ---------------------- 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 to be classified as a disregarded_entity for federal tax purposes the information submitted states that x was formed under the laws of country and is wholly-owned by y x represents that as of date x was a foreign_entity eligible to elect to be treated as a disregarded_entity for federal tax purposes however x inadvertently failed to timely file a valid form_8832 entity classification election electing to treat x as a disregarded_entity effective date sec_301_7701-3 provides that a business_entity with at least two members can elect to be classified either as an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner plr-104952-16 sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or - an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides guidance on the classification of a foreign eligible_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 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 days prior to the date the form is filed or up to twelve months after the date on which the election 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 sec_301_9100-3 provides that a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and 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 this ruling is contingent on x having filed all relevant tax and information returns consistent with the granted relief with the appropriate service_center within days of the date of this ruling a copy of this letter should be attached to any such late or plr-104952-16 amended returns if x fails to comply with this requirement this letter_ruling will be null and void 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 in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely associate chief_counsel passthroughs and special industries by _______________ richard t probst senior technician reviewer branch office of associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


tcmemo_2008_39 united_states tax_court rodolfo lizcano petitioner v commissioner of internal revenue respondent docket no filed date r determined a deficiency in income_tax for p’s tax_year based primarily on the disallowance of claimed business_expenses r mailed to p a notice_of_deficiency that incorrectly provided the last day p could petition the tax_court p claims that the notice_of_deficiency is invalid and alleges that the examination and audit were illegal and retaliatory held the notice_of_deficiency is valid because p received the notice timely and petitioned the tax_court timely held further the examination and audit of p’s federal_income_tax return were in accordance with applicable law held further r’s deficiency determination is sustained rodolfo lizcano pro_se roberta shumway and kelli h todd for respondent memorandum findings_of_fact and opinion wherry judge this case is before the court on respondent’s motion for summary_judgment the issues are whether the notice_of_deficiency is invalid because the date it specified as the last day on which petitioner could petition this court was in error whether the notice_of_deficiency is invalid because petitioner was improperly selected for examination and audit in retaliation for equal employment opportunity commission eeoc complaints and whistle blower reports he made while he was an employee of the internal_revenue_service irs unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended for the year in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact petitioner was employed by the irs for approximately years petitioner claims that during his employment he was subjected to harassment and discrimination by his superiors and colleagues and witnessed his superiors and colleagues engaging in illegal activities petitioner claims to have filed a complaint with the eeoc in or on account of religious harassment and discrimination by irs managers he also claims to have made whistle blower disclosures in regarding improprieties including fraud waste mismanagement and abuse by irs managers and employees in austin tx additionally he asserts that he reported an irs employee to irs inspection for interfering with an audit he was conducting in on date petitioner filed a formal equal employment opportunity eeo complaint case no td-00-2004 alleging that his employer the irs denied him the right to reasonable accommodation in violation of the rehabilitation act of the department of the treasury after its investigation ruled against petitioner petitioner appealed and the eeoc issued a decision appeal no 01a12073 on date affirming the adverse decision of the department of the treasury on date petitioner filed a formal eeo complaint case no td-02-2036 for retaliation discrimination and harassment additionally on date petitioner filed another formal eeo complaint case no td-02-2066 alleging illegal browsing of petitioner’s tax account information 1federal employees who believe that they have been discriminated against by a federal_agency have a right to file an eeo complaint with that agency the employee may then appeal the agency’s decision to the eeoc the illegal initiation of an audit on petitioner’s tax_return and the illegal denial of petitioner’s right to reasonable accommodation these cases were both decided against petitioner by the department of the treasury petitioner appealed both of these cases and the eeoc issued a final_decision appeal no 01a33800 on date the eeoc affirmed the initial adverse rulings as to both of petitioner’s complaints concluding that petitioner was not subjected to a hostile work environment or denied reasonable accommodation for his disability and that the allegation of discrimination due to the selection of petitioner’s tax_return for audit was rejected appropriately the notice_of_deficiency was mailed to petitioner on date the notice determined an income_tax deficiency of dollar_figure based primarily on the disallowance of amounts petitioner claimed as business_expense deductions for petitioner’s taxable_year the notice_of_deficiency in error listed date as the last day to file a petition with this court on date respondent mailed to petitioner a letter acknowledging the error and informing petitioner that the last day to file a petition with this court was in fact date petitioner denies receipt of this letter petitioner who at that time resided in mcallen texas filed timely a petition with this court postmarked date on date respondent filed a motion to dismiss for failure to state a claim upon which relief can be granted in response the court issued an order instructing petitioner to file an amended petition and informing both parties that a hearing would be held on respondent’s motion petitioner filed a motion for extension of the time to file his amended petition which the court granted petitioner filed an amended petition on date and filed a second amended petition on date all three of petitioner’s petitions were devoid of any arguments regarding the dollar amount of the deficiency they focused solely on petitioner’s contention sec_2respondent mailed the notice_of_deficiency to petitioner on date the 90th day thereafter was wednesday date which was a legal_holiday in the district of columbia see sec_6213 rule b when the last day prescribed under authority of the internal revenue laws for performing any act falls on a legal_holiday the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a legal_holiday sec_7503 if a postage prepaid properly addressed petition is received by the court after the expiration of the 90-day period it is nevertheless deemed to be timely if the date of the u s postal service postmark stamped on the envelope in which the petition was mailed is within the time prescribed for filing sec_7502 sec_301_7502-1 proced admin regs petitioner mailed his petition via the u s postal service and it bears a postmark of date accordingly the petition is deemed timely filed see sec_7502 3petitioner did not assign error to respondent’s deficiency continued that the statutory_notice_of_deficiency was invalid because of its faulty designation of date as the last date for filing the petition and that respondent illegally conducted a retaliatory audit of his federal_income_tax return on account of his eeoc complaints and whistle blowing a hearing on respondent’s motion to dismiss was held on date in san antonio texas at that time the court denied respondent’s motion thereafter respondent filed an answer to the second amended petition on date petitioner filed an original complaint in district_court in the mcallen division of the southern district of texas petitioner’s original complaint asserted various constitutional and statutory actions based upon his former employment with the irs and named the united_states of america the united_states department of the treasury the irs and individuals with whom he had worked or who had been involved with the audit of his federal_income_tax return as defendants petitioner sought a trial by jury and damages for alleged violations of his civil rights see 403_us_388 continued determination in his petition amended petition or second amended petition each issue not addressed by a clear and concise assignment of error in the petition is deemed to be conceded rule b accordingly petitioner is deemed to have conceded the correctness of respondent’s deficiency determination petitioner’s original complaint on date was sua sponte ordered transferred to the austin division of the western district of texas district_court where it was filed on date lizcano v united_states no a-03-ca-661-ss d tex date on date respondent filed a motion for continuance of the then-scheduled tax_court trial because the common issue before this court and the district_court will necessitate that the same evidence be introduced in each case the tax_court ordered petitioner to file a response on date petitioner filed a response indicating no objection to respondent’s motion on date the tax_court granted respondent’s motion for continuance on date the district_court defendants filed motions to dismiss and on date that court dismissed all causes of action against the individual defendants and granted petitioner leave to file an amended complaint with respect to his bivens and sec_7431 or privacy_act claims 4the district_court concluded that the suit against the individually named defendants in their official capacities was precluded by sovereign immunity and that there was no private cause of action against an employee under the family medical leave act or whistleblower act as applicable to federal employees no claims were alleged by petitioner under the federal tort claims act and the district_court found that his attempted bivens pleadings were also defective because they did not contain a specific allegation of any constitutional right violation petitioner on date filed his bivens_action amended complaint in which he named as defendants nine individuals with whom he had worked or who had been involved with the audit of his federal_income_tax return the amended complaint alleged violations of sec_6103 and sec_7605 and his civil rights on date the district_court issued an order and a judgment dismissing petitioner’s case it concluded that for summary_judgment purposes while petitioner had sufficiently alleged violations of his constitutional rights by defendants in 5petitioner’s amended complaint did not list the united_states the department of the treasury or the irs as a defendant in n in the appendix to individual defendant’s dispositive motion filed with the district_court the nine named individual defendants argued that by operation of lizcano’s amended complaint the treasury_department has been dismissed from this action charles alan wright arthur r miller mary k kane federal practice and procedure 2d ed reasoning that an amended pleading supersedes the original ie the original is of no legal effect 31_f3d_344 5th cir same see also 151_frd_682 d kan holding that the plaintiff’s amended complaint effected the dismissal of one of the defendants from the lawsuit moore’s federal practice 3d ed reasoning that an amended complaint is the appropriate mechanism for eliminating an issue or one or more but less than all of several claims this court notes that the district court’s order dismissing petitioner’s case as well as its judgment both discussed infra included the united_states the department of the treasury and the irs as defendants in the caption initiating the audit he had failed to prove those charges further the defendants had with competent summary_judgment evidence established that none of them were responsible for the initiation of his federal_income_tax examination and that his return was selected for audit by computer and not as a retaliatory action the order states plaintiff’s own evidence supports defendants’ claims of non-involvement in the selection of his audit the district_court completely dismissed petitioner’s suit including the bivens claim the district court’s judgment stated it is ordered adjudged and decreed that plaintiff rodolfo lizcano take nothing against defendants the united_states of america the internal_revenue_service the department of the treasury and the named individual defendants on date respondent filed with this court a motion for continuance of trial to provide time for petitioner to appeal the district_court case this court granted respondent’s motion on date respondent filed a motion for summary_judgment the tax_court by order dated date ordered petitioner to file any response on or before date to date the tax_court has not received a response the tax_court by order dated date informed both parties that a hearing on respondent’s motion for summary_judgment was scheduled for a time and date certain of date pincite a m in san antonio texas in a designated courtroom in order to precede the scheduled trial of the case that week petitioner failed to make an appearance at the hearing i jurisdiction opinion there are two prerequisites to this court’s jurisdiction to redetermine a deficiency the issuance of a valid notice_of_deficiency by the commissioner and the timely filing of a petition with the court by the taxpayer see rule a c 116_tc_356 and cases cited thereat affd 293_f3d_740 5th cir validity of notice_of_deficiency petitioner contends that the notice_of_deficiency is invalid because it lists incorrectly the last date on which petitioner could file a timely petition with this court petitioner relies on sec_6213 and the internal_revenue_service restructuring and reform act of rra publaw_105_206 sec a 112_stat_767 for his argument that the notice_of_deficiency is invalid pursuant to sec_6213 a taxpayer ha sec_90 days or days if the notice is addressed to a person outside the united_states from the date that the notice_of_deficiency is mailed to file a petition with this court for a redetermination of the contested deficiency rra section a provides as follows a in general --the secretary_of_the_treasury or the secretary’s delegate shall include on each notice_of_deficiency under sec_6212 of the internal_revenue_code_of_1986 the date determined by such secretary or delegate as the last day on which the taxpayer may file a petition with the tax_court b later filing deadlines specified on notice_of_deficiency to be binding --subsection a of sec_6213 relating to restrictions applicable to deficiencies petition to tax_court is amended by adding at the end the following new sentence any petition filed with the tax_court on or before the last date specified for filing such petition by the secretary in the notice_of_deficiency shall be treated as timely filed c effective date --subsection a and the amendment made by subsection b shall apply to notices mailed after date sec_6212 provides that if the commissioner determines a deficiency in income_tax he is authorized to send notice of such deficiency to the taxpayer by certified mail or registered mail the purpose of this provision is to provide the taxpayer with actual notice of the deficiency in a timely manner so that the taxpayer will have an opportunity to seek a redetermination of such deficiency in the prepayment forum offered by this court rochelle v commissioner supra pincite see 114_tc_489 affd 275_f3d_912 10th cir 89_tc_1063 affd 886_f2d_1237 9th cir accordingly this court has held that where the commissioner fails to provide the petition date on the notice_of_deficiency but the taxpayer nonetheless receives the notice and files a timely petition the notice is valid smith v commissioner supra pincite petitioner received the notice_of_deficiency and filed a timely petition with this court although the notice_of_deficiency stated incorrectly the last date on which petitioner could petition this court it clearly and conspicuously stated that a petition must be filed with this court within days of the date the notice_of_deficiency was mailed furthermore respondent mailed a letter to petitioner on date acknowledging the error in the notice_of_deficiency and informing petitioner that he had until date to file a petition with this court accordingly the statutory goal of providing the taxpayer with actual notice of the deficiency determination in a timely manner was satisfied the court concludes that the notice_of_deficiency is valid and this court has jurisdiction ii availability of a bivens remedy bivens provides that federal courts have the inherent authority to award damages against federal officials to compensate plaintiffs for violations of their constitutional rights however bivens remedies are not available to compensate plaintiffs for all constitutional torts committed by federal officials w ctr for journalism v cederquist 235_f3d_1153 9th cir there are three recognized circumstances in which a bivens remedy is unavailable congress has provided what it considers adequate remedial mechanisms for constitutional violations that may occur in the course of administering a federal program there are special factors counselling hesitation in the absence of affirmative action by congress that indicate that congressional inaction has not been inadvertent and congress has specifically foreclosed such relief and courts cannot judicially create a remedy id pincite n the third circumstance is applicable to the instant case as the anti-injunction_act sec_7421 prohibits suits to restrain the assessment or collection_of_taxes the first circumstance is also pertinent as congress has given taxpayers the right to sue for a refund sec_7422 additionally 6487_us_412 see the court_of_appeals for the fifth circuit’s decision in 802_f2d_801 5th cir the court to which an appeal in this case would normally lie absent a stipulation to an appeal elsewhere see also natl commodity and barter ass’n v archer 31_f3d_1521 10th cir 915_f2d_1230 9th cir 773_f2d_126 7th cir 7446_us_14 see 462_us_296 8see carlson v green supra pincite sec_6330 overrides the anti-injunction_act and permits proceedings in the proper court including this court to enjoin the beginning of a levy during the period the levy action is suspended see 124_tc_296 congress has given taxpayers the right to bring a civil_action for damages and has established criminal sanctions for federal officers or employees who infringe upon a taxpayer’s rights see sec_6103 sec_7213 sec_7213a and sec_7431 discussed infra iii anti-injunction_act in 416_us_725 the court stated the purpose of the anti-injunction_act as follows the anti-injunction_act apparently has no recorded legislative_history but its language could scarcely be more explicit - ‘no suit for the purpose of restraining the assessment or collection of any_tax shall be maintained in any court ’ the court has interpreted the principal purpose of this language to be the protection of the government’s need to assess and collect taxes as expeditiously as possible with a minimum of preenforcement judicial interference ‘and to require that the legal right to the disputed sums be determined in a suit_for_refund ’ citations omitted it is evident that the primary purpose of petitioner’s case is to prevent the assessment and collection_of_taxes for his taxable_year congress has given taxpayers the right to sue the government for a refund if forced to overpay taxes and it would make the collection_of_taxes chaotic if a taxpayer could bypass the remedies provided by congress simply by bringing a damage action against treasury employees 773_f2d_126 7th cir there are sound reasons not to subject the taxing system to an extra-statutory measure of damages without express congressional authority baddour inc v united_states supra pincite the anti-injunction_act expressly bars petitioner’s actiondollar_figure furthermore the courts of appeals for the first second third fourth fifth sixth seventh eighth ninth and tenth circuits are all in agreement that bivens relief is not available for alleged constitutional violations by irs officials involved in the process of assessing and collecting taxes 355_f3d_1179 9th cir see 409_f3d_106 2d cir 317_f3d_401 4th cir 214_f3d_148 3d cir 127_f3d_1249 10th cir 125_f3d_979 6th cir 26_f3d_1448 8th cir 960_f2d_187 1st cir baddour inc v united_states supra pincite cameron v irs supra pincite this court will not judicially create a remedy for petitioner 10none of the exceptions to the anti-injunction_act is applicable to the instant case sec_7421 provides except as provided in sec_6015 sec_6212 and c a b b e i c c a and b b and no suit for the purpose of restraining the assessment or collection of any_tax shall be maintained in any court by any person iv respondent’s motion for summary_judgment a general rules summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 a party is allowed to move for a summary adjudication in the moving party’s favor upon all or any part of the legal issues in controversy rule a a decision on the motion shall be rendered if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule b the moving party bears the burden of proving that no genuine issue of material fact exists and that he or she is entitled to judgment as a matter of law 98_tc_518 affd 17_f3d_965 7th cir facts and inferences drawn from the record are viewed in the light most favorable to the nonmoving party id where the moving party properly makes and supports a motion for summary_judgment an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but must by affidavits or otherwise set forth specific facts showing that there is a genuine issue for trial rule d b unlawful audit petitioner relies on sec_6103 and sec_7213 for his claim that the audit and examination of his federal_income_tax return was improper sec_6103 protects the privacy of taxpayers and restricts government officers and employees from disclosing confidential return_information in support of the restrictions imposed by sec_6103 sec_7213 and sec_7213a make unlawful the unauthorized disclosure of return_information and the unauthorized inspection of returns or return_information respectively sec_7213 makes it unlawful for any officer_or_employee of the united_states or any person described in sec_6103 or an officer_or_employee of any such person or any former officer_or_employee to willfully disclose except as otherwise authorized by law any_tax return or return_information as defined in sec_6103 the penalty for this felony is a fine of not more than dollar_figure or imprisonment for not more than years or both additionally sec_7431 imposes civil damages for the unauthorized inspection or disclosure of returns and return informationdollar_figure 11a taxpayer may bring a civil_action for damages in a u s district_court sec_7431 the damages are the greater of dollar_figure for each unauthorized inspection or disclosure of a return or return_information or the sum of the actual damages sustained by the taxpayer as a result of such unauthorized inspection or disclosure plus in the case of a continued sec_7213a unauthorized inspection of returns or return_information was enacted in by the taxpayer_browsing_protection_act publaw_105_35 111_stat_1104 to address unauthorized scanning of tax returns and return_information primarily by tax enforcement personnel sec_7213a provides sec_7213a prohibitions -- federal employees and other persons --it shall be unlawful for-- a any officer_or_employee of the united_states or b any person described in sec_6103 or an officer_or_employee of any such person willfully to inspect except as authorized in this title any return or return_information for purposes of sec_7213a inspect means any examination of a return or return_information sec_7213a sec_6103 violation of sec_7213a can result in a fine not exceeding dollar_figure or imprisonment not exceeding year or both as well as dismissal from federal employment sec_7213a and continued willful inspection or disclosure or an inspection or disclosure that is the result of gross negligence punitive_damages sec_7431 in addition to the damages as determined by sec_7431 the taxpayer is entitled to the cost of the action sec_7431 the taxpayer may also be able to recover attorney’s fees see sec_7431 and sec_7430 as a general_rule this court will not look behind a notice_of_deficiency it does not usually examine the evidence used or the propriety of the commissioner’s motives policy or procedures in making audit determinations see 79_tc_185 62_tc_324 61_tc_61 58_tc_792 overruled in part 78_tc_173 however this court has recognized an exception to the rule when there is substantial evidence of unconstitutional conduct on the commissioner’s part and the integrity of the judicial process would be impugned if the court permitted the commissioner to benefit from his conduct suarez v commissioner supra see greenberg’s express inc v commissioner supra but even in these limited situations this court has refused to hold the notice_of_deficiency null and void human engg institute v commissioner supra suarez v commissioner supra see greenberg’s express inc v commissioner supra c collateral_estoppel respondent contends that collateral_estoppel also known as issue preclusion precludes petitioner from relitigating the issue of whether his federal_income_tax return was illegally selected for audit respondent notes that the district_court has held that petitioner’s income_tax return was selected for audit by computer collateral_estoppel exists for the dual purpose of protecting litigants from the burden of relitigating an identical issue and of promoting judicial economy by preventing unnecessary or redundant litigation 91_tc_273 see also 440_us_147 439_us_322 in general the doctrine_of collateral_estoppel forecloses relitigation of issues actually litigated and necessarily decided in a prior suit parklane hosiery co v shore supra pincite n meier v commissioner supra pincite 90_tc_162 affd 904_f2d_525 9th cir this court expanding upon three factors identified by the supreme court in montana v united_states supra pincite has set forth five prerequisites necessary for the application in factual contexts of collateral_estoppel the issue in the second suit must be identical in all respects with the one decided in the first suit there must be a final judgment rendered by a court of competent jurisdiction collateral_estoppel may be invoked against parties and their privies to the prior judgment the parties must actually have litigated the issues and the resolution of these issues must have been essential to the prior decision the controlling facts and applicable legal rules must remain unchanged from those in the prior litigation peck v commissioner supra pincite citations omitted identity of issues the first of the five factors enumerated above focuses on identity of the issues the court must determine whether the facts and issues upon which the earlier judgment was rendered are applicable to the instant case see 62_tc_607 the question before the district_court in the proceeding between petitioner and the nine named individuals was whether the named individuals either participated in the decision to initiate audits of his tax returns or in the actual audit process itself in violation of sec_6103 and sec_7605 and whether petitioner’s constitutional rights specifically his first amendment right to free speech his fourth_amendment liberty interests his fifth_amendment right to procedural and substantive due process and equal protection and his right to be free of cruel and unusual punishment were violated sec_7605 provides sec_7605 restrictions on examination of taxpayer --no taxpayer shall be subjected to unnecessary examination or investigations and only one inspection of a taxpayer’s books of account shall be made for each taxable_year unless the taxpayer requests otherwise or unless the secretary after investigation notifies the taxpayer in writing that an additional inspection is necessary in probing the existence of the alleged violations the district_court made specific findings_of_fact and conclusions with respect to the selection of petitioner’s federal_income_tax return for audit the district_court found that none of the named individual defendants was responsible for the selection of petitioner’s federal_income_tax return for audit because his tax_return was selected by computer the district court’s findings addressed precisely the same issue that is now before this court the selection of petitioner’s federal_income_tax return for audit accordingly identity of issues poses no barrier to the application of collateral_estoppel final judgment by court of competent jurisdiction the second pertinent factor is phrased in terms of a final judgment by a court of competent jurisdiction there is no question that the district_court is a court of competent jurisdiction and that it reached a final judgment in the subject case this prerequisite also poses no barrier to the application of collateral_estoppel privity the third point typically considered by this court in assessing the propriety of collateral_estoppel is that the doctrine may be invoked against parties and their privies to the prior judgment peck v commissioner supra pincite historically courts often went further than this formulation in restricting the rule’s use as explained by the u s supreme court in until relatively recently however the scope of collateral_estoppel was limited by the doctrine_of mutuality of parties under this mutuality doctrine neither party could use a prior judgment as an estoppel against the other unless both parties were bound by the judgment parklane hosiery co v shore supra pincite the supreme court has now abandoned the requirement of mutuality and sanctioned both offensive and defensive use of nonmutual collateral_estoppel see eg 464_us_154 parklane hosiery co v shore supra pincite offensive use occurs when the plaintiff seeks to foreclose the defendant from litigating an issue the defendant has previously litigated unsuccessfully in an action with another party while use in the defensive sense occurs when a defendant seeks to prevent a plaintiff from asserting a claim the plaintiff has previously litigated and lost against another defendant parklane hosiery co v shore supra pincite n this court likewise no longer insists upon strict mutualitydollar_figure respondent seeks to assert collateral_estoppel against petitioner which is defensive collateral_estoppel privity in 13however there is a caveat where collateral_estoppel premised on a state proceeding is sought to be used offensively in federal court reference is made to the controlling state law to determine the propriety of such offensive use 103_tc_501 the sense of ‘identity of interests’ has been broadly construed and applied privity between the united_states and the commissioner of internal revenue is also recognized by this court gammill v commissioner supra pincite similarly government officials or employees who are sued in their official capacities are generally considered to be in privity with the government or their governmental agencies 894_fsupp_108 w d n y secretary_of_the_treasury was in privity with the united_states see 843_f2d_111 3d cir 810_f2d_438 4th cir 738_f2d_10 1st cir respondent is permitted to use collateral_estoppel in the defensive sense because petitioner’s case in the district_court was against respondent at least initially and named individual employees of respondent the fact that petitioner did not include respondent as a defendant in his district_court amended complaint does not bar the application of collateral_estoppel because respondent has privity with its employees see supra note furthermore the captions of the order and judgment of the district_court include respondent and the judgment specifically provides it is ordered adjudged and decreed that plaintiff rodolfo lizcano take nothing against defendants the united_states of america the internal_revenue_service the department of the treasury there is an obvious identity of interests where nine of respondent’s employees as well as respondent at least initially were defendants in petitioner’s district_court case and respondent is now the defendant in the instant case accordingly privity poses no barrier to the application of collateral_estoppel issues actually litigated and essential the fourth factor is that the issues in question have been actually litigated and essential to the result in the prior proceeding peck v commissioner supra pincite the district_court stated lizcano has also alleged the sole motivation underlying the audit of his tax returns was to retaliate against his constitutionally protected right to complain of illegal and discriminatory actions by other irs employees the district_court concluded that while petitioner had sufficiently alleged violations of his constitutional rights by defendants in initiating the audit he failed to prove that any of the named defendants initiated or were involved in the selection of his tax_return for examination instead the district_court found that the selection of his federal_income_tax return for audit had been done by computerdollar_figure petitioner again alleges that his 14there has been no allegation nor fact alleged that the computer’s selection was done in other than a neutral way based on the irs’s standard matching and or discriminatory income function dif software used to score tax returns for their continued federal tax_return was improperly selected for audit in retaliation for his eeoc complaints and whistle blowing thus petitioner seeks to relitigate the identical issue necessarily decided in his district_court case this factor poses no obstacle to the application of collateral_estoppel change_in_circumstances the fifth consideration for collateral_estoppel is whether there has been a change in the controlling facts or legal rules since the earlier ruling id the type of changes with which this factor is concerned are factual changes stemming from subsequent events and legal changes wrought by intervening judicial decisions statutory provisions or regulatory promulgations sunnen v 333_us_591 respondent seeks to apply collateral_estoppel to the same facts considered by the district_court petitioner has not brought to the tax court’s attention nor is this court aware of any relevant changes in the applicable law via judicial decisions statutory provisions or regulatory promulgations that have occurred since the district_court dismissed petitioner’s case on date accordingly change_in_circumstances also poses no bar to the application of collateral_estoppel continued probability of error and applied even handedly to all individual income_tax returns the dif scoring system was developed by using the results of random audits historically known as the taxpayer compliance movement program or by its acronym tcmp conclusion the court concludes that collateral_estoppel bars petitioner from relitigating the issue of whether his federal_income_tax return was improperly selected for audit in violation of sec_6103 and sec_7605 and petitioner’s constitutional rights the district_court previously found that petitioner’s federal_income_tax return was selected for audit by computer and not in retaliation for his complaints against his coworkers or his job performance petitioner also alleges that respondent violated sec_7213 an issue which he did not raise in his district_court case however pursuant to the judicial doctrine_of collateral_estoppel the parties to the suit and their privies are thereafter bound ‘not only as to every matter which was offered and received to sustain or defeat the claim or demand but as to any other admissible matter which might have been offered for that purpose ’ commissioner v sunnen supra pincite quoting 94_us_351 accordingly the court will grant respondent’s motion for summary_judgment the court has considered all of petitioner’s contentions arguments requests and statements to the extent not discussed herein we conclude that they are meritless moot or irrelevant to reflect the foregoing an appropriate order and 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-153344-08 date june legend x y ----------------------------------------------------------------------------------------------------- ----------------------- --------------------------------------------------- state ------------- date -------------------------- dear ------------- we received your letter dated date submitted on behalf of x requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be treated as an association_taxable_as_a_corporation under sec_301_7701-3 this letter responds to your request facts x was formed on date as a state limited_liability_company x is wholly-owned by y y intended that x be treated as an association_taxable_as_a_corporation for federal tax purposes effective date however x inadvertently failed to timely file a form_8832 entity classification election law and analysis plr-153344-08 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with a single owner can elect to be classified as an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed if an election specifies an effective date more than days prior to the date on which the election is filed it will be effective days prior to the date it was filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion plr-153344-08 based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 accordingly x is granted an extension of time of sixty days from the date of this letter to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date the election should be made by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the 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 representatives the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c date number release date tl-n-4976-99 cc dom fs it a uilc internal_revenue_service national_office field_service_advice memorandum for district_counsel brooklyn from cc ner brk deborah butler assistant chief_counsel field service cc dom fs subject potential ace_adjustment for depletion this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend corp a corp b corp c location d mine x state e taxable_year taxable_year dollar_figuref dollar_figureg dollar_figureh issue whether in computing alternative_minimum_tax amt corp c has an adjusted_current_earnings ace_adjustment under sec_56 for_the_use_of percentage_depletion for mining_property placed_in_service in a tax_year beginning prior to date when its amt basis in the mining_property is adjusted_basis for the purposes of sec_612 conclusion in computing amt corp c does not have an ace_adjustment under sec_56 for_the_use_of percentage_depletion for mining_property placed_in_service in a tax_year beginning prior to date when its amt basis in the mining_property is adjusted_basis for the purposes of sec_612 facts corp a is a wholly-owned united_states subsidiary of corp b a company located in location d corp c a wholly owned subsidiary of corp a owns and operates mine x located in state e the mine is an open-pit copper mine corp c placed the mining_property at issue in service prior to date and uses the percentage_depletion method described in sec_613 for computing its allowable sec_611 depletion deduction for regular_tax purposes corp c claimed depletion deductions for taxable_year of dollar_figuref and for taxable_year of dollar_figureg for amt purposes the taxpayer claimed depletion deductions for taxable_year of dollar_figuref and for taxable_year of dollar_figureh which is less than dollar_figureg corp c’s amt basis for the mine only included amounts that would be basis for purposes of for taxable_year the depletion deduction was determined by using sec_613 percentage_depletion which amount was less than the adjusted_basis for purposes of sec_612 therefore the depletion deduction was the same for regular_tax and amt purposes for taxable_year the depletion deduction was also determined by using sec_613 percentage_depletion the depletion deduction for amt purposes however was limited to the taxpayer's remaining sec_612 basis in the property which after adjustments was dollar_figureh law and analysis sec_55 imposes in addition to the other taxes imposed by subtitle a amt equal to the excess if any of the tentative_minimum_tax tmt for the taxable_year over the regular_tax for the taxable_year under sec_55 tmt equals the amt rate applied to the excess of alternative_minimum_taxable_income amti for the taxable_year over an exemption_amount reduced by the amt foreign_tax_credit for the taxable_year amti is defined in sec_55 as the taxable_income of the taxpayer for the taxable_year determined with the adjustments provided in sec_56 and sec_58 and increased by the amount of the items of tax preference described in sec_57 under sec_57 depletion is an item_of_tax_preference which with respect to each subject property is the excess of the deduction for depletion allowable under sec_611 for the taxable_year over the adjusted_basis of the property at the end of the taxable_year determined without regard to the depletion deduction of the taxable_year sec_611 provides that in the case of mines there shall be allowed in computing taxable_income a reasonable allowance for depletion the two methods of computing depletion are cost_depletion under sec_612 and percentage_depletion under sec_613 while the basis for cost_depletion is the adjusted_basis of the property percentage_depletion is computed by applying the specified rate for the mineral produced to gross_income_from_the_property sec_612 and sec_613 sec_56 requires an increase to amti based on ace of a corporate taxpayer the ace_adjustment is equal to of the corporation's ace for the taxable_year over its amti determined without regard to the ace_adjustment and the amt net_operating_loss_deduction amt nold sec_56 defines ace to mean amti for the taxable_year determined with the with the adjustments provided in sec_56 but without regard to the ace_adjustment and the amt nold sec_56 provides that in computing ace a deduction shall not be allowed for any item if the item would not be deductible for any taxable_year for purposes of computing the corporation's earnings_and_profits sec_56 defines the term earnings_and_profits for purposes of sec_56 as earnings_and_profits computed for purposes of subchapter_c sec_1_312-6 provides that in the case of a corporation in which depletion is a factor in the determination of income the only depletion deductions to be considered in the computation of the total earnings_and_profits are those based on cost or other basis without regard to the date value in computing earnings_and_profits for any period beginning after february the only depletion deductions that are to be considered are those based upon cost or other basis if the depletable asset was acquired after date or adjusted cost or date value whichever is higher if acquired before in computing ace sec_56 provides specifically with regard to depletion that the allowance with respect to any property placed_in_service in a taxable_year beginning after shall be cost_depletion determined under sec_611 no ace_adjustment is necessary under sec_56 here because the depletion at issue is on property placed_in_service in a taxable_year beginning before date percentage_depletion under all revenue acts for mines is not to be taken into consideration in computing earnings_and_profits instead under sec_1_312-6 only depletion based upon adjusted_basis like cost_depletion can reduce earnings_and_profits sec_56 requires that deductions which reduce amti but which do not reduce a corporation’s earnings_and_profits must be added back in for purposes of calculating ace here the amount that would not reduce earnings_and_profits is excess of percentage_depletion over cost_depletion but the amt depletion deduction does not ultimately exceed cost_depletion under sec_612 in this case because the preference item under sec_57 has effectively limited the amt depletion deduction to the amount of the adjusted_basis for cost_depletion in other words the percentage_depletion deduction in excess of cost_depletion does not reduce amti because the excess is completely offset by the preference item for depletion provided by sec_57 thus for amt purposes there is ultimately no reduction to amti that does not also reduce earnings_and_profits as a result there is no ace_adjustment under sec_56 attributable to depletion under these facts the current case is distinguishable from a case where a taxpayer has a percentage_depletion deduction that is in excess of cost_depletion and the excess is not completely offset by the preference item provided under sec_57 in computing amti for example basis under sec_57 may be increased by mine exploration and development costs that must be capitalized for amt purposes under sec_56 in such a case the excess of percentage_depletion over cost_depletion would not necessarily be eliminated by the preference item under sec_57 because the excess would never decrease earnings_and_profits the excess that was not eliminated would be added back to increase ace under sec_56 by clifford m harbourt senior technician reviwer income_tax and accounting branch field service division