t c memo united_states tax_court jerry d criner petitioner v commissioner of internal revenue respondent docket no 7126-02l filed date jerry d criner pro_se bruce k meneely for respondent memorandum findings_of_fact and opinion marvel judge on date respondent mailed to petitioner a notice_of_determination concerning collection action s under section and or notice of 1section references are to the internal_revenue_code_of_1986 as amended and in effect at the time the petition was filed determination for unpaid federal_income_tax liabilities of petitioner for through in response to that notice and pursuant to sec_6320 and sec_6330 petitioner timely petitioned this court to review the determination to proceed with collection by filing a nominee notice_of_federal_tax_lien nftl the issue for decision is whether the appeals_office abused its discretion in upholding respondent’s filing of a nominee nftl in this case background findings_of_fact petitioner resided in claremore oklahoma when he filed his petition in this case from to approximately excluding the periods of time that he was incarcerated petitioner derived at least some portion of his income from cheating at gambling by his own estimate since petitioner has earned substantial income by cheating at gambling at various times during the 1980s through the mid-1990s petitioner was prosecuted in nevada new jersey and oklahoma for money laundering structuring monetary transactions felony theft by deception possession of slot machine cheating devices fraud and burglary and he served time in prison in connection with the nevada prosecution petitioner was arrested in tulsa oklahoma on date petitioner had at least dollar_figure in cash in his possession at the time of his date arrest sometime during or petitioner established the wesley brown society allegedly an oklahoma corporation petitioner was the president and sole owner of the wesley brown society petitioner bought and sold real_estate through the wesley brown society purchasing at least four properties and recording the title to those properties in the name of the wesley brown society petitioner also purchased a car registering it in the name of the wesley brown society as lessee the wesley brown society did not file federal or state tax returns petitioner does not have a checking account and does not maintain any_tax or financial records petitioner pays his living_expenses with money orders or out of accounts titled in the names of family members the claremore property the property where petitioner and his family reside is located pincite4 carefree valley drive claremore oklahoma the claremore property the claremore property consists of a large two-story house on acres located about minutes by car outside the city of claremore oklahoma the 2the claremore property address is also shown as route box claremore oklahoma the legal description of the property is shown on the amended notice_of_federal_tax_lien as lot in block of amended plat of carefree valley an addition in section township north range east of the i b m rogers county oklahoma according to the recorded plat thereof claremore property was purchased on date from james t and virginia l arnold for dollar_figure and was titled in the name of alice criner petitioner’s mother no mortgage was recorded against the property in connection with the purchase the record in this case contains no evidence of the source of the funds used to purchase the claremore property in when the claremore property was purchased in alice criner was in her mid-sixties she had worked for st john’s hospital for approximately years when alice criner retired sometime in the early 1980s she was a cafeteria supervisor in alice criner’s income consisted of retirement benefits from st john’s hospital and possibly social_security_benefits alice criner lived in the claremore property for an unknown length of time between date and she never owned a car and did not know how to drive for the last few years of her life alice criner suffered from advanced-stage parkinson’s disease sometime between date and her death in alice criner became too ill to live at the claremore property and was moved into a care facility in broken arrow oklahoma alice criner died intestate on date each of alice criner’s six children received approximately dollar_figure in death_benefits from a life_insurance_policy as a result of her death 3alice criner’s daughter jeannie mclelland testified that she did not know where her mother would have gotten the funds to purchase the claremore property in petitioner lived at the claremore property many times before taking up permanent residence there in for example petitioner his wife and their two children resided at the claremore property from date through date and again from date through date petitioner has taken care of the claremore property since at least and has improved the property from time to time for example he constructed a pond and installed a spa on the claremore property petitioner also has maintained and continues to maintain utility accounts with respect to the claremore property for example in order for a property owner in rogers county oklahoma to obtain water rights he or she was required to submit proof of his or her property ownership to the rural water district no in rogers county oklahoma on date rural water district no in rogers county oklahoma issued a benefit unit certificate for water rights to petitioner for the claremore property on date petitioner became the tap owner with respect to the claremore property petitioner also has an account with verdigris valley electric cooperative with respect to the claremore property on date petitioner purchased a cashier’s check in the amount of dollar_figure payable to the rogers county treasurer 4the claremore property account with verdigris valley electric cooperative has never been listed under the name of alice criner for ad valorem property taxes on the claremore property for and petitioner also paid the ad valorem property taxes on the claremore property with a check drawn on the account of cass criner a minor jerry criner custodian utma on date petitioner’s 18-year-old son candon criner purchased a cashier’s check in the amount of dollar_figure payable to the rogers county treasurer at that time candon criner probably was not living at the claremore property and would not have had the money to buy the cashier’s check without petitioner or one of petitioner’s brothers or sisters giving him the funds petitioner’s tax_liabilities petitioner did not file form sec_1040 u s individual_income_tax_return for through petitioner signed a form_870 waiver_of_restrictions_on_assessment_and_collection of deficiency in tax and acceptance of overassessment on date consenting to the assessment of deficiencies in income_tax and additions to tax under sec_6651 for through respondent assessed the deficiencies in income_tax and the additions to tax under sec_6651 for through on date on date petitioner’s collection matter was assigned to revenue_officer dale baustert mr baustert’s review of the file revealed that collection actions had been initiated against condominiums allegedly owned by petitioner in new jersey and were still pending and that a request for a nominee nftl with respect to the claremore property had not been completed on date mr baustert submitted a memorandum requesting authorization to file a nominee nftl against the claremore property to the office of district_counsel in oklahoma city oklahoma counsel the memorandum request was sent through dale spannagel group manager in the memorandum mr baustert outlined the facts that formed the basis for his belief that petitioner was the equitable owner of the claremore property no mortgage was recorded when the claremore property was ostensibly purchased by alice criner indicating a cash purchase petitioner had a long history of placing real and personal_property in nominee names of his family members and the wesley brown society on date petitioner’s ex- wife recorded a quitclaim_deed divesting herself of any interest that she had in the claremore property rogers county treasurer’s records indicate that petitioner his wife and their children have paid the ad valorem property taxes on the claremore property and petitioner claimed to have an arrangement with his siblings to watch after the home but he did not produce any affidavits from them when asked to do so by the revenue_officer the memorandum also noted that the claremore property was listed for sale with peck realty for an asking price of dollar_figure on date counsel issued an advisory opinion to revenue_officer baustert approving his request to file a nominee nftl against the claremore property the date opinion listed the following facts in support of its conclusion authorizing the filing of a nominee nftl the claremore property was purchased free and clear at a time when petitioner had considerable amounts of cash that he had earned illegally title to the claremore property is in the name of a close relative ie petitioner’s mother petitioner had admitted to a revenue_officer that he owns a partial interest in the claremore property petitioner had paid the property taxes on the residence and had lived in the residence for many years petitioner has a history of placing property that he owns in the names of other persons or entities petitioner failed to produce affidavits from his brothers and sisters confirming under oath that they have an ownership_interest in the claremore property petitioner’s ex-wife filed a quitclaim_deed releasing any ownership_interest that she held in the property in date and counsel had already authorized on similar facts the filing of a nominee nftl against certain new jersey condominiums titled in the name of petitioner’s wife on date mr baustert filed a nominee nftl against the claremore property with the county clerk rogers county claremore oklahoma on date mr baustert filed a corrected nftl against the claremore property with the county clerk rogers county claremore oklahoma both the original and the corrected nftl identified the claremore property and listed the taxpayer as alice criner as the nominee of jerry d criner on date respondent mailed to petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 covering through on date petitioner timely submitted form request for a collection_due_process_hearing requesting a hearing under sec_6320 the hearing in his request for a hearing petitioner stated that he disagreed with the nominee nftl because the claremore property belonged to his deceased mother in a letter to petitioner dated date settlement officer scott penny mr penny or hearing officer acknowledged receipt of petitioner’s hearing request and asked petitioner to provide documentation to substantiate his claim that the claremore property listed in the nominee nftl belonged to his deceased mother mr penny specifically requested documentation showing alice criner’s ability to purchase the property for dollar_figure in date probate records showing distribution of alice criner’s estate and any other documentation to support petitioner’s claim in the date letter mr penny noted that based on his review of petitioner’s file it appeared that all legal and administrative procedures were met by respondent in filing the nftl against alice criner as nominee of petitioner on date petitioner sent a letter to mr penny expressing concern that mr penny had already come to a conclusion regarding the validity of the nominee nftl without seeing hearing or reviewing petitioner’s proof that he did not own the claremore property petitioner also expressed doubt that a person employed by the internal_revenue_service irs or any other branch of the federal government could review the evidence and reach a fair and impartial ruling petitioner also advised mr penny that he wanted to record the hearing and he inquired as to whether petitioner and his sister and up to witnesses would be reimbursed for the expense of attending the hearing petitioner enclosed with the letter form_2848 power_of_attorney and declaration of representative designating his sister jeannie mclelland as his representative on date mr penny sent a letter to petitioner informing him that the hearing had been scheduled for date and that in accordance with petitioner’s request the hearing would be recorded but at no cost to the government the letter also stated that because the hearing was petitioner’s hearing witnesses would not be allowed to speak during the hearing on date petitioner and his sister jeannie mclelland attended the hearing among other things petitioner and ms mclelland placed on the record of the hearing a statement that they had intended to call approximately witnesses but that they were told by mr penny before the hearing that their witnesses could not appear and testify mr penny acknowledged their statement and did not deny its accuracy but he also reminded petitioner of his request for testimony in the form of affidavits under oath during the hearing mr penny also explained that he had reviewed the information in petitioner’s case file and had verified that all applicable laws and administrative procedures governing the filing of a nominee nftl had been met during the hearing petitioner argued that his deceased 5petitioner did not raise any issue regarding mr penny’s apparent prohibition of live testimony from witnesses at the hearing or at the trial before this court petitioner did not argue in his trial memorandum or posttrial brief that the prohibition regarding live testimony deprived him of a fair hearing moreover we note that although mr penny specifically requested before the hearing that petitioner bring to the hearing affidavits under oath from each of his siblings to document his claim that they own interests in the claremore property petitioner failed to do so we conclude on these facts that the prohibition with regard to live testimony at the hearing did not deprive petitioner of the opportunity to present relevant testimony through affidavits under oath petitioner could have made a factual record in support of his position by submitting affidavits from his witnesses at the hearing but petitioner failed to do so mother owned the claremore property and that therefore the nominee nftl was unlawful petitioner and jeannie mclelland explained that their mother had died without a will that she had left the property to her six children that her estate had not gone through probate and that the property would remain in her name forever petitioner conceded however that he owned a one- sixth interest in the claremore property by virtue of his mother’s death at the hearing mr penny again asked for documentation showing the ability of petitioner’s mother to purchase the claremore property in without the encumbrance of a mortgage but petitioner did not produce the requested documentation at the hearing or at any time after the hearing petitioner also argued at the hearing that the assessments against him for through were invalid because he had rescinded his signature on the form_870 petitioner did not raise any spousal defenses or propose any specific collection alternatives during the hearing on date respondent’s appeals_office issued a notice_of_determination in which it determined the following all legal and administrative procedures for filing a nominee nftl were met the appeals officer had had no prior involvement with 6petitioner had previously filed two offers in compromise which respondent either rejected or requested be withdrawn respect to petitioner’s through income_tax liabilities petitioner did not raise any spousal defenses during the hearing and consequently none were considered petitioner had signed a form_870 agreeing to the assessment of the through income_tax deficiencies and waiving his right to judicial review thereby precluding any challenge to the amount of the underlying liabilities all legal and administrative requirements for the filing of a nominee nftl including the requirement to request and obtain counsel’s approval had been satisfied counsel’s approval of the nftl was based on documentation sufficient to show that petitioner was the sole owner of the claremore property moreover petitioner had admitted during the hearing that he owned an interest in the claremore property no collection alternatives were discussed because an agreement could not be reached regarding the extent of petitioner’s ownership_interest in the claremore property the filing of the nominee nftl balanced the need for efficient collection_of_taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary and was appropriate under the circumstances 7petitioner did not contest this part of the appeals office’s determination in his petition at trial or in his posttrial brief consequently we do not address it in this opinion in response to the notice_of_determination petitioner mailed a letter dated date to this court that this court treated as a timely but imperfect petition appealing respondent’s determination for through by order dated date this court directed petitioner to file a proper amended petition on date petitioner filed an amended petition in which he alleged as follows a the notice_of_determination is invalid as the appeals team manager whose name appears on the notice_of_determination did not make a determination that lien action against petitioner should be sustained for any of the years at issue b the notice_of_federal_tax_lien which forms the basis of this case is invalid as the revenue_officer whose name appears on the notice_of_federal_tax_lien was not authorized to file nominee notices of federal_tax_lien without the written approval of his direct supervisor issued pursuant to of the internal_revenue_service restructuring and reform act of rra ‘98 c the appeals officer who conducted petitioner’s collection_due_process cdp hearing had prior involvement in petitioner’s case prior to the hearing taking place with respect to the tax for the tax periods covered by the hearing in violation of sec_6320 sec_301_6320-1 and sec_301_6320-1 d the appeals officer who conducted petitioner’s cdp hearing determined before the said hearing was concluded that lien action against petitioner was appropriate in violation of sec_6330 sec_6330 and sec_6330 each by and through sec_6320 e respondent erred by determining it was appropriate to cause the filing against certain real_property of a nominee notice_of_federal_tax_lien with respect to petitioner respondent’s determination was arbitrary f respondent erred by determining that all applicable laws and administrative procedures to support his nominee lien action against petitioner had been met although he neither considered the applicability of the laws of the state of oklahoma nor considered petitioner’s status under those laws with respect to the real_property that is the subject of his nominee notice_of_federal_tax_lien g respondent erred by determining that petitioner had not proposed reasonable collection alternatives to respondent’s lien action h respondent erred by not considering exploring or eliciting from petitioner what collection actions less intrusive than lien action would balance the government’s need to efficiently collect the tax_liabilities at issue with petitioner’s legitimate concern that the collection action be made by the method least intrusive to him i with respect to the tax_liability for the year respondent abused his discretion by determining it was appropriate to cause the filing against certain real_property of a nominee notice_of_federal_tax_lien with respect to petitioner when he had already caused the filing of a notice_of_federal_tax_lien against petitioner for the year j respondent abused his discretion by asserting against petitioner a nominee theory with respect to specific real_property the existence and ownership of which was known to respondent at least four years prior to the filing of his nominee notice_of_federal_tax_lien yet which specific real_property was never deemed by him to be the property of petitioner the errors identified in paragraphs a b i and j were not raised by petitioner at the hearing and were not considered by the appeals_office in its notice_of_determination opinion all property and rights to property of a taxpayer become subject_to a lien in favor of the united_states on the date a tax_liability is assessed against a taxpayer if the taxpayer fails to pay the tax_liability after notice_and_demand for payment sec_6321 and sec_6322 until an nftl is filed however the lien is without validity and priority against certain persons such as judgment lien creditors of the taxpayer sec_6323 after the commissioner files the nftl the commissioner must provide the taxpayer with written notice of the filing informing the taxpayer of his right to request an administrative hearing on the matter sec_6320 b if the taxpayer makes a timely request for an administrative hearing sec_6320 requires that the hearing be conducted pursuant to sec_6330 d and e sec_6330 provides that a person may raise any relevant issue relating to the disputed collection action and may contest the existence or amount of the underlying tax_liability if the person did not receive a notice_of_deficiency or did not otherwise have the opportunity to dispute the underlying tax_liability see also 114_tc_604 114_tc_176 following the hearing the hearing officer is required to issue a notice_of_determination regarding the disputed collection action in the determination the hearing officer must confirm that he or she took into consideration the verification presented under sec_6330 sec_6330 sec_301 e proced admin regs in addition the determination must take into consideration any issues appropriately raised by the taxpayer offers by the taxpayer for collection alternatives and whether the disputed collection action represents a balance between the government’s need for efficient collection_of_taxes and the taxpayer’s concerns regarding the intrusiveness of the proposed collection action sec_6330 if the taxpayer disagrees with the hearing officer’s determination the taxpayer has the right to seek judicial review of the determination by appealing to this court or if this court lacks jurisdiction over the underlying tax_liability to a federal district_court sec_6330 if the taxpayer files a timely petition for judicial review the applicable standard of review depends upon whether the underlying tax_liability is at issue where the underlying tax_liability is not at issue the court will review the appeals officer’s determination for abuse_of_discretion sego v commissioner supra pincite in his amended petition petitioner enumerates a plethora of errors allegedly committed by the appeals_office in making its determination upholding the nominee lien filed against the claremore property several of the errors involve arguments that were not raised at the hearing or considered by the appeals_office in its notice_of_determination we shall divide petitioner’s alleged errors into two categories--those that were raised at the hearing and addressed in the notice_of_determination and those that were not--and evaluate them accordingly because petitioner concedes that he is not contesting the underlying tax_liabilities we shall review the appeals office’s determination for abuse_of_discretion id a errors raised at the hearing the errors listed in the amended petition that were raised by petitioner either explicitly and implicitly at the hearing and or addressed in the notice_of_determination are as follows respondent erred in determining that the hearing officer had no prior involvement with respect to the unpaid tax at issue in this proceeding respondent erred in determining that the requirements of applicable laws and administrative procedures relative to the issuance and filing of the nominee nftl had been satisfied and that the nominee nftl was valid respondent erred by not considering reasonable collection alternatives to respondent’s nominee nftl and by concluding that the filing of the nominee nftl balanced respondent’s need for efficient collection_of_taxes with petitioner’s concern that the collection action be no more intrusive than necessary we consider each of the listed arguments below a impartial officer sec_6320 provides in pertinent part that any hearing with respect to a lien under sec_6320 shall be conducted by an officer_or_employee who has had no prior involvement with respect to the unpaid tax petitioner alleges two errors in respondent’s determination regarding the impartiality of the hearing officer the first is that the hearing officer had prior involvement with respect to the tax for the tax periods covered by the hearing contrary to sec_6320 and the second is that the hearing officer had determined before the said hearing was concluded that lien action against petitioner was appropriate sec_6320 requires that any hearing conducted under that section must be conducted by an impartial officer sec_6320 however defines an impartial officer as an officer_or_employee who has had no prior involvement with respect to the unpaid tax specified in section a a before the first hearing under this section or sec_6330 the impartiality requirement ensures that a hearing officer has had no prior involvement in the determination and assessment of the underlying tax_liability that is the subject of the hearing the record confirms that the hearing officer in this case did not have any prior involvement with respect to the underlying tax_liability before the hearing consequently respondent did not abuse his discretion in determining that the sec_6320 requirement was met we also reject petitioner’s assignment of error alleging that the hearing officer had prejudged the issues raised by petitioner sec_6320 limits the definition of impartial officer as noted above and that definition does not address and arguably does not permit a challenge to the objectivity of the hearing officer who presides over a hearing under sec_6320 and sec_6330 however we shall assume without deciding for purposes of this analysis that sec_6320 and sec_6330 permit a challenge in appropriate cases to a demonstrably biased hearing officer see sec_6320 sec_6330 a person may raise at the hearing any relevant issue relating to the proposed collection action including the enumerated issues we have reviewed the transcript of the hearing and we can see no evidence of prejudgment or bias the hearing officer made an effort to explain to petitioner that petitioner must demonstrate that the filing of the nominee nftl was not valid it appears that petitioner’s allegation of bias was directed at the hearing officer’s refusal to invalidate the nominee nftl based on evidence that the claremore property was titled in alice criner’s name petitioner’s allegation of bias is not supported by the record in this case a validity of the nominee nftl sec_6321 provides sec_6321 if any person liable to pay any_tax neglects or refuses to pay the same after demand the amount including any interest additional_amount addition_to_tax or assessable penalty together with any costs that may accrue in addition thereto shall be a lien in favor of the united_states upon all property and rights to property whether real or personal belonging to such person the language of sec_6321 is broad and reveals on its face that congress meant to reach every interest in property that a taxpayer might have 472_us_713 see also 528_us_49 among the property interests reached by sec_6321 is an equitable interest owned by or for the benefit of a taxpayer in property titled in the name of a nominee g m leasin429_us_338 505_f2d_1031 10th cir sec_6321 authorizes the government among other things to file a nominee nftl against property of a taxpayer in the hands of an alter ego or nominee g m leasing corp v united_states supra pincite petitioner makes a vigorous and sometimes confusing attack on the nominee nftl utilized by respondent in this case as we understand petitioner’s arguments they are as follows a petitioner’s deceased mother owns the claremore property b petitioner does not own an equitable or legal_interest in the claremore property and did not own such an interest when the disputed nftl was filed c even if petitioner is deemed to own an interest in the claremore property it is only a partial interest and a nominee nftl should only be used when a taxpayer who is not the owner of record actually owns all of the property in question d respondent was required to consider but did not consider oklahoma law in reaching his determination that the filing of a nominee nftl was appropriate e even if the filing of a nominee nftl was arguably appropriate respondent did not follow the necessary administrative procedures in order to file a proper nominee nftl we group these arguments in three categories and address them below a petitioner’s interest in the claremore property the validity of any lien under sec_6321 depends in the first instance on whether the taxpayer owned property or held an interest in property to which the lien may attach sec_6321 sec_6321 does not create property rights but merely attaches federally defined consequences to rights created under state law united_states v natl bank of commerce supra pincite consequently in order to address petitioner’s arguments we must first examine whether the appeals_office abused its discretion in determining that petitioner had an interest in the claremore property while the priority of competing claims to property is determined under federal_law whether a taxpayer owns an interest in or exercises a right with respect to property is determined under state law 363_us_509 however the question whether a state-law right constitutes ‘property’ or ‘rights to property’ is a matter of federal_law united_states v natl bank of commerce supra pincite see also drye v united_states supra pincite petitioner argues that he was not the beneficial_owner of the claremore property under oklahoma law he undercut his argument during the hearing and before this court however by admitting that he owned an interest in the claremore property by reason of his mother’s death alice criner died intestate in and was survived by six children okla stat ann tit sec_213b a west supp provides that if there is no surviving_spouse the decedent’s estate is distributed in undivided equal shares to the surviving children of the decedent and the issue of any deceased child under oklahoma state law 8oklahoma state law also provides that when a person dies intestate leaving real_property title to the real_property vests continued petitioner as one of six surviving children of alice criner inherited an interest in the claremore property in when alice criner died consequently we hold that the appeals_office did not abuse its discretion in determining that petitioner owned an interest in the claremore property b respondent’s decision to use a nominee nftl petitioner contends that the filing of a nominee nftl is inappropriate when a taxpayer owns only a partial interest in the property we disagree a nominee nftl lien may be used whenever legal_title to property is held by a third party but equitable ownership in whole or in part resides with the taxpayer g m leasing corp v united_states supra it enables the commissioner to perfect a lien under sec_6323 on property in which a taxpayer has an interest that is titled in the name of a third party id see also 528_us_49 holding that a disclaimer by the sole heir of an intestate decedent did not prevent a federal_tax_lien with regard to the heir’s unpaid tax_liabilities from attaching to his inheritance 770_fsupp_1085 continued immediately in the decedent’s heirs subject only to administration proceedings the heirs may immediately convey their interest in such property to another dewitt v cavender p 2d okla ct app fessler v fariss p 2d okla davis v morgan p 2d okla see also okla stat ann tit sec_213b a west supp w d n c united_states v drexler aftr 2d ustc par e d okla we are aware of course that the appeals_office determined that petitioner was the sole equitable owner of the claremore property petitioner argues that oklahoma state law does not contemplate ownership in nominee form10 and that the appeals_office did not consider oklahoma law in making its determination upholding the nominee lien we reject petitioner’s arguments for several reasons first petitioner concedes that he owns an interest in the 9at the hearing petitioner did not offer any of the information previously requested by mr penny and revenue_officer baustert regarding petitioner’s claim that his siblings had an interest in the claremore property the silence of petitioner’s siblings undermines petitioner’s claim that each of them owns an interest in the claremore property but does not necessarily prevent them from asserting any ownership right that they may have a person who claims an ownership_interest in property subject_to a federal_tax_lien may bring a quiet title action to challenge the lien against the property see u s c sec generally the federal district courts have jurisdiction over any civil_action arising under any act of congress providing for internal revenue u s c sec 10petitioner’s argument on this point is erroneous as a matter of oklahoma state law because the concept of nominee ownership is recognized thereunder when legal_title to real_property is conveyed to one person and another person furnishes the consideration for the property a presumption arises under oklahoma state law that the person who furnished the funds to purchase the property intended to acquire the equitable interest in that property boatright v perkins p 2d okla see also okla stat ann tit sec_137 west supp which provides that when a transfer of real_property is made to one person and the consideration therefor is paid_by or for another a_trust is presumed to result in favor of the person by or for whom such payment is made claremore property although he disputes that he is the sole owner as respondent contends because of petitioner’s concession the hearing officer did not have to review oklahoma state law to decide whether petitioner owns the requisite property interest to which the federal_tax_lien in this case attaches second a nominee nftl is a collection device and a determination by respondent to use a nominee nftl is governed by federal_law not by oklahoma state law see g m leasing corp v united_states u s pincite only the determination of whether a taxpayer owns an interest in or holds rights to property is governed by state law drye v united_states supra pincite aquilino v united_states supra third even if the hearing officer was required to consider oklahoma state law petitioner has failed to show that he was prejudiced by any failure on the part of the hearing officer to do so although the transcript of the hearing reflects that the hearing officer did not research oklahoma state law the hearing officer referred to the substance of intestacy laws of oklahoma in his discussions regarding the interest in the claremore property that petitioner admits he inherited by reason of his mother’s death in fourth oklahoma state law recognizes the principle of equitable or beneficial_ownership on which the nominee lien is based in carey v winslow p okla the oklahoma supreme court found that although certain stock was titled in the name of a third party the judgment debtor who had previously held legal_title had never parted with the beneficial_ownership of the stock the court held that the stock remained subject_to the judgment debtor’s debts see also baxley v timms p 2d okla in which the oklahoma supreme court acknowledged that it was possible for a person to hold bare_legal_title to real_property while the beneficial_interest in the property remained in another we hold therefore that the appeals_office did not abuse its discretion in determining that a nominee nftl was a valid and appropriate collection procedure in this case c nominee lien procedures petitioner argues that even if the use of a nominee nftl is an appropriate collection procedure respondent did not follow required administrative procedures in obtaining approval to file the nominee nftl specifically petitioner contends that respondent skipped a required review step when revenue_officer baustert forwarded his memorandum requesting authorization to file the nominee nftl directly to counsel the internal_revenue_manual irm requires that before a nominee nftl is filed the collection office must obtain written approval from counsel administration internal_revenue_manual cch sec_5 at big_number the request for approval must show that while a third party may have legal_title to the property the taxpayer owns an interest in the property and enjoys its full use and benefit see administration internal_revenue_manual cch sec_5 at big_number factors which the irm lists as support for the filing of a nominee nftl include the following the taxpayer previously owned the property the nominee paid little or no consideration for the property the taxpayer retains possession or control of the property the taxpayer continues to use and enjoy the property conveyed just as the taxpayer had before such conveyance the taxpayer pays all or most of the expenses of the property and the conveyance was for tax_avoidance purposes id in accordance with the procedures outlined in the irm revenue_officer baustert submitted a memorandum dated date to counsel requesting that a nominee nftl be authorized with respect to the claremore property the memorandum listed several factors in support of the request that are enumerated in the irm on date counsel approved revenue_officer baustert’s request after reviewing the evidence 11even if a taxpayer never transferred a particular asset to the current titleholder a lien for his taxes may attach to it if purchased with funds he supplied e g 107_f3d_110 2d cir supporting his request as well as additional information counsel had obtained regarding petitioner’s collection file at trial petitioner argued that the following section in an ics transcript12 relating to petitioner’s case proved that mr baustert did not follow established guidelines in making his request for approval to file the nominee notice_of_federal_tax_lien reviewed copy of nominee lien approval received during ics downtime - control opened to maintain some advisory record thereof unless something was missed during ics downtime ro submitted request directly to counsel rather than following usual procedures of routing it through advisory as such there was no advisory review record or control it is unclear why it was not sent to counsel through advisory although it is acknowledged that advisory review is not required by the irm it has been established practice here in the absence of extraordinary circumstances the hearing officer testified at trial that he reviewed the ics transcript in making his determination he explained that although the advisory group normally reviewed the requests to decide if any additional supporting documentation was required collection officers sometimes worked directly with counsel bypassing the advisory review according to mr penny the revenue_officer was dealing with another nominee nftl on property allegedly owned by petitioner in another location so the revenue_officer had already established a direct path to counsel we 12an ics transcript is a case file transcript that is maintained by the irs to document case file actions taken by irs personnel find mr penny’s testimony credible on the subject of advisory review and we note that such review was not one of the required steps enumerated in the irm we hold therefore that the appeals_office did not abuse its discretion in determining that the requirements of any applicable law or administrative procedure have been met with respect to the nominee nftl at issue in this case a consideration of collection alternatives petitioner also contends that respondent erred by not considering reasonable collection alternatives to respondent’s nominee nftl and disputes that the filing of the nominee nftl properly balanced respondent’s need for efficient collection_of_taxes with petitioner’s concern that the collection action be no more intrusive than necessary petitioner however did not submit a completed form 433-a collection information statement - wage earner or form 433-b collection information statement - business to document his claimed inability to pay even if petitioner had submitted completed forms 433-a and 433-b the disagreement between petitioner and respondent regarding the extent of his ownership_interest in the claremore property precluded any determination of petitioner’s actual ability to pay the unpaid tax_liabilities at issue we also note that petitioner did not offer any collection alternatives that would adequately protect respondent’s need to perfect a lien with respect to petitioner’s ownership_interest in the claremore property at the trial in this case petitioner had testified that the claremore property would remain titled in the name of his deceased mother under the circumstances involved in this case the nominee nftl was a reasonable collection procedure that enabled respondent to perfect a federal_tax_lien with respect to the claremore property we conclude therefore that the appeals_office did not abuse its discretion in upholding the filing of the nominee nftl b errors not raised at the hearing in an appeal from a notice_of_determination under sec_6320 and sec_6330 we ordinarily consider only those matters that were raised in the hearing and or considered in the notice_of_determination 118_tc_488 115_tc_582 n as we stated in magana v commissioner supra pincite it would be anomalous and improper for us to conclude that respondent’s appeals_office abused its discretion under sec_6330 in failing to grant relief or in failing to consider arguments issues or other matter not raised by taxpayers or not otherwise brought to the attention of respondent’s appeals_office petitioner raised several issues for the first time in his petition that were not raised in the hearing or addressed in the notice_of_determination whether the appeals team manager whose name appears on the notice_of_determination actually made a determination as required by sec_6320 and sec_6330 whether revenue_officer baustert had the requisite authority to file the nominee nftl without the written approval of his direct supervisor whether respondent abused his discretion by filing a nominee nftl after he had already caused an nftl to be filed against petitioner for and whether respondent abused his discretion by asserting a nominee theory with respect to certain real_property the existence and ownership of which was known to respondent at least years before the nominee nftl was filed with the exception of the issue in above which challenges the adequacy of the notice_of_determination petitioner should have raised the above-listed issues with the hearing officer at the hearing so that the appeals_office could address the issues in its notice_of_determination petitioner did not do so and as a result the notice_of_determination did not address those issues we decline therefore to consider issues that could have been raised but were not raised at the hearing and addressed in the notice_of_determination magana v commissioner supra with respect to petitioner’s challenge to the notice_of_determination petitioner offered no evidence at trial or argument on brief to support his contention that the appeals team manager whose name appears on the letter portion of the notice_of_determination did not make the determinations in the notice moreover petitioner’s argument misconstrues the notice_of_determination which consists of a cover letter and a summary of the hearing officer’s determination regarding the matters considered at the hearing the appeals team manager who signed the letter portion of the notice_of_determination on behalf of the appeals_office refers to the determination made as our determination the summary attached to the letter bears no signature and summarizes the determination made in petitioner’s case that summary is extracted verbatim from an appeals transmittal and case memo that was prepared by mr penny and transmitted to the appeals team manager who approved mr penny’s determination on behalf of the appeals_office taken in context the determination in question is one made by mr penny and approved by mr penny’s supervisor on behalf of the appeals_office petitioner has failed to show that the determination in question is not a proper determination under sec_6330 conclusion based on the record before us we hold that the appeals_office did not abuse its discretion in determining that respondent’s filing of a nominee nftl with respect to the claremore property was an appropriate collection action in this case we have considered the remaining arguments of both parties for results contrary to those expressed herein and to the extent not discussed above find those arguments to be irrelevant moot or without merit to reflect the foregoing decision will be entered for respondent


t c summary opinion united_states tax_court santos m and ingrid i castillo petitioners v commissioner of internal revenue respondent docket no 4698-02s filed date santos m and ingrid i castillo pro_se vivian n rodriguez for respondent couvillion special_trial_judge this case was heard pursuant to sec_7463 in effect when the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency of dollar_figure in petitioners' federal_income_tax unless otherwise indicated section references hereafter are to the internal_revenue_code in effect for the year at issue after concessions by petitioners the sole issue for decision is whether petitioners are entitled to a deduction under sec_219 for an individual_retirement_account ira contribution of dollar_figure by santos m castillo petitioner for the year some of the facts were stipulated those facts and the accompanying exhibits are so found and are incorporated herein by reference petitioners’ legal residence at the time the petition was filed was miami florida during the year at issue petitioner was employed as an automobile salesman by carmax he began his employment with carmax sometime during and terminated his employment with that employer on date because of his need to have several surgeries he worked approximately years with carmax as an employee of carmax petitioner was an active_participant in two circuit city stores inc retirement plans the retirement_plan of circuit city stores inc and the circuit city stores inc 401k plan at the time petitioner's employment with carmax terminated on date petitioner at trial petitioners conceded unreported interest_income of dollar_figure and unreported self-employment_income of dollar_figure circuit city stores inc is believed to be the parent company of carmax was not vested in either of the plans nor is he entitled to future_benefits from either of the plans petitioners filed a timely joint federal_income_tax return for in which they reported total income of dollar_figure with the two unreported income items conceded by petitioners their total income for was dollar_figure on their tax_return petitioners claimed a deduction of dollar_figure for an ira contribution of dollar_figure by petitioner and an ira contribution of dollar_figure by petitioner ingrid i castillo in the notice_of_deficiency respondent disallowed the dollar_figure ira contribution deduction by petitioner5 on the ground that petitioner was an active_participant in his employer's qualified_plans and petitioners' joint income for exceeded the limitations of sec_219 and allowing an active_participant in a qualified_plan to contribute to an ira in general a taxpayer is entitled to deduct the amount of a contribution to an ira sec_219 the amount of an allowable ira deduction is provided under sec_219 and is subject_to a limitation under sec_219 where the taxpayer is for any part of the taxable_year an active_participant in a the record does not indicate that petitioner made any contributions to the plans respondent agreed that the ira contribution by petitioner ingrid i castillo was allowable and no adjustment was made in the notice_of_deficiency with respect to that contribution qualified_pension plan in such a case for married taxpayers who file a joint_return the deduction allowable with respect to either spouse is reduced under a formula prescribed in sec_219 and that formula generally provides for a phase- out of the deductible amount of the ira where for the year the joint income of the taxpayers exceeds dollar_figure felber v commissioner tcmemo_1992_418 affd without published opinion 998_f2d_1018 8th cir in this case petitioners' joint income after their concession of unreported income totaled dollar_figure under the statutory formula cited petitioner is not entitled to an ira deduction for petitioner's sole contention is that because he was not vested in the two plans of his former employer and his amounts in those plans were forfeited when he terminated his employment he will never receive any benefits from those plans and therefore he should be allowed a deduction for his ira contributions for the answer to that argument is that petitioner was nonetheless an active_participant in the two plans of his former employer he was an active_participant because contributions were made to his accounts in the two plans by his former employer the mere fact that his accounts in these plans were forfeited when his employment terminated and that he was not vested when his employment terminated does not change his status as an active_participant sec_219 a taxpayer is considered an active_participant whether or not his rights under a plan are vested or forfeited 69_tc_750 affd 592_f2d_677 2d cir therefore because petitioner was an active_participant in his former employer's plans during the claimed ira deduction for is not allowable respondent is sustained on this issue reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


internal_revenue_service number release date index number ------------------------------------------------- ------------------------------------- -------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number ---------------------- refer reply to cc psi b01 plr-122991-14 date date legend ------------------------------------- -------------------------------- -------------- ------------------- ------------------- ------- x state date decedent year dear ---------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to make an election under sec_754 of the internal_revenue_code the information submitted states that x was formed as a limited_liability_company taxed as a partnership for federal_income_tax purposes in state on date decedent was a partner in x decedent died in year however at that time x's tax advisors did not advise x of the availability of an election under sec_754 accordingly x inadvertently failed to timely file a sec_754 election for year sec_754 provides that if a partnership files an election in accordance with the regulations prescribed by the secretary the basis of the partnership property is adjusted in the case of a transfer of a partnership_interest in the manner provided in plr-122991-14 sec_743 such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 b of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions therefore for filing the return for the taxable_year sec_301_9100-1 c provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 b defines the item regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant and extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-3 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election under sec_754 effective for the year taxable_year and thereafter x must calculate the adjustments under sec_734 and c and sec_1_755-1 as if x had timely made the sec_754 election and allocated the increase in basis among the properties held by x at that time the election should be made in a written_statement filed with the appropriate service_center for association with x's year return a copy of this letter should be attached to the election plr-122991-14 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 internal_revenue_code and the regulations thereunder 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 copy of this letter is being sent to x's authorized representative sincerely associate chief_counsel passthroughs special industries by david r haglund david r haglund branch chief branch office of the associate chief_counsel passthroughs special industries


department of the treasury internal_revenue_service washington d c t a x e x e m a t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person telephone number identification_number number release date date date uil employer_identification_number legend a b c d e x dear ------------------- concerning the proposed reorganization between a b and c facts a was incorporated in x as a non-member nonprofit corporation under the laws of the state of e a has been recognized as an organization described in sec_501 of the internal_revenue_code and as a supporting_organization classified under sec_509 a provides management consolidated administration data processing services budgeting accounting and administrative services to b and c a also provides marketing services for all of a’s related entities a charges administrative fees for those services at cost which will not exceed the market rate for such services a is managed by its board_of directors board a will only manage related_organizations that it will fully control through its board b was incorporated as a member nonprofit corporation under the laws of the state of e b has been recognized as an organization described in sec_501 of the code and as a this is in reply to the ruling_request submitted by your authorized representative hospital classified under sec_509 and sec_170 b provides specialized healthcare in the areas of rehabilitation arthritis treatment and specialized psychiatric care both for geriatric patients and for children and adolescents b also provides hospice and home health care services for patients in the community b is managed by its board_of trustees board a’s membership is composed of its board c was incorporated as a non-member nonprofit corporation under the laws of the state of e c has been recognized as an organization described in sec_501 of the code and as a supporting_organization under sec_509 c raises funds for b and is controlled by b c is managed by its board_of directors board over the past year a b and c have reviewed their structures and interactions recent events in the exempt_organization sector prompted an examination of the way that governance of these organizations should be conducted the examination particularly focused on the inefficient current organizational structure and methods for b to enable it to better fulfill its charitable ie health care purpose therefore the organizations propose to reorganize as described below reorganization a will function as the sole member of b and will control b and c as well as any additional entities that may be added to this group of related_organizations in the future a will elect the members of the boards of b and c and a will always have the right to appoint a majority of the members of the board_of all of a’s subsidiaries b’s articles of incorporation articles will be restated to change its name to d and to provide a will be the sole member of b a will elect all the board members of b b’s board will always be composed of a majority of members from a and a must approve any amendments to b’s articles and bylaws before they can become effective c’s articles and bylaws will be restated in the same manner to provide for the same control relationship by a b will provide the initial operating capital to a the costs incurred by a in providing services to b and c will be allocated to b and c based upon each entity’s relative budgets in order to provide a proper matching of revenue and expenses there will be no profit involved in the allocation of those costs which will primarily consist of wages and benefits after the reorganization b and c will continue to have the same purposes and to conduct the same activities as before the reorganization the organizations anticipate several benefits from the reorganization these include ease of managing the existing members of the group of related_organizations and cost savings via a more efficient system which will also slow the increase in community healthcare costs the reorganization will also facilitate the expansion of programs and services through additional entities which may be added in the future the long range plan of b is to add lines of services that will expand the types of care it can offer to its patients and to the community rulings requested following the reorganization b will continue to qualify as an organization described under sec_501 of the code and will continue to be classified as a public charity and a hospital under sec_509 and sec_170 following the reorganization contributions from the public to b will continue to be deductible under sec_170 of the code law sec_170 of the code describes an organization the principal purpose or functions of which are the providing of medical or hospital care or medical education or medical_research if the organization is a hospital sec_501 of the code recognizes as exempt from federal_income_tax entities that are organized and operated exclusively for charitable purposes no part of the net_earnings of which inure to the benefit of any private_shareholder_or_individual analysis b will continue to operate as a hospital after the reorganization the purposes activities and sources of revenue of b after the reorganization will remain the same as before the reorganization therefore the reorganization will not adversely impact either the current tax- exempt status of b under sec_501 of the code or the current classification of b as a hospital under sec_509 and sec_170 accordingly contributions to b from the public will continue to be deductible under sec_170 ruling sec_1 following the reorganization b will continue to qualify as an organization described under sec_501 of the code and will continue to be classified as a public charity and a hospital under sec_509 and sec_170 following the reorganization contributions from the public to b will continue to be deductible under sec_170 of the code upon which it is based the facts submitted other than with respect to the sections described this ruling does not address the applicability of any section of the code or regulations to this ruling is based on the understanding there will be no material changes in the facts this ruling is directed only to the organization that requested it sec_6110 of this ruling will be made available for public inspection under sec_6110 of the code the code provides it may not be used or cited by others as precedent after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice telephone number are shown in the heading of this letter if you have any questions about this ruling please contact the person whose name and in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative enclosure notice sincerely steven b grodnitzky manager exempt_organizations technical group


internal_revenue_service sin department of the treasury washington dc person to contact telephone number refer reply to t ep ra t3 date jan legend taxpayer iraa ira b irac ira d this is in response to a letter dated date as supplemented letters of date and date in which you through your authorized representative request rulings under sec_408 and sec_72 of the internal_revenue_code the following facts and representations support your ruling_request page the taxpayer maintains four separate ira’s ira a ira b ira c and ira d it is represented that ira’s a b c and d meet the requirements of sec_408 of the code the ira’s were acquired as community_property during the taxpayer's marriage the taxpayer at age began receiving a series of substantially_equal_periodic_payments from each of the ira's in it is represented that the payments from each ira separately qualify as a series of substantially equai periodic_payments within the meaning of sec_72 of the code based on the taxpayer's life expectancy on date the taxpayer and his former spouse filed for dissolution of the above referenced marriage the taxpayer and his former spouse entered into a final separation agreement effective date it is represented that such a separation agreement is a decree or instrument described in sec_71 of the code the separation agreement provides that contingent upon approval by the internal_revenue_service ira’s c and d will be transferred to the taxpayer’s former spouse the payments which the taxpayer receives from ira's a and b will continue without change taxpayer will no longer receive payments from ira’s c and d which will become the property of his former spouse based on the above facts and representations you through your authorized representative request the following letter rulings division of the ira’s between the taxpayer and his former spouse specifically the transfer of ira’s c and d as described above pursuant to a decree of dissolution instrument defined in sec_71 of the code will be considered nontaxable transfers pursuant to sec_408 of the code where the annual dollar amount of ira_distributions paid to the taxpayer with respect to each of retained ira’s a and b remains unchanged the reduction in total annual payments from all ira's a b c and d will not be considered a subsequent modification in the series of payments under sec_72 of the code and continuing withdrawals at this unchanged annual level from ira’s a and b will not result in the imposition upon the taxpayer of the percent additional tax under sec_72 and of the code as applied and calculated pursuant to sec_72 a i i of the code sec_408 of the code provides that an individual’s ira interest transferred pursuant to a decree of divorce_or_separation_instrument described in subparagraph a of sec_71 is not to be treated as a taxable transfer made by such individual notwithstanding any other provision of this subtitle and is treated as an ira of the former spouse and not of the original ira holder benefit of the former spouse thereafter such transferred interest is to be treated as maintained for the code sec_72 provides that if any taxpayer receives any amount from a qualified_retirement_plan as defined in code sec_4974 which includes an ira the taxpayer's tax under this chapter for the taxable_year in which such amount is received shall be increased by an amount equal to percent of the portion of such amount which is includible in gross_income page code sec_72 iv provides that a distribution from a qualified_retirement_plan that is part of a series of substantially_equal_periodic_payments not less frequently than annually made for the life or life expectancy of the employee or joint lives or joint life expectancies of such employee and his designated_beneficiary is not subject_to the tax imposed by code sec_72 code sec_72 provides that if paragraph does not apply to a distribution by reason of paragraph a iv and the series of payments under such paragraph are substantially_modified other than by reason of death or disability - i before the close of the 5-year period beginning with the date of the first payment and after the employee attains age or ii before the employee attains age the taxpayer's tax for the first taxable_year in which such modification occurs shall be increased by an amount determined under regulations equal to the tax which but for paragraph a iv would have been imposed plus interest for the deferral_period code sec_72 defines the term deferral_period as the period beginning with the taxable_year in which without regard to paragraph a iv the distribution would have been includible in gross_income and ending with the taxable_year in which the modification described in subparagraph a occurs with respect to your first ruling_request as noted above code sec_408 provides that ira amounts transferred to an ira of a former spouse pursuant to its provisions become the ira property of the former spouse and that the transfer is not to be considered a taxable transfer thus with respect to your first ruling_request we conclude as follows division of the ira’s between the taxpayer and his former spouse specifically the transfer of ira’s c and d as described above pursuant to a decree of dissolution instrument defined in sec_71 of the code will be considered nontaxable transfers pursuant to sec_408 of the code with respect to your second ruling_request pursuant to sec_408 ira’s c and d are no longer the property of the taxpayer further since code sec_72 requirements were separately determined for ira’s a b c and d based on the taxpayer's life expectancy the transfer of ira’s c and d will have no effect on compliance with sec_72 with respect to ira’s a and b the same payments continue from ira’s a and b thus with respect to your second ruling_request the service concludes as follows where the annual dollar amount of ira_distributions paid to the taxpayer with respect to each of retained ira’s a and b remains unchanged the reduction in total annual payments to the taxpayer from all ira's a b c and d will not be considered a substantial modification in the series of payments under sec_72 of the code and continuing withdrawals at this unchanged annual level from ira’s a and b will not result in the imposition upon the taxpayer of the percent additional tax under sec_72 and of the code as applied and calculated pursuant to sec_72 of the code this ruling letter is based on the assumption that ira’s a b c and d meet the requirements of code sec_408 at all relevant times it also assumes that the transfer of ira's c and d to taxpayer’s former spouse will otherwise comply with the requirements of code sec_408 page this ruling letter is directed only to the taxpayer who requested it code sec_6110 provides that it may not be used or cited by others as precedent a copy of this ruling letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office sincerely yours fray fla frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of the ruling notice


department of the treasury internal_revenue_service commerce street dallas tx tax_exempt_and_government_entities_division release number release date legend org - organization name xx - date address - address org address certified mail dear date date person to contact badge number contact telephone number contact address employer_identification_number this is a final notice of adverse determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective july 20xx for the following reason s you are not operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you are not and have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 rather your activities further a substantial nonexempt commercial purpose and serve private rather than public interests because you did not protest the proposed modification of your non-private foundation status and have indicated your agreement by signing the form_6018 on june 20xx it is further determined that you have not exhausted your available remedies for purposes of declaratory_judgment under sec_7428 of the code contributions to your organization are no longer deductible you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending june 20xx and for all the tax years thereafter in accordance with instructions of the return it is further determined that your failure_to_file a written appeal constitutes a failure to exhaust your available administrative remedies however if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment to secure a petition form write to the following address united_states tax_court second street nw washington dc please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely nanette m downing director eo examinations enclosures publication internal_revenue_service department of the treasury capitol street fresno ca date date org address certified mail - return receipt requested dear taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures jor unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice catalog number 34809f letter rev if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing director eo examinations enclosures publication publication report of examination letter rev catalog number 34809f form_886 a department of the treasury - internal_revenue_service schedule no or exhibit explanation of items name of taxpayer org year period ended xx xx xx legend org organization name fdn-1 fdn-2 - g fdn xx - date co-1 city - city company state - state ra-1 - ra issues issue - does org continue to qualify for exemption under internal_revenue_code sec_501 issue - does inurement exist in the form of interest free and unpaid loans facts the org org was founded in june 19xx by fdn-1 and fdn-2 husband and wife the irs issued a determination_letter dated november 19xx the letter recognized org as a tax exempt_organization under internal_revenue_code code sec_501 the letter also recognized org as an organization described in code sec_170 org’s exempt_purpose as stated in its articles of incorporation is as follows a non non-profit stock corporation org is organized exclusively and solely for a combination of educational and charitable purposes its basic and primary purpose being to provide complete facilities for the study and provision of the optimum benefit to human life both mental and physical including thereunder the study and treatment of illness their cause prevention and cure the study of and provision for the needs of the human body both physical and mental including thereunder nutritional educational philosophical and other needs the providing of building operation of hospitals schools farms recreational and other facilities the cooperative joining with or working with and in conjunction with individuals having or controlling the above facilities or any of them other corporations associations recreational necessary purposes spiritual groups above and the to fdn-1 stated that org’s primary exempt_purpose was to provide traditional and alternative medical services at low or no cost to residents of city state fdn-1 fdn-2 utilized traditional medical practices and alternative homeopathic remedies they used the same techniques as traditional doctors and with patients’ cooperation form 886-a rev department of the treasury - internal_revenue_service page of form_8 a department of the treasury - internal_revenue_service schedule no or exhibit explanation of items name of taxpayer org year period ended xx xx xx recommended alternative medical solutions it is unclear from the testimony provided whether org ever operated its own medical clinic tax records for org from the period 19xx through 19xx have not been made available in 19xx fdn-1 fdn-2 created co-1 co-1 a for-profit medical corporation fdn-1 fdn-2 along with other doctors provided medical services through co-1 and were paid wages by same this for-profit clinic provided patient treatment for the years 19xx through 20xx during this same period of time org was dedicated solely to the collection and compilation of medical data produced by the patients of co-1 under the banner of org fdn-1 fdn-2 compiled patients’ response data to both the traditional and homeopathic treatment org's ultimate but never realized goal is to have the data published in a book from its inception in 19xx to the present no agents publishers or interested parties have been identified as supporting the publication of this material no evidence has been provided that org was ever a publicly_supported_organization since the formation of co-1 in 19xx org's primary source of funds has either been the direct donations of fdn-1 fdn-2 investment_income or the sale of investments or other assets held by the organization it appears that family members have been the only employees of the organization since its formation in the final years of co-1 fdn-1 fdn-2 devoted half days to org fdn-1 stated that in 20xx she and fdn-2 were going to sell their portion of co-1 to other doctors but at the last minute the purchasing doctors changed their minds and co- was closed instead sometime in 20xx property owned by org was sold in january 20xx at a profit of almost dollar_figure fdn-2 died in 20xx prior to the sale of org's real_estate fdn-1 fdn-2 and their son ra-1 ra-1 received modest compensation from org after the windfall from the real_estate sale their compensation increased significantly fdn-2's compensation went from dollar_figure in 20xx to dollar_figure in 20xx ra-1's compensation was dollar_figure in 20xx up to dollar_figure in 20xx and dollar_figure in 20xx prior to his death fdn-2 was the person primarily in charge of compiling and organizing the medical data intended for publication after his death fdn-1 and ra-1 were tasked with translating and organizing the data into a practical format to publish a book the data is stored in document boxes and fills an by foot storage room the data consists of the unorganized hand written notes of fdn-2 fdn-1 estimated that approximately of the collected material has been reviewed she stated that only form 886-a rev department of the treasury - internal_revenue_service page of form_886 a department of the treasury - internal_revenue_service schedule no or exhibit explanation of items name of taxpayer org year period ended xx xx xx she and ra-1 can decipher the handwritten notes ra-1 is not a medical doctor but does hoid a ph d in chemistry he does not hold himself out to the public as an author or specialist in the field of naturopathic medicine and thus far has not published any of his late father's material ten document boxes were observed by the agent while touring the premises there were also approximately reel-to-reel audio tapes purportedly holding two hours of recorded lectures which fdn-2 used as a reference in his work because of her husband’s death and her own medical issues fdn-1 does not know when the transcription work will be finished purportedly she and ra-1 dedicate approximately four hours a day to reviewing the material although fdn-2 may have lectured and published miscellaneous articles during his lifetime no serious works of published medical information were provided as evidence of the importance or validity of the collected work due to the age of the collected data and lack of iridependent review the marketability of the material has yet to be established fdn-1 and ra-1 are listed as president and secretary treasurer respectively on org’s 20xx through 20xx forms fdn-1 has served as org’s president since 20xx and has served on the board since org’s inception ra-1 has been actively involved with org since 20xx and served as secretary and treasurer for four years fdn-1 performs all of org’s bookkeeping she writes and signs checks and prepares the checkbook reconciliation she provides a handwritten ledger to the cpa which is used to prepare the forms org's 20xx through 20xx forms schedule a state that org qualifies for public charity status because it is a medical_research_organization operated in conjunction with a hospital described in sec_170 b a iii the hospital identified is co-1 this information is contradicted by the fact that co-1 was a small clinic not a hospital and ceased to provide medical treatment sometime in 20xx loans to ra-1 org's records show that it loaned ra-1 a total of dollar_figure in ten separate loans from july 20xx through june 20xx ra-1 stated that loan documents do not exist and the loans were treated as short term loans with no interest as of june 20xx he had repaid dollar_figure of the loans with the last payment made on october 20xx the table below provides loan and payment details form 886-a crev department of the treasury - internal_revenue_service page of form_8 a department of the treasury - internal_revenue_service schedule no or exhibit explanation of items name of taxpayer org year period ended xx xx xx date ck xx xx xx xx_ payment xx payment xx_ payment xx xx xx_ xx xx xx xx payment xx xx kx_ payment xx payment payment loans to ra-1 amount payment balance totals law sec_501 of the internal_revenue_code irc exempts from federal_income_tax organizations organized and operated exclusively for charitable educational and other exempt purposes provided that no part of the organization's net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the treasury regulations treas reg provides that in order to be exempt as an organization described in sec_501 of the code the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section sec_1_501_c_3_-1 of the regulations provides that an organization will not be regarded as operated exclusively for exempt purposes if more than an insubstantial part of its activities is not in furtherance of exempt purposes form 886-a rev department of the treasury - internal_revenue_service page of form_8 a department of the treasury - internal_revenue_service schedule no or exhibit explanation of items name of taxpayer org year period ended xx xx xx sec_1_501_c_3_-1 of the regulations treas reg provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests an organization must establish that it serves a public rather than a private interest and that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests income_tax regulation sec_1_501_c_3_-1 70_tc_1037 92_tc_1053 private benefits include an advantage profit fruit privilege gain or interest 78_tc_280 taxpayer's position the taxpayer's representative provided a letter dated august 20xx stating that org is engaged in the study and research of traditional and alternative medicine and that no intentional personal inurement exists government's position and conclusion org's tax exempt status should be revoked because it is not operated for an exempt_purpose and inurement exists issue - org does not qualify for exemption because it is not operated exclusively for an exempt_purpose org did not establish that its present activity--transcription of almost years of accumulated medical data--qualifies as an exempt_purpose as defined in regulation sec_1_501_c_3_-1 org fails the operational_test for an exempt_organization for the years under examination issue - org's earnings inured to the benefit of ra-1 in the form of dollar_figure of interest-free loans dollar_figure in unpaid loans and dollar_figure of unpaid interest on the same loans form 886-a rev department of the treasury - internal_revenue_service page of