covernnent entities division department of the treasury internal_revenue_service washington d c dec 20n uniform issue list tee aaz kkk kkk legend taxpayer a ae decedent b individual c individual d trust t ira x company y date date date state s ee ee ee alalal ee s ee ee ee dear this letter is in response to your request dated date as amended by letters dated date and date submitted on your behalf by your authorized representative in which you request a ruling under sec_401 and sec_408 of the internal_revenue_code code eek page the following facts and representations have been submitted under penalty of perjury in support of the ruling requested decedent b was a resident of state s and established trust t on date on date decedent b died at age and was survived by his spouse taxpayer a and his two children individuals c and d owned ira x an individual_retirement_account within the meaning of code sec_408 with company y at the time of his death decedent b decedent b’s beneficiary designation form received by company y on date designated trust t as the beneficiary of ira x article v of trust t provides that upon the death of decedent b taxpayer a shall receive one-third of decedent b’s interest in all assets of trust t with the remaining two-thirds divided equally among each of decedent b's living children individuals c and d were decedent b’s only living children on his date of death taxpayer a represents that trust t is valid under the laws of state s and that a copy of trust t was delivered to company y by october of the calendar_year following the year decedent b died trust t became irrevocable upon decedent b’s death based on the above you through your authorized representative request the following rulings that ira x may be divided by means of trustee-to-trustee transfers into an ira for taxpayer a in her own name and iras for individuals c and d in the name of decedent b for the benefit of trust t without resulting in taxable_distributions or payments under code sec_408 that the minimum distribution_requirements under code sec_401 may be met by a for the ira in taxpayer a’s name applying the uniform life table found in sec_1_401_a_9_-9 q a-2 of the income_tax regulations regulations and b for the iras set up to benefit individuals c and d in the name of decedent b for the benefit of trust t applying the single life table found in sec_1_401_a_9_-9 q a-1 of the regulations using the life expectancy of taxpayer a with respect to your first ruling_request code sec_408 provides generally that in accordance with the rules of code sec_72 amounts paid or distributed from an ira are included in gross_income by the payee or distributee code sec_408 provides that paragraph d of this section does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code code sec_408 provides generally that amounts from an inherited in general an inherited ira is an ira cannot be rolled over into another ira ira maintained by an individual who acquired said ira by reason of the death of another if the acquiring individual is not the surviving_spouse of said other individual on date final regulations were published in the federal_register with respect to code sec_401 and sec_408 see also r b date sec_1_408-8 of the regulations q a-5 provides that a surviving_spouse of an ira owner may elect to treat the spouse's entire_interest as a beneficiary in an individual's ira as the spouse's own ira this election the spouse must be the sole beneficiary of the ira and have an unlimited right to withdraw amounts from the ira beneficiary of the ira this requirement is not satisfied even if the spouse is the sole beneficiary of the trust however the preamble to the regulations under code sec_401 and sec_408 provides in relevant part that a surviving_spouse who actually receives a distribution from an ira is permitted to roll that distribution over to his her own ira even if the surviving_spouse is not the sole beneficiary of the deceased's ira as long as the rollover is accomplished within the requisite 60-day period a rollover may be accomplished even if ira assets pass through either a_trust or an estate revrul_78_406 1978_2_cb_157 rev_rul provides that the direct transfer of funds from one ira trustee to another ira trustee even if at the behest of the ira holder does not constitute a payment or distribution to a participant payee or distributee as those terms are used in code sec_408 furthermore such a transfer does not constitute a rollover_distribution revrul_78_406 is applicable if the trustee-to-trustee transfer is directed by the beneficiary of an ira after the death of the ira owner as long as the transferee ira is set up and maintained in the name of the deceased ira owner for the benefit of the beneficiary with respect to your first ruling_request we note that taxpayer a has the right to receive a distribution of her portion of ira x thus we believe it is appropriate to if a_trust is named as in order to make wes page treat taxpayer a as the payee or distributee of her portion of ira x for purposes of code sec_408 even though ira x must originally pass through trust t as such she is eligible to roll over or transfer by means of a trustee-to- trustee transfer her portion of ira x into an ira established in her name with regard to taxpayers c and d under the terms of trust t they are the beneficiaries of the remaining shares of ira x code sec_408 provides that amounts from inherited iras-ie iras acquired by reason of death by persons other than the surviving_spouse of the decedent-may not be rolled over to another ira and therefore constitute taxable_distributions however as noted above a trustee-to-trustee transfer described in revrul_78_406 does not constitute a payment or distribution such a transfer may be accomplished after the death of the ira holder on behalf of the beneficiaries of a decedent's ira the iras must be maintained in the name of decedent b deceased for the benefit of individual c or individual d as applicable as beneficiary of trust t therefore with respect to your first ruling_request we conclude that ira x may be divided by means of trustee-to-trustee transfers into an ira for taxpayer a in her own name and iras for individuals c and d in the name of decedent b for the benefit of trust t without resulting in taxable_distributions or payments under code sec_408 with respect to your second ruling_request code sec_408 provides the rules governing iras code sec_408 provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the trust is maintained code sec_401 provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee ira holder - i will be distributed to such employee not later than the required_beginning_date or ii will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary code sec_401 provides in general that if an employee ira holder dies after distribution of his interest has begun in accordance with sec_401 a ii after his required_beginning_date the remaining portion of his interest must be distributed at least as rapidly as under the method of distribution being used as of the date of his death kkk page code sec_401 provides in relevant part that for purposes of sec_401 the term required_beginning_date means april of the calendar_year following the calendar_year in which the employee attains age code sec_401 provides that for purposes of sec_401 the term designated_beneficiary means any individual designated as a beneficiary by the employee sec_1_401_a_9_-4 of the regulations q a-1 provides in relevant part that a designated_beneficiary is an individual who is designated as a beneficiary under the plan an individual may be designated as a beneficiary under the plan either by the terms of the plan or if the plan so provides by an affirmative election by the employee or the employee's surviving_spouse specifying the beneficiary under these regulations a designated_beneficiary need not be specified by name in the plan in order to be a designated_beneficiary so long as the individual who is to be the beneficiary is identifiable under the plan the member of a class of beneficiaries capable of contraction or expansion will be treated as being it is possible to identify the class member with the shortest life identifiable if expectancy further the passing of an employee’s interest to an individual under a will or otherwise under applicable state law will not make that individual a designated_beneficiary under sec_401 unless that individual is designated as a beneficiary under the plan sec_1_401_a_9_-4 of the regulations q a-3 provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee’s estate or a charitable_organization may not be a designated_beneficiary if a person other than an individual is designated as a beneficiary of an employee’s benefit the employee will be treated as having no beneficiary for purposes of sec_401 even if there are also individuals designated as beneficiaries sec_1_401_a_9_-4 of the regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee’s death generally an employee’s designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of the date of death sec_1_401_a_9_-4 of the regulations q a-5 provides that where a_trust is named as a beneficiary of an employee beneficiaries of the trust with respect to the trust’s interest in the employee’s benefit may be treated as designated beneficiaries if the following requirements are met the trust is valid under state law or would be but for the fact there is no corpus the trust is irrevocable or will by its terms become irrevocable upon the kkk es death of the employee the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee’s benefit are identifiable within the meaning of a-1 of this section from the trust instrument relevant documentation has been timely provided to the plan_administrator sec_1_401_a_9_-4 q a-6 b of the regulations provides in relevant summary that at a minimum documentation sufficient to enable an ira custodian to identify beneficiaries of an ira must be provided by a trustee to the custodian by october of the calendar_year immediately following the calendar_year in which the ira owner died sec_1_401_a_9_-4 of the regulations q a-5 c provides that if the trust has more than one beneficiary the rules under sec_1_401_a_9_-5 q a-7 determine which beneficiary’s life expectancy shall be used to determine the distribution period sec_1_401_a_9_-5 of the regulations q a-7 a states that if more than one individual is a designated_beneficiary the beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the applicable distribution period sec_1_401_a_9_-9 of the regulations q a-1 sets forth the single life table to be used to determine the life expectancy of an individual sec_1_401_a_9_-9 of the regulations q a-2 sets forth the uniform lifetime table to be used to determine the distribution period for lifetime distributions to an employee or ira holder in situations in which the employee ira holder's spouse is either not the sole designated_beneficiary or is the sole designated_beneficiary but is not more than years younger than the employee ira holder with respect to your second ruling_request taxpayer a as discussed above may roll her interest in ira x into an ira in her own name therefore her minimum required distributions should be calculated using the uniform lifetime table found in sec_1_401_a_9_-9 q a-2 of the regulations with regard to the iras set up to benefit individuals c and d you have represented that trust t is valid under the laws of state s that it became irrevocable upon the death of decedent b and that a copy of trust t was timely given to the ira custodian company y furthermore the identity of each person entitled to receive any portion of ira x upon decedent b’s death- taxpayer a and individuals c and d-is determinable under the provisions of trust t therefore trust t meets the requirements of sec_1_401_a_9_-4 q a-5 of the regulations for a see-through trust and the beneficiaries of trust t may be treated as designated beneficiaries of ira x ae page sec_1_401_a_9_-5 of the regulations q a-7 a provides that the minimum required distributions are paid out over the life expectancy of the oldest designated_beneficiary taxpayer a is older than individuals c and d thus in the case of the iras maintained for individuals c and d in the name of decedent b for the benefit of trust t the required minimum distributions should be calculated using the single life table found in sec_1_401_a_9_-9 q a-1 of the regulations over the life expectancy of taxpayer a therefore with respect to your second ruling_request we conclude that the minimum distribution_requirements under code sec_401 may be met by a for the ira in taxpayer a’s name applying the uniform life table found in sec_1_401_a_9_-9 q a-2 of the regulations and b for the iras set up to benefit individuals c and d in the name of decedent b for the benefit of trust t applying the single life table found in sec_1_401_a_9_-9 q a-1 of the regulations using the life expectancy of taxpayer a no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling letter is based on the assumption that ira x and the iras to be established met or will meet the requirements of code sec_408 at all relevant times furthermore this ruling letter assumes that trust t is valid under the laws of state s as represented this letter is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact please address all correspondence to se t ep ra t2 taser lavine sin deleted copy of ruling letter notice of intention to disclose ployee plans technical group acting br dennis jah ittlejohn manager donzel e enclosures enni2 eek a


internal_revenue_service department of the treasury number release date index nos washington dc person to contact telephone number refer reply to cc dom p si plr-112655-98 date date date grantor_trust spouse son date child child child individual individual individual individual individual individual court date3 state legend dear we received the date letter requesting rulings concerning the income estate gift and generation-skipping_transfer gst tax consequences of the proposed division of a_trust this letter responds to that request the facts and representations submitted are as follows on date grantor established trust for the benefit of spouse and son grantor died on date spouse is the primary beneficiary of trust and son is the secondary beneficiary it is represented that no additions actual or constructive have been made to trust since date son’s siblings child child and child are the trustees of trust article a of trust provides that any amount to be distributed at any time by the trustees to the secondary beneficiary is to be distributed by the trustees to the secondary beneficiary and the descendants if any of the secondary beneficiary shall be in such amounts and upon such divisions as in the discretion of the trustees are deemed wise to meet the needs and requirements of said beneficiaries from time to time article b of trust provides that during the life of grantor all income shall be payable to the secondary beneficiary article c of trust provides that upon grantor’s death one-half of the income shall be paid to the primary beneficiary the remaining one-half of the income shall be distributed between the primary beneficiary and the secondary beneficiary subject_to the provisions of article a in such amounts and upon such divisions as the trustees deem necessary article d of trust provides that upon spouse’s death all income shall be paid to the secondary beneficiary and his descendants in accordance with article a article of trust provides that the term of trust shall be for the life of the survivor of the following named individuals grantor spouse son child child child individual individual individual individual individual and individual article a of trust provides that upon the death of the survivor of son child child and child all income from trust shall be divided equally between grantor’s surviving grandchildren with the descendants of a deceased grandchild taking per stirpes the portion of their deceased ancestor and any after-born grandchild en ciente at the time of the death of the survivor of the aforesaid grantor being included as a surviving grandchild article b of trust provides that upon the death of the survivor of those named in section the entire trust including both principal and accumulated income shall be distributed equally to the surviving grandchildren of grantor with the descendants of a deceased grandchild taking per stirpes the portion of their deceased ancestor it is represented that the parties desire to divide trust into two trusts trust and trust in order to pursue differing investment strategies in accordance with this plan one-half of the trust value shall be allocated to trust and the other half by value shall be allocated to trust under the terms of the proposed division the beneficiary of trust will be spouse and all income from trust is to be distributed to her for her lifetime the beneficiaries of trust shall be spouse son and son’s descendants the income of trust is to be distributed among spouse son and son’s descendants in such amounts and upon such divisions as the trustees may deem necessary the term of trust shall be for spouse’s life at her death trust shall be merged with trust the term of trust shall be the same as the term of trust and trust shall terminate under the same provisions as for the termination of trust the trustees of trust petitioned court for an order authorizing the division further the trustees sought an order construing paragraph sec_2 and a of trust to mean that in the event the four children of grantor predecease spouse all of the provisions and directions found in paragraph sec_2 through d pertaining to the distribution of income to spouse shall take precedence over the provisions contained in paragraphs a and that if all four children of grantor predecease wife none of the income from trust shall be distributed under the provisions of paragraph a of trust until wife’s death on date court issued a decree construing and interpreting certain trust provisions and authorizing division of trust and trust assets the decree in the decree court approved the division of trust and construed paragraph sec_2 and a to mean that in the event that the four children of grantor predecease spouse the provisions of paragraph a through d shall apply and take precedence over the provisions contained in paragraph a court further held that if all four children predecease wife none of the income from trust is to be distributed under the provisions of paragraph a until spouse’s death the following rulings are requested the proposed division of trust into trust and trust will not cause the interest of any beneficiary of trust trust or trust to be includible in such beneficiary’s gross_estate under sec_2033 the proposed division of trust into trust and trust will not cause the interest of any beneficiary of trust trust or trust to be includible in such beneficiary’s gross_estate under sec_2036 sec_2037 or sec_2038 the proposed division of trust into trust and trust will not cause any beneficiary of trust trust or trust to have made a taxable gift_for purposes of chapter after the proposed division trust trust and trust each will be treated as a_trust that was irrevocable on date for purposes of b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations as a_trust that remains exempt from the gst tax under sec_2601 and that no actual or constructive additions to such trusts will result from such proposed division transfers from trust to trust and trust pursuant to the proposed division of trust into trust and trust to their beneficiaries will not be generation-skipping transfers and will not be subject_to tax under sec_2601 the proposed division of trust into trust and trust will not cause trust trust or trust or any of their beneficiaries to recognize any gain_or_loss from the sale_or_other_disposition of property under sec_61 or sec_1001 pursuant to sec_1015 the tax basis of trust and trust in each property received from trust in the proposed division of trust into trust and trust will be the same as the tax basis of trust in such property and pursuant to sec_1223 the holding_period of the trust and trust in each property received from trust in the proposed division of trust will include the holding_period of trust in such property ruling_request sec_2033 provides that the value of the gross_estate shall include the value of all property to the extent of the interest therein of the decedent at the time of his death based on the facts submitted and the representations made after the proposed division of trust into separate trusts spouse will have an income_interest in trust further spouse son and son’s descendants will have an income_interest in trust during the term of trust and trust none of the beneficiaries will have an interest in the principal of trust until its termination at wife’s death trust will terminate and be merged with trust at the end of the term of trust trust will terminate and the principal and accumulated income will be distributed to grantor’s surviving grandchildren accordingly we conclude that the proposed division of trust into trust and trust will not cause the interest of son child child or child to be includible in such beneficiary’s gross_estate under sec_2033 ruling_request sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_consideration in money or money’s worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2037 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time after date made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise if possession or enjoyment of the property can through ownership of such interest be obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property but in the case of a transfer made before date only if such reversionary_interest arose by the express terms of the instrument of transfer and the value of such reversionary_interest immediately before the death of the decedent exceed sec_5 percent of the value of such property sec_2038 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in the case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise where the enjoyment thereof was subject at his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the 3-year period ending on the date of the decedent’s death in order for sec_2036 through to apply the decedent must have at any time made a transfer of property or any interest therein except in the case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth under which the decedent retained an interest in or a power over the income or corpus of the transferred property based on the facts submitted and the representations made the beneficiaries have a right to income from the property and no right to distributions of principal under the terms of trust further on division of the trust into trust and trust each beneficiary will retain the same right to income as that beneficiary had under trust accordingly we consider that the division of trust into trust and trust will not cause any beneficiary of trust to be considered to have made a transfer within the meaning of sec_2036 sec_2037 or sec_2038 because the beneficiaries of trust trust and trust are not making a transfer within the meaning of sec_2036 sec_2037 and sec_2038 the division of trust into trust and trust will not cause the interest of any beneficiary of trust trust and trust to be includible in such beneficiary’s gross_estate under sec_2036 through ruling_request sec_2501 imposes a tax for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that subject_to certain limitations the gift_tax applies whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is personal tangible or intangible upon division of trust into trust and trust each beneficiary will have the same right to income as the beneficiary had under trust because the beneficial interests rights and expectancies of the beneficiaries of trust are substantially the same both before and after the proposed transaction no transfer of property will be deemed to occur as a result of the proposed division based on the information submitted and the representations made we conclude that the proposed transaction will not cause any beneficiary of trust trust or trust to have made a taxable gift_for purposes of the gift_tax ruling_request sec_4 and sec_2601 imposes a tax on every generation-skipping_transfer sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides that the tax does not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date the rule_of the preceding sentence does not apply to a pro_rata portion of any generation-skipping_transfer under an irrevocable_trust if additions are made to the trust after date sec_26_2601-1 provides that except as provided in sec_26_2601-1 or c any trust in existence on date is considered an irrevocable_trust sec_2611 defines the term generation-skipping_transfer as a taxable_distribution a taxable_termination and a direct_skip sec_26_2611-1 provides that a generation-skipping_transfer is an event that is either a direct_skip a taxable_distribution or a taxable_termination the determination as to whether an event is a generation-skipping_transfer is made by reference to the most recent transfer subject_to the estate and gift_tax sec_2612 defines the term direct_skip to mean a transfer subject_to a tax imposed by chapter or of an interest in property to a skip_person sec_2613 defines the term skip_person to mean - - a natural_person assigned to a generation that is two or more generations below the generation assignment of the transferor or a_trust - - a if all interests in the trust are held by skip persons or b if - - i ii there is no person holding an interest in the trust and at no time after the transfer may a distribution including distributions on termination be made from the trust to a non-skip_person an amendment to an exempt trust that modifies or otherwise changes the quality value or timing of any of the powers or beneficial interests rights or expectancies originally provided under the terms of the trust will cause the trust to lose its exemption from the gst tax based on the facts submitted and the representations made the division of trust into trust and trust will not change the quality value or timing of any powers beneficial interests rights or expectancies of any beneficiary provided for under the terms of the original trust it is represented that no additions have been made to trust since date accordingly trust trust and trust will be treated as trusts that were irrevocable on date and as trusts that remain exempt from the generation-skipping_transfer_tax no constructive or actual additions will result from the proposed transaction transfers to trust and trust pursuant to the proposed transaction will not be generation-skipping transfers and will not be subject_to tax under sec_2601 ruling_request sec_61 provides that gross_income includes gains derived from dealings in property sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in such section for determining loss over the amount_realized sec_1_1001-1 of the income_tax regulations provides that except as otherwise provided in subtitle a of the code the gain_or_loss realized from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or as loss sustained a partition of jointly owned property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result thereof thus neither gain nor loss is realized on a partition see revrul_56_437 1956_2_cb_507 in revrul_69_486 1969_2_cb_159 distinguished by revrul_83_61 1983_1_cb_78 a non-pro rata distribution of trust property was made in_kind by the trustee although the trust instrument and local law did not convey authority to the trustee to make a non-pro rata distribution_of_property in_kind the distribution was effected as a result of a mutual agreement between the trustee and the beneficiaries because neither the trust instrument nor local law conveyed authority to the trustee to make a non-pro rata distribution revrul_69_486 held that the transaction was equivalent to a pro_rata distribution followed by an exchange between the beneficiaries and was subject_to the provisions of sec_1001 and sec_1002 of the code the present case is distinguishable from revrul_69_486 because it has been represented that state code would permit the trustees to divide the properties of trust between trust and trust in a non-pro rata manner thus trust and trust are not required to receive pro_rata distributions of each asset of trust accordingly the proposed transaction will not be treated as a pro_rata distribution followed by an exchange of assets among the beneficiaries of trust 499_us_554 concerns the issue of when a sale_or_exchange has taken place that results in realization of gain_or_loss under sec_1001 of the code in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender’s interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution the supreme court in cottage savings u s pincite concluded that sec_1_1001-1 of the regulations reasonably interprets sec_1001 and stated that an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent cottage savings u s pincite in cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans since grantor is now deceased under trust one-half of the income is distributed to the primary beneficiary and one-half of the income is distributed by the trustee among the primary beneficiary the secondary beneficiary and the descendants of the secondary beneficiary also under trust upon the death of the primary beneficiary all income will be paid to the secondary beneficiary and the descendants of the secondary beneficiary trust will terminate upon the death of the primary beneficiary and its assets will be merged into trust trust will terminate at the same time that trust would have terminated the termination of trust upon the death of the primary beneficiary is consistent with the terms of trust since the assets of trust upon the death of the primary beneficiary will be held by trust for the benefit of the same beneficiaries under the same terms that they would have been held upon the death of the primary beneficiary under trust it is consistent with the supreme court’s opinion in cottage savings to find that the interests of the beneficiaries of trust and trust will not differ materially from their interests in trust the proposed transaction will not change the interests of the beneficiaries instead the beneficiaries will be entitled to the same benefits after the proposed transaction as before the proposed transaction is similar to the kinds of transactions discussed in revrul_56_437 since trust is to be partitioned but all other provisions of the trusts will remain unchanged other than changes which reflect the fact that grantor is no longer living and changes which are necessary to ensure that the beneficiaries will be entitled to the same benefits under trust and trust that they would have been entitled to under trust thus the proposed transaction will not result in a material difference in the kind or extent of the legal entitlements enjoyed by the beneficiaries therefore the beneficiaries of trust trust and trust will not realize gain_or_loss under sec_1001 of the code as a result of the proposed transaction ruling_request sec_1015 of the code provides that if property was acquired by gift after date the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift except that if such basis adjusted for the period before the date of the gift as provided in sec_1016 is greater than the fair_market_value of the property at the time of the gift then for the purpose of determining loss the basis shall be such fair_market_value sec_1015 provides that if property was acquired by a transfer in trust other than a transfer in trust by gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer sec_7701 of the code provides that the term transferred_basis_property means property having a basis determined under any provision of subtitle a or under any corresponding provision of prior income_tax law providing that the basis shall be determined in whole or in part by reference to the basis in the hands of the donor grantor or other transferor based upon the information submitted and representations made we conclude that because sec_1001 will not apply to the proposed partition of trust under sec_1015 the basis of the assets in trust and in trust sec_1 and after the partition will be the same as the basis of those assets prior to the partition therefore we conclude that the partition of trust will not alter the status of the assets held in trust prior to the proposed partition as transferred_basis_property under sec_1015 and sec_7701 ruling_request sec_1223 provides that in determining the period for which the taxpayer has held property however acquired there shall be included the period for which the property was held by any other person if under chapter of the code such property has for the purposes of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in the taxpayer’s hands as it would have in the hands of such other person as ruled above the basis of trust and trust in each property received from trust in the proposed division of trust into trust and trust will be the same as the basis of trust in such property therefore we conclude that the holding_period of trust and trust in each property received from trust in the proposed division of trust into trust and trust will include the holding_period of trust in such property except as specifically ruled herein we express no opinion as to the consequences of this transaction under the cited provisions of the code or under any other provisions of the code this ruling is based on the facts and applicable law in effect on the date of this letter if there is a change in material law local or federal before the transactions considered in this ruling take effect the ruling will have no force or effect if the taxpayer is in doubt whether there has been a change in material fact or law a request for reconsideration of this ruling should be submitted to this office this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely christine e ellison chief branch associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes


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-125391-06 date date -------------------------------------------------- legend legend x ---------------------------------- state ------------- d1 --------------------------- d2 dear ----------------- ---------------------- this responds to the letter dated date submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts according to the information submitted x was incorporated on d1 under the laws of state the shareholder of x intended that x be treated as an s_corporation effective on d2 but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective d2 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be plr-125391-06 treated as an s_corporation for the year in which the election is made under ' b however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no ' a election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and ' b shall not apply x did not timely file an election to be treated as an s_corporation under ' a x has however established reasonable_cause for not making a timely s election and is entitled to relief under ' b conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d2 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as specifically set forth above no opinion is expressed or implied as to the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 pursuant to the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes sincerely dianna k miosi chief branch office of associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c date o f f ic e o f c h ief c o u n sel number release date cc fip spr-133019-01 uilc internal_revenue_service national_office chief_counsel_advice memorandum for from subject this memorandum constitutes chief_counsel_advice in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend target taxpayer state a date a year year year z this memorandum is to inform you of a potential issue that may arise in the examination of taxpayer for the taxable_year in which it revoked its election under sec_831 taxpayer is a small_mutual insurance_company incorporated in state a and is taxable under sec_831 taxpayer has been in the insurance_business for many years and provides the property damage portion of fire and allied lines insurance coverage to residents in a limited geographic area within state a since year taxpayer has elected under sec_831 to be taxed only on its investment_income and not its underwriting_income on date our office granted taxpayer permission to revoke its election for the tax_year target was a small_mutual insurance nonlife company which formerly provided the property damage portion of fire and allied lines coverage for many years within a limited geographic area within state a prior to date a of year when it merged into taxpayer target had not made a sec_831 election nor was it exempt from tax under sec_501 rather target reported both its underwriting and investment activities on the u s property and casualty company income_tax return form pc and its predecessor forms during year through year target generated net operating losses totaling dollar_figurez on date a of year target was acquired by taxpayer in a statutory merger under state a law after the merger taxpayer the survivor retained its election to be taxed only on its investment_income and not its underwriting_income under sec_831 now that the election has been revoked taxpayer may attempt to utilize the dollar_figurex net_operating_loss carryforward from year through year of target in taxpayer’s tax_year we have tentatively concluded this would be impermissible for the reasons set forth below as a matter of background we assume that the statutory merger was a reorganization within the meaning of sec_368 and pursuant to the usual rules applicable to net_operating_loss carryovers in reorganizations under sec_381 the net operating losses of target as the transferor_corporation determined under sec_172 would subject_to certain conditions and limitations carryover from such transferor_corporation to the acquiring_corporation in the first taxable_year after the date of transfer sec_172 allows a deduction for the taxable_year of an amount equal to the aggregate of the net_operating_loss_carryover to such year plus the net_operating_loss carrybacks to such year sec_172 generally provides that a net_operating_loss for any taxable_year shall be a net_operating_loss_carryover to each of the years following the taxable_year of the loss sec_831 provides that taxes computed as provided in sec_11 shall be imposed for each taxable_year on the taxable_income of every insurance_company other than a life_insurance_company sec_831 provides that in lieu of the tax otherwise applicable under sec_831 there is imposed for each taxable_year on the income of every insurance_company to which this subsection applies a tax computed by multiplying the taxable_investment_income of such company for such taxable_year by the rates provided in sec_11 sec_831 provides in part that sec_831 applies to every insurance_company other than life including interinsurers and reciprocal underwriters if - i the net written premiums or if greater direct written premium for the taxable_year exceed dollar_figure but do not exceed dollar_figure and ii such company elects the application of this subsection for such taxable_year sec_831 provides that for purposes of this part except as provided in sec_844 a net_operating_loss as defined in sec_172 shall not be carried - a to or from any taxable_year for which the insurance_company is not subject_to the tax imposed by subsection a or b to any taxable_year if between the taxable_year from which the loss is being carried and such taxable_year there is an intervening taxable_year for which the insurance_company was not subject_to the tax imposed by subsection a underlying supplied target’s merger into taxpayer through the operation of the carryover provisions of sec_381 resulted in taxpayer’s acquisition of a net_operating_loss during a year year in which taxpayer was subject_to sec_831 as set forth above sec_831 provides that a net_operating_loss shall not be carried from any_tax year in which a nonlife insurance_company is not subject_to the tax imposed by sec_831 accordingly sec_831 bars a net_operating_loss from being carried forward from a sec_831 electing year eg year in which taxpayer is not taxed on its underwriting_income to a sec_831 tax_year eg or following years in which it is fully taxable under part ii of subchapter_l accordingly we tentatively conclude it would be impermissible to utilize target’s net operating losses for the year or any year thereafter please call william sullivan at if you have any further questions acting associate chief_counsel financial institutions products by mark smith chief cc fip sec_844 provides that if an insurance_company - is subject_to the tax imposed by part i or ii of this subchapter for the taxable_year and was subject_to the tax imposed by a different part of this subchapter for a prior taxable_year then any operations loss carryover under sec_810 or the corresponding provisions of prior_law or net_operating_loss_carryover under as the case may be arising in such prior taxable_year shall be included in its operations_loss_deduction under sec_810 or net_operating_loss_deduction sec_832 as the case may be no exception from the rule_of sec_831 results from the operation of sec_844 in the present case because this provision only applies to insurance_companies changing between part i and part ii of subchapter_l and the reverse


internal_revenue_service number release date index number ---------------------------- -------------------- ----------------------------------------------- legend trust 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 b07 plr-156024-06 date date --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- ---------------------- -------- ------------------------------------------------ state grantor --------------------- date ---------------- date ------------------ court child ------------------------ child --------------------------------- date ------------------ date ------------------ date ----------------------- statute ------------------------------------------------------------------------------------ dear ----- correspondence requesting income gift and generation-skipping_transfer gst tax rulings with respect to the proposed conversion of trust to a total_return_trust under state law the facts and representations are as follows grantor created an irrevocable_trust on date on date at the request of the trustees court divided the irrevocable_trust into four separate trusts one for each of grantor’s children and their descendants this letter responds to your letter dated date and subsequent date and date are before date no additions actual or under the terms of the original trust agreement and the date court order after under the terms of the original trust agreement and the date court order trust plr-156024-06 trust is one of the four trusts created by the date court order and is held for the benefit of child and her descendants constructive have been made to trust since date trust is governed by state law child 1’s death child may direct the payment of up to one-third of the net_income in her last will and testament to her surviving_spouse the balance of the net_income or all of the net_income if none becomes payable to a surviving_spouse shall be paid to child 1’s issue from time to time surviving per stirpes child may by will change the proportion in which her issue shall share in the net_income by exercise of a limited_power_of_appointment if child dies without issue before the termination of trust the trust assets shall be added to the shares established for grantor’s surviving children and their descendants shall continue until twenty years after the death of the last surviving of eight named individuals child was the last surviving named individual child died on date upon termination of trust the trust estate shall be paid to the person s then in receipt of the income if a spouse is currently receiving income a share of trust necessary to produce such income shall continue to be held in trust during the spouse’s life but the person s who would have received the income shall immediately have a vested interest in the principal withheld the trustees may choose to purchase an annuity for the spouse and make immediate distribution of the entire trust estate child exercised her right to change the percentage of net_income paid to her issue and to direct payment of up to one-third of the net_income she had been entitled to at her death to her surviving_spouse trust income is currently distributed in accordance with the percentages set out in child 1’s will state statute permits a court to convert a_trust to a total_return_trust or unitrust if the court determines that the conversion will enable the trustee to better carry out the purposes of the trust and that the conversion is in the best interests of the beneficiaries statute provides that following conversion of a_trust to a total_return_trust income in the governing instrument means an annual amount equal to a percentage of the net fair_market_value of the total trust assets averaged over a three-year period finally statute provides that a court has the power to determine the percentage of the total value of the trust assets to be distributed from a total_return_trust trust to a total_return_trust under statute and that court approve a distribution the trustees have filed a complaint in court requesting that the court convert child died on date under article three of her will executed on date sec_2511 provides that the tax imposed by sec_2501 applies whether the sec_2501 of the internal_revenue_code imposes a tax on the transfer of plr-156024-06 percentage from trust after the conversion the complaint further requests the court declare that on termination the trust assets will be distributed to the persons then in receipt of a portion of the unitrust_amount in the same proportions as the unitrust_amount is then being paid after the conversion the unitrust_amount will be divided among the beneficiaries as directed in child 1’s will the trustees have requested rulings that the proposed conversion of trust to a total_return_trust will not cause trust to lose its status as exempt from the gst tax will not cause any beneficiary to have made a gift_for gift_tax purposes and will not cause trust or any beneficiary to realize capital_gain from an exchange of a_trust interest for income_tax purposes ruling sec_1 and property by gift by an individual transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible the date of the gift shall be considered the amount_of_the_gift distribution a taxable_termination and a direct_skip under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date however this exemption does not apply if additions actual or constructive are made to the trust after date regulations provides that any trust in existence on date will be considered an irrevocable_trust except as provided in sec_26_2601-1 or c which relate to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or sec_2512 provides that if a gift is made in property the value thereof at sec_2611 defines the term generation-skipping_transfer as a taxable sec_26_2601-1 provides rules for determining when a modification sec_26_2601-1 of the generation-skipping_transfer_tax sec_2601 imposes a tax on every generation-skipping_transfer sec_26_2601-1 provides that a modification of the governing plr-156024-06 hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of gain for purposes of sec_1001 instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust in addition administration of a_trust in conformance with applicable local law that defines the term income as a unitrust_amount or permits a right to income to be satisfied by such an amount or that permits the trustee to adjust between principal and income to fulfill the trustee’s duty_of impartiality between income and principal beneficiaries will not be considered to shift a beneficial_interest in the trust if applicable local law provides for a reasonable apportionment between the income and remainder beneficiaries of the total return of the trust and meets the requirements of sec_1_643_b_-1 of the income_tax regulations that is otherwise exempt from the gst tax because it was irrevocable prior to sec_26_2601-1 example considers a situation where a_trust sec_26_2601-1 provides that for purposes of this section a the trustees represent that trust was irrevocable on date and the facts in this case are similar to those set forth in example of sec_26 plr-156024-06 date provides that trust income is payable to a for life and upon a’s death the remainder is to pass to a’s issue per stirpes state x the situs of the trust then amends its income and principal statute to define income as a unitrust_amount of of the fair_market_value of the trust assets valued annually the example concludes that the administration of the trust in accordance with the state statute defining income to be a unitrust_amount will not be considered to shift a beneficial_interest in the trust therefore the trust will not be subject_to the provisions of chapter further under the facts of the example no trust_beneficiary will be treated as having made a gift_for federal gift_tax purposes and neither the trust nor any trust_beneficiary will be treated as having made a taxable_exchange for federal_income_tax purposes that there were no additions to trust after date b i e which provides that the conversion of an income_interest to a unitrust_interest pursuant to state statute will not be considered to shift a beneficial_interest in a_trust for gst purposes example further concludes that no trust_beneficiary will be treated as having made a gift_for federal gift_tax purposes and neither the trust nor any trust_beneficiary will be treated as having made a taxable_exchange for federal_income_tax purposes provided the proposed conversion meets the requirements of state statute and an order from state court approving the conversion is obtained we conclude that the conversion of the income_interest in trust to a unitrust_interest will not be considered to shift any beneficial_interest in trust and therefore will not cause trust to lose its status as exempt from the gst tax we further conclude that the proposed modification will not result in any beneficiary being treated as having made a taxable gift_for federal gift_tax purposes ruling whatever source derived including gains derived from dealings in property and income from an interest in an estate_or_trust shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in such section for determining loss over the amount_realized under sec_1_1001-1 of the income_tax regulations the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially in_kind or in extent is treated as income or loss sustained under sec_1001 of the code gain from the sale_or_other_disposition of property sec_61 and provides that gross_income means all income from sec_1001 provides that the amount_realized from the sale or other sec_1_1001-1 provides that a loss is not ordinarily sustained prior to the plr-156024-06 disposition of property shall be the sum of any money received plus the fair_market_value of the property other than money received under sec_1001 except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sale_or_other_disposition of the property for the reason that until such sale_or_other_disposition occurs there remains the possibility that the taxpayer may recover or recoup some of the adjusted_basis of the property until some identifiable_event fixes the actual sustaining of a loss and the amount thereof the loss is not taken into account an exchange of property results in the realization of gain_or_loss under sec_1001 if the properties are materially different 499_us_554 properties exchanged are materially different if the properties embody legal entitlements different in_kind or extent or if the properties confer different rights and powers id pincite in cottage savings the supreme court held that mortgage loans made to different obligors and secured_by different homes embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans id in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent id pincite sec_1_643_b_-1 provides a comprehensive definition of income as that term applies to trusts_and_estates it provides in part that items such as dividends interest and rents are generally allocated to income and proceeds from the sale_or_exchange of trust assets are generally allocated to principal however an allocation of amounts between income and principal pursuant to applicable local law will be respected if local law provides for a reasonable apportionment between the income and remainder beneficiaries of the total return of the trust for the year including ordinary and tax- exempt_income capital_gains and appreciation for example a state statute providing that income is a unitrust_amount of no less than and no more than of the fair_market_value of the trust assets whether determined annually or averaged on a multiple year basis is a reasonable apportionment of the total return of the trust sec_1_643_b_-1 further provides that a switch between methods of determining trust income authorized by state statute will not constitute a recognition event for purposes of sec_1001 beneficiaries of the trust will have the same property interests and legal entitlements as a result of the proposed conversion under state statute a conversion to a total_return_trust may be made upon the court's determination that the conversion will enable the trustee to better carry out the purposes of the trust in addition and under the facts in the present case the preliminary question is whether the trustees and except as expressly provided herein no opinion is expressed or implied plr-156024-06 presented there is to be no material_change in property interests or legal entitlements for trust the trustees or the beneficiaries if the conversion to a total_return_trust does not result in a material_change in property interest or legal entitlements there is no occasion for realizing taxable gain_or_loss under sec_1001 therefore under the facts presented the conversion will not trigger realization of gain_or_loss for the taxpayers for federal_income_tax purposes concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 provides that it may not be used or cited as precedent being sent to the taxpayer’s representatives pursuant to the power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer s requesting it sec_6110 the rulings contained in this letter are based upon information and sincerely melissa c liquerman melissa c liquerman senior technician reveiwer branch passthroughs special industries copy for sec_6110 purposes enclosure cc


t c no united_states tax_court janet n moore petitioner v commissioner of internal revenue respondent docket no 16440-99l filed date p was an officer of a corporation that failed to pay federal trust_fund_taxes r determined that p is liable for a penalty pursuant to sec_6672 i r c equal to the unpaid taxes after r initiated a collection action against p p received a due process hearing with r's boston appeals_office r issued a determination_letter to p stating that r would proceed with collection p filed a petition for review of r's administrative determination with the court r fileda motion to dismiss for lack of jurisdiction held the court's jurisdiction to review an administrative determination respecting a collection matter is limited to cases where the underlying taxes are of a type over which the court normally has deficiency jurisdiction sec_6320 sec_6330 i r c held further because the court lacks jurisdiction over the penalty that r is attempting to collect the court lacks jurisdiction to review the administrative determination in dispute janet n moore pro_se john r mikalchus and kerry bryan for respondent opinion cohen chief_judge this case was assigned to chief special_trial_judge peter j panuthos pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_183 unless otherwise indicated section references are to sections of the internal_revenue_code as amended and rule references to the tax_court rules_of_practice and procedure the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge panuthos chief special_trial_judge this matter is before the court on respondent's motion to dismiss for lack of jurisdiction as discussed in detail below we shall grant respondent's motion background janet n moore petitioner was an officer of atlas elevator company atlas atlas failed to pay over to the government what respondent refers to as federal trust_fund_taxes federal_insurance_contributions_act taxes under sec_3101 et seq and employee_income_tax_withholding under sec_3401 through and for the periods ending date and date respondent subsegquently determined that petitioner was liable for a penalty pursuant to sec_6672 equal to the unpaid taxes respondent subsequently initiated a collection action against petitioner on date respondent's boston appeals_office issued a notice_of_determination to petitioner stating in pertinent part we have reviewed the proposed collection action for the periods date and date this letter is your legal notice_of_determination as required_by_law if you want to dispute this determination in court you have days from the date of this letter to file a complaint in the appropriate united_states district_court for a redetermination summary of determination it has been determined that all requirements of administrative procedure and applicable law have been met with regards to the proposed collection action ' sec_6672 provides in pertinent part sec a general_rule --any person required to collect truthfully account for and pay over any_tax imposed by this title who willfully fails to collect such tax or truthfully account for and pay over such tax or willfully attempts in any manner to evade or defeat any such tax or the payment thereof shall in addition to other penalties provided by law be liable to a penalty equal to the total amount of the tax evaded or not collected or not accounted for and paid over - - you have offered funds for settlement which are currently being litigated in the atlas elevator bankruptcy case receipt of these funds by the service is dependent on bankruptcy law the funds will not be sufficient to liquidate the entire corporate debt your personal financial statement indicates an ability to make monthly payments in the amount of dollar_figure per month payments to junior creditors and college education expenses have been disallowed you have declined to pay this amount and have offered no other alternatives other than settlement for whatever funds the bankruptcy court turns over the proposed collection action is approved to the limit of dollar_figure per month this amount balances your concerns about the intrusiveness of the collection action with the need for the efficient collection_of_taxes any contemplated seizure of your personal_residence is not approved emphasis added on date petitioner filed with the court a petition for review of respondent's determination_letter the petition states in pertinent part that the amount that respondent is attempting to collect from petitioner is unreasonable due to financial hardship as indicated respondent filed a motion to dismiss for lack of jurisdiction respondent contends that the court's jurisdiction to review administrative determinations respecting collection matters is limited to cases where the underlying tax_liability is of a kind within the court’s normal deficiency jurisdiction respondent asserts that the court lacks jurisdiction over the federal trust_fund_taxes at issue in this case and therefore the court lacks jurisdiction to review respondent's administrative determination to proceed with - - collection against petitioner petitioner filed an objection to respondent's motion to dismiss this matter was called for hearing at the court's motions session in washington d c counsel for respondent appeared at the hearing and argued in support of the motion to dismiss no appearance was made by or on behalf of petitioner at the hearing discussion sec_6321 provides that if any person liable to pay any_tax neglects or refuses to pay the same after demand the amount 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 sec_6323 generally requires the commissioner to file a notice_of_federal_tax_lien with the appropriate state office or the local federal district_court sec_6331 provides that if any person liable to pay any_tax neglects or refuses to pay such tax within days after notice_and_demand for payment the secretary is authorized to collect such tax by levy upon property belonging to the taxpayer sec_6331 provides that the secretary is obliged to provide the taxpayer with notice including notice of the administrative appeals available to the taxpayer before proceeding with collection by levy on the taxpayer's property in the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_685 - - congress enacted new sec_6320 pertaining to liens and pertaining to levies to provide due process protections for taxpayers in tax collection matters sec_6320 and sec_6330 are effective with respect to collection actions initiated more than days after date date see rra sec_3401 112_stat_750 sec_6320 requires the commissioner to provide notice to a person described in sec_6321 of the filing of a notice of lien under sec_6323 sec_6320 and b provides that the person described in sec_6321 is entitled to notice of and the opportunity for an administrative review of the lien in the form of an appeals_office due process hearing sec_6330 provides for a similar due process hearing where the commissioner has proposed to levy on the taxpayer's property sec_6320 adopts the procedures set forth in sec_6330 d and e governing the issues that may be raised in a due process hearing and the means for obtaining judicial review of the matter see goza v commissioner t c sec_6330 provides for judicial review of an administrative determination respecting a collection matter in pertinent part as follows sec_6330 proceeding after hearing --- judicial review of determination ---the person may within days of a determination under this section appeal such determination-- - jj - a to the tax_court and the tax_court shall have jurisdiction to hear such matter or b if the tax_court does not have jurisdiction of the underlying tax_liability to a district_court of the united_states if a court determines that the appeal was to an incorrect court a person shall have days after the court determination to file such appeal with the correct court in short sec_6330 provides that a taxpayer may file a petition for review of the commissioner's administrative determination with the tax_court where the court has jurisdiction of the underlying tax_liability the court's deficiency jurisdiction generally is limited to the redetermination of income estate_and_gift_taxes see sec_6211 sec_6213 while congress clearly intended for sec_6330 to provide an opportunity for judicial review of collection matters we interpret sec_6330 a and b together to mean that congress did not intend to expand the court's jurisdiction beyond the types of taxes that the court may normally consider thus sec_6330 a and b provides for tax_court jurisdiction except where the court does not normally have jurisdiction over the underlying liability the tax_court is a court of limited jurisdiction and we may exercise our jurisdiction only to the extent authorized by congress see 85_tc_527 in the present case respondent is attempting to collect federal --- - trust_fund_taxes from petitioner by way of a penalty imposed under sec_6672 sec_6672 contemplates that the federal district_court or the court of federal claims shall have jurisdiction to determine a taxpayer's liability for a penalty imposed under that section the tax_court does not have jurisdiction to redetermine the taxes that respondent is attempting to collect in this case see 112_tc_1 consistent with sec_6330 it follows that this court does not have jurisdiction to review the administrative determination at issue herein however petitioner is not without a remedy pursuant to the final flush language of sec_6330 petitioner ha sec_30 days from the date of the court's order dismissing this case to file an appeal with the appropriate federal district_court to reflect the foregoing an order of dismissal will be entered


internal_revenue_service number release date index number --------------------------------------------------- ---------------------------------- ----------------------------- ------------------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ---------------- telephone number -------------------- refer reply to cc psi b03 plr-150127-13 date date legend company --------------------------------------------------- x y ------------------------------------------------------------------------------------------------ ---------------------------- ------------------------------------------------------------------------------------------------ -------------------------- country --------- date --------------------- dear -------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of company by its authorized representative requesting that company be granted an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a partnership under sec_301_7701-3 facts company was formed under the laws of country on date company represents that it is a foreign_entity eligible to elect to be classified as a partnership for federal tax purposes company and company’s members x and y intended that company be classified as a partnership effective date however due to inadvertence form_8832 entity classification election was not timely filed plr-150127-13 law sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain plr-150127-13 elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion 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 company is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a partnership effective date a copy of this letter should be attached to the form_8832 this ruling is contingent on x and y filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief to the extent appropriate these returns must include but are not limited to forms return of u s persons with respect to certain foreign_partnerships such that these forms reflect the consequences of the relief granted in this letter except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election 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 plr-150127-13 the ruling contained in this letter is 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 ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs and special industries by ________ s _______________________ mary beth carchia senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index no p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si plr-105091-99 re ein- legend date trust grandparent grandparent trust a beneficiary trustee date x corporation charity this is in response to your letter dated date in which you requested a ruling regarding the application of the generation-skipping_transfer gst tax provisions of chapter of the internal_revenue_code specifically you requested a ruling that the exempt status of trust a for gst tax purposes would not be affected by the following i the trustee’s consent to corporation’s s election on behalf of trust a ii the trustee’s execution of an electing_small_business_trust election on behalf of trust a and iii the trustee’s execution of the shareholder agreement on behalf of trust a according to your submission on date grandparent transferred x shares of corporation common_stock to trust an irrevocable_trust pursuant to the terms of trust instrument trust was divided into four separate trusts of equal value for the benefit of grandparent’s four children including trust a for the benefit of beneficiary and her descendants article e of trust provides that during the lifetime of each child the trustee shall pay to or expend or apply for the benefit of such child so much or all of the net_income of the trust estate of such child as the trustee in its absolute discretion deems best subject_to the above provision in favor of each child so much or all of the net_income of the trust estate shall be paid to or expended or applied for the benefit of the descendants of each child as shall be living from time to time at such times and in such equal or unequal proportions plr-105091-99 among them and in such manner as the trustee in its absolute discretion deems best any net_income not so distributed by the trustee during any calendar_year shall be accumulated and added to the principal of the respective trust estate article f of trust provides that the trustee is fully authorized to pay to each child such sums from the principal of the trust estate of such child as the trustee deems necessary or advisable from time to time for the best interests of the child and his or her descendants in that order and as a group taking into consideration all other income available to such child for such purposes from all sources known to the trustee article g provides that each child has the right at any time and from time to time during his or her lifetime by instrument in writing delivered to the trustee to direct that any part or all of the trust estate of such child as then constituted shall be held in trust for the benefit of or distributed to or in trust for the benefit of any one or more of such child’s descendants in such amount and in such manner and upon such terms and conditions as may be specified in such instrument in writing article h of trust states that upon the death of a child the trust estate of such child as then constituted shall be held in trust for the benefit of or distributed to or in trust for the benefit of any one or more of such child’s descendants in such amount and in such manner and upon such terms and conditions as such child shall appoint by his or her last will specifically referring to the power_of_appointment conferred upon him or her pursuant to article i in default of the exercise of the power_of_appointment by a child upon the death of such child the trust estate of the child or the part not effectively appointed shall be distributed per stirpes to the child’s then living descendants if any if there are no such descendants the trust estate or the part not effectively appointed shall be distributed per stirpes to grandparent’s then living descendants subject_to certain withholding provisions each portion otherwise distributable to a descendant of grandparent for whom a_trust estate or share of a_trust estate is then being held is to be added to such trust estate or share under article k if at any time prior to the complete vesting or distribution of the trust no child of grandparent nor any other descendant of the grandparent shall be living the entire remaining trust estate then in the hands of the trustee shall be paid transferred and delivered to charity article m of trust provides that notwithstanding any other provision of trust the trusts created pursuant to the plr-105091-99 terms of trust will terminate not later than twenty-one years after the death of the last survivor of grandparent’s descendants living on date if the trusts created pursuant to the terms of trust have not sooner terminated the trustee is directed to distribute any property then held in a_trust to the beneficiary for whom the trust is named the primary asset of trust a is stock in corporation a c_corporation the corporation’s board_of directors proposes to elect to treat corporation as a small_business_corporation an s_corporation trustee proposes to consent to the s election in order to convert corporation to an s_corporation each of its shareholders must be eligible to hold s_corporation stock as of the first day of the year for which the election is to take effect trustee proposes to make an election under sec_1361 to treat trust a as an electing_small_business_trust so that it will qualify as an eligible s_corporation shareholder in an effort to ensure the continuing qualification of corporation as an s_corporation trustee intends to enter into a shareholder agreement with corporation and corporation’s other shareholders to protect the s election under the sec_3 of the proposed shareholder agreement no shareholder may transfer and no person may acquire the legal or beneficial_ownership of any share if such transfer or acquisition would cause the s status of the corporation to terminate specifically no transfer may be made to any person that is not eligible to be a shareholder of an s_corporation under the applicable provisions of the code as in effect at the time of the purported transfer in addition no shareholder may affirmatively transfer shares to a person if the transfer would cause the corporation to exceed the maximum number of persons who are allowable s_corporation shareholders sec_3 of the proposed shareholder agreement provides that no shareholder shall make any transfer of shares to any trust having multiple beneficiaries or amend any trust that owns shares to increase the number of beneficiaries unless all such beneficiaries are persons eligible to be transferees pursuant to sec_3 and immediately after such transfer or amendment the number of shareholders the corporation is deemed to have for purposes of sec_1361 would not exceed the maximum number of persons who are allowable s_corporation shareholders pursuant to that section notwithstanding any other provision of the shareholder agreement the shareholders and the corporation acknowledge and agree in sec_3 that none of the following shall be prohibited by the terms of the shareholder agreement i the addition of a_trust beneficiary due to the birth of an additional plr-105091-99 descendant of grandparent ii the exercise of a power_of_appointment granted to a beneficiary pursuant to the terms of any irrevocable_trust that is in existence on the date of the agreement and that owns shares iii the transfer of shares to any person in whose favor a power_of_appointment described in ii above is exercised or iv the distribution of shares to a a beneficiary of any irrevocable_trust that is in existence on the date of the agreement and that owns shares pursuant to the terms thereof or b to the beneficiary of any trust created pursuant to the exercise of a power_of_appointment described in ii above even if such addition exercise or distribution shall cause the termination of the corporation’s s election sec_3 provides that prior to any transfer or other_disposition of shares if the corporation in its discretion so requires an opinion of counsel to the corporation must first be received by the corporation the cost of which shall be borne by the shareholder whose shares are to be transferred or disposed of that the transferee is i eligible to be a shareholder of an s_corporation in accordance with the applicable_requirements of the code or ii that the transfer otherwise is allowable pursuant to the provisions of the shareholder agreement in addition to the other requirements of sec_3 of the shareholder agreement sec_3 provides that no transfer of shares including without limitation transfers pursuant to sec_3 shall be permitted and no purported transfer shall be effective until a permitted transferee has executed a supplemental signature page to the shareholder agreement all parties agree that upon execution and acceptance of a supplemental signature page the shareholder agreement shall be amended and the transferee shall have the rights and obligations of a shareholder under the agreement sec_3 of the shareholder agreement provides that shareholders possessing of the total voting power of all outstanding shares may at any time and from time to time agree in writing to authorize or ratify any transfer of shares which would otherwise not be permitted by the shareholder agreement in which event the transfer shall be deemed for all purposes to comply with the shareholder agreement notwithstanding any other provision of the agreement under sec_3 if a transfer of shares is required to be made pursuant to sec_3 iii or iv to a transferee who is not already a shareholder and who has not previously executed or currently refuses to execute a supplemental signature page to the shareholder agreement a non- consenting transferee certain procedures will apply the shareholders may allow the transfer of shares to the non- consenting transferee pursuant to the procedure set forth in plr-105091-99 sec_3 otherwise the shares that otherwise would be transferred to the non-consenting transferee shall instead be redeemed by the corporation for a price equal to the fair_market_value of the shares as of the valuation_date pursuant to sec_5 of the proposed shareholder agreement any purported transfer in violation of the shareholder agreement shall not affect the beneficial or legal ownership of shares section of the agreement states that subject_to any limitations on dividends or other distributions imposed by statute the corporation shall make pro_rata dividend distributions of money based on ownership of shares to pay the federal state and local income_tax on the income and gain of the corporation net of any_tax benefits produced for the shareholders by the corporation’s losses deductions and credits for the current_year and for each prior year during which the corporation’s s election was in effect that passes through to the shareholders under the applicable provisions of the code in respect of each taxable_year or portion thereof of the corporation for which its s election is in effect section of the proposed shareholder agreement provides that the corporation shall a not issue more than one class of shares b use its best efforts to avoid a termination of its s election and c in the event of a termination of the s election use its best efforts to distribute to each shareholder such shareholder’s net share of the corporation’s undistributed_taxable_income for all taxable years for which the s election was in effect to the extent permitted by law and consistent with the obligations of the corporation to creditors agreements to which the corporation is a party and other business considerations within the period when such a distribution will be considered a non-dividend distribution under sec_1371 section of the proposed shareholder agreement states that if the corporation’s status as an s_corporation is terminated inadvertently and the corporation wishes to obtain a ruling under sec_1362 each shareholder agrees to make any adjustments required pursuant to sec_1362 and approved by the corporation’s board_of directors a shareholder’s obligation to make such adjustments shall continue after the shareholder has ceased to own shares in the corporation and after the shareholder agreement has terminated except as directed by the shareholder agreement the existing trustee will continue to serve in the same manner as it previously served in addition trust a will continue to be administered in accordance with the terms and conditions set forth in trust plr-105091-99 sec_2601 imposes a tax on every generation-skipping_transfer sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides that the gst tax applies to any generation-skipping_transfer made after date sec_26_2601-1 provides an exception to this rule for any distributions from a_trust that was irrevocable on date however this exception does not apply to a pro_rata portion of any generation-skipping_transfer under an irrevocable_trust where additions were made to the trust after date in addition a modification to a_trust that results in a change in the quality value or timing of any beneficial_interest provided for under the trust instrument will cause the trust to lose its exempt status in the present case it has been represented that trust a was irrevocable on date and that there have been no additions constructive or otherwise to trust a after that date based on the representations made and the facts submitted we conclude that there is no change in the quality value or timing of any beneficial_interest in trust a resulting from the following i the trustee’s consent to corporation’s proposed s election ii the trustee’s election to treat trust a as an electing_small_business_trust and iii the trustee’s execution of the proposed shareholder agreement therefore items i - iii above will not cause trust a to lose its exempt status with respect to the gst tax provided that there are no additions constructive or otherwise to trust a after date distributions from trust a to skip persons will not be subject_to the gst tax except as specifically ruled herein we express no opinion as to the consequences of this transaction under the cited provisions of the code or under any other provisions of the code specifically we express no opinion on whether trust a will qualify as an electing_small_business_trust within the meaning of sec_1361 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely assistant chief_counsel passthroughs and special industries by george masnik chief branch enclosure copy for sec_6110 purposes