department of the treasury internal_revenue_service washington d c government entities bivision’ number release date date date contact person identification_number contact number employer_identification_number form required to be filed tax years uniform issue list dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a etter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final because you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions te you under code sec_170 you must file federal_income_tax retums on the form and for the years listed above within days of this letter unless you request an extension of time to file file the retums in accordance with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice action in accordance with cade sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you agree with our deletions you do not need te take any further if you have any questions about this letter please contact the person whase name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you rave any questions about your sincerely robert choi director exernpt organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c contact person dentification number contact number fax number employer_identification_number xrkx tax exempt and government entities owvision date xxxxk xxkxk xxaxk uniform issue list d legend a xxxxx b xxxkx xxkxx xxxxx xxkxk xxxxxx xxxxx xxxxx xxxxx e go ho xxxxx b xxx g xxkxx t xxxkx xxkxx ear we have considered your application_for recognition of exemption from federal_income_tax under intemal revenue code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_804 the basis for our conclusion is set forth below you are a nonprofit organization incorporated in a on your stated purpose is to provide funding for the education of students in the medical field you have not adopted bylaws you state that you have adopted a conflict of interest policy you have a three person board_of directors your current directors are b c and d gis the mother of b in order to achieve your stated purpose you plan to maintain a fund that will be supplied by money that you receive from the sale of e vitamins and health products and medical all three directors receive a salary of p equipment for use by emt's physicians and hospitals you also state that you will raise funds through donations grants from private organizations and government entities and entrance fees from raffles sporting events and other events that you may hold the majority of your time however will be dedicated to the sale of the products listed above you obtain your inventory from f at cost f owns the copyrights to two medical programs contained in some of the products that you sell but does not charge you any fees associated with the use or sale of its intellectual_property b same products that you will sell but f targets physicians and hospitals whereas you target individual consumers of the gross_profits after paying e cost for the product will go to your scholarship fund the other will go to pay your operating_expenses ail proceeds will be deposited in your checking account of any money that you receive other than from the sale_of_goods will go towards the scholarship grants is the president and founder of f f sells the the number and amount of your scholarship grants will be determined based on the amount of available funds as well as the current cost of obtaining a 4-year bachelor's degree from g ‘since your grants are school specific the grant money will be prepaid annually and held by g under the supervision of the coordinator of scholarships and federal work study for g each scholarship grant will be awarded by your selection committee you plan for the membership of this committee to include the coordinator of scholarships and federal work study for g h a clergyman two teachers and d eligible recipients must have a b- or better gpa from their junior and senior years in high school no criminal record good moral character an interest in the field of medicine and insufficient finances to be able to afford college recipients must also complete a grant application the selection committee evaluates applicants and makes selections based on high school grades letters of recommendation interviews and an essay by the applicant the grant will be supervised by the coordinator of scholarships and federal work study for g and monthly reports will be made to you continued receipt of grant money is conditioned on the maintenance of a b average non-participation in campus protests and random drug screening if necessary and part of school policy failure of any racipient ta live up to these conditions will result in a warning followed by possible termination of the grant money if the failure persists seotion c of the code provides for the exemption from federal_income_tax of organizations which are both organized and operated exclusively for charitable purposes and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual section big_number o -1 of the income_tax regulations provides that in order to qualify for exemption under sec_507 an organization must be both organized and operated exclusively for one or more exempt purposes an organization that fails to meet either the organizational or operational_test is not exempt sec_1 -1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of the exempt purposes specified in sec_507 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1 -1 e provides that an organization may meet the requirements of sec_501 although it operates a trade_or_business as a substantial part of its activities if the operation of such trade_or_business is in furtherance of the organization’s exempt_purpose and if the organization is not organized and operated for the primary purpose of carrying on an unrelated_trade_or_business as defined in sec_513 of the code sec_513 of the code defines unrelated_trade_or_business as any trade_or_business the condust of which is not substantially related aside from the need of the organization for income or funds or the use it makes of the profits derived to the exercise or performance by the organization of the charitable purposes constituting the basis for its exemption sec_1_513-1 of the regulations provides that a trade_or_business is related to exempt purposes where the conduct of the business activities has a causal relationship to the achievement of exempt purposes other than through the production_of_income and it is substantially related for purposes of sec_613 only if the causal relationship is a substantial one thus for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes where the production or distrioution of the goods or the performance of the services does not contribute importantly to the accomplishment of the exempt purposes of an organization the income from the sale_of_goods or the performance of the services does not derive from the conduct of related trade_or_business whether activities productive of gross_income contribute importantly to the accomplishment of any purpose for which an organization is granted exemption depends in each case upon the facts and circumstances involved sec_4943 of the code imposes a tax on the excess_business_holdings of any private_foundation in a business_enterprise in rev_rul 1954_2_cb_127 the intemal revenue service held that a corporation organized and operated for the primary purpose of operating and maintaining a purchasing agency for the benefit of its otherwise unrelated tax exempt members was engaged in business activities that would be unrelated activities if carried on by any one of the tax-exempt organizations served and therefore was not entitled to exemption under the predecessor to sec_501 rev_rul was based upon the ruling in hospital bureau of standards supplies inc case that involved evaluation and purchase of necessary hospital supplies by an organization for hospitals which was subsequently lost by the government in the court of claims 158_fsupp_560 ct_cl although the government did not apply for a writ of certiorari the regulations under sec_502 of the code were subsequently amended as a result of that case in order to make it clear that a business organization could nat be exempt if it was used by unrelated exempt_organizations and was operated for the purpose of engaging in activities that would amount to the conduct of unrelated_trade_or_business if carried on by the exempt_organizations a in revrul_69_177 1989_1_cb_150 an organization that manufactured and so d wood and metal products was wholly owned by a tax-exempt college one of the primary purposes of the organization was to employ the students of the college to enable them to continue their education a majority of the organization's employees were students of the college however student employment was not related to the curriculum of the college the organization turned over the profits from its business to the college the ruling points out that although granting scholarships to enable needy students to obtain an education may be a charitable activity if an ‘organization engages in trade_or_business to obtain funds for scholarship purposes itis not exempt merely because the profits are used for scholarships in rey rul 197_1_cb_223 an organization was formed by a church to promote and provide financial support for the charitable programs of the church through the performance of certain printing functions and the production_of_income for church use it sought to accomplish these objectives these objectives by printing religious materials for the church but also derived substantial profits from the operation of a commercial printing business the publication functions performed for the church accounted for approximately percent of the overall publishing activities of the organization all of its profits were derived from the commercial printing business all of the net_income was paid to the church the ruling holds that although the organization may be organized and operated exclusively for charitable purposes by virtue of the fact that the beneficial use of all of its assets was effectively dedicates to exclusively charitable objects its only basis for qualifying in that respect apart from the relatively insignificant amount of printing performed for the church was that all of its profits were required to be paid to the church since the organization had no ather significant charitable activity and its principal income producing activity was the conduct_of_a_trade_or_business the service held that the organization was not exempt under sec_501 c of the code ‘the basic principal to be derived from the above discussion is that organizations performing ordinary commercial services to raise funds for exempt_organizations or scholarship funds are not performing a charitable function and are not themselves exempt under sec_501 the income derived from such activities is not income related to a charitable purpose within the meaning of sec_513 ‘your primary activity is the sale of e vitamins and health products and medical equipment for use by emt's physicians and hospitals you have indicated that f sells the same products that you will sell but that e's target market differs somewhat from yours f is a for-profit business engaged in commercial activity in this way you are similar to the organizations described in rey rul and revrul_73_164 because your activities are commercial in nature and not substantially related to any exempt_purpose the fact that g of the profits from these commercial activities are used for a scholarship fund does not change this analysis furthermore the sale of these products will consume between and hours per day thus like the organization described in revrul_73_164 your principal income producing activity is the business activity of selling certain medical products and your fundraising through donations grants from private organizations and government entities and entrance fees from raffles sporting events and other events that you may hold is not significant both of the organizations described in rev ruls and were denied exempt status under sec_501 of the code you are similar to these organizations in that almost all of your profits from unrelated_trade_or_business activities are to be used for charitable purposes accordingly we conclude that you are not organized and operated for charitable purposes within the meaning of sec_501 c of the code contributions to you are not deductible under sec_170 of the code you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this fetter we will consider your statement and decide if the information affects aur determination ‘your protest statement should be accompanied by the following declaration under penatties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains aif the relevant facts and such facts are true correct and complete ‘you also have a right to request a conference to discuss your protest made when you file your protest statement individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper pawer of attomey form_2848 power of atlomey and declaration of representative if you have not already done so and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications for more information about representation see publication practice_before_the_irs an attomey certified_public_accountant or an this request should be if you if you do not file a protest within days you will not ba able to file a suit for declaratory_judgment in court because the intemal revenue service irs will consider the failure to protest as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not bs issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization invoived has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we da not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax retums and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service constitution ave n w washington dc if you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert choi director exempt_organizations rulings agreements


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date date date uil contact person identification_number telephone number employer_identification_number o g - o - n t dear this is in response to your letter dated date in which you requested certain rulings with respect to lr c sec_4943 background you are a non-profit organization described in sec_501 and classified as a private_foundation under sec_509 you were founded on date when you were initially funded with shares of stock in company at the time of this transfer your shares represented over percent of the shares in company these shares were transferred to you from trust and represent your only assets your founders for whom you are named and who are also two of your directors are the trustees beneficiaries and settlors of trust throughout the time that you have owned shares in company these disqualified persons have together held more than percent of the shares of company over the initial five years that you owned these shares you divested yourself of certain shares in order to fund your charitable programs at the end of those five years you owned over x percent of the shares in company at this time the disqualified persons listed above continued to hold over percent of the shares in company shortly after the end of your initial five years your founders attempted to take company private in the process of purchasing the other by buying out shareholders of company other than you shares another company stepped in to merge with company and talks regarding the details of this merger as well as the financing for such a buyout took several months during this time the price of company’s stock was highly volatile and all of your directors had inside information on the merger and were advised that they could not sell shares in company held by you without risking sec sanctions at the end of the merger you still held over x percent of the new company and your founders still held over thirty-five percent of shares in that company after merger talks had begun and after the end of the tax_year in which the initial five year holding_period concluded you discovered that you had excess_business_holdings you propose to correct your excess_business_holdings by donating the number of shares necessary to bring your portion of the shares to less than two percent of the overall shares to public_charities exempt from tax and recognized as described in sec_501 one of the proposed donees of your shares is charity one of your founders serves as one of sixteen directors of charity while the other founder serves as one of twelve advisory board members for charity also one of your advisory board members serves as a non-voting secretary for the board_of charity charity provides scholarships to students who have attended a state public school for the four years immediately prior to high school graduation who attain a cumulative gpa or or higher and who are eligible for federal financial aid and demonstrate need your shares that are given to charity would go toward providing for a scholarship fund for a student that not only met the criteria above but who also meet the criteria for deferred action status as used by the secretary of homeland security in her date memorandum regarding the exercise of prosecutorial discretion with respect to individuals who came to the united_states as children these criteria require that the applicant not currently have legal status in the united_states have arrived in the united_states before they attained sixteen years of age had five years of continuous residency in the united_states prior to date were present in the united_states on date are currently in school have graduated from high school have obtained a general equivalence degree or are honorable discharged veterans of the coast guard or armed_forces_of_the_united_states have no felony convictions and have not attained thirty years of age the board_of charity will exercise ultimate control_over which applicant meeting those criteria is selected for the scholarship and it will have ultimate control_over the sell or investment of the shares donated to it ruling requested contributions to unrelated public_charities who are recognized as exempt under sec_501 of the number of shares sufficient to bring your remaining shares to two percent or lower ownership_interest will render your retained shares permitted holdings under sec_4943 law sec_501 provides that organizations may be exempted from tax if they are organized _ and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_507 provides that a substantial_contributor means any person who contributed or bequeathed an aggregate amount of more than dollar_figure to the private_foundation if such amount is more than two percent of the total contributions and bequests received by the foundation sec_4943 defines excess_business_holdings as the amount of stock or other interest in the enterprise which the foundation would have to dispose_of to a person other than a disqualified_person in order for the remaining holdings of the foundation in such enterprise to be permitted holdings r c sec_4943 defines permitted holdings as twenty percent of the voting_stock of any corporation reduced by the percentage of stock owned by ail disqualified persons sec_4943 provides that if i the private_foundation and all disqualified persons together do not own more than percent of the voting_stock of an incorporated business_enterprise and ii it is established to the satisfaction of the secretary that effective_control of the corporation is in one or more persons who are not disqualified persons with respect to the foundation then subparagraph a shall be applied by substituting percent for percent r c sec_4943 provides that a private_foundation shall not be treated as having excess_business_holdings in any corporation in which it owns not more than two percent of the voting_stock and not more than two percent in value of all outstanding shares of all classes of stock sec_4946 provides that a disqualified_person with respect to a private_foundation includes a substantial_contributor as defined under sec_507 a foundation director trustee or officer and any spouse ancestor child grandchild great grandchild and any spouse of a child grandchild or great grandchild of that contributor director or officer sec_53_4943-2 states that if a private_foundation disposes of an interest in a business but imposes any material restrictions or conditions that prevent the transferee from freely and effectively using or disposing of the transferred interest then the transferor foundation will be treated as owning such interest until all such restrictions or conditions are eliminated sec_53_4943-2 provides that except as otherwise provided in sec_4943 and the permitted holdings of any private_foundation in an incorporated business_enterprise are a percent of the voting_stock in such enterprise reduced but not below zero by b the percentage of voting_stock in such enterprise actually or constructively owned by all disqualified persons sec_53_4943-3 provides that except as provided in sec_4943 paragraph b of this section shall be applied by substituting percent for percent if a the private_foundation and all disqualified persons together do not hold actually or constructively more than percent of the voting_stock in the business_enterprise and b the foundation establishes to the satisfaction of the commissioner that effective_control as defined in paragraph b ii of this section of the business_enterprise is in one or more persons other than the foundation itself who are not disqualified persons analysis as a private_foundation under sec_4943 you are subject_to an excise_tax on your excess business hoidings under sec_4943 your permitted holdings in corporation are limited to percent of the voting_stock less the percentage of voting_stock owned by all disqualified persons under sec_4943 and sec_53_4943-3 your permitted levels of voting_stock in company may be raised to percent if you demonstrate that effective_control of the business_enterprise is in one or more persons other than the foundation itself who are not disqualified persons under sec_4946 a disqualified_person means with respect to a private_foundation a person who is a substantial_contributor to the foundation a foundation_manager a member_of_the_family of any individual described in above sec_507 defines a substantial_contributor as any person who contributed or bequeathed an aggregated amount of more than dollar_figure to a private_foundation if such amount is more than two percent of the total contributions and bequests received by the foundation before the close of the taxable_year of the foundation in which the contribution or bequest is received by the foundation from such person here you have stated that the others owning shares in company are disqualified persons since they are foundation managers substantial contributors and family members of the above listed individuals you currently hold over x percent of the stock in company while you have represented that disqualified persons as to you own over percent of the stocks of company additionally you have represented that disqualified persons as to you effectively control company these facts mean that you have excess_business_holdings under sec_4943 sec_4943 provides however that if a private_foundation holds less than two percent of the voting_stock and less than two percent in value of all of the outstanding shares then these shares will be considered de_minimis thus would not be considered excess_business_holdings regardless of the overall percentage held by the private_foundation and its disqualified persons you propose to dispose_of your holdings in company to the extent that your holdings exceed two percent of the voting_stock and the overall value of all stocks issued you will dispose_of these stocks to organizations described in sec_501 and classified as public_charities some of your stocks will go to charity these stocks will be used to create a fund to provide scholarships to individuals who meet specific criteria beyond those required for charity’s usual scholarship additionally one of your directors is also a director of charity while a second of your directors is on the advisory board for charity sec_53_4943-2 states however that if a private_foundation disposes of an interest in a business but imposes any material restrictions or conditions that prevent the transferee from freely and effectively using or disposing of the transferred interest then the transferor foundation will be treated as owning such interest until all such restrictions or conditions are eliminated the additional criteria you place on the scholarships issued by charity through your fund and the minority status of your directors on the board_of charity do not constitute material restrictions preventing charity from freely and effectively using or disposing of the transferred interest while the regulations do not provide further information as to what would constitute restrictions preventing the free and effective use or disposition of transferred interest the restrictions you have placed on the separate fund do not involve the use or disposition of the transferred interest charity can choose to sell those interests and reinvest or it can choose to hold that interest and pay the scholarships from dividends of such interest your additional criteria also do not limit the organization from using such funds to further its charitable purpose of providing funds for education additionally your directors that have managerial and advisory powers over charity do not hold enough of such power to independently or together determine the disposition of such interests as such your interest transferred to charity will be considered as transferred for purposes of sec_53_4943-2 since the amounts transferred will be considered to no longer belong to you you will have less than two percent of the shares in company so long as you transfer a sufficient amount your remaining shares will constitute permitted holdings as long as they remain below two percent of the voting_stock and two percent in value of all outstanding shares ruling contributions to unrelated public_charities who are recognized as exempt under sec_501 c of the number of shares sufficient to bring your remaining shares to two percent or lower ownership_interest will render your retained shares permitted holdings under sec_4943 this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described specifically this ruling does not address any private benefit concerns that may be present with your operations because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records 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 in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely ronald shoemaker manager exempt_organizations technical group enclosure notice


t c memo united_states tax_court brian e harriss petitioner v commissioner of internal revenue respondent docket nos filed date brian e harriss pro_se randall b childs and caroline r krivacka for respondent memorandum findings_of_fact and opinion vasquez judge in these consolidated cases respondent determined deficiencies additions to tax and penalties with respect to petitioner’ sec_2010 and sec_2011 federal_income_tax as follows additions to tax penalty year deficiency sec_6651 sec_6651 sec_6662 dollar_figure big_number --- dollar_figure dollar_figure dollar_figure big_number --- after concessions the issues for decision are whether compensation petitioner received from his employers is includible in income for the and tax years whether a distribution from petitioner’s individual_retirement_account ira is includible in income for the tax_year whether petitioner is liable for a additional tax on the ira distribution under sec_72 for the tax_year whether petitioner is liable for an addition_to_tax under sec_6651 for the tax_year whether petitioner is liable for an addition_to_tax under sec_6651 for the tax_year whether petitioner is liable for accuracy-related_penalties under sec_6662 for the and tax years and whether the court should impose a penalty on petitioner under sec_6673 before trial respondent conceded that he had incorrectly included a dollar_figure dividend in petitioner’ sec_2010 income and a dollar_figure dividend in petitioner’ sec_2011 income unless otherwise indicated all section references are to the internal_revenue_code code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in alaska when he timely filed the petitions petitioner is a licensed engineer with bachelor’s and master’s degrees from the georgia institute of technology during petitioner worked as an engineer for bergaila associates inc bergaila bergaila paid petitioner dollar_figure for the services he performed in that same year petitioner withdrew dollar_figure from an ira that he held at td ameritrade petitioner was below age in at some point in not established by the record petitioner resigned from bergaila and began working as an engineer for ch2m hill alaska inc ch2m ch2m paid petitioner a salary of dollar_figure in and dollar_figure in on date petitioner filed form sec_1040 u s individual_income_tax_return for the and tax years via certified mail in a single envelope addressed to respondent on hi sec_2010 return he reported zero wages petitioner also reported a taxable_amount of zero with respect to the above-described ira distribution petitioner attached to hi sec_2010 return three forms substitute for form_w-2 wage and tax statement or form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc on his forms petitioner claimed that bergaila had paid him zero wages and withheld dollar_figure in federal income social_security and medicare taxes claimed that ch2m had paid him zero wages and withheld dollar_figure in federal income social_security and medicare taxes and reported a distribution of dollar_figure from his ira but claimed the taxable_amount was zero petitioner also reported zero wages on hi sec_2011 return he attached to hi sec_2011 return one form_4852 in which he claimed that ch2m had paid him zero wages and withheld dollar_figure in federal income social_security and medicare taxes in a cover letter accompanying his returns petitioner explained that he was disputing information returns prepared by bergaila ch2m and td ameritrade because our non-federally-connected work or business arrangement is an entirely private agreement not involving the exercise of any federal privilege respondent selected petitioner’ sec_2010 and sec_2011 returns for examination following the examination respondent sent petitioner a timely notice_of_deficiency for each tax_year the notice for included petitioner’s unreported wages and ira distribution in income determined a additional tax on petitioner’s premature ira distribution and determined an addition_to_tax under sec_6651 and an accuracy-related_penalty under sec_6662 the notice for included petitioner’s unreported wages in income and determined an addition_to_tax under sec_6651 and an accuracy-related_penalty under sec_6662 i preliminary matters opinion petitioner argues that respondent bears the burden_of_proof with respect to his unreported income for both tax years for the reasons below we disagree generally the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of proving that the commissioner’s determinations are erroneous see rule a 290_us_111 under sec_6201 if a taxpayer asserts a reasonable dispute with respect to an item_of_income reported on an information_return filed by a third party and the taxpayer meets certain other requirements the commissioner bears the burden of producing reasonable and probative evidence petitioner has not shown entitlement to any shift in the burden_of_proof to respondent pursuant to sec_7491 see 116_tc_438 in addition to the information_return concerning the deficiency attributable to the income item petitioner argues that we should set_aside the notices of deficiency because respondent failed to satisfy the requirements of sec_6201 when he relied only on third-party information returns however sec_6201 is not applicable here because petitioner’s frivolous position that his wages are not taxable does not constitute a reasonable dispute with respect to an item_of_income see eg nelson v commissioner tcmemo_2012_232 aff’d 540_fedappx_924 11th cir petitioner also argues that the presumption of correctness does not apply to the notices of deficiency because respondent failed to establish an evidentiary foundation linking him to income-producing activity in the court_of_appeals for the ninth circuit to which an appeal of these cases presumably would lie absent a stipulation to the contrary see sec_7482 the presumption of correctness does not attach in cases involving unreported income unless the commissioner first establishes an evidentiary foundation linking the taxpayer to the alleged income-producing activity see 596_f2d_358 9th cir rev’g 67_tc_672 the requisite evidentiary foundation is minimal and need not include direct evidence see banister v commissioner tcmemo_2008_201 aff’d 418_fedappx_637 9th cir once the commissioner produces evidence linking the taxpayer to an income-producing activity the burden shifts to the taxpayer to rebut the presumption of correctness of the commissioner’s deficiency determination by establishing by a preponderance_of_the_evidence that the deficiency determination is arbitrary or erroneous 92_tc_661 see also 181_f3d_1002 9th cir aff’g tcmemo_1997_97 respondent has adequately established an evidentiary foundation linking petitioner to his employment activity and the ira withdrawal petitioner stipulated that he was compensated by bergaila and ch2m for his work as an engineer during the years in issue petitioner also stipulated that he withdrew funds from a td ameritrade retirement account in his response to respondent’s first request for admissions petitioner admitted that td ameritrade had characterized this account as an ira accordingly respondent’s determinations that petitioner had unreported income and is liable for deficiencies for and are presumed correct and petitioner bears the burden of proving that respondent’s determinations are erroneous see rule a welch v helvering u s pincite ii unreported wage income petitioner concedes that he received the amounts of compensation set out in the notices of deficiency however petitioner argues that the compensation he received in and was not taxable_income within the meaning of the law sec_61 defines gross_income to include income from whatever source derived more specifically sec_61 includes in an individual’s gross_income any compensation_for services interest payments dividend payments and gains derived from dealings in property clearly petitioner’s compensation from bergaila and ch2m is gross_income for federal_income_tax purposes see 348_us_426 stating that gross_income includes all accessions to wealth that are clearly realized and under the control of the taxpayer 788_f2d_1509 11th cir describing the taxpayer’s argument that his wages were not income as patently frivolous 82_tc_235 77_tc_1169 petitioner’s assertion to the contrary that is that the payments made to him for his services are not gross_income is frivolous and characteristic of rhetoric that has been universally rejected by this and other courts see 848_f2d_1007 9th cir aff’g tcmemo_1987_225 the court need not address petitioner’s assertions with somber reasoning and copious citation to precedent to do so might suggest that these arguments have some colorable merit see 737_f2d_1417 5th cir 136_tc_498 consequently we uphold respondent’s determinations with respect to petitioner’s wage income for and iii ira distribution petitioner argues that the dollar_figure distribution he received from his ira is not taxable_income we disagree subject_to certain exceptions amounts distributed from an ira are includible in a taxpayer’s gross_income as provided in sec_72 sec_408 petitioner who has not established that an exception applies argues that his retirement account was not an ira however petitioner has offered no evidence petitioner acknowledges that wages are taxable but argues that the term does not encompass the compensation he received from his employers this position has been previously rejected by this court as baseless and subject_to the imposition of sec_6673 penalties see waltner v commissioner tcmemo_2014_35 aff’d __ f app’x __ wl 9th cir date nelson v commissioner tcmemo_2012_232 aff’d 540_fedappx_924 11th cir supporting this contention accordingly the distribution is includible in petitioner’s gross_income iv sec_72 tax ira_distributions made before the taxpayer’s attaining the age of that are includible in income are generally subject_to a additional tax unless an exception applies see sec_72 a i because the sec_72 additional tax is a tax and not a penalty addition_to_tax or additional_amount within the meaning of sec_7491 the burden of production with respect to the additional tax remains on petitioner see 144_tc_140 petitioner who was under years of age in has neither argued nor established that any of the statutory exceptions applies see sec_72 accordingly the distribution is subject_to the additional tax under sec_72 v additions to tax a sec_6651 respondent determined that petitioner is liable for the sec_6651 late-filing addition_to_tax for the tax_year sec_6651 imposes an addition_to_tax for failing to file a return by the filing deadline as extended unless such failure is due to reasonable_cause and not due to willful neglect pursuant to sec_7491 respondent has the burden of production with respect to this addition_to_tax see 116_tc_438 petitioner stipulated that he filed hi sec_2011 return on date several months after the extended filing deadline of date consequently respondent has met his burden of producing evidence that the late-filing addition_to_tax should be imposed for petitioner has not demonstrated that he had reasonable_cause for his failure_to_file a timely return he is therefore liable for the sec_6651 addition_to_tax for b sec_6651 respondent also determined that petitioner is liable for the sec_6651 late-payment addition_to_tax for the tax_year sec_6651 imposes an addition_to_tax for failure to pay the amount of tax shown on a taxpayer’s federal_income_tax return on or before the payment due_date unless such failure is due to reasonable_cause and not due to willful neglect the sec_6651 addition_to_tax applies only when an amount of tax is shown on a return filed by the taxpayer or prepared by the secretary sec_6651 g 120_tc_163 aff’d without published opinion a f t r 2d ria 3d cir pursuant to sec_7491 respondent has the burden of production with respect to this addition_to_tax see higbee v commissioner t c pincite respondent has not carried his burden here petitioner’ sec_2010 return which respondent received and processed shows a tax of zero there is nothing in the record to indicate that a substitute for return sfr meeting the requirements of sec_6020 was ever prepared for the tax_year we therefore hold that petitioner is not liable for the sec_6651 addition_to_tax vi accuracy-related_penalty respondent also determined that petitioner is liable for accuracy-related_penalties under sec_6662 for the and tax years pursuant to sec_6662 and b and a taxpayer may be liable for a penalty of over petitioner’s objection respondent introduced a literal transcript of account for petitioner’ sec_2010 tax_year the literal transcript contains no reference to any sfrs even if it did the literal transcript does not establish that the requirements of sec_6020 were satisfied see 127_tc_200 aff’d 521_f3d_1289 10th cir gardner v commissioner tcmemo_2013_67 at for respondent determined in the notice_of_deficiency that the underpayment was attributable to one or more of the following negligence or disregard of rules or regulations a substantial_understatement_of_income_tax a substantial_valuation_misstatement or a transaction lacking economic_substance for respondent determined in the notice_of_deficiency that petitioner’s underpayment was attributable to a substantial_understatement_of_income_tax in his answer respondent raised the issue of negligence or disregard of rules or regulations as another basis for the accuracy-related_penalty for on the portion of an underpayment_of_tax attributable to negligence or disregard of rules or regulations or a substantial_understatement_of_income_tax whether applied because of a substantial_understatement_of_income_tax or negligence or disregard of rules or regulations the accuracy-related_penalty is not imposed with respect to any portion of the underpayment as to which the taxpayer acted with reasonable_cause and in good_faith sec_6664 the decision as to whether the taxpayer acted with reasonable_cause and in good_faith depends upon all the pertinent facts and circumstances see sec_1_6664-4 income_tax regs generally the most important factor is the extent of the taxpayer’s effort to assess his or her proper tax_liability humphrey farrington mcclain p c v commissioner tcmemo_2013_23 sec_1_6664-4 income_tax regs the term negligence in sec_6662 includes any failure to make a reasonable attempt to comply with the code and any failure to keep adequate books_and_records or to substantiate items properly sec_6662 sec_1 b income_tax regs negligence has also been defined as the failure to exercise due care or the failure to do what a reasonable person would do under the circumstances see 92_tc_1 aff’d 925_f2d_348 9th cir see also 85_tc_934 the term disregard includes any careless reckless or intentional disregard sec_6662 petitioner reported zero tax_liabilities on hi sec_2010 and sec_2011 returns however petitioner received taxable wage income in both years and as discussed above was liable for federal_income_tax on his wages petitioner therefore had an underpayment for each year within the meaning of sec_6662 petitioner does not dispute that he worked during and and that he received payments from his employers in the amounts set forth in the notices of deficiency in fact petitioner acknowledges that he received information statements from his employers reporting these payments but instead of relying on these statements he attached to his returns forms that reported zero wages as discussed above it is well settled that wages are taxable_income and should be reported as such see eg wilcox v commissioner f 2d pincite- petitioner’s position to the contrary demonstrates not only a failure to comply reasonably with the code but also negligence and a clear disregard of rules or regulations petitioner did not act with reasonable_cause and in good_faith accordingly the court holds that petitioner is liable for accuracy-related_penalties under sec_6662 for the and tax years vii sec_6673 sec_6673 authorizes the tax_court to impose a penalty not in excess of dollar_figure on a taxpayer for proceedings instituted primarily for delay or in which the taxpayer’s position is frivolous or groundless while petitioner advanced frivolous arguments in this proceeding we decline to impose a sec_6673 penalty against him at this time however we warn petitioner that continuing to advance frivolous or groundless arguments may result in substantial penalties in the future we have considered the parties’ arguments and to the extent not addressed herein conclude that they are moot irrelevant or without merit to reflect the foregoing appropriate orders will be issued and decisions will be entered under rule


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division apr o uniform issue list xxx xxx xxx legend decedent spouse ira x xxx xxx xxx trust t xxx dear xxx this is in response to your request dated date submitted by your authorized representative as supplemented by correspondence dated date concerning the proper treatment of a distribution from decedent's individual_retirement_account ira x under sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested decedent died on date decedent was survived by his spouse spouse and two children neither decedent nor spouse had reached age at the time of decedent's death at his death decedent maintained an individual_retirement_account ira x decedent designated trust t a revocable_trust established by spouse as the beneficiary of ira x trust t provides that spouse as its settlor has the right to withdraw all or any portion of its net_income and or its principal trust t also provides that spouse has the right to modify amend or revoke such trust at any time during her lifetime spouse is its sole trustee based on the facts and representations you request that the internal_revenue_service issue the following rulings ira x does not constitute an inherited ira within the meaning of code sec_408 with respect to spouse spouse is eligible to rollover or transfer by means of a trustee-to-trustee transfer the funds in ira x into an ira established in spouse's own name and spouse will not be required to include in gross_income for federal_income_tax purposes for the year in which amounts are distributed from ira x and the year in which the above referenced rollover is made if different any portion of the amounts distributed from ira x and contributed to the individual_retirement_account set up and maintained in spouse's name provided that the rollover of such distribution occurs no later than the 60th day from the date on which ira x proceeds are distributed from ira x to trust t sec_408 d of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 d a of the code provides that sec_408 d of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 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 sec_408 of the code provides in summary that the rollover rules of sec_408 do not apply to inherited iras sec_408 of the code provides that the term inherited ira means an ira obtained by an individual other than the ira owner's spouse as a result of the death of the ira owner sec_1_408-8 of the income_tax regulations question and answer 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 in order to make this election the spouse must be the sole beneficiary of the ira and have an unlimited right to withdraw amounts from the ira if a_trust is named as beneficiary of the ira this requirement is not satisfied even if the spouse is the sole beneficiary of the trust in this case decedent designated trust t as the beneficiary of ira x decedent's surviving_spouse spouse is sole trustee of trust t and has the right as its settlor and one of its beneficiaries to withdraw all or any portion of its principal and or its net_income at any time spouse intends to distribute the proceeds of ira x to herself as beneficiary of trust t and to then rollover the distribution to an ira maintained in her own name generally if the proceeds of a decedent's ira are payable to a_trust and are paid to its trustee who then pays them to the decedent's surviving_spouse as the beneficiary of the trust the surviving_spouse is treated as having received the ira proceeds from the trust and not from the decedent accordingly such surviving_spouse in general is not eligible to roll over the distributed ira proceeds into her own ira however the general_rule will not apply where the surviving_spouse is the sole trustee of the decedent's trust and has the sole authority and discretion under its language to distribute the ira proceeds to herself the surviving_spouse may then receive the ira proceeds and roll over the amounts into an ira set up and maintained in her name therefore with respect to your ruling requests we conclude as follows ira x will not be treated as an inherited ira within the meaning of sec_408 of the code with respect to spouse spouse is eligible to roll over or transfer by means of a trustee to trustee transfer a distribution of the proceeds of ira x into an ira set up and maintained in her own name as long as the rollover of such distribution occurs no later than the 60th day from the date such distribution is made from ira x and spouse will not be required to include in gross_income for federal_income_tax purposes for the year in which the amounts are distributed from ira x and the year in which the above referenced rollover is made if different any portion of the amounts distributed from ira x and contributed to the individual_retirement_account set up and maintained in spouse's name provided that the rollover of such distribution occurs no later than the 60th day from the date on which the ira x proceeds are distributed from ira x to trust t this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described in this ruling under the provisions of any other section of either the code or regulations which may be applicable this letter is based on the assumption that ira x met the requirements of sec_408 of the code at all relevant times and that trust t is valid under applicable state law it also assumes that any rollover ira established by spouse will also meet the requirements of sec_408 at all relevant times pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative this ruling is directed only to the taxpayer who requested it sec_611 o k of the code provides that it may not be used or cited by others as precedent if you wish to inquire about this ruling please contact xxxx at xxx xxx-xxxx please address all correspondence to se t ep ra t3 sincerely laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc xxx


t c memo united_states tax_court michael k wolfe and rosemarie e wolfe petitioners v commissioner of internal revenue respondent docket no filed date michael k wolfe and rosemarie e wolfe pro sese franklin r hise for respondent memorandum opinion körner judge respondent determined deficiencies in and additions to petitioners' federal income taxes for the years and in the amounts as follows additions to tax under section year deficiency b b b a b b dollar_figure dollar_figure -- dollar_figure big_number big_number -- big_number big_number -- dollar_figure big_number percent of the interest payable on the portion of the deficiency attributable to fraud all statutory references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure except as otherwise noted during the taxable years and the period involved herein and when the petition was filed petitioners michael k wolfe and rosemarie e wolfe were residents of texas petitioner rosemarie e wolfe did not appear at the hearing of this case but was represented by her husband petitioner michael k wolfe petitioners' taxable years and were investigated by the internal_revenue_service during and after this examination petitioners accepted adjustments by respondent to their income_tax_liability for the years and thereafter respondent received information concerning the possible receipt of additional and fraudulent income by petitioners in the years and and the examination of these years was reopened in as a result substantial additional deficiencies and additions to tax for fraud were determined by respondent and are contained in the notice_of_deficiency that was issued herein as detailed above such deficiencies and additions to tax were computed at petitioners' request on the basis of petitioners being married and filing jointly prior to the years in issue petitioner rosemarie wolfe was married to jose escalante on two separate occasions and they have three children during the years in issue here however jose escalante was married to susan escalante now susan myers during the years and susan escalante was employed by the spring branch savings loan association in texas as a branch manager she was not a loan officer nevertheless during that period she abstracted large amounts of money from the savings and loan association hereinafter spring branch and during the years in question caused the following amounts of money to be transferred with their complicity to one or both of petitioners or to others who in turn remitted the money to one or both of petitioners dollar_figure dollar_figure dollar_figure all the above proceeds were received by petitioners or deposited in a bank account or bank accounts controlled by them petitioners were also the sole owners of and controlled the business known by the name of deli etc in cypress texas and controlled bank accounts of that organization susan escalante later pled guilty to both criminal and civil charges in connection with these abstractions inter alia from spring branch upon audit respondent's statutory notice increased petitioners' income by the above amounts after giving credit to the amounts previously agreed to for and in the case of each petitioner petitioners were later charged criminally in texas with theft or theft by receiving in connection with the above takings from spring branch petitioner rosemarie wolfe pled guilty and was sentenced to prison petitioner michael wolfe likewise pled guilty and was placed on probation for years petitioners were also sued civilly by spring branch as the result of the above abstractions and others and they consented in to the entry of judgment against them jointly or separately of a total of some dollar_figure with interest costs and attorney's_fees with respect to the funds stolen or illegally received by petitioners in the years in question some were apparently used by petitioners for their personal purposes and some were invested in the business that they operated as deli etc in the original examination by respondent of petitioners' taxable years and petitioners did not furnish detailed information about their income or assets and did not disclose the illegal acquisition of funds for which they later pled guilty and liable both criminally and civilly in the later examinations by respondent which for the first time included the year petitioners attempted to conceal their participation in the theft of these funds as well as the identity of at least eight bank accounts where they had stowed funds in different places in texas they likewise attempted to conceal the fact that petitioner rosemarie wolfe was the owner of deli etc where some of the funds from spring branch went they did not disclose any taxable_income for the years in question and they filed no income_tax returns for those years petitioners fraudulently failed to report any income or pay the required tax thereon for and as to the statutory_notice_of_deficiency herein petitioners contest only the inclusion in their gross_income of their illegally acquired receipts from spring branch as well as the additions to tax we consider first the correctness of the deficiencies in tax in general the burden_of_proof is on petitioners to prove that respondent's determination as set forth in the notice_of_deficiency is incorrect rule a 290_us_111 petitioners have admitted the receipt of the income in question petitioners contend that the money received from the spring branch checks was not embezzlement income but rather a loan there is not a scrap of evidence in this record to support that argument neither petitioner testified nor did any witness appear on their behalf they pled guilty both criminally and civilly to the receipt of the money that respondent would tax to them here gross_income includes income from all sources sec_61 it is well established that illegal gain can be taxable_income as in the case of other accessions to wealth under the dominion and control of the taxpayer 366_us_213 343_us_130 sec_1 imposes a tax on individuals for taxable_income received the liability for the payment of the income_tax is ordinarily on the individual receiving the income 39_tc_78 affd in part and revd in part 323_f2d_751 9th cir the evidence submitted in this case clearly shows the receipt of the income by petitioners and in fact they admitted it in the pleadings petitioners' argument of a loan is not only unsupported by this record it is clearly contrary to that record and we find that respondent's determination with respect to unreported income must be sustained we next consider the correctness of the imposition of additions to tax for fraud on petitioners by respondent on this matter the burden_of_proof is on respondent rule b a failure_to_file tax returns without more is not conclusive proof of fraud but may be considered in connection with other facts 398_f2d_1002 3d cir 86_tc_1253 petitioners' entire course of conduct can be relied on to establish a fraudulent intent 53_tc_96 fraud as used in sec_6653 means actual intentional wrongdoing 118_f2d_308 5th cir revg 40_bta_424 the intent required is the specific purpose to violate a known legal duty in this case to evade a tax believed to be owing stoltzfus v united_states supra 67_tc_143 where direct evidence of fraudulent intent is not available its existence may be determined from the conduct of the taxpayer and the surrounding circumstances 56_tc_213 the supreme court has stated that an affirmative willful attempt may be inferred from any conduct the likely effect of which would be to mislead or to conceal 317_us_492 making false statements to a revenue_agent is evidence of fraud 344_us_43 468_f2d_791 5th cir in the instant case we need not rely on any presumption of correctness as to the deficiency in order to conclude that fraud has been committed by petitioners they have admitted the receipt of the unreported income and it is clear from the facts that an income_tax was owing thereon which has not been paid we are convinced that petitioners' failure_to_file returns or pay the required tax was fraudulent on their part the tax was clearly owing and petitioners without any excuse intentionally did not file the returns and pay the tax in addition during the investigation of their tax_liability petitioners withheld information from the revenue agents as to the amount of their income and also concealed the fact of their prior convictions for illegally obtaining such income we think respondent has satisfied the burden of proving fraud in this case by the clear_and_convincing evidence required by sec_7454 and rule b cf green v commissioner tcmemo_1993_152 affd without published opinion 33_f3d_1378 5th cir this leaves for discussion the imposition of additions to tax by respondent under sec_6654 for the failure by petitioners to pay estimated_tax respondent determined that the addition_to_tax for failure to pay an estimated_tax was applicable for each of the years here in question and petitioners bear the burden of proving that respondent's determination of the addition_to_tax is erroneous rule a 75_tc_1 the statute is specific and unless the taxpayer can bring himself within one of the four enumerated exceptions thereto its application is mandatory 33_tc_1071 grosshandler v commissioner supra no such showing has been made in this case and we therefore sustain respondent on this issue decision will be entered for respondent


internal_revenue_service number release date index number ------------------------ -------------------- --------------------- -------------------------- in re --------------------------------------------------- -------------------------------------------- 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 b04 plr-124335-15 date date husband wife husband’s trusts wife’s trust year year year -------------------------- ------------------------ --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- ---------------------------------------------------------------- -------------------------------------------------- ------ ------ ------ dear -------------------------------------------- this letter responds to your personal representative's letter of date and subsequent correspondence requesting an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to make the election out of the automatic allocation of generation-skipping_transfer gst_exemption under sec_2632 the facts submitted and the representations made are as follows in year through year on dates after date husband established and made transfers to several irrevocable trusts husband’s trusts the trusts had gst tax potential in year wife created and funded an irrevocable_trust wife’s trust for the benefit of husband wife’s trust had gst tax potential husband died in year for year through year husband and wife retained tax professionals to prepare their yearly form sec_709 united_states gift and generation-skipping_transfer_tax returns on these returns husband and wife elected to treat gifts made by each plr-124335-15 as made by both under sec_2513 the tax professionals failed on the returns to report the transfers husband made in year through year and wife made in year and thus failed to make proper elections with respect to husband’s trusts and wife’s trust the executor of husband’s estate and wife request an extension of time under sec_301_9100-3 to make an election out of the deemed_allocation of gst_exemption with respect to husband’s year through year transfers and wife’s year transfer pursuant to sec_2632 law and analysis sec_2513 provides generally that for gift_tax purposes if the parties’ consent a gift made by one spouse to any person other than his or her spouse shall for gift_tax purposes be considered as made one-half by the donor spouse and one-half by his or her spouse sec_2601 imposes a tax on every gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2632 is effective for transfers subject_to chapter or made after date and to estate_tax inclusion periods etips ending after date see pub_l_no sec_561 sec_2632 provides that if any individual makes an indirect_skip during such individual's lifetime any unused portion of such individual's gst_exemption shall be allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero if the amount of the indirect_skip exceeds such unused portion the entire unused portion shall be allocated to the property transferred sec_2632 provides that for purposes of sec_2632 the term indirect_skip means any transfer of property other than a direct_skip subject_to the tax imposed by chapter made to a gst_trust sec_2632 provides that an individual may elect to have sec_2632 not apply to an indirect_skip such an election shall be deemed to be timely if made on a timely filed gift_tax_return for the calendar_year in which the transfer was made or deemed to have been made pursuant to sec_2632 or on such later date or dates as may be prescribed by the secretary sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides in relevant part that a transferor may prevent the automatic allocation of gst_exemption elect out with respect to one or more prior-year transfers subject_to sec_2642 regarding etips made by the transferor to a specified trust or trusts one or more or all current-year transfers made by the transferor to a specified trust or trusts one or more or all future transfers made by the transferor to a specified trust or trusts all future transfers made by the transferor to all trusts plr-124335-15 whether or not in existence at the time of the election out or any combination of through sec_26_2632-1 provides that to elect out the transferor must attach an election out statement to a form_709 filed within the time period provided in sec_26_2632-1 in general the election out statement must identify the trust and specifically must provide that the transferor is electing out of the automatic allocation of gst_exemption with respect to the described transfer or transfers sec_26_2632-1 provides that to elect out the form_709 with the attached election out statement must be filed on or before the due_date for timely filing the form_709 for the calendar_year in which for a transfer subject_to sec_2642 the etip closes or for all other elections out the first transfer to be covered by the election out was made sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation shall be treated as if not expressly prescribed by statute see notice_2001_50 2001_2_cb_189 sec_2652 and sec_26_2652-1 provide that if under sec_2513 one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of the individual then for purposes of the gst tax each spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor spouse regardless of the interest the electing spouse is actually deemed to have transferred under sec_2513 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 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 code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 a taxpayer may seek an extension of time to make an allocation plr-124335-15 described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner 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 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore the executor of husband’s estate and wife are each granted an extension of time of days from the date of this letter to elect out of the automatic allocation rules with respect to the transfers husband made in year through year and the transfer wife made in year husband elections should be made on supplemental form sec_709 for year through year wife’s election should be made on a supplemental form_709 for year the supplemental form sec_709 should be filed with the internal_revenue_service center at the following address internal_revenue_service cincinnati service_center - stop cincinnati oh a copy of this letter should be attached to the supplemental form sec_709 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representative sincerely melissa c liquerman melissa c liquerman chief branch passthroughs special industries enclosures copy for sec_6110 purposes cc


significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jul 201i se t ep re az re dear this letter is to inform you that your request for a waiver of the minimum_funding_standard for the plan for the plan_year ending date has been denied in a letter dated date you were informed that your request for a waiver of the minimum_funding_standard had been tentatively denied and you were offered a conference of right in accordance with section dollar_figure of revproc_2011_4 2011_1_irb_123 one of the criteria we are statutorily required to take into account when determining whether a waiver of the minimum_funding_standard should be approved is that it is reasonable to expect that the plan will be continued only if the waiver is granted our primary reason for tentatively denying your request was information received from your authorized representative indicated that the plan was on the verge of insolvency and that it was unlikely that granting your request for a waiver of the minimum_funding_standard for the plan for the plan_year ending date would prevent the insolvency from occurring our letter dated date stated that if you did not contact us to schedule a conference by date days from the date of the letter we would finalize our ruling denying your request for a waiver of the minimum_funding_standard for the plan for the plan_year ending date as of date we have not heard from you or your authorized representative accordingly your request for a waiver of the minimum_funding_standard for the plan for the plan_year ending date has been denied 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 we have sent a copy of this letter to the to the - representative pursuant to a power_of_attorney on file in this office assistance concerning this matter please contact and to your authorized if you require further sincerely yours david m ziegler manager employee_plans actuarial group