qwhuqdo 5hyhqxh 6huylfh department of the treasury number release date index no washington dc person to contact telephone number refer reply to cc ita - plr-116604-99 date date legend parent taxpayer qi dear this letter responds to your request for a private_letter_ruling submitted on behalf of taxpayer requesting rulings on issues concerning its establishment of a like-kind_exchange program under sec_1031 of the internal_revenue_code facts taxpayer is a wholly-owned subsidiary of a subsidiary which in turn is owned by parent a multi-state bank_holding_company taxpayer is primarily engaged in the business of leasing vehicles to consumers and issuing loans to consumers for the purchase of vehicles taxpayer currently maintains a portfolio of vehicles leased to individual customers for non-commercial use these vehicles are automobiles passenger vans light duty trucks and sport utility vehicles suvs typically the leases range from twelve months to sixty-three months in duration taxpayer has legal_title to each vehicle and depreciates each vehicle pursuant to sec_168 taxpayer restructured its vehicle leasing operations with the intention that the disposition of a vehicle coming off lease a relinquished vehicle by taxpayer to an unrelated party and the acquisition by taxpayer of a vehicle recently leased from a dealer a replacement vehicle will qualify as a like-kind_exchange under sec_1031 relinquished vehicles are typically sold to the dealer the lessee or a third party through an auction replacement vehicles are usually purchased from an unrelated dealer plr-116604-99 to meet the requirements of sec_1031 taxpayer entered into an agreement with qi the exchange_agreement under which qi is to act as the qualified_intermediary under sec_1_1031_k_-1 of the income_tax regulations accordingly taxpayer assigns its rights for the sale of relinquished vehicles and the purchase of replacement vehicles to qi qi is a corporation wholly owned by a third party that is unrelated to taxpayer qi has not previously performed services other than routine financial services for taxpayer under the exchange_agreement qi is to keep an escrow account and a disbursement account at a financial_institution unrelated to parent or taxpayer the escrow account is to hold the proceeds from relinquished vehicles while the disbursement account consisting of funds solely from the escrow account is to pay for replacement vehicles if the disbursement account does not contain a sufficient amount of funds to acquire replacement vehicles taxpayer will supply additional funds to the disbursement account to cover any deficiency the exchange_agreement expressly limits taxpayer’s rights to receive pledge borrow or otherwise obtain the benefits of money or other_property held by qi before the end of the exchange_period for this purpose the exchange_period begins on the day of the sale of the relinquished vehicle and ends at midnight on the 45th day following the sale of a relinquished vehicle if no replacement vehicle is identified if a replacement vehicle has been identified during the 45-day window the exchange_period will end the earlier of the 180th day following the sale of the relinquished vehicle or the date taxpayer receives the replacement vehicle the exchange_agreement provides that taxpayer has a right to receive money or other_property held by qi prior to the end of the exchange_period only upon the occurrence of an event described in sec_1_1031_k_-1 or iii the exchange_agreement authorizes qi to purchase all leased vehicles on taxpayer’s behalf including vehicles that will not be replacement vehicles for purposes of a like-kind_exchange periodically taxpayer will assign qi the right to sell all vehicles purchased by taxpayer after the date of the exchange_agreement non- replacement vehicles are purchased by qi and paid for out of the disbursement account in the same procedures applicable to replacement vehicle purchases this is done because taxpayer currently acquires more vehicles than are being relinquished and it matches each replacement vehicle with one relinquished vehicle for basis tracking purposes the unmatched vehicles are non-replacement vehicles plr-116604-99 sale of relinquished vehicles the exchange transactions take place on completion of a lease_term or upon early termination of a lease at such time the vehicle will be offered to sale to the lessee and if the lessee refuses then to the dealer the transactions are then carried out as follows in a typical transaction the lessee of a vehicle decides to purchase the vehicle from taxpayer consequently the lessee contacts taxpayer’s customer service_department to obtain the purchase_price of the vehicle during the time of the phone call a customer service representative verbally notifies the lessee that taxpayer’s rights to sell the vehicle have been assigned to qi additionally this notification appears in the lessee’s payment coupon booklet after receiving an offer from the lessee to purchase the vehicle taxpayer includes the vehicle’s purchase_price lease numbers and purchaser’s name on a list that is then sent to qi the list contains notification that the vehicles are being assigned from taxpayer to qi the lessee will forward to taxpayer a check made payable to qi taxpayer will receive the check in order to process the paperwork associated with the lease transaction since taxpayer maintains the leases on its accounting system taxpayer will have all information necessary to ascertain whether the paperwork and check amounts are in order due to the volume of outstanding leases these are significant tasks in some cases the lessee purchases the vehicle using funds borrowed from one of the banking subsidiaries of parent this loan occurs in a separate arm’s-length transaction after the loan agreement is executed the banking subsidiary mails a check to taxpayer the check is made payable to the order of qi pursuant to the exchange_agreement taxpayer forwards the check to qi for deposit into the escrow account after qi has received the check taxpayer arranges to transfer title of the vehicle to the lessee additionally in some cases the lessee elects to have the lease security deposit held by taxpayer applied to the purchase of the vehicle in those circumstances taxpayer will ask the lessee to request in writing that taxpayer as the lessee’s agent forward the security deposit to qi in satisfaction of part of the purchase_price taxpayer will make a check payable to qi for the amount of the security deposit and forward it along with the lessee’s purchase check to qi plr-116604-99 acquisition of replacement vehicles taxpayer acquires replacement vehicles pursuant to contracts taxpayer has entered into with unrelated dealerships in which taxpayer agrees to purchase from the dealer each vehicle leased by the dealer under certain terms and conditions before the purchase transaction taxpayer sends each dealer a letter notifying the dealer that taxpayer’s rights to purchase a vehicle have been assigned to qi under taxpayer’s leasing program a lessee and a dealer complete a leasing application in which the lessee applies for a credit check next the dealer notifies taxpayer of the potential lease customer and the credit check if the credit application is approved taxpayer begins to process the paperwork to acquire the vehicle which includes notifying the qi of the purchase of the vehicle after the necessary paperwork has been completed by all parties to the transaction the dealer will obtain payment for the vehicle by drawing on the disbursement account controlled by qi once a dealer has drafted on the disbursement account the funds will be transferred directly from the disbursement account to the dealer’s account title will be transferred to and in the name of taxpayer within days of relinquishing a vehicle taxpayer matches the relinquished vehicle with one replacement vehicle requested ruling sec_1 each transfer by taxpayer of a relinquished vehicle and receipt of an identified replacement vehicle in accordance with the exchange_agreement will constitute a separate and distinct like-kind_exchange transaction that qualifies for deferral of gain recognition for federal_income_tax purposes pursuant to sec_1031 taxpayer will not be in constructive receipt of any money or other_property held by qi pursuant to sec_1 k -1 f unless and until such items are actually payable to or received by taxpayer on the condition that the requirements of the exchange_agreement representations in this ruling_request and other conditions of the safe-harbor test are in fact met plr-116604-99 if a lessee elects to have the security deposit held by taxpayer applied to the purchase of a vehicle taxpayer will not be in constructive receipt of the security deposit funds pursuant to sec_1_1031_k_-1 the exchange pursuant to the exchange_agreement of each relinquished vehicle for a properly identified and received replacement vehicle will constitute a nontaxable_exchange to the extent no cash or other non-like-kind property as defined ins sec_1031 is received in the exchange if cash or other non-like-kind property is received in the exchange any gain with respect to the relinquished vehicles will be recognized only to the extent of such cash or other_property the role of qi in the purchase of vehicles that are not replacement_property and thus not involved in the like-kind_exchange constitutes routine financial or trust services for taxpayer under sec_1_1031_k_-1 and does not disqualify qi from being a qualified_intermediary under sec_1_1031_k_-1 law and analysis sec_1031 of the code provides that in general no gain_or_loss shall be recognized on the exchange of property held for productive use in a trade_or_business or for investment if such property is exchanged solely for property of like_kind which is to be held either for productive use in a trade_or_business or for investment sec_1031 provides that if an exchange would be within the provisions of sec_1031 if it were not for the fact that the property received in the exchange consists not only of property permitted by such section to be received without recognition of gain but also of other_property or money then the gain if any to the recipient shall be recognized but in an amount not in excess of the sum of such money and the fair_market_value of such other_property sec_1_1031_k_-1 of the regulations provides that a deferred_exchange is defined as an exchange in which pursuant to an agreement the taxpayer transfers property held for productive use in a trade_or_business or for investment the relinquished_property and subsequently receives property to be held either for productive use in a trade_or_business or for investment the replacement_property in order to constitute a deferred_exchange the transaction must be an exchange ie a transfer of property for property as distinguished from a transfer of property for money for example a sale of property followed by a purchase of property of a like_kind does not qualify for nonrecognition_of_gain_or_loss under sec_1031 regardless of whether the identification and receipt requirements of sec_1031 and paragraphs b c and d of sec_1_1031_k_-1 are satisfied plr-116604-99 the relevant qualified_use of the property owned by taxpayer and subsequently being exchanged in the transaction is the leasing of such property to third parties thus the relinquished_property that taxpayer previously leased to third parties and the replacement_property that taxpayer will be leasing to third parties upon acquisition is considered property held for productive use in a trade_or_business in taxpayer’s hands sec_1_1031_a_-1 provides that as used in sec_1031 the words like_kind have reference to the nature or character of the property and not to its grade or quality one kind or class of property may not under that code section be exchanged for property of a different kind or class as examples sec_1_1031_a_-1 provides that a truck for a new truck or a passenger_automobile for a new passenger_automobile to be used for a like purpose are like_kind sec_1_1031_a_-2 further provides that depreciable tangible properties are of like_class if they are either within the same general asset class as defined in sec_1_1031_a_-2 or within the same product_class as defined in sec_1_1031_a_-2 taxpayer states that the vehicles exchanged are not within these general asset class or product_class safe harbors the general asset class and product_class safe harbors in the regulations simplify the determination of whether depreciable tangible_personal_property is of a like_kind but they are not the exclusive method for making this determination for depreciable tangible_personal_property to be considered of like_kind the property can be either like_kind or like_class sec_1_1031_a_-2 of the regulations provides that an exchange of properties of a like_kind may qualify under sec_1031 regardless of whether the properties are also of like_class in determining whether exchanged properties are of a like_kind no inference is to be drawn from the fact that the properties are not of a like_class thus two properties can be in different general asset classes and thus not be of a like_class and yet be of like_kind the like-kind standard has been interpreted more narrowly in the case of exchanges of personal_property as compared to exchanges of real_property see 680_f2d_85 9th cir even within the more restrictive parameters of the like-kind standard as applied to personal_property the differences between an automobile and a passenger van or an suv do not rise to the level of a difference in nature or character but are merely a difference in grade or quality however a truck is different in nature or character than an automobile sec_1031 states that any property received by the taxpayer shall be treated as property that is not like-kind_property if a such property is not identified as property to be received in the exchange on or before the day that i sec_45 days after the plr-116604-99 date on which the taxpayer transfers the property relinquished in the exchange or b such property is received after the earlier of i the day that i sec_180 days after the date on which the taxpayer transfers the property relinquished in the exchange or ii the due_date determined with regard to extension for transferor’s return of the tax imposed by this chapter for the taxable_year in which the transfer of the relinquished_property occurs sec_1_1031_k_-1 provides that any replacement_property that is received by the taxpayer before the end of the identification period will in all events be treated as identified before the end of the identification period in all cases taxpayer acquires the replacement_property within the time period mandated by sec_1031 sec_1_1031_k_-1 provides that a transfer of relinquished_property in a deferred_exchange is not within the provisions of sec_1031 if as part of the consideration the taxpayer receives money or other_property in addition in the case of a transfer of relinquished_property in a deferred_exchange gain_or_loss may be recognized if the taxpayer actually or constructively receives money or other_property before the taxpayer actually receives like-kind replacement_property sec_1_1031_k_-1 further provides that if the taxpayer actually or constructively receives money or other_property in the full amount of the consideration for the relinquished_property before the taxpayer actually receives like-kind replacement_property the transaction will constitute a sale and not a deferred_exchange even though the taxpayer may ultimately receive like-kind replacement_property sec_1_1031_k_-1 provides that except as provided in paragraph g of this section relating to safe harbors the determination of whether or the extent to which the taxpayer is in actual or constructive receipt of money or other_property before the taxpayer actually receives like-kind replacement_property is made under the general rules concerning actual and constructive receipt and without regard to the taxpayer’s method_of_accounting sec_1_1031_k_-1 further explains that the taxpayer is in actual receipt of the money at the time the taxpayer actually receives the money or receives the economic benefit of the money the taxpayer is in constructive receipt of money or property at the time the money or other_property is credited to the taxpayer’s account set apart for the taxpayer or otherwise made available so that the taxpayer may draw upon it at any time or so that the taxpayer can draw upon it if notice of intention to draw is given sec_1_1031_k_-1 provides that there are four safe harbors the use of which will result in a determination that the taxpayer is not in actual or constructive receipt of money for purposes of sec_1031 plr-116604-99 sec_1_1031_k_-1 provides that in the case of a taxpayer’s transfer of relinquished_property involving a qualified_intermediary the qualified_intermediary is not considered the agent of the taxpayer for purposes of sec_1031 in such a case the taxpayer’s transfer of relinquished_property and subsequent receipt of like-kind replacement_property is treated as an exchange and the determination of whether taxpayer is in actual or constructive receipt of money before the taxpayer actually receives like-kind replacement_property is made as if the qualified_intermediary is not the agent of the taxpayer however sec_1_1031_k_-1 only applies if the agreement between the taxpayer and the qualified_intermediary expressly limits the taxpayer’s rights to receive pledge borrow or otherwise obtain the benefits of money or other_property held by the qualified_intermediary as provided in paragraph g of this section sec_1_1031_k_-1 further provides that a qualified_intermediary is a person who is not the taxpayer or a disqualified_person as defined in paragraph k of this section and enters into a written_agreement with the taxpayer the exchange_agreement and acquires the relinquished_property from the taxpayer transfers he relinquished_property acquires the replacement_property and transfers the replacement_property to the taxpayer sec_1_1031_k_-1 provides that an agreement limits a taxpayer’s rights as provided in the paragraph g only if the agreement provides that the taxpayer has no rights to receive pledge borrow or otherwise obtain the benefits of money or other_property before the end of the exchange_period sec_1_1031_k_-1 provides that for purposes of this section a disqualified_person is a person described in paragraph k k or k of this section sec_1_1031_k_-1 provides that a person is a disqualified_person if the person is the agent of the taxpayer at the time of the transaction for this purpose a person who has acted as the taxpayer’s employee attorney accountant investment banker or broker or real_estate agent or broker within the 2-year period ending on the date of the transfer of the first of the relinquished properties is treated as an agent of the taxpayer at the time of the transaction solely for purposes of this paragraph performance of the following services will not be taken into account - i services for the taxpayer with respect to exchanges of property intended to qualify for nonrecognition_of_gain_or_loss under sec_1031 and plr-116604-99 ii routine financial title insurance escrow or trust services for the taxpayer by a financial_institution title insurance_company or escrow company qi is a corporation owned by an independent third party qi has not previously performed services other than routine financial services for taxpayer as such qi is not a disqualified_person under the regulations taxpayer has assigned to qi its rights to sell the relinquished_property in all instances the purchaser receives written notice of the assignment prior to the time that the relinquished_property is transferred to the purchaser title to the property will be transferred from taxpayer to the purchaser of the property pursuant to the agreement between taxpayer and purchaser thus qi will be treated as acquiring and transferring the relinquished_property in addition taxpayer assigned its right to purchase replacement_property to qi in all instances the seller receives written notice prior to the time that the replacement_property is transferred to taxpayer title to the property is transferred to taxpayer thus qi will be treated as acquiring and transferring the replacement_property the exchange_agreement provides that taxpayer will have no rights to receive pledge borrow or otherwise obtain the benefits of money or other_property as required by the regulations proceeds from the sale of relinquished_property are deposited into the escrow account to the extent that funds from the sale of the relinquished_property are insufficient to cover the purchase of replacement_property taxpayer deposits funds to cover the amount of the purchases taxpayer is therefore not in constructive receipt of money held by qi taxpayer is not in actual or constructive receipt of checks written by purchasers of relinquished_property or funds held as security deposits all agreements governing the flow of funds limit taxpayer’s ability to actually or constructively receive those funds conclusion accordingly based on your representations and the above analysis we rule as follows each transfer by taxpayer of a relinquished vehicle and receipt of an identified replacement vehicle in accordance with the exchange_agreement will constitute a separate and distinct like-kind_exchange transaction that qualifies for deferral of gain recognition for federal_income_tax purposes pursuant to sec_1031 taxpayer will not be in constructive receipt of any money or other_property held by qi pursuant to sec_1 k -1 f unless and until such items are actually payable to or received by taxpayer on the condition that the requirements of plr-116604-99 the exchange_agreement representations in this ruling_request and other conditions of the safe-harbor test are in fact met if a lessee elects to have the security deposit held by taxpayer applied to the purchase of a vehicle taxpayer will not be in constructive receipt of the security deposit funds pursuant to sec_1_1031_k_-1 the exchange pursuant to the exchange_agreement of each relinquished vehicle for a properly identified and received replacement vehicle will constitute a nontaxable_exchange to the extent no cash or other non-like-kind property as defined ins sec_1031 is received in the exchange if cash or other non-like-kind property is received in the exchange any gain with respect to the relinquished vehicles will be recognized only to the extent of such cash or other_property the role of qi in the purchase of vehicles that are not replacement_property and thus not involved in the like-kind_exchange constitutes routine financial or trust services for taxpayer under sec_1_1031_k_-1 and does not disqualify qi from being a qualified_intermediary under sec_1_1031_k_-1 caveats a copy of this letter must be attached to any income_tax return to which it is relevant we enclose a copy of the letter for this purpose also enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 of the internal_revenue_code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely robert m casey senior technician reviewer office of associate chief_counsel income_tax accounting enclosures cc


internal_revenue_service number release date index number ----------------------------- ---------------------------------- ------------------------------------------------------------ ------------------------------------------------------------ - --------------------------------------- ------------------- -------------------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact --------------------- id no ------------------ telephone number ---------------------- refer reply to cc fip b1 plr-131862-16 date date legend fund -------------------------------------------------------------------------------- ---------------------------------------------------------- ------------------------------------------------------------ ----------------------------------------------------------------------------------- ---------------------------------------------------------- dear ------------------ this letter revokes a part of plr plr-143452-08 issued to fund on date and in response to a request from your authorized representative dated date limits the retroactive effect of such revocation pursuant to sec_7805 of the internal_revenue_code in plr the internal_revenue_service the service issued rulings that i income and gain from certain commodity-linked notes constitute qualifying_income under sec_851 the cln ruling and ii subpart_f_income of the subsidiaries attributable to fund is other income derived from fund’s business of investing in stock securities or currencies and therefore constitutes qualifying_income under sec_851 the subpart_f ruling in a letter dated date the service notified fund that it was considering revoking the cln ruling on date fund requested that the service exercise its discretionary authority under sec_7805 to limit the retroactive effect of any revocation plr-131862-16 since issuing plr the service has determined that having provided a private_letter_ruling on the issue in the cln ruling is not in accord with the current views of the service see revproc_2016_50 2016_43_irb_522 superseded by revproc_2017_3 i r b sec_4 see also reg-123600-16 fed reg date section dollar_figure of revproc_2017_1 2017_1_irb_1 provides in part that unless it was part of a closing_agreement a letter_ruling found to be in error or not in accordance with the current views of the service may be revoked or modified accordingly the cln ruling in plr is revoked the subpart_f ruling is not revoked and that portion of plr remains in effect at this time section dollar_figure of revproc_2017_1 also provides that if a letter_ruling is revoked the revocation applies to all years open under the statute_of_limitations on assessment unless the service uses its discretionary authority under sec_7805 to limit the retroactive effect of the revocation in accordance with fund’s request the service has decided to grant relief under sec_7805 the revocation of the cln ruling in plr will apply prospectively only to commodity-linked notes acquired by fund after date in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to fund’s authorized representative we are also sending a copy of this letter to the appropriate operating division sincerely ------------------------------------------- andrea m hoffenson branch chief branch office of associate chief_counsel financial institutions and products


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 ------------------------------- --------------------- --------- telephone number --------------------- refer reply to cc psi b02 plr-139227-07 date date x a --------------------------------------- ------------------------ ------------------------------------ b ----------------------------------------------------- ------------------- trust ------------------------------------- trust --------------------------------------------------- --------------------------------------------- trust --------------------------------------------------- ------------------------------------------------------- d1 d2 -------------------------- ------------------------- dear ------------ this responds to a letter dated date submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code x made an election to be treated as an s_corporation x stock was owned by trust a revocable_trust that was treated as owned by a under sec_671 and sec_676 a plr-139227-07 died on d1 trust became an irrevocable_trust trust that continued to qualify as a permitted subchapter_s_trust under sec_1361 which allows a_trust to hold s_corporation stock for a two-year period following the deemed owner’s death on d2 which was within the two-year period the x stock in trust was transferred to trust x’s election was inadvertently terminated effective d2 because b the income_beneficiary of trust did not make a timely qualified_subchapter_s_trust qsst election x represents that the termination was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x’s s_corporation on d2 was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d2 and thereafter provided x’s s_corporation_election was valid and provided that the election was not otherwise terminated under sec_1361 accordingly all of x's shareholders in determining their federal tax_liability for that period must include their pro_rata share of the separately and nonseparately computed items of x as provided in sec_1366 make any adjustments to stock basis as provided in sec_1367 and take into account any distributions made by x to shareholders as provided in sec_1368 this ruling shall be null and void if the requirements of this paragraph are not met this ruling is contingent upon b filing a qsst election for trust with an effective date of d2 with the appropriate service_center within days of the date of this ruling a will be treated as the owner of the x stock held by trust for the period plr-139227-07 beginning d2 and thereafter a copy of this letter should be attached to the qsst election if x or its shareholders fail to treat x as described above this letter_ruling will be null and void except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representative sincerely j thomas hines chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to plr-104933-00 cc psi date date number release date index number legend fund fund fund fund fund fund d1 d2 d3 d4 d5 manager state dear this letter responds to your date letter and subsequent correspondence on behalf of fund requesting certain rulings under the internal_revenue_code facts according to the information submitted fund formed on d1 fund formed on d2 fund formed on d3 and fund formed on d4 collectively the funds are separate master fund portfolios in a master-feeder investment structure the funds are series of registered investment companies sponsored by manager specifically fund fund and fund are subtrusts of fund and fund is a subtrust of fund fund and fund are trusts organized under state law and are open-end management investment companies under the investment_company act of the act fund has substantially the same investment objective as fund plr-104933-00 investments in fund and fund may only be made by certain institutional investors such as regulated_investment_companies rics and segregated_asset accounts generally no individual s_corporation partnership or grantor_trust beneficially owned to any extent by an individual s_corporation or partnership may invest in any portfolio of fund or fund the interest of the holders in any portfolio or series is limited to the net assets of that portfolio or series and does not extend to the assets of any other investment vehicles of fund or fund a portfolio_interest entitles the holder to receive a pro_rata share of distributions of income and capital_gain and an allocable share of any losses the portfolio experiences holders’ capital accounts are maintained by the portfolio and any increases or decreases in a holder’s investment are made by adjusting the capital_account balance the allocations of taxable_income gain loss deductions and credits under each agreement transferring a beneficial_interest have been drafted with the intent to comply with the regulations promulgated under sec_704 and c of the internal_revenue_code each holder is entitled to a pro_rata share in proportion to its capital_account of the assets of a separate portfolio upon its liquidation and may only look to the assets of the separate portfolio on liquidation redemption or termination of the separate portfolio on d5 fund contributed all of its assets to fund and fund the fund contributions and fund contributed all of its assets to fund the fund contribution collectively the contributions in exchange for interests in those funds thereafter both fund and fund liquidated distributing the interests in fund and fund they received to their feeder funds in complete redemption of the interests in fund and fund held by those funds the purpose of these contributions was to consolidate the assets of what were four master funds with substantially_similar investment objectives into two master funds ie fund and fund thereby eliminating duplicative expenses and achieving economies of scale with regard to its contribution fund represents that it contributed to fund and fund represents that it held immediately after the contribution a diversified portfolio of stocks and securities for purposes of this representation a portfolio of stocks and securities is diversified if it satisfies sec_368 applying the relevant provisions of sec_368 except that in applying sec_368 government securities are included in determining total assets unless the government securities are acquired to meet sec_368 the funds also represent that none of their respective investors acquired their interests in any of the funds in exchange for any asset other than cash or other permissible investments of investment partnerships within the meaning of sec_731 plr-104933-00 rulings requested fund requests rulings that fund will not recognize any gain_or_loss as a result of the contribution specifically fund requests a ruling that fund is not an investment_company as defined by sec_721 and sec_351 fund also requests a ruling concerning its basis in its fund interests no investor in fund will recognize any gain_or_loss in connection with the issuance or receipt of interests in fund in exchange for and in liquidation of interests in fund if the contribution qualifies for nonrecognition for the investors fund requests that the investors' bases and holding periods in their new respective properties be determined accordingly discussion a pursuant to sec_721 no gain_or_loss shall be recognized to fund as a result of the fund contribution sec_721 provides that neither a partner nor a partnership will recognize gain_or_loss on a contribution of assets to a partnership in exchange for a partnership_interest sec_721 provides that subsection a shall not apply to gain realized on a transfer of property to a partnership which would be treated as an investment_company within the meaning of sec_351 if the partnership were incorporated sec_351 provides that no gain_or_loss will be recognized if one or more persons transfers property to a corporation solely in exchange for stock_or_securities in the corporation and immediately_after_the_exchange the transferors control the transferee corporation sec_351 provides that sec_351 will not apply to a transfer of property to an investment_company sec_1_351-1 of the income_tax regulations provides that a transfer to an investment_company will occur when i the transfer results directly or indirectly in diversification of the transferors' interests and ii the transferee is a regulated_investment_company ric real_estate_investment_trust reit or a corporation more than percent of the value of whose assets excluding cash and non-convertible debt obligations from consideration are held for investment and are readily marketable stocks or securities or interests in rics or reits plr-104933-00 sec_1002 of the taxpayer_relief_act_of_1997 pub_l_no 111_stat_788 the act amends sec_351 for transfers after date in taxable years ending after such date subject_to certain transitional relief provisions sec_1002 of the act is intended to expand the types of assets considered in determining whether a transfer is to a transferee described in sec_1_351-1 to include certain assets in addition to readily marketable stocks or securities and interests in rics or reits however the act is not intended to alter the requirement of sec_1_351-1 that a transfer of property will be considered to be a transfer to an investment_company under sec_351 only if the transfer results directly or indirectly in diversification of the transferors' interests see s rep no 105th cong 1st sess h_r rep no 105th cong 1st sess h_r rep no 105th cong 1st sess sec_1_351-1 provides that a transfer ordinarily results in diversification of the transferors' interests if two or more persons transfer nonidentical assets to a corporation in the exchange it further provides that if a transfer is part of a plan to achieve diversification without recognition of gain such as a plan which contemplates a subsequent transfer however delayed of the corporate assets or of the stock_or_securities received in the earlier exchange to an investment_company in a transaction purporting to qualify for nonrecognition treatment the original transfer will be treated as resulting in diversification revrul_87_9 1987_1_cb_133 provides that a transfer to a corporation of shares of corporation y stock by one transferor and a transfer of cash by another transferor will be treated as a transfer of nonidentical assets under sec_1 c sec_1_351-1 provides that a transfer of stocks and securities will not be treated as resulting in a diversification of the transferors' interests if each transferor transfers a diversified portfolio of stocks and securities and a portfolio of stocks and securities is considered to be diversified if it satisfies the and 50-percent tests of sec_368 applying the relevant provisions of sec_368 except that government securities are included in total assets for purposes of the denominator of the and 50-percent tests unless acquired to meet the and 50-percent tests but are not treated as securities of an issuer for purpose of the numerator of the and 50-percent tests an investment_company is diversified within the meaning of sec_368 if not more than percent of the value of its assets is invested in the stock and securities of any one issuer and not more than percent of the value of its total assets is investment in the stock and securities of five or fewer issuers after applying the relevant law to the facts submitted and the representations made we conclude that the transfer of property by fund to fund would not be a transfer to an investment_company within the meaning of sec_351 and sec_1_351-1 if plr-104933-00 fund was incorporated provided that this is the only transfer to fund aside from the transfer from fund therefore under sec_721 no gain_or_loss shall be recognized by fund as a result of the contribution b fund 2's basis in its interest in fund shall be determined accordingly sec_722 provides that the basis of an interest in a partnership acquired by a contribution of property including money to the partnership shall be the amount of such money and the adjusted_basis of such property to the contributing_partner at the time of the contribution increased by the amount if any of gain recognized under sec_721 to the contributing_partner at such time sec_723 provides that the basis_of_property contributed to a partnership by a partner shall be the adjusted_basis of such property to the contributing_partner at the time of the contribution increased by the amount if any of gain recognized under sec_721 to the contributing_partner at such time based on the finding that fund recognized no gain_or_loss on its contribution fund will have a basis in the interest received in fund equal to the amount of money and aggregate adjusted bases determined immediately prior to the contribution to fund of the other_property contributed to fund a pursuant to sec_731 no investor in fund will recognize any gain_or_loss under sec_731 in connection with fund 2's receipt of an interest in fund in exchange for and in liquidation of interests in fund sec_731 provides that in the case of a distribution by a partnership to a partner gain shall not be recognized to such partner except to the extent that any money distributed exceeds the adjusted_basis of such partner's_interest_in_the_partnership immediately before the distribution loss shall not be recognized to such partner except that upon a distribution in liquidation_of_a_partner's_interest in a partnership where no property other than that described in sec_731 or b is distributed to such partner loss shall be recognized to the extent of the adjusted_basis of such partner's interest over the sum of - a any money distributed and b the basis to the distributee as determined under sec_732 of any unrealized_receivables as defined in sec_751 and inventory as defined in sec_751 sec_731 provides that for purposes of sec_731 and sec_737 - a the term money includes marketable_securities and b such securities shall be taken into account at their fair_market_value as of the date of the distribution sec_731 provides that for the purposes of sec_731 the term marketable_securities means financial instruments and foreign_currencies which are plr-104933-00 as of the date of the distribution actively_traded within the meaning of sec_1092 sec_731 provides that for the purposes of sec_731 the term marketable_securities includes any financial_instrument the value of which is determined substantially by reference to marketable_securities sec_731 provides that the term financial_instrument includes stocks and other equity interests evidences of indebtedness options forward or futures contracts notional_principal_contracts and derivatives sec_731 provides that sec_731 shall not apply to the distribution from a partnership of a marketable_security to a partner if such partnership is an investment_partnership and such partner is an eligible_partner thereof sec_731 provides that the term investment_partnership means any partnership which has never been engaged in a trade_or_business and substantially_all of the assets by value of which have always consisted of i money ii stock in a corporation iii notes bonds debentures or other evidences of indebtedness iv interest rate currency or equity notional_principal_contracts v foreign_currencies vi interests in or derivative financial instruments including options forward or futures contracts short positions and similar financial instruments in any asset described in any other subclause of this clause or in any commodity traded on or subject_to the rules of a board_of trade or commodity exchange vii other assets specified in regulations prescribed by the secretary or viii any combination of the foregoing sec_731 provides that for the purposes of sec_731 a partnership shall not be treated as engaged in a trade_or_business by reason of i any activity undertaken as an investor trader or dealer in any asset described in sec_731 or ii any other activity specified in regulations prescribed by the secretary sec_731 provides that the term eligible_partner means any partner who before the date of the distribution did not contribute to the partnership any property other than assets described in sec_731 fund represents that none of its investors acquired their interests in exchange for any asset other than cash or other permissible investments of investment partnerships within the meaning of sec_731 sec_751 provides in part that for the purposes of subchapter_k the term unrealized_receivables includes goods delivered or to be delivered to the extent the proceeds therefrom would be treated as amounts received from the sale_or_exchange of property other than a capital_asset or services rendered or to be plr-104933-00 rendered sec_751 provides that for the purposes of subchapter_k the term inventory means - property of the partnership of the kind described in sec_1221 any other_property of the partnership which on sale_or_exchange by the partnership would be considered property other than a capital_asset and other than property described in sec_1231 any other_property of the partnership which if sold or exchanged by the partnership would result in a gain taxable under sec_1246 relating to gain on foreign_investment_company_stock and any other_property held by the partnership which if held by the selling or distributee partner would be considered property of the type described in sec_751 - after applying the relevant law to the facts submitted and the representations made we conclude that the fund contribution and the related distribution involved the distribution_of_property from an investment_partnership to eligible partners as those terms are used in sec_731 thus under sec_731 no money was distributed by or to fund or its investors therefore no investor in fund shall recognize any gain as a result from the contribution or the related distributions further we conclude that no unrealized_receivables or inventory as those terms are used in sec_731 were distributed to any investor in fund therefore under sec_731 no investor in fund shall recognize any loss as a result from the contribution or the related distributions b the investors' bases and holding periods in their new properties shall be determined accordingly sec_732 provides that the basis_of_property other than money distributed by a partnership to a partner in liquidation of the partner's interest shall be an amount equal to the adjusted_basis of such partner's_interest_in_the_partnership reduced by any money distributed in the same transaction sec_735 provides that in determining the period for which a partner has held property received in a distribution from a partnership other than for purposes of sec_735 there shall be included the holding_period of the partnership as determined under sec_1223 with respect to such property sec_1223 provides that in determining the period for which the taxpayer has held property however acquired there shall be included in the period for which such property was held by any other person if under this chapter such property has for the purpose of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in his hands as it would have in the hands of such other person based on the findings that no investor in fund recognized gain_or_loss upon plr-104933-00 the contribution each investor in fund receiving an interest in fund will have a basis in such interest in fund equal to its adjusted_basis determined immediately prior to the distribution of such interest in fund furthermore provided that any such interest in fund is a capital_asset each investor will have a holding_period as determined under sec_1223 for such interest conclusions as stated above after applying the relevant law to the facts submitted and the representations made we find that neither fund nor any of its interest holders will recognize gain_or_loss as result of the contribution furthermore the bases and holding periods of all of the assets involved to fund and its investors will be determined under sec_722 sec_723 sec_732 sec_735 and sec_1223 as applicable 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 specifically we express no opinion about whether subsequent transfers of property to fund by any transferor would be considered to be part of the original transfers thereby potentially affecting the tax consequences of the original transfers additionally we express no opinion about whether the above-referenced transfers are part of a plan to achieve diversification without recognition of gain under sec_1_351-1 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 pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to the taxpayer this ruling is directed only to the taxpayer requesting it fund sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours robert honigman acting assistant to the chief branch office of the associate chief_counsel passthroughs and special industries


internal_revenue_service number release date index number ---------------------- ----------------------------------------- ---------------------------- department of the treasury washington dc person to contact ------------------- id no ------------- telephone number -------------------- refer reply to cc psi b03 - plr-155337-03 date date ------------- --------------- ---------------------- ------------------------------------------ this letter responds to a letter dated date on behalf of x requesting a x ----------------------------------------- a ------------------------------------------- d1 state dear ----------------- ruling under sec_1362 of the internal_revenue_code facts x to be an s_corporation as of d1 however x’s form_2553 election be a small_business_corporation was not filed timely taxable_year beginning d1 law and analysis s_corporation sec_1362 provides that such election shall be effective for the current taxable_year if it is made during the preceding_taxable_year or before the 15th day of the third month of the current taxable_year sec_1362 provides that an election made after the 15th day of the third month of the current taxable_year shall be treated as having been made for the following taxable_year x requests a ruling that it will be recognized as an s_corporation effective for the x was incorporated under state law on d1 x’s sole shareholder a intended for sec_1362 provides that a small_business_corporation may elect to be an based on the facts submitted and representations made we conclude that x has plr-155337-03 sec_1362 provides that if an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by this subsection for making such election for such taxable_year or no such election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply conclusion established reasonable_cause for failing to make an s election in a timely manner thus we conclude that x is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 within days of this letter containing as an effective date d1 the election shall be treated as timely made for x’s taxable_year beginning d1 a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether x is otherwise eligible to be an s_corporation for federal_income_tax purposes letter is being sent to the taxpayer the code provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 of in accordance with the power_of_attorney on file with this office a copy of this except as expressly provided herein we express or imply no opinion concerning sincerely christine ellison chief branch office of associate chief_counsel passthroughs special industries a copy of this letter a copy for sec_6110 purposes enclosures cc


internal_revenue_service department of the treasury eee ion washington ranklin station be q 303g person to contact telephone number refer reply to cc ebeo br6 - plr-115865-98 ale oct index no state city statute system dear this is in reply to your request for a ruling concerning whether certain disability benefits received from state are excludable from gross_income under sec_104 of the internal_revenue_code it is represented that while working as a police officer with the city police department you were injured in the line of duty after applying to the board_of trustees of the system you were approved for accidental disability retirement the statute defines retirement for accidental disability as follows upon the written application by a member in service by one acting in his behalf or by his employer any member may be retired on an accidental disability retirement allowance provided that the medical board after a medical examination of such member shall certify that the member is permanently_and_totally_disabled as a direct result of a traumatic event occurring during and as a result of the performance of his regular or assigned duties and that such disability was not the result of the member's willful negligence and that such member is mentally or physically incapacitated for the performance of his usual duty and of any other available duty in the department which his employer is willing to assign to him wek -2- upon retirement for accidental disability a member shail receive an accidental disability retirement allowance which shall consist of a an annuity which shall be the actuarial equivalent of his aggregate contributions and b a pension in the amount which when added to the member's annuity will provide a total retirement allowance of of the member's actual annual compensation_for which contributions were being made at the time of the occurrence of the accident sec_61 of the internal_revenue_code provides that except as otherwise provided by law gross_income means all income from whatever source derived sec_72 of the code provides that except as otherwise provided by law gross_income includes any amount_received_as_an_annuity whether for a period certain or during one or more lives under an annuity endowment or life_insurance_contract sec_72 of the code provides that gross_income does not include that part of any amount_received_as_an_annuity under an annuity endowment or life_insurance_contract which bears the same ratio to such amounts as the investment_in_the_contract as of the annuity_starting_date bears to the expected retum under the contract as of such date sec_104 of the code provides that gross_income does not include amounts received under workmen's_compensation acts as compensation_for personal injuries or sickness sec_1_104-1 of the income_tax regulations provides that sec_104 of the code excludes from gross_income amounts received by an employee under a workmen's_compensation_act or a statute in the nature of a workmen's_compensation_act that provides compensation to employees for personal injuries or sickness incurred during employment sec_104 also applies to compensation which is paid under a workmen's_compensation_act to the survivor or survivors of a deceased employee however sec_104 does not apply to a retirement pension or annuity to the extent that it is determined by reference to the employee's age or length of service or the employee's prior contributions even though the employee's retirement is occasioned by an occupational injury or sickness sec_104 also does not apply to amounts which are received as compensation_for a nonoccupational injury or sickness nor to amounts received as compensation_for an occupational injury or sickness to the extent that they are in excess of the amount provided in the applicable workmen's_compensation_act or acts -3- in revrul_80_44 1980_1_cb_34 the taxpayer was receiving disability payments a portion of each payment was excludable under sec_104 and a portion was not excludable under sec_104 because it was attributable to length of service the employee could reduce his disability allowance in order to increase the survivor's benefit the revenue_ruling held that if an employee elected to reduce the employee's lifetime allowance in order to increase the survivor's benefit the reduction was attributable pro_rata among the components of the ifetime allowance thus the increase in the survivor's benefits was partially attributable to the employee's exciudable sec_104 benefit and partially attributable to the employee's nonexcludable benefit based on the information submitted representations made and authorities cited above we conclude as follows the statute provides for mandatory payment of benefits restricted to a class of employees with service-incurred injuries the statute provides for payment of of the injured employee's actual annual compensation_for which contributions were being made at the time of the occurrence of the disability regardless of the employee's age length of service or prior contributions thus the statute is a statue in the nature of a workmen's_compensation_act as defined in sec_1_104-1 of the regulations annual amounts received by you under the statute which equal of your actual annual compensation_for which contributions were being made at the time of the occurrence of your disability are payable regardless of age years_of_service or prior contributions and are therefore excludable from your gross_income under sec_104 of the code annual amounts in excess of of your actual annual compensation_for which contributions were being made at the time of the occurrence of your disability are attributable to your prior contributions and are therefore includible in your gross_income to the extent provided in sec_72 of the code amounts received by your spouse after your death under the statute that are directly attributable to your benefits otherwise payable under these provisions constitute a continuation of the sec_104 benefits accordingly the payments would qualify as payments under a statute in the nature of a workmen's_compensation_act and therefore excludable from the gross_income of your spouse beneficiary under sec_104 of the code except as specifically ruled above no opinion is expressed as to the federal_income_tax consequences of the transaction described under any other section of the internal revenue cade this ruling is directed only to the taxpayer on whose behalf it was requested sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours harry beker chief branch office of the associate chief_counsel employee_benefits and exempt_organizations enclosure copy for sec_6110 purpose