internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-157970-02 date date grantor grantor child child child grandchild grandchild grandchild grandchild grandchild grandchild grandchild trust plr-157970-02 trust trust trust d1 d2 d3 d4 year year year corporation bank trust company state county dear plr-157970-02 this letter responds to a letter dated date and subsequent correspondence submitted on behalf of grandchild by grandchild 6's authorized representative requesting certain rulings under the internal_revenue_code the information submitted states that grantor and grantor collectively the grantors husband and wife both died prior to date survived by child child and child on d1 grantors established three separate irrevocable individual trusts trust trust and trust collectively the d1 trusts for the benefit of their three children the trust agreements have identical terms except that each trust designates a different child as beneficiary the current trustee of the d1 trusts is bank under article i a of each d1 trust the beneficiary shall receive all of the income of his or her trust during his or her lifetime if the beneficiary becomes disabled then the income distributions will be discretionary based on the general comfort well-being education and support of said beneficiary article i b of the d1 trusts provides that upon the death of a beneficiary the trustee is to pay the net_income from the trust estate to his or her descendants per stirpes each d1 trust will terminate twenty years after the death of the last to die of child child and child at which time the trustee will distribute the trust corpus to the beneficiary’s then living issue per stirpes article iii a of the d1 trusts provides that the trustee may hold any shares of corporate stock comprising any part of the trust estate in its own name as trustee or in the name of its nominee or nominees it may give proxies to any person it may select to vote such stock at any stockholders’ meeting of any such corporation but shall during the life of grantor nominate grantor as such proxy in all instances except where grantor shall be unable to serve or be disqualified and following grantor 1's death so long as it shall continue to hold any stock of corporation in the trusts therein created it shall nominate as proxy for the voting of all such shares child article iv of the d1 trusts provides that in the case of a vacancy in the office of trustee resulting from resignation or disqualification for any cause then the trustors or the survivor of them or after their deaths a majority of their living children may nominate a successor trustee but if a majority of the children of the trustors are unable to agree upon a successor trustee within thirty days after such resignation or disqualification then any one of them may apply to any court of original general jurisdiction in the county and state for the appointment of a new trustee on such notice as shall be in accordance with the rules and practice of that court on d2 grantor established an inter_vivos revocable_trust trust pursuant to article viii of the trust agreement on grantor 1's death in year the trust corpus was divided into two equal parts the deceased spouse’s share and the surviving plr-157970-02 spouse’s share under article xii the surviving spouse’s share was held for the exclusive benefit of grantor grantor had the power during her lifetime to invade trust corpus for any amount or for any purpose on her death a portion of the trust was to be distributed to a private_foundation and the balance pursuant to grantor 2's exercise of a general power to appoint the trust corpus in default of exercise the trust corpus was to be added to the deceased spouse’s share in general under article xi the deceased spouse’s share was administered for the benefit of grantor and the grantors’ children pursuant to article xiii on grantor 2's death in year the remaining balance of the deceased spouse’s share and additions from the surviving spouse’s share was divided into three parts each part constituting a separate trust share for the benefit of each of the grantors’ three children child child and child and their descendants the current trustee of trust is bank article xiv paragraph b of the trust agreement defines beneficiary to include each named child if he or she is living at the death of grantor sec_1 or whichever event occurs later and all the descendants of the named child born prior to the termination of trust under article xv paragraph a of the trust agreement the trustee shall distribute the net_income of each separate trust among its beneficiaries in such proportion equal or unequal as the trustee shall determine article xv paragraph b of the trust agreement provides that the trustee may in its sole discretion invade the principal of each trust for the support education and emergency needs of any beneficiary of such trust article xv paragraph c of the trust agreement provides that trust will terminate by the exhaustion of all the principal or one day before the twenty-first anniversary of the date of death of the last survivor of grantor sec_1 and and all descendants of grantor living at the time of execution of this amendment but not later than such earlier termination_date as is required to prevent violation of the rule_against_perpetuities or any applicable rule against remoteness upon termination the entire balance of the principal and any accumulated income of each separate trust share shall be distributed outright free of trust per stirpes among the beneficiaries of such trust share then living article xvii paragraph b subparagraph of the trust agreement provides that upon the death of grantor or during any period of his incapacity the trustee shall appoint as proxies of all corporation stock grantor child and child upon the death resignation or incapacity of any of these proxies the named spouse of child shall be appointed proxy when all of the previously named proxies are no longer able or willing to serve as proxies then the trustee shall appoint child to serve as proxy if child is able and willing to serve plr-157970-02 article xviii of the trust agreement provides that in the event of the resignation or disqualification of the trustee then the trustor or after the trustor’s death any two of the trustor’s three children may appoint a successor if no two children of the trustor’s are then living or if living but are unable to agree upon a successor trustee then a successor trustee shall be chosen by the court of the state for the county in the manner provided for in the state trust act any successor trustee shall be a national bank or trust company authorized to do trust business in the state and having an unimpaired capital stock of at least dollar_figure as noted above grantor died in year and grantor died in year child died in year and child and child are currently living there are also grandchildren grandchildren through currently living the d1 trusts and trust are funded with common_stock of corporation a state corporation pursuant to article iiia of the d1 trusts child holds a proxy to vote any corporation stock held by the d1 trusts in addition pursuant to article xviib of the trust agreement child holds a proxy to vote the corporation stock held by trust on d3 the trust company a state nonprofit corporation was formed by the filing of the articles of incorporation and bylaws of the trust company with the secretary of state of state one of the purposes of the trust company as stated in article iii of the articles of incorporation is to serve as the successor trustee of the d1 trusts and trust article iv of the articles of incorporation provides that trust company has three members of a single class each member is a lineal descendant of the grantors the relative rights and responsibilities of each member are identical to those of every other member the three initial members were child child and child each a founding member should a founding member be unwilling or unable to serve or after the death of a founding member a successor member successor must be selected by and from among the adult lineal_descendants the family of that founding member lineal_descendants include adopted children each family determines for itself the term of any successor from that family and the procedure by which the successor will be selected and must designate the successor to the secretary of the corporation article x of the articles of incorporation provides in part that trust company has seven directors and no founding member may be a director each member is entitled to appoint two directors each of whom must be from the family of that appointing member all members are entitled to vote for the election of a seventh director who may or may not be a member of any family the number of directors constituting the board_of directors may be increased or decreased only by an amendment to the articles of incorporation any director may be removed with or plr-157970-02 without cause by the vote of two-thirds of the board_of directors provided however in the case of a director from the family of a founding member at least one vote for removal must be made by a director from the same family as the director to be removed the initial directors of trust company are grandchildren through article iv paragraph of the bylaws provides in part that the management of all the affairs property and interests of trust company is vested in a board_of directors consisting of seven persons appointed and elected as provided in the articles directors need not be members no founding member may be a director subject_to the limitations and requirements of article xii with respect to discretionary distributions from the d1 trusts and trust the board_of directors as a whole has the authority to make any and all decisions regarding trust company’s actions as trustee of the d1 trusts and trust the affirmative vote or written consent of not less than five directors is required to sell assets of the d1 trusts and trust on d4 the members of trust company consented to amendment to the bylaws adding new article xii under new article xii a special discretionary distribution committee will make all decisions regarding discretionary distributions to any beneficiary under the d1 trusts and trust and will have no other purpose or function the discretionary distribution committee is subject in part to the following requirements and limitations the committee will consist solely of not less than one and not more than three member s the board_of directors will appoint each member of the committee for a term of two years subject_to removal only for malfeasance or bad faith conduct no member of the committee may be a grantor or have any beneficial_interest in the d1 trusts or trust no member of the committee may be an employee of the trust company or corporation or any subsidiary or affiliate of either entity and no member of the committee may be a_related_or_subordinate_party within the meaning of sec_672 as to any grantor of any of the d1 trusts or trust or any beneficiary of the d1 trusts or trust bank has filed a petition in the appropriate court of state and county stating that it no longer desires to serve as trustee and asking the court for directions regarding the appointment of a successor trustee after the filing of bank’s petition bank trust company current and remainder adult beneficiaries and the special representative appointed by the court to represent all minor and unborn remainder beneficiaries of the d1 trusts and trust entered into a settlement agreement the settlement agreement will be effective upon the confirmation by the court and the issuance of a favorable private_letter_ruling by the internal_revenue_service plr-157970-02 paragraph of settlement agreement provides in part that the parties intend that trust company replace bank as trustee of the d1 trusts and trust all parties waive certain requirements of trust that the trustee be a corporate trustee with capitalization of dollar_figure million or more the settlement agreement has been signed by all parties and confirmed by order of the court the d1 trusts and trust were irrevocable prior to date and no additions to the d1 trusts and trust have been made since that date ruling sec_671 of the internal_revenue_code provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_678 provides in general that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would within the principles of sec_671 to inclusive subject a grantor of a_trust to treatment as the owner thereof based on the facts and representations submitted none of grandchildren through will have the power to vest the corpus or income from the d1 trusts or trust in themselves therefore we conclude that grandchildren through will not be treated as the owners of any portion of the d1 trusts or trust under sec_671 and sec_678 ruling sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition that is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive plr-157970-02 sec_2041 provides that a general_power_of_appointment is a power that is exercisable in favor of the decedent the decedent's_estate the decedent's creditors or the creditors of the decedent's_estate however a power to consume invade or appropriate property for the benefit of the decedent that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent shall not be deemed a general_power_of_appointment sec_20_2041-1 of the estate_tax regulations provides that a power in a donee to remove or discharge a trustee and appoint himself may be a power_of_appointment for example if under the terms of a_trust instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and the decedent has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself the decedent is considered as having a power_of_appointment sec_2514 and the regulations promulgated under that section provide similar rules regarding the application of the gift_tax in the case of the release exercise or lapse of a general_power_of_appointment revrul_95_58 1995_2_cb_191 revoking revrul_79_353 1979_2_cb_325 holds that a decedent-settlor's reservation of an unqualified power to remove a trustee and appoint an individual or corporate successor trustee that is not related or subordinate to the decedent within the meaning of sec_672 is not considered a reservation of the trustee's discretionary powers of distribution over the property transferred by the decedent-settlor to the trust for purposes of sec_2036 and sec_2038 sec_672 defines the term related_or_subordinate_party to mean any nonadverse_party who is the grantor's spouse if living with the grantor or any one of the following the grantor's father mother issue brother or sister an employee of the grantor a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control a subordinate employee of a corporation in which the grantor is an executive for purposes of sec_672 sec_674 and sec_675 a_related_or_subordinate_party shall be presumed to be subservient to the grantor in respect of the exercise or nonexercise of the powers conferred on him unless such party is shown not to be subservient by a preponderance_of_the_evidence in this case under article xii of the bylaws no beneficiary under the d1 trusts or trust can participate directly or indirectly in any decisions regarding discretionary distributions to any beneficiary under the trusts furthermore any decisions regarding discretionary distributions are made by the distributions committee which must consist of individual s who are not related or subordinate within the meaning of sec_672 to any grantor or to any beneficiary the distributions committee cannot include any employee of trust company corporation or any affiliate accordingly based on the plr-157970-02 facts presented the directors of trust company will not be deemed to possess a general_power_of_appointment under sec_2041 and sec_2514 with respect to the d1 trusts or trust ruling sec_2601 imposes a tax on each generation-skipping_transfer made by a transferor to a skip_person under sec_2611 and sec_26_2611-1 of the generation-skipping_transfer_tax regulations a generation-skipping_transfer is an event that is either a direct_skip a taxable_distribution or a taxable_termination the determination as to whether an event is a generation-skipping_transfer is made by reference to the most recent transfer subject_to the estate or gift_tax under a of the tax_reform_act_of_1986 the generation-skipping_transfer_tax is generally applicable to generation-skipping transfers made after date however under b a of the tax reform act and sec_26_2601-1 of the regulations the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification that does not result in an increase in the amount of a gst transfer or the creation of a new gst transfer will not cause the trust to lose its exempt status under the facts presented the replacement of bank as trustee with trust company will not shift a beneficial_interest in the d1 trusts or trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trusts beyond the period provided for in the original trusts plr-157970-02 accordingly we conclude that the replacement of bank as trustee with trust company will not cause the d1 trusts or trust to lose exempt status for generation- skipping transfer_tax purposes under sec_2601 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to grandchild 6's authorized representative sincerely j thomas hines chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc psi plr-115357-00 date date number release date index number legend x a b c d e d1 d2 d3 d4 d5 d6 d7 plr-115357-00 dear this letter responds to your letter dated date and subsequent correspondence written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts according to the information submitted x incorporated on d1 and elected to be an s_corporation effective d1 on d2 entity b an ineligible s_corporation shareholder converted its convertible debentures in x into shares of x common_stock on d3 b converted its warrants in x into x common_stock on d4 corporation c an ineligible s_corporation shareholder converted its convertible debentures in x into x common_stock on d5 c converted its warrants in x into x common_stock in the later part of d6 x’s auditors noticed that x had issued its common_stock to ineligible shareholders and thus had terminated its s election on d2 subsequently beginning on d7 the x common_stock that was held by b is held by a and the x common_stock that was held by c is held by d and e a d and e are eligible s_corporation shareholders x represents that as soon as the termination was brought to its attention it took steps to obtain relief x also represents that there was no intent to knowingly terminate its s election and that the events that resulted in the termination were not motivated by tax_avoidance or retroactive tax planning also x and its shareholders have agreed to make any adjustments that the secretary may require consistent with the treatment of x as an s_corporation law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1362 provides that an s election under sec_1362 shall be terminated whenever at any time on or after the first day of the taxable_year for which the corporation is an s_corporation the corporation ceases to be a small_business_corporation the termination is effective on and after the day of the termination sec_1362 provides that if an election under sec_1362 by any plr-115357-00 corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in the termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder in the corporation at any time during the period specified under sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the termination the corporation shall be treated as an s_corporation during the period specified by the secretary s rep no 97th cong 2d sess 1982_2_cb_718 in discussing sec_1362 of the code states in part if the internal_revenue_service determines that a corporation's subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts conclusions after applying the law to the facts submitted and the representations made we conclude that x’s s_corporation_election under sec_1362 was terminated when shares of x stock were issued to b on d2 we conclude that the termination constituted an inadvertent termination within the meaning of sec_1362 therefore under the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d2 to d7 and thereafter provided that x's s_corporation_election is not otherwise terminated under sec_1362 and b and c will be treated as shareholders during the period from d2 to d7 this ruling is contingent on x and all of its shareholders treating x as having been an s_corporation from d2 to d7 and thereafter accordingly all of the shareholders in x in determining their respective income_tax liabilities must include their pro_rata share of the separately and nonseparately computed items of x as plr-115357-00 provided in sec_1366 make adjustments to stock basis as provided in sec_1367 and take into account any distributions made by x as provided by sec_1368 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed regarding the tax consequences of the transfer of x common_stock from b to a and from c to d and e this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent under the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely yours mary beth collins assistant to the chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division dec in re dear this letter constitutes notice that with respect to the above-named defined benefit pension_plan we have granted a waiver of the minimum_funding_standard for the plan_year ended date this waiver for the plan_year ended date has been granted in accordance with sec_412 of the internal_revenue_code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the waived amount is the contribution which would otherwise be required to reduce the balance in the funding_standard_account to zero as of the end of the plan_year for which this waiver has been granted the company is a licensed bed skilled nursing facility and a comprehensive outpatient rehabilitation facility located in experienced a drop in the daily bed census the percentage of beds being occupied which has caused a significant reduction in revenue steps to improve cash_flow and has experienced a recent increase in its census as of date the value of the assets of the plan was equal to of the plan's current_liability the company has taken i the company has your attention is called to sec_412 of the code and sec_304 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived_funding_deficiency remains unamortized please note that any amendment to other retirement plans maintained by the company or to the company’s profit sharing pian to increase the liabilities of those plans would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan_year ended date the date of this letter should be entered on schedule b actuarial information a copy of this letter is being sent to the manager employee_plans classification in if you have any questions on this ruling letter please contact sincerely y i rue norman greenberg manager actuarial group yee eg


internal_revenue_service number release date index number --------------------------- ----------------------------------- ------------------------------------------ re ---------------------------- 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-104746-17 date date legend date grantor spouse guardian guardian guardian trust state state trustee power_of_appointment committee dear --------------------- -------------------- ------------------------------------------------------ -------------------------------------------------------- --------------------- ----------------------- -------------------------- ----------------------------------------------- ----------- -------------- -------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ------------------------------------------- this responds to a letter dated date and subsequent submissions requesting rulings under the internal_revenue_code facts plr-104746-17 the facts submitted and representations made are as follows on date grantors husband and wife created an irrevocable_trust trust for the benefit of grantors and beneficiaries which means a class consisting of grantors’ issue and the brothers of husband trust is a domestic_trust governed by the laws of state a corporate trustee trustee is the sole trustee of trust grantors are married and reside in state a community_property_state the terms of trust provide that until the death of the first grantor to die predeceased grantor at any time or times trustee shall distribute to the beneficiaries and or either or both of the grantors such amounts of the net_income or principal of trust as the power_of_appointment committee committee appoints while the committee is in existence trustee shall make no distributions except as the committee appoints from and after the death of the predeceased grantor and until the death of the surviving grantor at any time or times trustee shall distribute to the beneficiaries and or the surviving grantor such amounts of the net_income or principal of trust as the committee appoints while the committee is in existence trustee shall make no distributions except as the committee appoints any appointment direction determination or action by the committee requires either the unanimous written consent of the then serving members of the committee unanimous member power or the written consent of either or both of the grantors or the survivor of them and a majority of the then serving members of the committee grantor’s consent power the members of the committee serve and act in a non-fiduciary capacity the committee may direct that distributions be made equally or unequally to or for the benefit of any one or more of the beneficiaries to the exclusion of others trust provides that the members of the committee shall initially consist of guardian guardian and guardian or any other individual s who have legal authority to act on behalf of grantors’ issue guardian guardian and guardian each represent one of grantors’ three minor children if at any time the committee includes three or more members then all the members of the committee may by unanimous vote at any time and from time to time add one or more members to the committee provided that such members are beneficiaries and provided further that if any one or more of them is a minor then serving members of the committee shall by unanimous vote designate an individual who has legal authority under trust to serve as guardian if at any time a committee member resigns or fails or ceases to so serve then the position of such committee member shall remain vacant the committee shall cease to exist upon the first to occur of the death of the surviving grantor distribution date or the date upon which the committee is reduced to one member plr-104746-17 if the committee ceases to exist prior to the distribution date trustee may distribute to the beneficiaries such amounts of net_income or principal as trustee determines if the committee ceases to exist then until the death of the predeceased grantor trustee may distribute to either or both grantors such amounts of net_income or principal as trustee determines if the committee ceases to exist then from and after the death of the predeceased grantor trustee may distribute to the surviving grantor such amounts of net_income or principal of trust as trustee determines trust provides that at all times trustees of all trusts created under trust must be independent trustees who are not members of grantors’ family independent_trustee is defined as any bank or individual who is not either of the grantors and who is not within the meaning of sec_672 related or subordinate to either of the grantors grantors’ family is defined to include the issue of each of the grantor’s grandparents including the grantors and charities as defined in trust any net_income not distributed by trustee will be accumulated and added to principal each of the grantors shall have the power in a non-fiduciary capacity at any time and from time to time to appoint to any one or more of the grantors’ issue amounts of principal including the whole thereof as the grantor deems advisable to provide for the health maintenance support and education of grantors’ issue grantor’s sole power upon the death of the predeceased grantor trustee shall distribute the predeceased grantor’s entire_interest in the property of trust to or for the benefit of any person or persons or entity or entities other than the predeceased grantor’s estate the predeceased grantor’s creditors or the creditors of predeceased grantor’s estate as the predeceased grantor may appoint by will predeceased grantor’s testamentary power upon the death of the predeceased grantor any property remaining of the predeceased grantor’s entire one-half interest in trust that has not been effectively appointed by will shall be distributed as follows five percent to each member of the committee other than the grantors’ issue if there are one or more grantors’ issue then living the balance is to be distributed per stirpes to the grantors’ issue who are then living or held in a_trust for their benefit as provided by trust the surviving grantor’s balance in trust continues to be held by trust and administered pursuant to the terms of trust until the surviving grantor’s death upon the death of the surviving grantor trustee shall distribute the surviving grantor’s balance of trust to or for the benefit of any person or persons or entity or entities other than the surviving grantor’s estate the surviving grantor’s creditors or the creditors of surviving grantor’s estate as the surviving grantor may appoint by will surviving grantor’s testamentary power plr-104746-17 upon the death of the surviving grantor any property remaining of the surviving grantor’s balance of trust that has not been effectively appointed by will shall be distributed as follows five percent to each member of the committee other than the grantors’ issue if there are one or more grantors’ issue then living the balance is to be distributed per stirpes to the grantors’ issue who are then living or held in a_trust for their benefit as provided by trust trust provides that all transferred property to trust is community_property and grantors may hereafter either singly or jointly transfer other_property to trust which either is community_property or is being transmuted into community_property moreover any and all property transferred to trust prior to the death of the predeceased grantor is and shall retain its character as community_property any distribution pursuant to the terms of trust to either grantor prior to the death of the predeceased grantor is and shall be a distribution of community_property all distributions of the net_income or principal prior to the death of the predeceased grantor whether made by the committee trustee or a grantor’s exercise of the powers retained by such grantor to a beneficiary shall be a distribution out of community_property prior to the death of the predeceased grantor any exercise of either grantor’s sole power shall be funded equally from each grantor’s share of community_property held in trust each grantor consents to all such distributions by the other grantor with respect to each grantor’s testamentary powers any such appointment by the predeceased grantor shall be funded solely from the predeceased grantor’s one-half interest in property in trust each grantor affirmatively agrees and confirms that upon any distribution from trust other than to one of the grantors and other than the exercise of the predeceased grantor’s testamentary power such property shall be funded equally from each grantor’s share of community_property in trust it is represented that trustee grantors and members of the committee are all united_states persons within the meaning of sec_7701 no distribution by trustee to a beneficiary and no distribution to a beneficiary pursuant to the exercise of a power_of_appointment granted hereunder shall discharge any individual’s legal_obligation to support the beneficiary taxpayer has requested the following rulings as long as the committee is serving no portion of the items of income deductions plr-104746-17 and credits against tax of trust shall be included in computing the taxable_income deductions and credits of the grantors or any member of the committee under sec_671 the contribution of property to trust by grantors will not be a completed_gift subject_to federal gift_tax any distribution_of_property by the committee from trust to either grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee any distribution_of_property by the committee from trust to any beneficiary of trust other than the grantors will not be a completed_gift subject_to federal gift_tax by any member of the committee no member of the committee upon his or her death will include in his or her estate any property held in trust because such member is deemed to have a general_power_of_appointment within the meaning of sec_2041 over property held in trust the basis of all community_property in trust on the date of death of the predeceased grantor will receive an adjustment in basis to the fair_market_value of such property at the date of death of the predeceased grantor ruling sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_672 provides for purposes of subpart e the term adverse_party means any person having a substantial_beneficial_interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust sec_673 provides that the grantor shall be treated as the owner of any portion of a_trust in which the grantor has a reversionary_interest in either the corpus or the income therefrom if as of the inception of that portion of the trust the value of such interest exceeds five percent of the value of such portion plr-104746-17 sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to the powers described in sec_674 regardless of by whom held sec_674 provides that sec_674 shall not apply to a power exercisable only by will other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to a power to distribute corpus to or for a beneficiary provided that the power is limited by a reasonably_definite_standard under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant on its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both sec_677 provides in general that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor’s spouse held or accumulated for future distribution to the grantor or the grantor’s spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse sec_678 provides that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would within the principles of inclusive subject a grantor of a_trust to treatment as the owner thereof plr-104746-17 sec_679 provides that a united_states_person who directly or indirectly transfers property to a foreign_trust shall be treated as the owner for his taxable_year of the portion of such trust attributable to such property if for such year there is a united_states_beneficiary of any portion of the trust based on the facts submitted and representations made we conclude than an examination of trust reveals none of the circumstances that would cause either grantor to be treated as the owner of any portion of trust under sec_673 sec_674 sec_676 sec_677 or sec_679 so long as trust remains a domestic_trust and the committee remains in existence we further conclude that an examination of trust reveals none of the circumstances that would cause administrative controls to be considered exercisable primarily for the benefit of either grantor under sec_675 thus the circumstances attendant on the operation of trust will determine whether either grantor will be treated as the owner of any portion of trust under sec_675 this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office with responsibility for such examination also because none of the members of the committee has a power exercisable by himself to vest trust income or corpus in himself none shall be treated as the owner of trust under sec_678 ruling sec_2 and sec_2501 provides for the imposition of a gift_tax for each calendar_year on the transfer of property by gift during such calendar_year by any individual sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete as to any property or part thereof or interest therein with respect to which the donor has so parted with dominion and control as to leave the donor with no power to change the disposition of the property whether for the donor’s own benefit or for the benefit of another but if upon a transfer of property whether in trust or otherwise the donor reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the facts in the particular case accordingly in every case of a transfer of property subject_to a reserved power the terms of the power must be examined and its scope determined sec_25_2511-2 provides an example where the donor transfers property in trust to pay the income to the donor or accumulate it in the discretion of the trustee and the donor retains a testamentary power to appoint the remainder among the donor’s descendants the regulation concludes that no portion of the transfer is a completed plr-104746-17 gift however if the donor had not retained a testamentary_power_of_appointment but had instead provided that the remainder should go to x or his heirs the entire transfer would be a completed_gift sec_25_2511-2 provides that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title to the property in himself or herself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard under sec_25_2511-2 a donor is considered as possessing a power if it is exercisable by the donor in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom a trustee as such is not a person having an adverse_interest in the disposition of the trust property or its income sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that if a donor transfers property to himself as trustee or to himself and some other person not possessing a substantial adverse_interest as trustees and retains no beneficial_interest in the trust property and no power over it except fiduciary powers the exercise or nonexercise of which is limited by a fixed_or_ascertainable_standard to change the beneficiaries of the transferred property the donor has made a completed_gift sec_25_2511-2 does not define substantial adverse_interest sec_25_2514-3 provides in part that a taker in default of appointment under a power has an interest that is adverse to an exercise of the power sec_25_2514-3 also provides that a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in 308_us_39 the taxpayer created a_trust for the benefit of named beneficiaries and reserved the power_to_revoke the trust in whole or in part and to designate new beneficiaries other than himself six years later in the taxpayer relinquished the power_to_revoke the trust but retained the right to change the beneficiaries in the taxpayer relinquished the right to change the beneficiaries the court stated that the taxpayer’s gift is not complete for purposes of the gift_tax when the donor has reserved the power to determine those others who would ultimately receive the property accordingly the court held that the taxpayer’s plr-104746-17 gift was complete in when he relinquished his right to change the beneficiaries of the trust a grantor’s retention of a power to change the beneficial interests in a_trust causes the transfer to the trust to be incomplete for gift_tax purposes even though the power may be defeated by the actions of third parties 37_tc_897 see also 51_tc_352 in this case each grantor retained the grantor’s consent power over the income of trust under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom the committee members are not takers in default for purposes of sec_25_2514-3 they are merely coholders of the power under sec_25_2514-3 a coholder of a power is only considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in this case the committee ceases to exist upon the death of the last grantor to die accordingly the committee members do not have interests adverse to either grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 if the committee ceases to exist trustee has the power to distribute net_income to a beneficiary however trustee’s power is not a condition_precedent to each grantor’s consent power each grantor’s consent power over income is presently exercisable and not subject_to a condition_precedent thus trustee’s power to distribute net_income does not cause the transfer of property to be complete with respect to the income_interest in trust for federal gift_tax purposes therefore each grantor is considered as possessing the power to distribute income to any beneficiary himself or herself because he or she retained the grantor’s consent power each grantor also retained the power to appoint such amounts of principal including the whole thereof to any one or more of the beneficiaries grantor’s sole power under sec_25_2511-2 a gift is incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard in this case the grantor’s sole power gives each grantor the power to change the interests of the beneficiaries finally each grantor consented to allow the other grantor to exercise the grantor’s sole power alone even though each grantor’s power is limited by an ascertainable_standard ie health education maintenance and support grantors’ powers are not fiduciary powers if the committee ceases to exist trustee in its fiduciary capacity also has the power to distribute principal to one or more beneficiaries trustee is a corporate trustee and under the terms of the trust instrument cannot be related or subordinate within the meaning of sec_672 to the grantors the powers of trustee are not conditions precedent to the grantors’ powers each grantor’s sole power over principal is presently exercisable and not subject_to a condition_precedent accordingly each plr-104746-17 grantor retains dominion and control_over the principal of trust until trustee exercises his or her power to appoint principal see 37_tc_897 thus trustee’s powers to distribute principal do not cause the transfer of property to be complete with respect to the remainder in trust for federal gift_tax purposes accordingly the retention of grantor’s consent power and grantor’s sole power causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes further each grantor retained either a predeceased grantor’s testamentary power or the surviving grantor’s testamentary power depending on the order of the deaths of the grantors to appoint property in trust to any person or persons or entity or entities other than his or her respective estate his or her respective creditors or the creditors of his or her respective estate under sec_25_2511-2 the retention of a testamentary power to appoint the remainder of a_trust is considered a retention of dominion and control_over the remainder accordingly the retention of this power causes the transfer of property to trust to be incomplete with respect to the remainder in trust for federal tax purposes accordingly based on the facts submitted and representations made we conclude that the contribution of property to trust by the grantors will not be a completed_gift subject_to federal gift_tax however any distribution made from trust to a beneficiary is a completed_gift at the time of the distribution made one-half by each grantor_trust provides that any distribution pursuant to the terms of trust to either grantor prior to the death of the predeceased grantor is and shall be a distribution of community_property accordingly any distribution from trust to either grantor is merely a return of each grantor’s property therefore we conclude that any distribution_of_property by the committee from trust to either grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee further upon the predeceased grantor’s death the fair_market_value of the predeceased grantor’s interest in trust is includible in the predeceased grantor’s gross_estate for federal estate_tax purposes moreover upon the surviving grantor’s death the fair_market_value of the balance in trust is includible in the surviving grantor’s gross_estate for federal estate_tax purposes ruling sec_4 and sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power possessor the possessor’s estate the possessor’s creditors or the creditors of the individual’s estate plr-104746-17 sec_25_2514-1 provides in part that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the possessor or his creditors or the possessor’s estate or the creditors of the estate sec_2514 provides that in the case of a power_of_appointment created after date if the power is exercisable by the possessor only in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2514 provides that in the case of a power_of_appointment created after date if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the possessor such power shall not be deemed a general_power_of_appointment for purposes of sec_2514 a person who after the death of the possessor may be possessed of a power_of_appointment with respect to the property subject_to the possessor’s power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor’s power sec_25_2514-3 provides in part that a co-holder of a power_of_appointment has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y’s death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent’s gross_estate under sec_2035 to inclusive under sec_2041 the term general_power_of_appointment is defined in relevant part to mean a power which is exercisable in favor of the decedent his estate his creditors or the creditors of his estate plr-104746-17 sec_2041 provides however that in the case of a power_of_appointment created after date which is exercisable by the decedent only in conjunction with another person if the power is not exercisable by the decedent except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the decedent - such power shall not be deemed a general_power_of_appointment for purposes of sec_2041 a person who after the death of the decedent may be possessed of a power_of_appointment with respect to the property subject_to the decedent’s power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the decedent’s power sec_20_2041-3 of the estate_tax regulations provides in part that a co-holder of a power_of_appointment has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the decedent’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y’s death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y the powers held by the committee members under the grantor’s consent power are powers that are exercisable only in conjunction with the creators the grantors accordingly under sec_2514 and sec_2041 the committee members do not possess general powers of appointment by virtue of possessing this power further the powers held by the committee members under the unanimous member powers are not general powers of appointment for purposes of sec_2514 and sec_2041 as in the examples in sec_25_2514-3 and sec_20_2041-3 the committee members have substantial adverse interests in the property subject_to this power accordingly any distribution made from trust to a beneficiary other than grantors pursuant to the exercise of these powers the grantor’s consent power and the unanimous member powers are not gifts by the committee members instead such distributions are gifts by the grantors based upon the facts submitted and representations made we conclude that any distribution_of_property by the committee from trust to any beneficiary of trust other than the grantors will not be a completed_gift subject_to federal gift_tax by any member of the committee further we conclude that any distribution_of_property from trust to a beneficiary other than grantors will be a completed_gift by the grantors trust provides that all distributions of the net_income or principal prior to the death of the predeceased grantor whether made by the committee trustee or a grantor’s exercise of the powers retained by such grantor to a beneficiary is and shall be a distribution out of plr-104746-17 community_property accordingly distributions to beneficiaries other than grantors will be gifts made one-half by each grantor finally we conclude that the powers held by the committee members are not general powers of appointment for purposes of sec_2041 and accordingly the possession of these powers by the committee members will not cause trust property to be includible in any committee member’s gross_estate under sec_2041 ruling sec_1014 provides in part that except as otherwise provided in this section the basis_of_property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent will if not sold exchanged or otherwise_disposed_of before the decedent’s death by such person be the fair_market_value of the property at the date of the decedent’s death sec_1014 provides that in the case of decedents dying after date property which represents the surviving spouse’s one-half share of community_property held by the decedent and the surviving_spouse under the community_property_laws of any state is considered for purposes of sec_1014 to have been acquired from or to have passed_from_the_decedent if at least one-half of the whole of the community interest in such property was includible in determining the value of the decedent’s gross_estate sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money or money’s worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2038 provides that the value of the decedent’s gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money or money’s worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the three-year period on the date of the decedent’s death plr-104746-17 grantors reside in state a community_property_state trust provides that all transferred property to trust is community_property or is being transmuted into community_property moreover any and all property transferred to trust prior to the death of the predeceased grantor is and shall retain its character as community_property as concluded above upon the death of each grantor his or her respective interest in trust as either the predeceased grantor or the surviving grantor will be includible in his or her respective gross_estate for federal estate_tax purposes accordingly based upon the facts submitted and representations made we conclude that the basis of all community_property in trust on the date of death of the predeceased grantor will receive an adjustment in basis to the fair_market_value of such property at the date of death of the predeceased grantor except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion on the trust provisions permitting trustee to distribute income or principal to trustees of other trusts decanting or any other trust provisions not referenced in this private_letter_ruling this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 lorraine e gardner lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures cc