department of the treasury washington pn tax_exempt_and_government_entities_division date mar uniform issue list contact person identification_number telephone number - -e wv legend n p q r x dear sir or madam we have considered your ruling_request dated date in which you requested approval of a proposed set-aside of m's income under the suitability test of sec_4942 of the internal_revenue_code the code and sec_53_4942_a_-3 of the foundation and similar excise_taxes regulations the regulations and a determination that the amount set_aside may be treated as a qualifying_distribution in the year in which it is set_aside but not in the year in which actually paid m is recognized as exempt from federal_income_tax as a charitable_organization under sec_501 of the code and is classified as a private_foundation within the meaning of sec_509 m wishes to set_aside a grant totaling dollar_figure x fo n nis exempt from federal_income_tax under sec_501 of the code and is classified as a publicly_supported_organization under sec_509 no additions to the set-aside are planned the purpose of the grant is to restore and renovate an historic site known as p which is operated and maintained by n project to its original condition and to update the electrical wiring and plumbing due to hazards they impose the cost of the restoration project is estimated at dollar_figure n has proposed to renovate and restore p the restoration xk m's grant is subject_to an agreement with n the agreement under the agreement m will make a grant of dollar_figure restoration grant m will disburse the funds to n in a lump sum within business days after to partially fund the costs of the restoration project the x to n ood the satisfaction of the conditions set forth in paragraph sec_2 b and c of the agreement upon receipt of the funds from m n shall deposit the funds in a separate interest bearing account the project account as the conditions set forth in paragraph sec_2 and e are satisfied n may make disbursements from the project account solely to pay reimbursable costs of the restoration project m's obligation to make the restoration grant to n is subject_to the following conditions precedent detailed in paragraph of the agreement a on or before i n shall have received eligible matching_contributions for the restoration project in an amount not less than dollar_figure -_ x and ii shall have provided m with evidence satisfactory to m in its sole discretion that such contributions have been received b on or before m shall have received assurances satisfactory tot that q and r have been engaged to provide consulting and supervisory services with respect to the restoration project c on or before i n shall have submitted to m and m shall have approved in writing the drawings plans and specifications for the restoration project collectively the pians and ii m shall be satisfied in its sole discretion that n has sufficient funding to complete the restoration project as embodied in the plans d prior to the disbursement of any portion of the restoration grant from the project account for the purchase of any materials or the performance of any work for the restoration project n shall have submitted to m and m shall have approved in writing the contractor vendor or other supplier and the finally awarded contract for the labor or materials for which such disbursement is to be made e at the time of disbursement of any portion of the restoration grant from the project account n shall not be in default in the performance of any of its obligations under the agreement and shall be an organization described in sec_501 and sec_509 or of the code should any of the conditions not be satisfied and should m be unwilling to waive the same then m's obligation to make the restoration grant may be terminated m states that the set-aside was made as of date and that the amounts set_aside must and will actually be paid for the restoration project within a period of time that ends not more than months after the date of the set-aside the aareement requires that the payments of the restoration grant be made on or before months from the date of the set-aside which is less than m states that the restoration grant as part of a matching-grant program is intended to stimulate grants to n from the community at large in addition because of m's concern with the preservation of the historical and architectural features of p m believes it is crucial that it retain a degree of control_over the renovation process by making the disbursement of the funds dependent upon approval of outside consultants and contractors m believes it can best meet the goal of preserving p sec_4942 of the code imposes on the undistributed_income_of_a_private_foundation for any taxable_year which has not been distributed before the first day of the second taxable_year following such taxable_year a tax equal to percent of the amount of such income remaining undistributed at the beginning of such second taxable_year sec_4942 of the code provides that for purposes of sec_4942 the term undistributed_income means with respect to any private_foundation for any taxable_year as of any time the amount by which the distributable_amount for each taxable_year exceeds the qualifying distributions made before such time out of such distributable_amount sec_4942 of the code defines the term qualifying_distribution in general as any amount_paid to accomplish one or more purposes described in sec_170 or to acquire an asset used directly in carrying out one or more purposes described in sec_170 sec_4942 of the code provides that an amount of income that is set_aside for a specific project which comes within one or more purposes described in sec_170 b of the code may be treated as a qualifying_distribution if the amount meets the set-aside_requirements of sec_4942 sec_4942 of the code provides in pertinent part that an amount set_aside for a specific project may be treated as a qualifying_distribution if at the time of the set-aside the private_foundation establishes to the satisfaction of the secretary that the amount set_aside will be paid for the specific project within five years and that the suitability test for a set-aside under sec_4942 is met sec_4942 of the code provides a suitability test under which the private_foundation at the time of the set-aside must establish to the satisfaction of the secretary that the specific project is one that can better be accomplished by the set-aside of income rather than by the immediate payment of funds sec_53_4942_a_-3 of the regulations provides that an amount set_aside for a specific project that is for one or more of the purposes described in sec_170 or b of the code may be treated as a qualifying_distribution in the year in which set_aside but not in the year in which actually paid if the requirements of sec_4942 of the code are met the foundation establishes to the satisfaction of the commissioner that the amount set_aside will be paid for the specific project within months after it has been set_aside and the set-aside otherwise meets the suitability test of sec_53_4942_a_-3 of the regulations sec_53_4942_a_-3 of the regulations provides that the suitability test is satisfied if the private_foundation establishes to the satisfaction of the commissioner that the specific project for which the amount is set_aside is one that can be better accomplished by a set-aside than by the immediate payment of funds specific projects that can be better accomplished by -4- the use of a set-aside include but are not limited to projects in which relatively long-term grants or expenditures must be made in order to assure the continuity of particular charitable projects or program-related investments as defined in sec_4944 or where grants are made as part of a matching-grant program such projects include for example a plan to erect a building to house the direct charitable educational or other similar exempt activity of the private_foundation even though the exact location and architectural plans have not been finalized revrul_77_7 1977_1_cb_354 halds that the term specific project includes a building project to be undertaken by a public charity unrelated to the foundation making the set_aside sec_53_4942_a_-3 of the regulations provides that if an amount is set_aside under the suitability test of sec_4942 of the code and sec_53_4942_a_-3 of the regulations the private_foundation must apply for the commissioner's approval of the set- aside before the end of the taxable_year in which the amount is set_aside m has timely sought approval of its set-aside of income in advance of the time when the amounts of income are to be set_aside as required by sec_4942 of the code and sec_53_4942_a_-3 of the regulations m's set-aside of dollar_figure x as a matching-grant will be for specific projects within the charitable purposes of sec_170 of the code as required by sec_4942 of the code and sec_53_4942_a_-3 of the regulations m represents that the amount set_aside for the restoration project will be paid out within months from the time it is set_aside as required by sec_4942 of the code and sec_53_4942_a_-3 of the regulations m's specific project ie the restoration grant is better accomplished by this set-aside of income rather than by immediate payment because it involves a grant made as part of a matching grant program as described in sec_53_4942_a_-3 of the regulations thus m's restoration grant to n meets the requirements for a set-aside of income under the suitability test of sec_4942 of the code and sec_53_4942_a_-3 of the regulations accordingly we rule that up todollar_figure x of m's income to be set_aside for the restoration grant to n will be treated as a qualifying_distribution under sec_4942 of the gode and sec_53_4942_a_-3 of the regulations in the tax_year when such amount is set_aside sec_53_4942_a_-3 of the regulations provides that any set-aside approved by the internal_revenue_service must be evidenced by the entry of a dollar amount in on the books_and_records of a private_foundation as a pledge or obligation to be paid at a future date or dates further any amount which is set_aside must be taken into account in determining the private_foundation's_minimum_investment_return under sec_53_4942_a_-2 of the regulations and any income attributable to a set-aside must be taken into account in computing adjusted_net_income under sec_53_4942_a_-2 of the regulations because this ruling letter could help to resolve any questions please keep it in m's permanent records and include a copy with m's annual return form_990-pf hoy this ruling letter is directed only to m sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely signed terrell m berkovsky terrell m berkovsky manager exempt_organizations technical group


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 b6 plr-146892-10 date may legend legend taxpayer ------------------------------------ ----------------------- ----------------------- corp a possession ---------------- utility location date ------------------------------------------------------------- ------------------------------ ------- dear ----------------- this is in response to your request for rulings submitted by your authorized representative concerning the federal_income_tax consequences of the transaction described below the facts as represented by the taxpayer are as follows taxpayer has a december taxable year-end and uses the accrual_method of accounting for income_tax and financial statement purposes taxpayer is a wholly- owned domestic single member limited_liability_company disregarded as an entity separate from its owner the original member for united_states federal_income_tax purposes taxpayer will be owned by a number of domestic corporations that are subject_to united_states federal_income_tax and united_states citizens that are subject_to united_states federal_income_tax ie none of which are exempt from tax pursuant to sec_931 sec_933 or sec_936 as applicable the domestic corporations and united_states citizens will own their respective interests in taxpayer through various passthrough entities eg wholly owned single member limited_liability companies domestic partnerships and foreign_partnerships none of the owners of taxpayer will be a tax- exempt entity within the meaning of sec_168 and as stated above none of such plr-146892-10 owners will have elected to be exempt from united_states federal_income_tax pursuant to sec_931 sec_933 or sec_936 as applicable taxpayer’s primary business is the construction operation management and ownership of a megawatt ground-mounted solar_energy_facility the project located in location through its wholly-owned subsidiary corp a a possession limited_liability_company that will be organized under the laws of possession all items of income gain loss and deduction generated from the operation of the project will be passed through corp a and up to the taxpayer ie all of the income and gain derived from the operation of the project by corp a will be subject_to untied states federal_income_tax the taxpayer anticipates that the project will be placed_in_service and begin commercial operation in date the project will use solar_energy to generate electricity within the meaning of sec_48 and will sell all such electricity to utility pursuant to a 20-year power purchase agreement furthermore no portion of the project will include any property that is part of a facility the production from which is allowed as a credit under sec_45 at no time will any portion of the project be used i for lodging ii by a tax-exempt_organization described in sec_50 or iii by governments or foreign persons at the time the project achieves commercial operation it is anticipated that a taxable entity incorporated in a state of the united_states the new member and together with the original member each a partner and subject_to united_states federal_income_tax ie the new member will not have elected to be exempt from united_states federal_income_tax pursuant to sec_936 will make a capital_contribution to the taxpayer in consideration for an interest therein it is the intent of the original member and the new member that upon the capital_contribution of the new member the taxpayer will convert from a disregarded_entity to a partnership for united_states federal_income_tax purposes the partnership will own and operate the project pursuant to a limited_liability_company agreement and will allocate income gain loss and deductions and distribute cash received from operations ie from the sale of electricity pursuant to the terms of such agreement rulings requested the taxpayer has requested the service to rule that i assuming the taxpayer will be regarded as a valid partnership for united_states federal_income_tax purposes and that each partner will be regarded as a valid partner of taxpayer each partner will be regarded as an owner and user of the project to the extent of its respective shares of the basis of the project for purposes of sec_50 and therefore will be entitled to a share of the energy_credit to the extent the partners share in the gross_profits of taxpayer and plr-146892-10 ii to the extent each partner is so regarded the project will not be excluded by sec_50 from the definition of energy_property as defined below law and analysis sec_48 of the code provides for an energy_credit equal to percent of the cost_basis of qualifying energy_property placed_in_service before date sec_48 of the code provides that energy_property includes equipment which uses solar_energy to generate electricity to heat or cool or provide hot water for use in a structure or to provide solar process heat excepting property used to generate energy for the purposes of heating a swimming pool sec_1_48-9 provides that in order to qualify as energy_property under sec_48 of the code property must be depreciable_property with an estimated_useful_life when placed_in_service of at least three years and constructed after certain dates sec_1_48-9 of the regulations provides as follows d solar_energy property-- in general energy_property includes solar_energy_property the term solar_energy_property includes equipment and materials and parts related to the functioning of such equipment that use solar_energy directly to i generate electricity ii heat or cool a building or structure or iii provide hot water for use within a building or structure generally those functions are accomplished through the use of equipment such as collectors to absorb sunlight and create hot liquids or air storage tanks to store hot liquids rockbeds to store hot air thermostats to activate pumps or fans which circulate the hot liquids or air and heat exchangers to utilize hot liquids or air to create hot air or water property that uses as an energy source fuel or energy derived indirectly from solar_energy such as ocean thermal energy fossil fuel or wood is not considered solar_energy_property sec_1_48-9 of the regulations provides in part that solar_energy_property includes equipment that uses solar_energy to generate electricity and includes storage devices power conditioning equipment transfer equipment and parts related to the functioning of those items such property however does not include any equipment that transmits or uses the electricity generated sec_1 f of the regulations provides in part that in the case of a partnership each partner shall take into account separately for his taxable_year with or within which the partnership taxable_year ends his share of the basis of partnership new sec_38 property and his share of the cost of partnership used section property plr-146892-10 placed_in_service by the partnership during such partnership taxable_year each partner shall be treated as the taxpayer with respect to his share of the basis of partnership new sec_38 property and his share of the cost of partnership used sec_38 property sec_50 provides that except as provided in sec_50 no investment_credit is determined for any property that is used predominantly outside the united_states sec_50 provides that sec_50 does not apply to any property described in sec_168 sec_168 provides that any tangible_property used predominantly outside the united_states during the taxable_year must be determined under the alternative_depreciation_system of sec_168 sec_168 has an exception from sec_168 for certain property used outside the united_states sec_168 provides that property will not be treated as used predominantly outside the united_states if the property is owned by a domestic_corporation other than a corporation which has an election in effect under former sec_936 or by a united_states citizen other than a citizen entitled to the benefits of sec_931 or sec_933 and which is used predominantly in a possession_of_the_united_states by such a corporation or such a citizen or by a corporation created or organized in or under the law of a possession_of_the_united_states the background of sec_168 provides insight in determining whether sec_168 applies to domestic partnerships where all of the partners are domestic corporations none of which has an election in effect under sec_936 or united_states citizens none of whom is entitled to the benefits of sec_931 or sec_933 the rules in sec_168 are derived from former sec_48 prior to sec_168 provided in relevant part that for purposes of sec_168 rules similar to the rules under sec_48 including the exceptions contained in sec_48 shall apply in determining whether property is used predominantly outside the united_states when former sec_48 was repealed in sec_168 was amended to incorporate the enumerated exceptions contained in former sec_48 see of the omnibus budget reconciliation act of publaw_101_508 the act the language of sec_168 is the same as the language in former sec_48 prior to its repeal in the senate_finance_committee stated the following comments in relevant part on the reason for the enactment of former sec_48 your committee’s amendment extends the application of the investment_credit provision to property used in a possession by a u_s_person or by a corporation organized in a possession provided the property would otherwise have qualified for the investment_credit this rule is not extended if the property is owned or used in the possession by u s persons who are presently exempt from u s tax due to the application plr-146892-10 of the special provisions of the code which exempt u s persons who derive substantially_all of their income from a u s possession sec_931 sec_932 sec_933 sec_934 s rep no 89th cong 2d sess 1966_2_cb_1100 based on the senate report it appears that congress intended former sec_48 to apply to united_states persons even though the literal language of former sec_48 applied to united_states citizens or domestic corporations when former sec_48 was enacted in the term united_states_person was defined under sec_7701 as meaning a a citizen or resident_of_the_united_states b a domestic_partnership c a domestic_corporation and d any estate_or_trust other than a foreign_estate or foreign_trust within the meaning of sec_7701 similar to former sec_48 the literal wording of sec_168 applies to domestic corporations or united_states citizens but not to domestic partnerships however the repeal of the former provision and the amendment to sec_168 by of the act were not intended to be substantive changes in the tax law h_r rep no 101st cong 2d sess date sec_7701 defines the term united_states_person as a a citizen or resident_of_the_united_states b a domestic_partnership c a domestic_corporation d any trust if a court within the united_states is able to exercise primary supervision over the administration of the trust and one or more united_states persons have the authority to control all substantial decisions of the trust in light of the legislative_history of sec_168 and former sec_48 we believe that sec_168 is intended to apply to a domestic_partnership where all of its partners are domestic corporations that do not have an election in effect under sec_936 or are united_states citizens that are not entitled to the benefits of sec_931 or sec_933 in this case taxpayer represents that when the project is placed_in_service and begins commercial operations in date taxpayer will be a partnership and the partnership will own and operate the project therefore provided that taxpayer is a domestic_partnership where all of its partners are domestic corporations other than a corporation which has an election in effect under sec_936 or united_states citizens other than a citizen entitled to the benefits of sec_931 or sec_933 the project that is owned by taxpayer for depreciation purposes and is used by taxpayer only in possession is property described in sec_168 accordingly we conclude that i assuming taxpayer will be regarded as a valid partnership for united_states federal_income_tax purposes and that each partner will be regarded as a valid partner of taxpayer each partner will be regarded as an owner plr-146892-10 and user of the project to the extent of its respective shares of the basis of the project for purposes of sec_50 and therefore will be entitled to a share of the energy_credit to the extent the partners share in the gross_profits of taxpayer and ii to the extent each partner is so regarded the project will not be excluded by sec_50 from the definition of energy_property in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives a copy of this ruling must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling we express no opinion concerning any issue not directly addressed in this ruling this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent we are sending a copy of this letter_ruling to the industry director sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs special industries


internal_revenue_service number release date index number ------------------------------------------- --------------------- ---------------------------------------- ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- telephone number --------------------- refer reply to cc tege eb ec plr-141519-07 date date legend company a -------------------------------------------------------- company b ---------------------------------------------------- taxpayer a --------------- taxpayer b --------------------- date a date b date c date d date e date f date g amount a amount b amount c amount d ----------------------- -------------------------- ------------------- -------------------------- ----------------------- ------------------------- ------------------------- ----------- -------- ------------- ----------- plr-141519-07 amount e ----------- dear -------------------------------------- this letter responds to your request dated date for a ruling on the federal_income_tax consequences under sec_83 of the internal_revenue_code code regarding the imposition of vesting restrictions upon certain shares of common_stock in company b the facts represented by taxpayer a and taxpayer b collectively taxpayers are as follows on date a taxpayers incorporated company a at all times relevant hereto taxpayer a was president and chief_executive_officer and taxpayer b was chief technical officer and secretary of company a taxpayers retained these positions in company b following the merger described below on date b taxpayers each purchased amount a shares of company a common_stock company a common_stock for amount b per share -----------------percent of this stock was substantially nonvested within the meaning of code sec_83 taxpayers each timely filed an election under code sec_83 with respect to their nonvested stock on date c in order to provide company a with additional capital taxpayer a purchased amount c shares of company a preferred_stock company a preferred_stock for amount d per share and taxpayer b purchased amount e shares of company a preferred_stock for amount d per share the company a preferred_stock was convertible into common_stock on a one-for-one basis the company a preferred_stock was substantially_vested within the meaning of code sec_83 and under the terms of the company a preferred_stock any common_stock received upon conversion thereof also would be substantially_vested on date d taxpayers incorporated company b for the purpose of a future reincorporation of company a into company b to facilitate an investment in company b by certain venture capital funds investors taxpayers and company b entered into among other things the following transactions on date e company a executed an agreement and plan of merger pursuant to which company a would be merged with and into company b in a reorganization described under code sec_368 reincorporation taxpayers represent that the reincorporation satisfied the requirements of and constituted a reorganization described under code sec_368 pursuant to the reincorporation each share of substantially_vested company a common_stock was exchanged for a substantially_vested share of company b’s common_stock company b common_stock each share of substantially nonvested company a common_stock was exchanged for a substantially nonvested share of company b common_stock with the substantially nonvested shares of company b common_stock remaining subject_to the same vesting restrictions as applied with respect to the company a common_stock plr-141519-07 and each share of substantially_vested company a preferred_stock was exchanged for a substantially_vested share of company b’s preferred_stock company b preferred_stock the respective rights and preferences of company b stock received in the reincorporation were substantially identical to the respective rights and preferences of the company a stock surrendered on date f taxpayer a and taxpayer b exercised their conversion rights with respect to approximately percent of their respective shares of company b preferred_stock conversions on date g taxpayer a and taxpayer b executed restriction agreements restriction agreements causing the company b common_stock to be substantially nonvested within the meaning of code sec_83 restricted company b common_stock neither taxpayer a nor taxpayer b filed an election under code sec_83 in connection with the imposition of vesting restrictions on their company b common_stock on date g the investors and company b completed a purchase and sale of company b preferred_stock on date g company b filed an amended and restated certificate of incorporation arci which modified the rights preferences privileges and terms of the company b preferred_stock to provide for among other things a liquidation preference equal to the price per share the investors paid for their company b preferred_stock under code sec_83 if in_connection_with_the_performance_of_services property is transferred to any person other than the person for whom the services are performed the excess of the fair_market_value of the property determined without regard to any restriction other than a nonlapse_restriction at the first time the rights of the person having the beneficial_interest in the property are transferable or are not subject_to a substantial_risk_of_forfeiture whichever occurs earlier over the amount if any paid for the property shall be included in the gross_income of the person who performed the services in the first taxable_year in which the rights of the person having the beneficial_interest in the property are transferable or are not subject_to a substantial_risk_of_forfeiture whichever is applicable sec_1_83-1 of the income_tax regulations regulations provides that property transferred in_connection_with_the_performance_of_services is not taxable under code sec_83 until it has been transferred to an employee or independent_contractor and becomes substantially_vested in such person sec_1_83-3 of the regulations provides that a transfer of property occurs when a person acquires a beneficial_ownership interest in such property sec_1_83-3 of the regulations provides that property is substantially nonvested when it is subject_to a substantial_risk_of_forfeiture and is nontransferable plr-141519-07 property is substantially_vested when it is either transferable or not subject_to a substantial_risk_of_forfeiture revrul_2007_49 2007_31_irb_237 sets forth the tax consequences under code sec_83 of imposing vesting restrictions on substantially_vested stock the revenue_ruling addresses three situations the imposition of restrictions on substantially_vested stock causing the stock to become substantially nonvested the exchange of substantially_vested stock for substantially nonvested stock in a reorganization described in code sec_368 and the exchange of substantially_vested stock for substantially nonvested stock in a taxable stock acquisition with respect to situation the revenue_ruling concludes that there is no transfer under code sec_83 when restrictions are imposed on substantially_vested stock causing the stock to become substantially nonvested with respect to situation sec_2 and however the revenue_ruling concludes that the exchange of substantially_vested stock for substantially nonvested stock in a reorganization under code sec_368 or a taxable stock acquisition constitutes a transfer of property subject_to code sec_83 based on the facts represented by the taxpayers we rule that i taxpayers did not recognize income under code sec_83 as a result of the conversions ii the imposition of restrictions on the company b common_stock pursuant to the restriction agreements did not result in a transfer of substantially nonvested company b common_stock under code sec_83 except as specifically ruled on above no opinion is expressed as to the federal tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed as to the whether the transaction described above satisfies the requirements of code sec_368 in addition no opinion is expressed regarding federal tax consequences of the modifications described in the arci this ruling is directed only to the taxpayer who requested it code sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-141519-07 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely kenneth m griffin senior technician reviewer executive compensation branch office of the division counsel associate chief_counsel tax exempt government entities


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp 3-plr-118171-99 date date parent sub sub purchaser seller target date a date b date c date d e state x state y business z parent’s company official seller’s company official plr-118171-99 parent’s outside tax professional parent’s outside tax professional seller’s outside tax professional parent’s other authorized representatives this responds to your authorized representative’s letter dated date requesting on behalf of the taxpayers identified above an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election parent as common parent of the consolidated_group of which purchaser is a member and seller are requesting an extension to file a sec_338 election under sec_338 and sec_338 of the internal_revenue_code and sec_1_338_h_10_-1 of the income_tax regulations with respect to purchaser’s acquisition of the stock of target sometimes hereinafter referred to as the election effective on date a additional information was submitted in a letter dated date the material information is summarized below parent a state x corporation is the common parent of a consolidated_group that has a fiscal_year ending september and uses an accrual_method of accounting sub a wholly owned subsidiary of parent owns e percent percent or more of the outstanding_stock of sub sub owns all of the outstanding_stock of purchaser prior to and as of the date of the qualified_stock_purchase described below sub sub and purchaser were included in parent’s consolidated federal_income_tax return target was an s_corporation incorporated in state y prior to the qualified_stock_purchase seller owned all of the stock of target target’s tax_year was the calendar_year target was engaged primarily in business z purchaser acquired all of the outstanding_stock of target from seller for notes pursuant to a stock purchase agreement dated date b effective date a in a fully taxable transaction it is represented that parent and purchaser are not and were not at all times relevant related to seller within the meaning of sec_338 and purchaser’s acquisition of all of the outstanding_stock of target qualified as a qualified_stock_purchase as defined in sec_338 following the acquisition new target was included in parent’s consolidated_return purchaser and seller intended to file the election the election was due on date c but for various reasons it was not filed on date d which is after the due_date for the election parent seller parent’s company official seller’s company official parent’s outside tax professional parent’s outside tax professional and seller’s outside tax professional discovered that the election was not filed the period of plr-118171-99 limitations on assessment under sec_6501 has not expired for parent’s purchaser’s seller’s or target’s taxable_year in which the acquisition sale was consummated the taxable_year in which the election should have been filed or for any taxable_year s that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election under sec_338 and the acquisition is a qualified_stock_purchase sec_1_338-1 provides that a sec_338 election is an election to apply sec_338 to target sec_338 specifies the requirements for making a sec_338 election sec_338 defines a qualified_stock_purchase as any transaction or series of transactions in which stock meeting the requirements of sec_1504 of corporation is acquired by another corporation by purchase during the 12-month_acquisition_period sec_338 provides that the term purchase means any acquisition of stock but only if i the basis of the stock in the hands of the purchasing_corporation is not determined i in whole or in part by reference to the adjusted_basis of such stock in the hands of the person from whom acquired or ii under sec_1014 relating to property_acquired_from_a_decedent ii the stock is not acquired in an exchange to which sec_351 sec_354 sec_355 or sec_356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain_or_loss realized on the transaction and iii the stock is not acquired from a person the ownership of whose stock would under sec_318 other than paragraph thereof be attributed to the person acquiring such stock sec_338 permits the purchasing and selling corporations to elect jointly to treat the target_corporation as deemed to sell all of its assets and distribute the proceeds in complete_liquidation the sale of stock included in the qualified_stock_purchase generally is ignored a sec_338 election may be made for target only if it is a member of a selling_consolidated_group a member of a selling affiliated_group filing separate returns or an s_corporation sec_1_338_h_10_-1 gain_or_loss on the deemed sale is included in the consolidated_return of the selling group unless the target_corporation is a member of a selling affiliated_group filing separate returns or an s_corporation sec_1_338_h_10_-1 provides that a sec_338 election may be made for the target_corporation if the purchasing_corporation makes a qualified_stock_purchase of the target_corporation stock sec_1_338_h_10_-1 and provide that if a sec_338 election is made for the target_corporation it is irrevocable and a sec_338 election is deemed made for the target_corporation sec_1_338_h_10_-1 provides that a sec_338 election is jointly made by a purchaser and the selling_consolidated_group or the selling affiliate or the s_corporation shareholders on form_8023 in accordance with the instructions to the form the regulations further provide that the election must be made not later than the 15th day of the ninth month beginning after the month in which the acquisition_date occurs plr-118171-99 the instructions to form_8023 provide that a sec_338 election must be made jointly by the purchasing_corporation and the common parent of the selling_consolidated_group or selling affiliate or s_corporation shareholders the instructions provide that the form must be signed by a person authorized to act on behalf of each corporation and if made for an s_corporation it must be signed by each s_corporation shareholder who sells target stock in the qualified_stock_purchase the instructions further provide that the signatures dates and titles if applicable of those persons must be provided in a signature attachment and they provide specific details as to the preparation of the signature attachment and its attachment to form_8023 sec_1_1502-77 provides that the common parent for all purposes other than for several purposes not relevant here shall be the sole agent for each subsidiary in the group duly authorized to act in its own name in all matters relating to the tax_liability of the consolidated_return_year see also form_8023 and the instructions thereto under sec_301_9100-1 c the commissioner has discretion to 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 except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338_h_10_-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for parent and seller to file the election provided parent and seller show they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent seller parent's company official parent's outside tax professional and parent’s other authorized representatives explain the circumstances that resulted in the failure to timely file the valid election the information also establishes that parent’s company official was responsible for the election that parent and seller relied on parent’s company official plr-118171-99 to timely make the election and that the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that parent and seller have shown they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date_of_issuance of this letter for parent as the common parent of the consolidated_group of which purchaser is a member and seller to file the election with respect to the acquisition of target as described above the above extension of time is conditioned on the taxpayers' seller's parent's purchaser’s and target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made talking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made by the district director's office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers' liability is lower sec_301_9100-3 the above extension is also conditioned on i parent and seller signing the election and ii parent and seller treating the acquisition sale of target’s stock as a sec_338 transaction parent as agent for purchaser and seller must file the election in accordance with sec_1_338_h_10_-1 that is a new election on form_8023 must be executed on or after the date of this letter which grants an extension and filed in accordance with the instructions to the form see announcement 1998_2_irb_38 a copy of this letter should be attached to the election form parent and seller must file or amend their returns as applicable for the year in which the transaction was consummated to report the transaction as a sec_338 transaction and to attach thereto a copy of this letter and a copy of the election along with the information required with the election form if they already reported the transaction as a sec_338 transaction they must amend their returns to attach a copy of the election the information requested therewith and a copy of this letter pursuant to sec_1_338_h_10_-1 target’s s election is not terminated accordingly target is not required to file an s_short_year return ie a year that ended the day before the acquisition nor a one day short return as a non-affiliated c_corporation we express no opinion as to whether the acquisition sale of target’s stock qualifies as a qualified_stock_purchase under sec_338 whether the acquisition sale of target’s stock qualifies for sec_338 treatment or if sec_338 is applicable as to the amount and character of gain_or_loss if any recognized by target and thus by seller on target’s deemed asset sale plr-118171-99 in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the district_director s should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter is being sent to seller and to parent’s and seller's authorized representatives pursuant to the powers of attorney on file in this office sincerely yours assistant chief_counsel corporate by berrnita thigpen deputy assistant chief_counsel corporate


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 intl br1 plr-134998-05 date date legend company parent subsidiary country a state b date c date d date e date f amount g dear ---------------- ----------------------- ---------------------------------------------- ---------------------------------------------------------------------- --------------------- ------------ ------------------- ---------------------- ---------------------- ------------------ ------------------------------- this is in response to your letter dated date c as supplemented by letters dated date d and date e requesting a ruling on behalf of company under article limitation_on_benefits of the u s -netherlands income_tax treaty treaty that the term gross_income for purposes of the base erosion test in paragraph b includes u s -source dividends that are exempt from corporate_income_tax in the netherlands under a participation_exemption regime the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination company a netherlands holding_company is seeking the benefits of article dividends of the treaty with respect to dividends to be received from subsidiary a state b corporation and company’s u s subsidiary company is an indirect wholly plr-134998-05 owned subsidiary of parent a publicly traded country a company company represents that it will qualify for treaty benefits under the derivative_benefits_test contained in article of the treaty if the dividends to be received from subsidiary in the amount of amount g are included in gross_income for purposes of determining whether company satisfies the base erosion prong of that test in article b the issue arises because company’s shareholding in subsidiary qualifies for the participation_exemption regime in the netherlands under which dividends are exempt from corporate_income_tax company’s eligibility for the participation_exemption was confirmed in an advance transfer ruling settlement agreement between company and the netherlands tax authorities dated date f the derivative_benefits_test in article of the treaty generally entitles a resident of a contracting state to treaty benefits if the owner of the resident would have been entitled to the same benefit had the income in question flowed directly to that owner article provides as follows notwithstanding that a company that is a resident of a state may not be a qualified_person it shall be entitled to all the benefits of this convention otherwise accorded to residents of a state with respect to an item_of_income if it satisfies any other specified conditions for the obtaining of such benefits and a shares representing at least percent of the aggregate voting power and value and at least percent of any disproportionate class of shares of the company are owned directly or indirectly by seven or fewer persons who are equivalent beneficiaries and b less than percent of the company’s gross_income for the taxable_year in which the item_of_income arises is paid_or_accrued directly or indirectly to persons who are not equivalent beneficiaries in the form of payments that are deductible for the purposes of the taxes covered by this convention in the state of which the company is a resident but not including arm’s length payments in the ordinary course of business for services or tangible_property and payments in respect of financial obligations to a bank provided that where such a bank is not a resident of a state such payment is attributable to a permanent_establishment of that bank located in one of the states the term equivalent beneficiaries used in article is defined in article of the treaty and generally includes residents of each contracting state and residents of countries that are members of the european union or parties to the north american free trade agreement to qualify as an equivalent_beneficiary with respect plr-134998-05 to dividends interest royalties or branch_tax a resident of a third country must be entitled to a rate of withholding_tax under a treaty between the third country and the source country that is at least as low as the withholding_tax rate that would apply to such income under the treaty the memorandum of understanding mou that accompanied the date protocol amending article of the treaty defines the term gross_income for purposes of article paragraph xv of the mou provides it is understood that the term gross_income means the total revenues derived by a resident of a state from its principal operations less the direct costs of obtaining such revenues the treasury_department technical explanation of the protocol states that a company satisfies the base erosion test in article b if less than percent of its gross_income for the taxable_period is paid_or_accrued directly or indirectly to a person or persons who are not equivalent beneficiaries in the form of payments deductible for tax purposes in company’s state of residence this test is the same as the base erosion test in clause ii of subparagraph f of paragraph except that deductible payments made to equivalent beneficiaries rather than amounts paid to residents of a contracting state are not counted against a company for purposes of determining whether the company exceeded the percent limit the reference to subparagraph f of paragraph refers to an alternative safe_harbor under article known as ownership base erosion the technical explanation describes the base erosion test contained in article f ii as follows the base erosion prong of clause ii of subparagraph f is not satisfied with respect to a person if percent or more of the person’s gross_income for the taxable_year is paid_or_accrued to a person or persons who are not residents of either contracting state in the form of payments deductible for tax purposes in the payer’s state of residence for this purpose paragraph xv of the understanding states that the term gross_income means total revenues derived by a resident of a contracting state from its principal operations less the direct costs of obtaining such revenues in the case of the united_states the term gross_income has the same meaning as such term in sec_61 of the code and the regulations thereunder distributions are deductible payments however depreciation and amortization deductions which do not represent payments or accruals to to the extent they are deductible from the taxable base trust plr-134998-05 other persons are disregarded for this purpose deductible payments also do not include arm’s length payments in the ordinary course of business for services or tangible_property or with respect to financial obligations to banks that are residents of either contracting state or that have a permanent_establishment in either contracting state to which the payment is attributable the joint_committee on taxation explanation of the protocol contains an overview of netherlands tax law including a summary of the participation_exemption the companies income_tax act provides for a participation_exemption which is applicable to both domestic and foreign shareholdings corporate tax need not be paid on the profits generated by the participation the exemption allows for the avoidance of double_taxation when the profits of a subsidiary are distributed to its parent company a participation exists if the taxpayer holds at least five percent of the nominal paid-up capital of a company or holds less than five percent but ownership of the shares is necessary for the conduct of normal business or the acquisition of the shares serves a general interest all profits gained from shareholdings are exempt from taxation unless shares in a foreign_corporation are held as an investment or the foreign company in which the shares are held is not subject_to tax on its profits in the foreign_country a percent withholding_tax is imposed on dividends from corporations resident in the netherlands unless the participation_exemption applies dividends received from a qualifying subsidiary company are exempt from tax in the hands of the parent company similarly capital_gains realized on the disposition of shares of such a subsidiary company are exempt for purposes of article of the treaty paragraph xv of the mou sets forth the meaning of the term gross_income based on the representations made in this case we conclude that the dividends company expects to receive from subsidiary are part of the total revenues derived by company from its principal operations notwithstanding that the dividends are exempt from corporate_income_tax in the netherlands under a participation_exemption regime accordingly company should include the amount of the dividends in gross_income for purposes of applying the base erosion test under article b except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-134998-05 letter is being sent to company’s representative in accordance with the power_of_attorney on file with this office a copy of this sincerely elizabeth u karzon chief branch office of associate chief_counsel international cc -------------------- --------------------------------- ------------------------------------------- ----------------------------------------


2uvu628040 department of the treasury internal_revenue_service te_ge eo examinations fulton street room brooklyn ny taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax tax_exempt_and_government_entities_division et eo set y- uc ‘cl so certified mail - return receipt requested dear this is a final_determination regarding your exempt status under sec_501 of the internal_revenue_code irc recognition of your exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 is retroactively revoked to because it is determined that you have not established that you are observing the ‘conditions required for the continuation of an exempt status we previously provided you a report explaining the proposed revocation of your tax-exempt status at that time we informed you of your appeal rights by signing form_6018 consent to proposed action you indicated that you accept our determination to revoke your organization’s exempt status we have determined that you fail to qualify for exempt status under any other subsection of sec_501 20v628040 a you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for all years beginning we have secured form_1120 for years ended _ and you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter thank you for your cooperation sincerely marsha a ramirez director eo examinations department of the treasury internal_revenue_service n los angeles street ms los angeles ca tax_exempt_and_government_entities_division taxpayer_identification_number form tax_year ended person to contact id number contact numbers telephone fax dear taxpayers we have enclosed a copy of our draft report of examination explaining why we believe revocation of your exempt status under c of the internal_revenue_code is necessary please review the report form 886-a and the enclosed publications if you accept our findings please sign the enclosed form_6018 and return the form to our office within days if you do not accept our findings please contact me immediately to discuss the proposed adjustments you may also schedule a meeting with my manager to discuss the proposed adjustments thank you for your cooperation sincerely laura spencer revenue_agent enclosures form 886-a form_6018 publication publication 20ug28040 form 886a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service issue should org’s tax exemption under c of the internal_revenue_code be revoked because it has not met the requirements of c and revenue_procedure facts org was recognized as a tax exempt_organization under c of the code currently located in state its facilities include a large building and a smaller building in back with a basketball court between the buildings the large building consists mainly of a dance floor area with a stage and a kitchen area next to the dance floor the large building is used for all the organization’s activities and it is rented out for parties the smaller building is set up to play games for adults and children storage and planned to be used for office space it is also used for reported income per form_990 was as follows direct public support program service revenue membership dues assessments rental income total revenue income received from direct public support was donations from non-members and income from advertising program service revenue was income received from member events primarily from members rental income was income received from non- members for the rental of the organization’s facilities for non-member events and parties ie unrelated_business_income in support of the rental income received the organization provided rental agreements and contracts for each rental the contracts and agreements were all executed with non-members during the year therefore it was determined during the examination that all of the income received from the rental of the organization’s facilities was from non-members during the year for the examination of the tax periods ending years the organization did not file a form 990-t for the exam year for the rental income received from non-members ie unrelated_business_income a prior audit report issued during reported that forms 990-t were required to be filed but were not filed by the organization during the returns the be filed in any year which there is unrelated_business_income of dollar_figure or more during the current examination of the year examination forms 990-t were secured as delinquent audit report also advised the organization that a form 990-t must it was determined that the form 886-a cev department of the treasury - internal_revenue_service page -1- department of the treasury - internal_revenue_service form 886a name of taxpayer schedule no or exhibit year period ended explanation of items organization did not comply with the audit report and file a form 990-t for the unrelated_business_income received from rental income which exceeded dollar_figure however it is noted that due to the current examination the organization filed a form 990-t for the year which reported non-member income of dollar_figure and total gross_receipts of dollar_figure law internal_revenue_code sec_501 exempts from federal_income_tax clubs organized for pleasure recreation and other nonprofitable purposes substantially_all of the activities of which are for such purposes and no part of the net_earnings of which inures to the benefit of any private shareholder income_tax regulation c -1 a states the exemption provided by sec_501 for organizations described in sec_501 applies only to clubs which are organized and operated exclusively for pleasure recreation and other nonprofitable purposes but does not apply to any club if any part of its net_earnings inures to the benefit of any private shareholder in general this exemption extends to social and recreation clubs which are supported solely by membership fees dues and assessments however a club otherwise entitled to exemption will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities income_tax regulation c -1 b also states a club which engages in business such as making its social and recreational facilities available to the general_public or by selling real_estate timber or other products is not organized and operated exclusively for pleasure recreation and other nonprofitable purposes and is not exempt under sec_501 solicitation by advertisement or otherwise for public patronage of its facilities is prima facie evidence that the club is engaging in business and is not being operated exclusively for pleasure recreation or social purposes revproc_71_17 sets forth guidelines for determining the effect gross_receipts derived from use of a social club’s facilities by the general_public have on the club’s exemption from federal_income_tax under sec_501 of the internal_revenue_code of the term general_public as used in the revenue_procedure means persons other than members of a club or their dependents or guests revenue_procedure states that where a club makes its facilities available to the general_public to a substantial degree the club is not operated exclusively for pleasure recreation or other nonprofitable purposes revproc_71_17 provides that a significant factor reflecting the existence of a nonexempt purpose is the amount of gross_receipts derived from use of club facilities by the general_public make up more that of total gross_receipts will demonstrate a nonexempt purpose it provides that gross_receipts in excess of dollar_figure and which form 886-acev department of the treasury - internal_revenue_service page -2- 2uvu628040 form 886a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service public law passed in later changed the allowable portion of income received from the general_public to not more that revproc_71_17 defines total gross_receipts as receipts from normal and usual activities of the club including charges admissions membership fees dues and assessments excluded for this purpose are a initiation fees and capital contributions interest dividends rents and similar receipts and c unusual amounts of income such as amounts derived from nonrecurring sales of club assets internal_revenue_code sec_512 provides in pertinent part that the unrelated_business_taxable_income of an organization described in sec_501 means the gross_income excluding any exempt_function_income less deductions allowed by chapter of the code which are directly connected with the production of the gross_income excluding exempt_function_income internal_revenue_code sec_512 of the code defines the term exempt_function_income for purposes of subparagraph a as the gross_receipts from dues fees charges or similar amounts paid_by members of the organization as consideration for providing such members or their dependents or guest goods facilities or services in furtherance of the purposes constituting the basis for the exemption of the organization to which such income is paid revrul_58_589 sets forth criteria for determining whether an organization qualifies for exemption from tax under sec_501 including a discussion of income from non-member sources used to reduce the cost of providing services to members revrul_60_324 ruled that a c organization may lose its exemption if makes its club facilities available to the general_public on a regular recurring basis since it may no longer be considered to be organized and operated exclusively for its exempt_purpose it revrul_69_220 provided that s social_club that receives a substantial portion of its income from the rental of property and uses such income to defray operating_expenses and to improve and expand its facilities is no exempt under sec_501 government’s position based on the examination org has exceeded the threshold of gross_receipts allowed from non-members during the year per revproc_71_17 determined as follows direct public support program service revenue membership dues rental income dollar_figure big_number dollar_figure dollar_figure dollar_figure form 886-a rev department of the treasury - internal_revenue_service page -3- form 886a name of taxpayer explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service total gross_receipts per revproc_71_17 total non-member gross_receipts per revproc_71_17 dollar_figure dollar_figure percentage of non-member gross_receipts dollar_figure dollar_figure dollar_figure dollar_figure in addition the organization filed form 990-t for the year subsequent to the year under examination the form_990 for year shows that non-member income from rental of its facilities dollar_figure i sec_42 of the organization’s total gross_receipts dollar_figure therefore based on the examination org is not operated substantially for pleasure recreation and other nonprofitable purpose because it is engaged in the business of making its facilities available to the general_public org is not entitled to tax exemption under c of the code and its tax-exempt status should be revoked taxpayer’s position the taxpayer singed the form_6018 consent to proposed action - sec_7428 to agree the revocation of its exemption on date the taxpayer filed returns and paid corporation income taxes for years conclusion org is not entitled to tax exemption under c of the code and its tax-exempt status should be revoked form 886-a rev department of the treasury - internal_revenue_service page -4-


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom p si 1-cor-110562-00 date date number info release date legend x we are responding to your letter regarding x and the filing of form_8832 entity classification election we are furnishing the following general information relating to your request it is unclear from your letter whether or not you wish to elect to be treated as a disregarded_entity or as an association_taxable_as_a_corporation in general absent an election otherwise if an llc has one member it will be disregarded as an entity separate from its owner for federal tax purposes if an llc has more than one owner it will be treated as a partnership for federal tax purposes these provisions are refered to as default classifications an eligible_entity can change its default classification for federal tax purposes by submitting a properly completed form_8832 this election will be effective on the date specified on the form where the date specified is no more than days prior to the date it was filed or more than months after the form is filed regulation sec_301_9100-3 provides that the commissioner may grant an extension of time to make a regulatory election a private_letter_ruling is necessary to obtain relief under sec_301_9100-3 the procedures for requesting a private_letter_ruling are set out in revproc_2000_1 copy enclosed in addition revproc_2000_1 requires taxpayers to submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their last-filed tax_return qualify for a reduced user_fee in the amount of dollar_figure if you are eligible to use the reduced fee provision you must include the statement described in b b of appendix a with your request cor-110562-00 please review appendix b for a sample format for requesting a private_letter_ruling if you decide to submit a formal request for a private_letter_ruling please explain why your form_8832 was filed late provide documents supporting your actions as reasonable and in good_faith and include the proper user_fee please refer your request to our office by adding the following to the address attn cc dom corp t p o box ben franklin station washington dc direct to cc dom p si br room please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful if you have any further questions please contact horace howells at sincerely yours s dianna k miosi dianna k miosi chief branch office of the assistant chief_counsel passthroughs and special industries enclosures revproc_2000_1


number release date id office uilc cca_2011012709442650 ------------------------- from -------------------- sent thursday date am to ------------------------- cc subject guaranteeing a loan this is in response to your voice message with respect to the issue concerning signing personally as guarantors of a note congress stated in the erisa conference_report that a prohibited_transaction generally will occur if a loan to a plan is guaranteed by a party-in-interest disqualified_person unless it comes within the special exemption for employee_stock_ownership_plans h_r rep no 93d cong 2d sess pincite consequently a guarantee of a plan’s indebtedness by a fiduciary or other disqualified_person is an extension of credit to the plan in violation of sec_4975 of the code see the attached dol advisory opinion 90-33a date and dol advisory opinion 2009-03a date


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jul j significant index number in re request for waiver of the minimum_funding_standard for e i n company plan dear this letter constitutes notice that waivers of the required minimum_funding contribution for the plan for the plan years ending date and date have been approved subject_to the conditions listed below the waivers are for the remaining unpaid required minimum contributions for the above listed plan years all waiver amortization payments representing these waivers still must be paid as stated in sec_412 of the code within one hundred and twenty days of the receipt of this ruling letter company will provide collateral acceptable to the pension_benefit_guaranty_corporation pbgc for the full amount of the funding waivers for the and plan years starting with the quarterly contribution due on date the company makes the required quarterly contributions to the plan in a timely fashion while the plan is subject_to a waiver of the minimum_funding_standard for this purpose the total amount of each quarterly contribution will be determined in accordance with section d and section e of the code and can be comprised of several installments made prior to the respective due_date of the quarterly contribution under sec_412 of the code the company is restricted from amending the plan to increase benefits and or plan liabilities while any portion of the waived_funding_deficiency remains unamortized except to any extent otherwise permitted under code sec_412 in which case company copies pbgc on any correspondence with the irs regarding notification of or application_for such an exception the company makes contributions to the plan in an amount sufficient to meet the minimum_funding requirements for the plan for the plan years ending date through by date through respectively the company provides proof of payment of all contributions described above within five business days after each payment thereof to the service and pbgc using the fax numbers or addresses below irs- ep classification fax pension_benefit_guaranty_corporation fax if any one of these conditions is not satisfied the waiver is retroactively null and void this conditional waiver has been granted in accordance with sec_412 c of the internal_revenue_code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the company is a hospital that serves a semi-rural community it has suffered a temporary substantial business hardship due increased numbers of underinsured or uninsured patients and a decline in reimbursements from government healthcare programs and federal and state government grants it has also made significant investments in new equipment and personnel in order to upgrade its current facilities or provide additional services to the community for which it serves these investments temporarily reduced company's net_income and cash flows the company has demonstrated that it has executed a strategy to increase revenues and reduce expenses to improve its financial health its financial projections show that it will likely generate increasing profits in future years in addition the company believes and its financial projections illustrate that its revenues and cash flows will improve adequately to satisfy the plan's funding obligation in the near future your attention is called to sec_412 of the code and sec_302 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived_funding_deficiency remains unamortized please note that any amendment to a profit sharing plan or any other retirement plans covering employees covered by this plan maintained by the company to increase or any_action by the company or its authorized agents or designees such as a board_of directors or board_of trustees that has the effect of increasing the liabilities of those plans would be considered an amendment for purposes of sec_412 c of the code and sec_302 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan by the company covering employees covered by this plan would be considered an amendment for purposes of sec_412 of the code and sec_302 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan years ending date and date the date of this letter should be entered on schedule sb actuarial information for this reason we suggest that you furnish a copy of this letter to the enrolled_actuary who is responsible for the completion of the schedule sb we have sent a copy of this letter to the manager ep classification in baltimore maryland and to the manager ep compliance unit in chicago illinois if you require further assistance in this matter please contact at - sincerely william b hulteng manager employee_plans technical cc


internal_revenue_service number release date index number ---------------------------- ------------------------- ------------------------------------- ----------------------- -------------------------- employer president date date date dear ------------- x 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 tege eb ec plr-114930-07 date date --------------------------------------------- ------------------------- --------------------- -------------------------- ----------------------- ----------- this is in response to your letter of date in which you request consent to revoke an election that you made under sec_83 of the internal_revenue_code employer granted you x shares of restricted_stock you represent that you were told that at a board_of directors meeting on date on date you purchased x shares of restricted_stock on the same day you filed an election under sec_83 with the internal_revenue_service center where you file your individual_income_tax_return with respect to the restricted_stock on date president learned that the board_of directors had authorized the grant of incentive stock_options isos rather than restricted_stock and you were notified of the error the next day thus the restricted award was not authorized by the board_of directors you subsequently returned the stock to employer on date you sent a letter to this office requesting consent to revoke the sec_83 election plr-114930-07 sec_83 of the code provides that if in_connection_with_the_performance_of_services property is transferred to any person other than the person for whom such services are performed the fair_market_value of the property less the amount_paid for the property shall be included in the gross_income of the recipient in the first taxable_year in which the recipient s interest in the property is not subject_to a substantial_risk_of_forfeiture under sec_83 of the code any person who performs services with respect to which property is transferred may elect to include in his or her gross_income for the taxable_year in which the property is transferred the excess of the fair_market_value of the property over the amount_paid an election under sec_83 must be filed with the internal_revenue_service not later than days after the date the property is transferred sec_83 of the code and sec_1_83-2 of the income_tax regulations provides that an election under sec_83 may not be revoked without the consent of the commissioner of internal revenue the regulations also provide that such consent will only be granted where the person filing the election is under a mistake of fact as to the underlying transaction and must be requested within days of the date on which the mistake of fact first became known to the person who made the election in any event neither a mistake as to the value or decline in the value of the property for which an election was made nor the failure of anyone to perform an act that was contemplated at the time of transfer of the property constitute a mistake of fact for this purpose revproc_2006_31 2006_27_irb_32 provides guidance on revoking an election under sec_83 of the code sec_5 example describes a situation involving a mistake of fact as to the underlying transaction in example b begins employment with company o under an employment contract that provides b will receive substantially nonvested company o class a common_stock instead substantially nonvested company o class b common_stock is transferred to b b made a valid sec_83 election with respect to the transferred stock b subsequently discovers that company o ha sec_2 classes of common_stock and that company o transferred class b common_stock instead of class a common_stock b timely requests consent to revoke the sec_83 election consent to revoke b’s sec_83 election is granted because the stock b received was transferred under a mistake of fact as to the underlying transaction you indicate that the amistake of fact was that you believed that the board_of directors had authorized the grant of restricted_stock when in fact they had authorized the grant of isos you have requested consent to revoke your election within days of the date you first became aware of the mistake of fact as to the underlying plr-114930-07 transaction the aunderlying transaction being your employer s transfer of the restricted_stock to you accordingly because you were under a mistake of fact as to the underlying transaction and you requested consent to revoke your sec_83 election within days of when the mistake of fact first became known to you consent to revoke your sec_83 election is granted except as specifically ruled above no opinion is expressed as to the federal tax consequences of the transaction described above under any other provision of the code the ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to your income_tax return for sincerely yours ________________________________ cate livingston fernandez chief executive compensation branch office of division counsel associate chief_counsel tax exempt and government entities