office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 llconway posts-112862-10 uilc date december to daniel lauer acting chief sbse employment_tax from marie cashman special counsel tax exempt government entities subject taxicab payments this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent this follows up on our earlier response to your questions related to the proper treatment of payments made by certain establishments to taxicab drivers and takes into account the additional facts provided since that time this advice may not be used or cited as precedent issue sec_1 whether the payments are income to the drivers whether the payments are tips for services the drivers perform as employees of the taxicab companies tips in the course of employment or are payments for separate and distinct services what reporting requirements apply to the payments conclusion sec_1 the payments to the drivers are income to the drivers under the facts and circumstances described the payments are not tips received by the drivers in the course of their employment with their respective taxicab companies posts-112862-10 the drivers are not responsible for reporting the payments to the taxicab company pursuant to sec_6053 the payments are for services separate and distinct from the drivers’ employment with the taxicab companies the clubs and other establishments are responsible for complying with the reporting requirements under sec_6041 with respect to such payments facts the drivers are employees of taxicab companies engaged in the business of transporting passengers for a metered fare the cabs are equipped with meters which calculate and display the fares for any transportation the drivers pick up and transport passengers to their requested destinations typically the driver collects the fares from the passengers and the meter fare is split between the driver and the taxicab company it is customary for the passengers to tip the drivers an amount in addition to the meter fare for the transportation provided some adult entertainment clubs and other establishments have a practice of making payments to taxicab drivers who bring passengers to their establishments generally the club personnel will not render payment to the driver until the passengers first pay a cover charge or otherwise indicate in some manner that they are patrons of the club such as purchasing drinks or drink tickets payments are usually made in cash although some clubs issue vouchers to the drivers that can be exchanged for cash at a later time the amount of the cash or voucher payment may or may not bear any relationship to the meter fare may vary depending upon the number of passengers and may be far greater than either the metered fare or the customary tip for the transportation typically one or more passengers are transported from a hotel directly to a club in some cases the driver may make agreements with certain hotel personnel so that when a guest wants to go to a club the hotel personnel will summon the driver’s taxicab from the queue at the hotel and the driver will split the payment from the club with the hotel personnel in some cases the passenger may not request a particular destination and the driver or hotel personnel will recommend a club that will pay an amount for delivering the passenger club patron several clubs and other establishments advertise in a local magazine specifically targeted at drivers in the transportation industry that they will pay a referral fee or tip or incentive for delivery of passengers patrons generally the clubs making the payments at issue are not reporting the payments to the individual drivers on a form_1099 miscellaneous income the clubs appear to argue that the payments should be treated as tips received in the course of the drivers’ employment that the drivers should report to their employer taxicab companies the the industry magazine also contains advertisements referencing discounts and free items for drivers such as meals entertainment tickets and other rewards however these discounts and rewards do not appear to be linked directly to delivery of patrons but rather at garnering the goodwill of the cab drivers this memorandum does not address the proper tax treatment of these items posts-112862-10 drivers are not separately reporting the payments to the taxicab companies as tips thus the taxicab companies are not treating the payments as wages subject_to employment_taxes and required to be reported on forms w-2 the absence of reporting on either forms or forms w-2 may result in some drivers not reporting the payments as income on their income_tax returns law and analysis issue payments are income to drivers sec_61 provides that gross_income means all income from whatever source derived including but not limited to compensation_for services including fees commissions fringe_benefits and similar items sec_1_61-2 provides that tips are income to the recipients the payments made by the clubs to the drivers are income to the drivers regardless of whether the payments are tips or remuneration for services that are separate and distinct from their employment by the taxicab companies issue under the facts and circumstances described the payments are not tips received in the course of employment with the taxicab companies but are for services separate and distinct from those the drivers perform for their employer taxicab companies tips are not defined in the code or regulations however published guidance is instructive in determining whether a payment is a tip revrul_59_252 1959_2_cb_215 provides criteria which indicate when amounts received in an employment relationship are tips rather than service charges the revenue_ruling provides that the absence of any of the following factors creates a doubt as to whether a payment is a tip and indicates that the payment may be a service charge the payment must be made free from compulsion the customer must have unrestricted right to determine the amount thereof the payment should not be the subject of negotiation or dictated by employer policy and generally the customer has the right to determine who receives the payment while the criteria listed in revrul_59_252 are instructive they were set out in the context of determining whether payments from a customer of the employer were tips to the employees accordingly application of the criteria is not necessarily determinative in all instances in classifying a payment as a tip in the course of employment or as something else altogether all of the surrounding facts and circumstances must be considered in this regard we note that cab drivers who have signed a participation_agreement under the taxicab company’s tip rate determination agreement trda with the irs agree to report tips to their employer at or above the agreed upon rate nothing indicates that these payments were taken into account in determining the tip rates under the taxicab companies’ trdas for example a few court cases have used a test to analyze whether certain payments from patrons were tips includible in income or gifts excludable from income generally the test used to determine whether or not the payments were tips rather than gifts is whether the payments were an incident of the posts-112862-10 on the question of whether the payments at issue are tips received in the course of employment or payments for separate and distinct services the facts and circumstances presented support the characterization that the payments at issue are for the drivers’ separate and distinct service of referring patrons influencing patrons and delivering patrons to particular clubs rather than merely transporting passengers as part of their duties for their employers the taxicab companies the fact that the payments from the clubs are contingent upon the passenger becoming a patron of the club--whether by entering the club paying the cover charge buying a drink etc -- illustrates that the payment is made for the separate service of delivering a patron rather than transporting a passenger the club is not the recipient of the transportation service they are the recipient of the delivery of a patron furthermore the fact that drivers frequently recommend the passenger’s destination sometimes in collaboration with hotel personnel in order to secure the payment from a particular club further strengthens the conclusion that the clubs are paying the drivers for bringing them customers a service separate and distinct from merely transporting passengers to the passenger’s requested destination certainly in cases where a passenger requests a particular destination and the driver tries to persuade the passenger to go to a different destination because of the payment the driver expects to receive the purpose of the payment for these separate services becomes even more apparent however this fact is not necessary to our conclusion that drivers are providing services that are separate and distinct from transporting passengers differences in the facts and circumstances discussed above may influence the determination of whether particular payments are tips for driving passengers as an employee of a taxicab company or payments for separate and distinct services for example if the taxicab company shared in the payments made by the clubs or other services provided in 176_f2d_221 9th cir the ninth circuit in considering whether tips to an employee taxi driver from customers were taxable_income recognized that tips lacked the essential element of a gift - namely the free bestowing of a gratuity without consideration id pincite furthermore the court noted that a tip is connected directly with the service and its quality id pincite the taxpayer received tips as an incident to the service which he rendered to his patrons id pincite in 26_tc_1218 the tax_court relying primarily on roberts found that tokes tips were taxable_income because the dealer received the monies as an incident of the services which he performed as an employee for the patrons these cases further support the conclusion herein that the payments from the clubs are not tips in the context of the drivers’ employment relationships because they are not incident to the transportation services some of the drivers may be engaged in a separate trade_or_business of supplying patrons to the clubs the u s supreme court stated in 480_us_23 that the question of whether a taxpayer is engaged in a trade_or_business requires an examination of the relevant facts in each case furthermore to be engaged in a trade_or_business the taxpayer must be involved in the activity with continuity and regularity and the taxpayer’s primary purpose for engaging in the activity must be for income or profit id pincite while a determination that a driver has a separate trade_or_business of delivering patrons is wholly consistent with our conclusion that the payments are made by the clubs for separate and distinct services rather than as tips received in the course of the drivers’ employment such determination is not critical to a finding that the payments are made for separate and distinct services provided by the driver for the clubs posts-112862-10 establishments and drivers were aware that they must turn over a portion of the payments to the taxicab company to keep their jobs then the portion of the payments the drivers keep may be tips as remuneration for driving the taxicab for the company issue the clubs and other establishments are responsible for complying with the reporting requirements under sec_6041 with respect to such payments the reporting requirements applicable to the payments for services separate and distinct from the drivers’ employment are provided in sec_6041 which requires all persons engaged in a trade_or_business and making payment in the course of such trade_or_business to another person of rent salaries wages premiums annuities compensations remunerations emoluments or other fixed or determinable gains profits and income of dollar_figure or more in any taxable_year to file an information_return with the service and to furnish an information statement to the payee sec_1 c provides that payments are fixed when they are paid in amounts definitely predetermined income is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained sec_1_6041-1 requires payments that are fixed or determinable to be reported on form_1099 sec_6721 provides for a penalty when an information_return such as form_1099 or form_w-2 is not timely filed the sec_6721 penalty is waived if the failure_to_file the information returns is due to reasonable_cause and not to willful neglect sec_6724 sec_301_6724-1 provides that the penalty for failure_to_file information returns is waived for reasonable_cause only if the filer establishes that there are significant mitigating factors with respect to the failure and that the filer acted in a responsible manner or the failure arose from events beyond the filer’s control significant mitigating factor include but are not limited to- the filer was never required to file this return or statement with respect to this type of transaction previously or the filer has an established history of complying with the information requirements with respect to this type of transaction sec_301_6724-1 a filer acts in a responsible manner if the filer exercised reasonable care undertook significant steps to avoid or mitigate the failure and rectified the failure as promptly as possible once the impediment was removed or the failure discovered sec_301_6724-1 whether or not the filer's actions were reasonable is an objective inquiry lefcourt v united_states 125_f3d_79 2d cir because the payments at issue are for separate and distinct services of delivering patrons to the clubs the clubs are required under sec_6041 to file a form_1099 with sec_6041 provides that the reporting requirement contained in subsection a does not apply to tips with respect to which sec_6053 applies sec_6053 generally requires employees to report tips to received in the course of their employment to their employer when a club makes payments for the delivery of patrons either to a nonemployee driver or to an employee driver performing a service that is not in the course of his employment with the taxicab company employers such as those under the facts and circumstances described in this memo it cannot rely on sec_6041 as authority for not reporting the payments to the drivers because such payments are not required to be reported under sec_6053 posts-112862-10 the irs for each taxicab driver to whom they paid dollar_figure or more during the calendar_year if the clubs do not file form_1099 whether they are subject_to penalties under sec_6721 depends on the facts and circumstances case development and hazards while the facts you have collectively presented warrant the conclusion in this memorandum that the payments at issue are for services separate and apart from the drivers’ employment we note that an examination of a specific club or of a specific driver may produce different or varied facts including indications that the cab companies receive part of the payments that may or may not warrant the same conclusion or may present a differing degree of uncertainty regarding the proper characterization of the payments thereby increasing the hazards_of_litigation ------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------- in addition while published guidance and some case law provide helpful analysis in characterizing the payments at issue we have found no prior cases or other authority which definitively defines tips in the context of the facts and circumstances described accordingly the legal issue would be somewhat novel in litigation --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call me pincite-6000 or linda conway pincite-0047 if you have any further questions if the clubs were paying the taxicab companies not the taxicab drivers the clubs generally will not be required to file a form_1099 because under current law the reporting requirement does not apply if the taxicab companies are corporations but see sec_9006 of the patient protection and affordable_care_act pl enacted in date which requires information reporting for payments of dollar_figure or more for property or services to a non-tax-exempt corporation after


internal_revenue_service number release date index number ---------------------- -------------------------- --------------------------- -------------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------------ telephone number ---------------------- refer reply to cc corp b02 plr-146015-12 date april legend distributing --------------------------- controlled --------------------------------------- state a state b ------------ -------------- business aa ------------------------------------------------------------------------------------------------------------ ------------------------------------ trust w ------------------------------------------------ trust x trust y trust z llc -------------------------------------------------- ---------------------------------------- ------------------------------------------ ----------------------------------------- region ------------------ year ------- a b ------------ ------------ plr-146015-12 dear ---------------- this letter responds to your representative’s date letter requesting rulings as to the federal_income_tax consequences of the proposed transactions the material information submitted in that letter and subsequent correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process in particular this office has not reviewed any information pertaining to and has made no determination regarding i whether the distribution described below satisfies the business_purpose requirement of sec_1_355-2 ii whether the distribution is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code code and sec_1_355-2 and iii whether this distribution is part of a plan or a series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing percent or greater interest in the distributing_corporation distributing or the controlled_corporation controlled see sec_355 and sec_1_355-7 facts distributing is a state a calendar_year s_corporation distributing has been in existence since year and is primarily engaged in business aa distributing has two classes of common_stock class a and class b there are a class a shares outstanding and b class b shares outstanding the only difference between the two classes of stock is that only class a shares are entitled to notice of or to vote any_action required or permitted by law to be approved by the shareholders trust w and trust x each own half the class a shares and trust y and trust z each own half the class b shares hereinafter trust x and trust z will be referred to as shareholder and trust w and trust y will be referred to as shareholder prior to the proposed transaction shareholder and shareholder each own half of the interest in distributing the shareholders desire to separate the operation of business aa into two entities to resolve problems that arise from operating the business in various geographic locations and an increasingly divergent shareholder base prior to the separation distributing will contribute four pieces of real_property to a wholly owned limited_liability_company llc distributing will distribute all its interest in the plr-146015-12 llc to shareholder and shareholder pro_rata in a taxable_distribution distributing will lease certain pieces of property from llc at market_value proposed transaction for what are represented as valid business reasons and in order to achieve the objectives discussed above distributing proposes the following transaction proposed transaction distributing will cause the formation of wholly owned corporation controlled in state a controlled will have a class a shares and b class b shares outstanding the only difference between the two classes of stock is that only class a shares are entitled to notice of or to vote any_action required or permitted by law to be approved by the shareholders distributing will contribute percent of its assets to controlled in exchange for all of controlled’s outstanding_stock contribution the contributed assets will constitute distributing’s business aa in region including trademarks and a piece of real_estate in state b distributing will distribute all of controlled’s class a and class b stock to shareholder in exchange for all of shareholder 2’s class a and class b stock in distributing distribution following the distribution controlled will elect to be taxed as a subchapter_s_corporation distributing and controlled will enter into a trademark assignment and license back agreement that will allow distributing and controlled the right to use trademarks in their respective regions representations distributing has made the following representations in connection with the proposed transaction a the fair_market_value of the controlled stock to be received by shareholder will be approximately equal to the fair_market_value of the distributing stock surrendered b no part of the consideration to be distributed by distributing will be received by shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing c distributing controlled and shareholder will each pay their own expenses if any incurred in connection with the distribution plr-146015-12 d the five years of financial information submitted on behalf of distributing is representative of its present operations and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted e no intercoporate debt will exist between distributing and controlled at the time of or after the distribution f following the distribution distributing and controlled will each continue the active_conduct of its respective business independently and with its separate employees g distributing will retain approximately employees who perform accounting human resources purchasing and data processing functions controlled will have access to the services of these employees for up to months after the distribution controlled will be billed by distributing for_the_use_of these employees based on actual use and the allocable share of expenses related to these employees h the distribution is being carried out for the following business purposes to enhance the success of the business by enabling the corporations to resolve management systemic or other problems that arise or are exacerbated by the taxpayer’s operation of business in various geographic locations within a single corporation and an increasingly divergent shareholder base the distribution is motivated in whole or substantial part by one of these corporate business purposes i the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in either distributing or controlled including any predecessor or successor of any such corporation j immediately after the transaction as defined in sec_355 either i no person will hold a percent or greater interest within the meaning of sec_355 in distributing or controlled ii if any person holds a percent or greater interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person will have held such interest in such corporation immediately before the transaction or iii neither distributing or controlled will be a disqualified_investment_corporation within the meaning of sec_355 plr-146015-12 k for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five year period determined after applying sec_355 ending on the date of distribution l for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was i acquired by purchase as defined in sec_355 and during the five year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five year period determined after applying sec_355 ending on the date of distribution m the liabilities to be assumed as determined under sec_357 in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred n no two parties to the transaction are investment companies as defined in sec_368 and iv o the distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both p payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length q the total fair_market_value of the assets transferred from distributing to controlled will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by controlled ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished and iii the amount of cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in the contribution the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after the contribution plr-146015-12 r the total adjusted bases and the fair_market_value of the assets transferred to controlled by distributing each equals or exceeds the sum of any liabilities assumed by controlled plus any liabilities to which the transferred assets are subject s distributing is an s_corporation within the meaning of sec_1361 controlled will elect to be an s_corporation pursuant to sec_1362 on the first available date after the distribution and there is no plan or intent to revoke or otherwise terminate the s_corporation_election of either distributing or controlled rulings based solely on the information submitted and the representations set forth above we rule as follows the contribution followed by the distribution will qualify as a reorganization within the meaning of sec_368 distributing and controlled will each be a party to the reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing on the contribution sec_361 and sec_357 no gain_or_loss will be recognized by controlled on the contribution sec_1032 the basis of each asset received by controlled will equal the basis of that asset in the hands of distributing immediately before the contribution sec_362 the holding_period of each asset received by controlled in the contribution will include the period during which distributing held that asset sec_1223 no gain_or_loss will be recognized by distributing on the distribution sec_361 no gain_or_loss will be recognized by and no amount will be included in the income of shareholder on the distribution sec_355 the basis of the controlled stock in the hands of shareholder immediately after the distribution will equal shareholder 2’s basis in the distributing stock surrendered sec_358 the holding_period of the controlled stock received by shareholder will include the holding_period of the distributing stock surrendered by the shareholder in plr-146015-12 exchange therefor provided such stock is held as a capital_asset on the date of the distribution sec_1223 proper allocation of earnings_and_profits between distributing and controlled will be made in accordance with sec_312 and sec_1_312-10 the accumulated_adjustments_account of distributing will be allocated between distributing and controlled in a manner similar to the manner in which the earnings_and_profits will be allocated under sec_312 see sec_1_312-10 and sec_1_1368-2 provided that the distribution is undertaken immediately after the contribution distributing’s momentary ownership of the stock of controlled as part of the reorganization under sec_368 will not cause controlled to have an ineligible shareholder for any portion of its first taxable_year under sec_1361 and will not in itself render controlled ineligible to elect to be an s_corporation for its first taxable_year caveats except as specifically provided herein we express no opinion concerning the tax consequences of any aspect of any matter or item discussed or referenced in this letter moreover no opinion is expressed about the tax treatment of the transactions or of any other matter under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction not specifically covered by the above rulings in particular no opinion is expressed regarding i ii whether the distribution satisfies the business_purpose requirement of sec_1_355-2 whether the distribution is used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both see sec_355 and sec_1_355-2 iii whether the distribution is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest in the distributing or the controlled see sec_355 and sec_1_355-7 iv whether distributing or controlled otherwise meet the requirements of a subchapter_s_corporation under sec_1361 or plr-146015-12 v the tax consequences of the trademark assignment and license back agreement between distributing and controlled procedural statements this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that this letter may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of this ruling letter pursuant to the power_of_attorney on file in this matter a copy of this letter is being sent to your authorized representatives sincerely gerald b fleming senior technician reviewer branch office of associate chief_counsel corporate


t c memo united_states tax_court edith hunter hornberger et al petitioners v commissioner of internal revenue respondent docket nos filed date craig d bell for petitioners john c mcdougal for respondent memorandum findings_of_fact and opinion jacobs judge in separate notices of deficiency respondent determined the following deficiencies and additions to tax cases of the following petitioners are consolidated herewith for purposes of trial briefing and opinion estate of edna b hunter deceased shirley hunter administratrix docket no and ev hunter trust shirley m hunter and t william dowdy co-trustees docket no - - re edith h hornberger docket no addition_to_tax year deficiency sec_6651 a dollar_figure dollar_figure re estate of edna b hunter deceased shirley m hunter administratrix docket no addition_to_tax year deficiency sec_6651 a dollar_figure dollar_figure re ev hunter trust shirley m hunter and t william dowdy co- trustees docket no addition_to_tax year deficiency sec_6651 a dollar_figure dollar_figure the deficiency and addition_to_tax in each of these consolidated cases is a duplication of the deficiency and addition_to_tax in the other cases following concessions by the parties the issues for decision are whether interest on estate_taxes paid_by the ev hunter trust the trust in and deducted by the trust’s grantor edith h hornberger petitioner on her amended individual tax_return and refunded by the internal_revenue_service irs to the estate of edna b hunter deceased the estate in constitutes income in pursuant to the tax-benefit rule to - - the estate the trust or petitioner and whether a sec_6651 addition_to_tax for failure to timely file a tax_return is applicable all section references are to the internal_revenue_code in effect for the year under consideration all rule references are to the tax_court rules_of_practice and procedure all dollar amounts are rounded findings_of_fact some of the facts have been stipulated and are found accordingly the stipulation of facts and the attached exhibits are incorporated herein by this reference background petitioner resided in springfield virginia on the date her petition was filed the legal address of both the trust and the estate was in springfield virginia at the time they petitioned this court decedent and her estate edna b hunter’s decedent’s only child herbert c hunter mr hunter was married to shirley m hunter mrs hunter mr and mrs hunter had a daughter petitioner who was born on date mr hunter was murdered in on date decedent died intestate leaving an estate valued at over dollar_figure million to petitioner mrs hunter qualified and served as the administratrix of decedent’s estate mrs hunter - retained henry clay mr clay the family accountant and attorney to advise her and to prepare legal and tax documents for the estate the trust on date days after her 18th birthday petitioner executed a_trust indenture pursuant to which an irrevocable_trust was established the trust was to exist until date the date petitioner would turn years old however the terms of the trust_indenture could be modified or amended and the trust could be terminated at the end of each year period during the term of the trust provided the change or termination was agreed to by all of the trustees and petitioner ultimately all of the assets petitioner inherited from the decedent were placed into the trust the trust had three cotrustees t william dowdy mr dowdy mrs hunter and mr clay mr dowdy an attorney dealt with real_estate issues particularly condemnation proceedings and other matters requiring court appearances mrs hunter acted as a liaison between petitioner and mr clay pursuant to the provisions of the indenture two trustees could act on any matter within their collective authority in reality mr clay alone determined the amount of the trust distributions the trust was established at the recommendation of mr clay at the time petitioner signed the trust_indenture mr clay did not explain to her how the trust would operate - - mr clay managed and controlled the trust its assets and all relevant files relating thereto he alone assumed responsibility for investment decisions made distributions to petitioner maintained the trust books_and_records and prepared and filed tax returns and supporting documentation he prepared annual accountings of the trust’s finances on behalf of the cotrustees depicting distributions from the trust as well as assets contained in the trust as of spring mr clay had fallen a few years behind in preparing these accountings because most of the trust assets consisted of unimproved land near springfield mall which was tied up in condemnation proceedings mr clay believed that petitioner was too young to comprehend the substantial inheritance she had received he took the position that only after petitioner became older would she appreciate the size and type of assets inherited and be in a position to properly manage her inheritance consequently mr clay provided petitioner with minimal information regarding her inheritance he did not prepare any statements detailing the size or composition of the trust assets the income generated by the trust or the amounts of distributions or expenditures of funds that were made on her behalf because of mr clay’s philosophy petitioner was clueless as to the size and type of the trust assets petitioner was aware only that the trust assets included real_estate which she believed had a value of dollar_figure to dollar_figure million the estate’s form_706 and petitioner’s amended_return on date the estate timely filed a form_706 u s estate_tax_return reporting dollar_figure as the estate_tax due at the time the return was filed the estate remitted dollar_figure asa partial payment the return was audited and a notice_of_deficiency was issued determining an additional estate_tax liability of dollar_figure and additions to tax of dollar_figure the estate did not contest the deficiency or additions to tax and they were duly assessed between date and date a total of dollar_figure including the dollar_figure partial payment remitted with the return was paid toward the balance due pursuant to the estate_tax_return the deficiency and additions to tax and the statutory interest the trust paid a portion of this balance in including dollar_figure of interest on the estate’s deficiency mr clay treated the trust as a complex taxable trust in preparing and filing the trust’s fiduciary income_tax returns ’ accordingly the trust’s form_1041 u s fiduciary income_tax return reflected a total dollar_figure deduction for interest_paid in the parties’ stipulation of facts the figure for interest_paid is erroneously reflected as dollar_figure we use the correct figure reflected on the return ‘ a complex_trust is a separate taxpayer subject_to the income_tax see sec_1 which included the dollar_figure paid in date the irs and the estate entered into a settlement agreement in which the federal estate_tax liability and additions to tax previously assessed were decreased in the respective amounts of dollar_figure and dollar_figure in late date the irs the trust representatives and petitioner agreed that the trust should have been taxable as a grantor_trust pursuant to sec_671 through since its inception accordingly in date amended form sec_1041 were filed for the trust recharacterizing the trust as a grantor_trust as a result of this recharacterization the dollar_figure of interest_paid on the estate_tax was attributed to petitioner and was reflected as an interest_deduction on her amended income_tax return the refund check on date the irs issued a dollar_figure refund check the refund check made payable to the estate the refund check included dollar_figure in interest that previously had been a grantor_trust is not subject_to the income_tax rather all of the income and deductions pertaining to a grantor_trust must be taken into account by the grantor see secs the explanation of change to income and tax reduction for attached to petitioner’s amended_return in relevant part states the administrative expenses of the hunter estate are to be flowed through the e v hunter trust grantor_trust and ultimately reflected on the individual income_tax returns of edith hunter hornberger --- - assessed against the estate and paid_by the trust as well as an additional dollar_figure in statutory interest on the overpayment the parties have stipulated upon receipt of the estate_tax refund check the administratrix of the hunter estate provided the check to edith hunter hornberger who negotiated it to the co- trustees of the hunter trust who deposited it into the trust bank account of the interest component of the refund check petitioner reported dollar_figure the portion which her representatives calculated as the interest on the overpayment on her individual tax_return ’ the remainder of the interest component of the refund check dollar_figure represented a return of a portion of the dollar_figure deficiency_interest the trust paid in neither petitioner the trust nor the estate reported the dollar_figure refund of overpaid assessed interest on her or its respective return no form 1099-int or other informational return was issued to the estate or the trust the parties now agree that the interest on the overpayment is dollar_figure and the balance of dollar_figure is also reportable by petitioner as interest_income on date respondent provided petitioners with a copy of the irs office of appeals posting voucher approving the manual refund of estate_taxes additions to tax and interest for the estate refund this posting voucher notes that the dollar_figure total payments included dollar_figure in interest previously assessed against the estate it also specifies an additional dollar_figure of statutory interest on the federal estate_tax overpayment that was included in the refund to the estate --- - mr clay keith hornberger and the trust distributions mr clay managed the trust assets conservatively other than paying a portion of petitioner’s education and other living_expenses he gave her a modest monthly cash allowance which was deposited directly into her bank account in petitioner’s monthly allowance was dollar_figure petitioner attended college part time and worked part time as a bank teller on date she married keith hornberger mr hornberger following her marriage petitioner no longer attended school and began working full time after the couple had children in petitioner ceased working outside their home at all relevant times mr hornberger was unemployed mr clay periodically increased petitioner’s monthly allowance but only after and in response to her requests mr clay did not approve of petitioner’s marriage to mr hornberger mr clay believed mr hornberger to be a freeloader thus he kept the trust financial information from petitioner because he feared that mr hornberger and his questionable friends might try to milk the trust through petitioner at the time of petitioner’s marriage to mr hornberger she asked mr clay to increase her monthly allowance approximately a week later mr clay agreed to do so increasing her monthly allowance to dollar_figure mr clay’s concern arose from an incident in the late 1980's when the trust provided dollar_figure to mr hornberger in order for him to start an automobile detailing business the funds continued -- - adding to mr clay’s skepticism during mr hornberger experienced a bipolar mental disorder that became progressively worse mr hornberger threatened suicide and violence against his family ie he told mrs hunter that he would cut her or slice her up petitioner was forced to move with her children out of the family home she did not inform mr hornberger of their whereabouts mr hornberger was then hospitalized for observation several times and on date he escaped from a hospital after being confronted by police and the possibility of his arrest mr hornberger agreed to a to 60-day confinement he was placed on medication in order to be convinced that he was properly taking his medication petitioner waited approximately l month after his release from the hospital to move back into the family home in february or date mr clay objected to petitioner’s requests that the trust pay mr hornberger’s hospitalization bills which at the time had accumulated to approximately dollar_figure as a result of her strained relationship with mr clay petitioner frequently approached her mother as cotrustee to intercede on her behalf in obtaining additional funds from the trust it was only after mrs hunter’s intervention that mr clay permitted the trust to pay mr 1’ continued were quickly spent and no business was created from that point on mr clay took a hard-nosed position with petitioner whenever she requested additional funds from the trust hornberger’s medical_expenses by mr clay increased petitioner’s monthly allowance to dollar_figure mr clay’s demise from to mr clay prepared the annual tax returns for petitioner and the trust petitioner usually went to mr clay’s office to sign her individual tax returns she generally was not provided an opportunity to review the returns rather mr clay had the return open to the signature page and petitioner was instructed to sign it mr clay alone signed the trust fiduciary income_tax return petitioner never saw this return during the fall of at the age of mr clay suffered several heart ailments his strength and physical endurance weakened on several occasions during the latter part of mr clay fell in the parking lot outside his law office his falls and physical condition resulted in his hospitalization on several occasions in late and in early concurrently mr clay was the care provider for his wife who suffered from alzheimer’s disease in late date they moved from the family home to the palm springs retirement community mr clay continued practicing law going to his office when possible in early mrs hunter and mr dowdy were aware of mr clay’s deteriorating health and periodically discussed with him the progress he had made regarding the preparation and filing of the required returns mr clay who had remained mentally alert assured them that he was progressing in the usual manner in preparing the fiduciary income_tax return and the allocation statement for petitioner during march and april of petitioner inguired about her tax_return with mr clay and her mother she was told that the tax returns and grantor_trust allocation statements were being prepared mr clay informed the cotrustees that sufficient estimated_tax payments had been previously made he specifically informed mr dowdy that if he was unable to complete and file the returns he would prepare and file appropriate extension forms mr clay’s health continued to decline through the spring of on date he was moved to a convalescent home where he died days later as a result of mr clay’s deteriorating health he neither completed the information_return for the trust nor filed the necessary returns for petitioner the estate or the trust within the prescribed period no extensions were requested following mr clay’s death the surviving cotrustees retained a certified_public_accountant to prepare and file tax returns for the estate the trust and petitioner on date the returns a form_1040 for petitioner and form sec_1041 for the estate and the trust were filed for all three taxpayers’ tax_year notices of deficiency separate notices of deficiency were mailed to petitioner of the notices stated recovery_of prior deduction per return s -q- the trust and the estate the explanation of items attached to each as corrected big_number adjustment big_number since you and or pass-through entities of which you are beneficiary recovered an amount deducted in a prior year we included it in your income under the tax- benefit rule and pursuant to the duty_of_consistency this amount is income to you in accordance with sec_61 income from whatever source is taxable interest_income from irs per return dollar_figure as corrected big_number adjustment big_number since you and or pass-through entities of which you are a beneficiary received interest_income on a refund from the internal_revenue_service we have included the amount shown in your income each notice also determined a sec_665l a addition_to_tax ultimate findings_of_fact in petitioner received a refund of dollar_figure in interest that she had deducted as interest_expense on her amended_return petitioner had reasonable_cause for the late filing of her federal_income_tax return - - opinion issue tax-benefit rule respondent contends that the tax-benefit rule requires petitioner to include in her income the dollar_figure refund of interest which was deducted on her amended tax_return in the alternative respondent asserts that that amount is includable in the income of either the estate or the trust the tax-benefit rule requires an amount to be currently included as income to the extent that the amount was properly deducted in a year prior to the current_year the deduction resulted in a tax_benefit an event occurs in the current_year that is fundamentally inconsistent with the premises on which the deduction was originally based and a nonrecognition_provision of the internal_revenue_code does not prevent the inclusion in gross_income see eg 460_us_370 101_tc_35 a current event is an event that is fundamentally inconsistent with the premises on which the deduction was originally based when that event would have prevented the deduction i the deficiencies and additions respondent determined against the estate and trust are alternatives neither a deficiency nor an addition_to_tax will be due from either entity should we hold that petitioner realized income pursuant to the tax-benefit rule -- - if the event had occurred in the year of the deduction see hillsboro natl bank v commissioner supra frederick vv commissioner supra pincite petitioner maintains that the tax-benefit rule is not herein applicable she posits that the estate and petitioner are different persons---petitioner claimed the interest_deduction on her amended tax_return the refund check was payable to the estate in as the estate’s recovery in of the amount deducted continuing petitioner asserts that it is of no consequence that the trust or petitioner ultimately received the proceeds from the refund check because it was the estate which had title to and possessed the refund respondent asserts petitioner’s position is flawed relying on the stipulation agreed to by the parties upon receipt of the estate_tax refund check the administratrix of the hunter estate provided the check to edith hunter hornberger who negotiated it to the co-trustees of the hunter trust who deposited it into the trust bank account respondent contends that although the refund check was payable to the estate the funds were returned in to petitioner who had taken the interest_deduction on her amended_return ’ according to respondent it is inconsistent for respondent points to the stipulated fact that the refund check included dollar_figure which represented a return of part of the dollar_figure deficiency_interest paid_by the trust in moreover the parties stipulated that the amended continued -- - petitioner to have claimed a deduction on her amended_return and not reported the refund she received we agree with respondent the trust originally paid the interest on the tax_deficiency and deducted that amount dollar_figure as an interest_expense on its fiduciary return when this return was amended to reflect the agreement among the irs the trust representatives and petitioner to recharacterize the trust as a grantor_trust the interest_expense_deduction the trust had claimed was allocated to petitioner and was reflected on her amended income_tax return the deduction resulted in a tax_benefit in proportion to the full amount of the deduction and the amount was ultimately returned to petitioner via the refund check in in sum the refund of the interest on the tax_deficiency previously deducted gives rise to taxable_income under the tax- continued return attributed to edith hunter hornberger all trust income and deductions including the deduction for the dollar_figure of interest_paid on the estate_tax in 460_us_370 the hillsboro bank paid state taxes and deducted them when paid pursuant to sec_164 later the state refunded the taxes directly to the bank’s shareholders the government sought to include the shareholders’ refund of the state taxes in the income of the bank see id pincite the supreme court concluded that unless a nonrecognition_provision of the internal_revenue_code prevents it the tax_benefit_rule ordinarily applies to require the inclusion of income when events occur that are fundamentally inconsistent with an earlier deduction id pincite benefit rule the dollar_figure petitioner deducted on her amended return went from the trust to the irs to the estate to petitioner and back to the trust petitioner and the trust parted with no money consequently it would be inconsistent to permit petitioner to retain the benefit of the dollar_figure deduction when that amount was refunded to her see e g frederick v commissioner supra further we are mindful that respondent’s tax_benefit analysis is consistent with the date agreement that the trust had been a grantor_trust since its inception as reflected on the amended returns for the trust and petitioner accordingly we hold that the dollar_figure refunded constitutes income to petitioner pursuant to the tax-benefit rule for her tax_year issue sec_665l a addition_to_tax we now address whether the imposition of the sec_6651 a addition_to_tax for failure to timely file a return is herein appropriate the sec_6651 addition_to_tax can be avoided if the taxpayer’s failure_to_file was due to reasonable_cause and not due to willful neglect see sec_6651 rule a 469_us_241 38_f3d_440 9th cir reasonable_cause requires a taxpayer to demonstrate that he exercised ordinary business care and prudence and was nevertheless unable to file a return within the prescribed time see united_states v boyle -- - supra pincite sec_301 6651-l1 c proced admin regs willful neglect means a conscious intentional failure_to_file or reckless indifference see united_states v boyle supra pincite petitioner argues that personal problems and the unavailability of records constituted reasonable_cause for petitioner’s failure to timely file her return respondent on the other hand contends that petitioner could have obtained sufficient information if she had so desired we agree with petitioner we are satisfied that petitioner was ignorant of the trust’s large income and assets she was not provided with any documentation that would inform her what if any funds’ she received from the trust were taxable_income mr clay as principal trustee of the trust possessed and controlled the financial records pertaining to the trust the uncontradicted testimony reveals that mr clay was extremely secretive with regard to these records because of his concern about petitioner’s young age as well as the undesirable qualities mr hornberger exhibited he refused to hand over relevant information regarding the trust in addition mr clay did not permit mr dowdy or mrs hunter access to the financial records moreover given mr clay’s previous track record there was nothing to suggest that he would be late in performing his fiduciary responsibilities petitioner mrs hunter and mr dowdy - - testified that although mr clay was physically ill during and he remained mentally sharp until his death petitioner and the cotrustees frequently inguired as to mr clay’s progress regarding the necessary tax documents mr clay repeatedly assured them of his progress absent mr clay’s illness undoubtedly the appropriate documents would have been prepared and filed we have held that the inability of a taxpayer to obtain records may constitute reasonable_cause to justify setting aside the failure to timely file addition_to_tax see eg berenbeim v commissioner tcmemo_1992_272 connor v commissioner tcmemo_1982_302 we conclude that petitioner was unable to obtain the necessary trust records from mr clay and consequently had reasonable_cause not to file her individual tax_return and did not willfully neglect her duty to do so on the basis of the record before us we conclude that petitioner exercised ordinary business care and prudence but because of circumstances beyond her control she was unable to file her tax_return timely accordingly we hold that petitioner is not liable for the addition_to_tax and respondent's sec_6651 a determination is not sustained - - to reflect the foregoing and the parties’ concessions decision will be entered under rule in docket no decision will be entered for petitioner estate of efdnabbb hunter deceased shirley m hunter administratrix in docket no decision will be entered for petitioner ev hunter trust shirley m hunter and t william dowdy co-trustees in docket no


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-114685-07 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities subject railroad_retirement_tax_act status ----------------------------------------- in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion dated ------- --------------------- that the following business is not a covered employer under the railroad retirement act and the railroad unemployment insurance act ------------------------------------------------------------- ------------------------------------------------------------------- ----------------------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that -------------------------------------- is not a covered employer under the railroad_retirement_tax_act please take the appropriate action regarding this business cc ________________ janine cook


department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- ---------------------- telephone number --------------------- refer reply to cc intl b02 plr-112267-09 date date internal_revenue_service number release date ---------------------- ------------------------ ------------------------ uil legend legend corporation taxpayer a percent country tax advisor tax advisor tax advisor year year year year date business dear ------------ ---------------------------- -------------------------------------------- ------------------------------- ----------- ------------------------------------------------------- ----------------------- ------------------------ ------- ------- ------- ------- ------------------ ------------------------ this is in response to a letter dated date submitted on behalf of taxpayer by its authorized representative requesting the consent of the commissioner to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 with respect to taxpayer’s investment in corporation for the year tax_year 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 plr-112267-09 facts in year taxpayer and others formed corporation of which taxpayer owns a percent in country corporation is engaged in business in country and generates passive_income through its activities the country income_tax filing is prepared by tax advisor the us income_tax filing of the majority shareholder of the corporation is prepared by tax advisor a us person who has prepared corporation’s information returns since year tax advisor identified corporation as a controlled_foreign_corporation cfc under sec_957 and he filed forms on behalf of taxpayer since year based on the representations of tax advisor corporation did not generate any net positive_income from year to year however in year corporation recognized gain due to the disposition of certain passive_assets tax advisor calculated taxpayer’s pro_rata share of this gain which taxpayer included on its tax_return for year on date with the intention of liquidating or reorganizing corporation the majority shareholder of the corporation consulted tax advisor who informed taxpayer that corporation was in fact a passive_foreign_investment_company pfic within the meaning of sec_1297 tax advisor also discussed with taxpayer the proper subpart_f inclusions for year and he suggested taxpayer file an amended_return for that year taxpayer has agreed to file an amended_return for year affidavits from tax advisor have been submitted that meet the requirements of sec_1_1295-3 and ii the pfic status of corporation has not been raised on audit ruling requested taxpayer requests the consent of the commissioner of the internal_revenue_service to make a retroactive qef election under sec_1_1295-3 with respect to corporation beginning with year law code sec_1293 provides that every u_s_person who owns stock of a qef at any time during the taxable_year of such fund shall include in gross_income as ordinary_income such shareholder’s pro_rata share of the ordinary_earnings of such fund for such taxable_year and as long-term_capital_gain such shareholder’s pro_rata share of the net_capital_gain of such fund for such taxable_year code sec_1295 provides that any pfic shall be treated as a qef with respect to a taxpayer if an election by the taxpayer under code sec_1295 applies to such company for the taxable_year and the company complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company plr-112267-09 under code sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic under sec_1_1295-3 a taxpayer may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the granting consent will not prejudice the interests of the united_states government meaning of sec_1_1295-3 as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1_1295-3 conclusion based on the information submitted and representations made with taxpayer’s ruling_request we conclude that taxpayer has satisfied sec_1_1295-3 accordingly consent is granted to taxpayer to make a retroactive qef election with respect to corporation for year provided that taxpayer complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election 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 a copy of this letter is being sent to your authorized representative sincerely phyllis marcus branch chief acci intl b02


pemrennacrevenur sevice washington d c tax exempt and government entities dec uniform issue list legend taxpayer a ira b financial_institution c account d amount dear this letter is in response to your request dated date and supplemented by letter dated date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested purpose taxpayer a represents that he received a distribution from ira b totaling amount on date taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to his mental condition which impaired his ability to make financial decisions taxpayer a further represents that amount has not been used for any other taxpayer a represents that he owned ira b which was maintained with financial_institution c taxpayer a also owned account d a non-ira joint account with his spouse which is also maintained by financial_institution c taxpayer a and his spouse have suffered from serious medical conditions for a period of years given their medical conditions taxpayer a intended to consolidate the money from ira b and account d taxpayer a directly transferred amount into account d believing he had completed an ira rollover into one account to simplify his finances on date taxpayer a has submitted a letter from his physician which documents his difficulty with various memory and mental retention which prevented him from completing a rollover the mistake was discovered in when taxpayer a received a deficiency_notice from the service based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 of the code 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 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 - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 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 of the code sec_408 of the code provides that sec_408 of the code does not apply to any amount described in sec_408 of the code received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 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 and sec_402 of the code 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 the documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a rollover of amount was caused by his mental condition which impaired his ability to manage his financial affairs and accomplish a timely rollover therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute amount into a rollover ira requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 provided all other this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code 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_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please contact se t ep ra t1 at if you wish to inquire about i d - sincerely yours carlton a watkins manager employee_plans technical group enclosures deleted copy of this letter_ruling notice of intention to disclose notice cc


number release date id office uilc cca_2009031811582462 ---------------------------- from ------------------------- sent wednesday date am to ------------------- cc subject re gl-1 materials yes we can sec_6502 provides that if a timely proceeding in court for the collection of a tax is commenced the period during which a tax may be collected by levy is extended until the liability becomes unenforceable sec_6502 is read in connection with sec_6322 which provides that the tax_lien continues until the liability for the amount so assessed or judgment against the taxpayer arising out of such liability is satisfied or becomes unenforceable by reason of lapse of time the administrative levy power referred to in sec_6502is based on the continued existence of federal_tax_lien which is made possible by the judgment when a tax_assessment is reduced to judgment the lien does not merge into the judgment but continues to exist independently 888_f2d_725 11th cir tax_lien was incorporated but not merged with judgment and could be enforced at any time 823_f2d_911 6th cir t ax assessment liens unlike most liens under state law continue to exist independently of the suit or judgment which has extended their existence 424_f2d_1142 9th cir suit to recover judgment on liability underlying tax assessments brought before expiration of six-year limitation period in sec_6502 extended life of liens beyond the initial six-year period united_states v hodes f 2d 2nd cir judgment in government’s favor extended the life of assessment liens beyond the six-year period in sec_6502 having said all of this i can see how the slide could be misleading change it to say levy based on the federal_tax_lien it might be best to