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 b09 plr-132692-04 date december legend taxpayer ------------------------------------------------------------------------------------------------- ------------------------- ------------------------------------------------------- ------------------------- ------------------- ----------- ---------------------------- ---------- ------- ------------------------ ------- --------------- -------------------------- ------- --------------- trust date date a date b year date year c date year d dear ------------------ this is in response to your letter dated date 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 allocations of taxpayer’s generation-skipping_transfer gst_exemption the facts and representations submitted are summarized as follows taxpayer established the trust on date for the benefit of taxpayer’s spouse taxpayer’s issue and the issue of taxpayer’s spouse on date taxpayer transferred cash and marketable_securities with a value of dollar_figurea to the trust on date taxpayer transferred cash and marketable_securities with a article i of the trust provides in relevant part that the trustee has the discretion plr-132692-04 value of dollar_figureb to the trust date and date are in year on date in year taxpayer transferred cash and marketable_securities with a value of dollar_figurec to the trust on date in year taxpayer transferred cash and marketable_securities with a value of dollar_figured to the trust to distribute net_income and principal to or for the benefit of any one or more of taxpayer’s spouse taxpayer’s issue and the issue of taxpayer’s spouse upon the death of taxpayer’s spouse the trust will be divided into the number of equal shares necessary to provide one such share for each of four named beneficiaries who are either then living or not then living but have issue who are then living upon the death of a named beneficiary the remaining principal of the trust held in that beneficiary’s name shall be distributed to the beneficiary’s surviving issue per stirpes notwithstanding any provision of the trust agreement to the contrary each trust created under article i shall terminate not later than twenty-one years after the death of the last survivor of all of the issue of each of taxpayer’s parents and each of taxpayer’s spouse’s parents who were in being on date upon such termination the remaining principal of each trust shall be distributed to the primary beneficiary of the trust exemption would need to be allocated to transfers made to the trust taxpayer provided his accountant with the information received from the attorney and relied upon the accountant to prepare the appropriate gift_tax returns taxpayer’s accountant inadvertently failed to allocate taxpayer’s gst_exemption on the gift_tax returns the transfers made to the trust during year year and year skipping transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2601 imposes a tax on every generation-skipping_transfer a generation- taxpayer was advised by the attorney who drafted the trust agreement that gst taxpayer has requested an extension of time to allocate his gst_exemption to sec_2602 provides that the amount of the tax is the taxable_amount multiplied sec_2631 provides that for purposes of determining the inclusion_ratio by the applicable_rate sec_2641 defines aapplicable rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2632 provides that any allocation by an individual of his or her gst sec_2642 provides generally that the secretary shall by regulation plr-132692-04 sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides in part that an allocation of gst_exemption to property transferred during the transferor s lifetime other than in a direct_skip is made on form_709 an allocation of gst_exemption to a_trust is void to the extent the amount allocated exceeds the amount necessary to obtain an inclusion_ratio of zero with respect to the trust sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period 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 such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph this paragraph 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 under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 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 internal_revenue_code except in subtitles e g h and i sec_2642 provides that in determining whether to grant relief under notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation requests for relief under sec_301_9100-3 will be granted when the taxpayer sec_301_9100-3 provides that a taxpayer is deemed to have acted based on the facts submitted and the representations made we conclude that plr-132692-04 and not expressly provided by statute under ' b a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with ' g b and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in ' b or b or an election described in ' b or c under the provisions of ' 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 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 to advise the taxpayer to make the election the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to make allocations of taxpayer’s available gst_exemption with respect to the transfers to the trust in year year and year the allocations will be effective as of the date of the transfers and the gift_tax value of the transfers to the trust will be used in determining the amount of gst_exemption to be allocated to trust the allocations should be made on supplemental form sec_709 filed with the internal_revenue_service center cincinnati ohio a copy of this letter should be attached to each supplemental form_709 a copy is included for this purpose concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition we express or imply no opinion regarding the value of the property transferred to the trust 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 being sent to the taxpayer’s representative pursuant to the power_of_attorney on file with this office a copy of this letter is except as expressly provided herein no opinion is expressed or implied the rulings contained in this letter are based upon information and plr-132692-04 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 sincerely heather c maloy associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of letter


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 b02 plr-134671-13 date date ----------------------------------------------------- ----------------------------------------------------------------------------- grantor distribution committee -------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- trust state trustees ------------------------------------------------ ---------- ------------------------------------------------------- dear ----- ---------- this responds to a letter dated date and subsequent correspondence requesting rulings under sec_671 sec_2501 and sec_2514 of the internal_revenue_code the information submitted states that grantor proposes to create an irrevocable_trust trust for the benefit of himself his parents siblings and issue which he intends to execute upon receipt of a favorable private_letter_ruling from the internal_revenue_service two independent trustees are the trustees trustees of trust during grantor’s lifetime the beneficiaries of trust are grantor and his siblings however if grantor’s siblings are not living the class of permissible beneficiaries will include grantor’s parents trustees must make distributions of income and principal as directed by distribution committee and or grantor as follows at any time trustees pursuant to the direction of a majority of distribution committee with the written consent of grantor shall distribute to grantor or the beneficiaries such amounts of the net_income or principal as directed by distribution committee grantor’s consent power plr-134671-13 at any time trustees pursuant to the direction of all distribution committee members other than grantor shall distribute to the beneficiaries such amounts of the net_income or principal as directed by distribution committee unanimous member power and at any time grantor in a nonfiduciary capacity may but shall not be required to distribute to any one or more of the beneficiaries other than himself such amounts of the principal including the whole thereof as grantor deems advisable to provide for the health maintenance support and education of grantor’s issue grantor’s sole power the distribution committee may direct that distributions be made equally or unequally and to or for the benefit of any one or more of the beneficiaries of trust to the exclusion of others any net_income not distributed by trustee will be accumulated and added to principal distribution committee will be initially composed of grantor grantor’s siblings and grantor’s nephews and will cease to exist upon grantor’s death trust provides that at all times the distribution committee must consist of at least two adults other than grantor either who are members of the class of persons eligible to receive distributions of income or principal under trust or if there are not two adult members of such class who are willing and able to serve who are the parent or guardian of a member of such class of eligible distributes eligible individuals if at any time fewer than two eligible individuals are members the distribution committee shall be deemed not to exist a vacancy on distribution committee must be filled in the following order the oldest of the grantor’s adult issue who willing to serve and is not already serving as a member of distribution committee the oldest of the adult issue of grantor’s parents who is willing to serve and who is not already serving as a member of distribution committee the legal guardian if any or the parent of the oldest of the grantor’s minor issue who is not already serving as a member of distribution committee the legal guardian if any or the parent of the oldest minor issue of grantor’s parents who is willing to serve and is not already serving as a member of distribution committee grantor’s father or grantor’s mother if at any time distribution committee does not include at least two members distribution committee shall be deemed not to exist the distribution committee will cease to exist upon grantor’s death upon grantor’s death the trustee will dispose_of the then-remaining principal and undistributed_income of trust as grantor directs by a will specifically referring to this power_of_appointment the testamentary power provided that no such appointment may be made to grantor’s estate grantor’s creditors or the creditors of grantor’s estate grantor’s power includes the power to appoint outright or in trust and to create new powers in default of the exercise of grantor’s testamentary power the balance of trust will be distributed per stirpes to grantor’s then living issue in further trust if none plr-134671-13 of grantor’s issue is then living but any descendant of grantor’s parents is then living trustees are to allocate income and principal per stirpes among grantor’s parents issue in further trust if no descendant of grantor’s parents is then living trustees are to distribute the remaining income and principal pursuant to state law as if grantor had died intestate and unmarried you have requested the following rulings during the period distribution committee is serving no portion of the items of income deductions and credits against tax of the trust will be included in computing the taxable_income deductions and credits of the grantor under sec_671 the contribution of property to trust by grantor will not be a completed_gift subject_to federal gift_tax any distribution_of_property by the distribution committee from trust to grantor will not be a completed_gift subject_to federal gift_tax by any member of the distribution committee any distribution_of_property by distribution committee from trust to any beneficiary of trust other than grantor will not be a completed_gift subject_to federal gift_tax by any member of the distribution committee other than grantor ruling sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_672 provides that for purposes of subpart e the term adverse_party means any person having a substantial_beneficial_interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust sec_673 provides that the grantor shall be treated as the owner of any portion of a_trust in which the grantor has a reversionary_interest in either the corpus or the income therefrom if as of the inception of that portion of the trust the value of such plr-134671-13 interest exceed sec_5 percent of the value of such portion sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to the power in sec_674 regardless of by whom held sec_674 describes a power to distribute corpus to or for a beneficiary provided that the power is limited by a reasonably_definite_standard which is set forth in the trust instrument sec_674 provides that sec_674 shall not apply to a power exercisable only by will other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse_party or both without the approval or consent of any adverse_party under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant to its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to re-vest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both sec_677 provides in general that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor’s spouse held or accumulated for future distribution to the grantor or the grantor’s spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse sec_678 provides that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would within the principles of inclusive subject a grantor of a_trust to treatment as the owner thereof based solely on the facts submitted and representations made we conclude an plr-134671-13 examination of trust reveals none of the circumstances that would cause grantor to be treated as the owner of any portion of trust under sec_673 sec_674 sec_676 or sec_677 because none of the other distribution committee members has a power exercisable solely by himself to vest trust income or corpus in himself none shall be treated as the owner of any portion of the trust under sec_678 we further conclude that an examination of trust reveals none of the circumstances that would cause administrative controls to be considered exercisable primarily for the benefit of grantor under sec_675 thus the circumstances attendant on the operation of trust will determine whether grantor will be treated as the owner of any portion of trust under sec_675 this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office with responsibility for such examination ruling sec_2 and sec_2501 provides that a tax is imposed for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that the tax imposed by sec_2501 applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete as to any property or part thereof or interest therein of which the donor has so parted with dominion and control as to leave in the donor no power to change its disposition whether for the donor’s own benefit or for the benefit of another but if upon a transfer of property whether in trust or otherwise the donor reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the facts in the particular case accordingly in every case of a transfer of property subject_to a reserved power the terms of the power must be examined and its scope determined sec_25_2511-2 also provides an example where the donor transfers property to another in trust to pay the income to the donor or accumulate it in the discretion of the trustee and the donor retains a testamentary power to appoint the remainder among the donor’s descendants the regulation concludes that no portion of the transfer is a completed_gift however if the donor had not retained a testamentary_power_of_appointment but instead provided that the remainder should go to x or his heirs the entire transfer would be a completed_gift sec_25_2511-2 provides that a gift is incomplete in every instance in which a donor reserves the power to re-vest the beneficial title in himself or herself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name plr-134671-13 new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard sec_25_2511-2 provides that a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that if a donor transfers property to himself as trustee or to himself and some other person not possessing a substantial adverse_interest as trustees and retains no beneficial_interest in the trust property and no power over it except fiduciary powers the exercise or nonexercise of which is limited by a fixed_or_ascertainable_standard to change the beneficiaries of the transferred property the donor has made a completed_gift and the entire value of the transferred property is subject_to the gift_tax sec_25_2511-2 does not define substantial adverse_interest sec_25_2514-3 provides in part that a taker in default of appointment under a power has an interest that is adverse to an exercise of the power sec_25_2514-3 also provides that a coholder of a power is considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in 308_us_39 the taxpayer created a_trust for the benefit of named beneficiaries and reserved the power_to_revoke the trust in whole or in part and to designate new beneficiaries other than himself six years later in the taxpayer relinquished the power_to_revoke the trust but retained the right to change the beneficiaries in the taxpayer relinquished the right to change the beneficiaries the court stated that the taxpayer’s gift is not complete for purposes of the gift_tax when the donor has reserved the power to determine those others who would ultimately receive the property accordingly the court held that the taxpayer’s gift was complete in when he relinquished his right to change the beneficiaries of the trust a grantor’s retention of a power to change the beneficial interests in a_trust causes the transfer to the trust to be incomplete for gift_tax purposes even though the power may be defeated by the actions of third parties 37_tc_897 see also 51_tc_352 in this case grantor retained the grantor’s consent power over the income and principal of trust under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial plr-134671-13 adverse_interest in the disposition of the transferred property or the income therefrom the distribution committee members are not takers in default for purposes of sec_25_2514-3 they are merely co-holders of the power the distribution committee ceases to exist upon the death of grantor under sec_25_2514-3 a co- holder of a power is only considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in this case the distribution committee ceases to exist upon grantor’s death accordingly the distribution committee members do not have interests adverse to grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 therefore grantor is considered as possessing the power to distribute income and principal to any beneficiary himself because he retained the grantor’s consent power the retention of this power causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes grantor also retained the grantor’s sole power over the principal of trust under sec_25_2511-2 a gift is incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries in this case grantor’s sole power gives grantor the power to change the interests of the beneficiaries accordingly the retention of the grantor’s sole power causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes further grantor retained grantor’s testamentary power to appoint the property in trust to anyone including trusts other than grantor’s estate grantor’s creditors or the creditors of grantor’s estate under sec_25_2511-2 the retention of a testamentary power to appoint the remainder of a_trust is considered a retention of dominion and control_over the remainder accordingly the retention of this power causes the transfer of property to trust to be incomplete with respect to the remainder in trust for federal gift_tax purposes finally the distribution committee possesses the unanimous member power over income and principal this power is not a condition_precedent to grantor’s powers grantor’s powers over the income and principal are presently exercisable and not subject_to a condition_precedent grantor retains dominion and control_over the income and principal of trust until the distribution committee members exercise their unanimous member power accordingly this power does not cause the transfer of property to be complete for federal gift_tax purposes see 37_tc_897 51_tc_352 accordingly based on the facts submitted and the representations made we conclude that the contribution of property to trust by grantor is not a completed_gift subject_to federal gift_tax any distribution from trust to grantor is merely a return of grantor’s property therefore we conclude that any distribution_of_property by the distribution committee from trust to grantor will not be a completed_gift subject_to plr-134671-13 federal gift_tax by any member of the distribution committee further upon grantor’s death the fair_market_value of the property in trust is includible in grantor’s gross_estate for federal estate_tax purposes ruling sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power possessor the possessor’s estate the possessor’s creditors or the creditors of the individual’s estate sec_25_2514-1 provides in part that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the possessor or his creditors or the possessor’s estate or the creditors of the estate sec_2514 provides that in the case of a power_of_appointment created after date if the power is exercisable by the possessor only in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2514 provides that in the case of a power_of_appointment created after date if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the possessor such power shall not be deemed a general_power_of_appointment for purposes of sec_2514 a person who after the death of the possessor may be possessed of a power_of_appointment with respect to the property subject_to the possessor’s power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor’s power sec_25_2514-3 provides in part that a co-holder of a power has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have plr-134671-13 interests adverse to the exercise of the power in favor of x similarly if on y’s death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y the powers held by the distribution committee members under the grantor’s consent power are powers that are exercisable only in conjunction with the creator grantor accordingly under sec_2514 the distribution committee members do not possess general powers of appointment by virtue of possessing this power further the powers held by the distribution committee members under the unanimous member powers are not general powers of appointment as in the example in sec_25_2514-3 the distribution committee members have substantial adverse interests in the property subject_to this power accordingly any distribution made from trust to a beneficiary other than grantor pursuant to the exercise of these powers the grantor’s consent power and the unanimous member powers are not gifts by the distribution committee members instead such distributions are gifts by grantor based upon the facts submitted and representations made we conclude that any distribution_of_property by the distribution committee from trust to any beneficiary of trust other than grantor will not be a completed_gift subject_to federal gift_tax by any member of the distribution committee further we conclude that any distribution_of_property from trust to a beneficiary other than grantor will be a completed_gift by grantor except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion on the trust provisions permitting trustee to distribute income or principal to trustees of other qualified trusts decanting plr-134671-13 this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


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 intl b03 plr-125270-09 date date acquirer ----------------------------------------------------------- --------------------------------------- us sub ----------------------------------------------------------- -------------------------------------------------- target foreign newco us newco dollar_figurea date ---------------------------------------------------- ----------------------- ------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------ ----------------------- ---------------------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------ ----------------------- ---------------------- ---------------------- plr-125270-09 dear -------------------- this letter responds to a request for rulings dated date regarding certain federal_income_tax consequences of a series of transactions the information submitted for consideration is summarized below unless otherwise indicated references herein to code sections and regulation sections are to the applicable internal_revenue_code and income_tax regulations acquirer a domestic_corporation owns through disregarded entities percent of the stock of us sub a domestic_corporation on date us sub acquired all of the stock of target a domestic_corporation for cash in a taxable transaction the target acquisition effected through a reverse subsidiary cash_merger after the target acquisition pursuant to a series of transactions the following occurred for u s tax purposes i target converted to a foreign_corporation foreign newco in a transaction that qualified as a reorganization within the meaning of sec_368 of the code the outbound reorganization ii foreign newco transferred a portion of its assets and liabilities to us newco a newly formed domestic_corporation in exchange for all the us newco stock the contribution iii us sub distributed its assets to acquirer in a complete_liquidation qualifying under sec_332 as a consequence of the outbound reorganization foreign newco succeeded to the target tax_attributes enumerated in sec_381 including approximately dollar_figurea of earnings_and_profits of target the target e_p following the contribution us newco is expected to generate earnings_and_profits us newco may distribute such earnings_and_profits as a dividend to its percent owner foreign newco foreign newco may distribute its earnings_and_profits including earnings_and_profits attributable to any dividends it receives from us newco to its percent owner acquirer the following representations have been made with respect to the transaction plr-125270-09 a foreign newco is a controlled_foreign_corporation cfc within the meaning of sec_957 and acquirer is a u s shareholder with respect to foreign newco within the meaning of sec_951 b dividends received by foreign newco from us newco are included in foreign newco’s gross_income and constitute foreign_personal_holding_company_income a type of subpart_f_income pursuant to sec_954 c dividends received by foreign newco from us newco are not effectively connected with the conduct by foreign newco of a trade_or_business_within_the_united_states within the meaning of sec_952 d foreign newco is not a passive_foreign_investment_company as defined in sec_1297 e us newco is subject_to taxation under chapter of the code law sec_957 defines a cfc as a foreign_corporation with regard to which more than percent of the total combined voting power of all classes of stock entitled to vote or the total value of the stock of the corporation is owned directly indirectly or constructively by u s shareholders sec_951 defines a u s shareholder for cfc purposes as a u_s_person who owns directly indirectly or constructively percent or more of the total combined voting power of all classes of stock entitled to vote of the foreign_corporation sec_7701 defines a u_s_person as a u s citizen or resident a domestic_partnership a domestic_corporation and any domestic estate_or_trust sec_951 provides that a u s shareholder of a cfc who owns within the meaning of sec_958 stock in the cfc shall include in gross_income his pro_rata share of the cfc’s subpart_f_income for the year sec_958 provides that stock owned means stock owned directly and stock owned indirectly through foreign entities as provided in sec_958 sec_952 defines subpart_f_income to include foreign_base_company_income as determined under sec_954 sec_954 provides that the term foreign_base_company_income includes foreign_personal_holding_company_income as determined under sec_954 sec_954 provides that the term foreign_personal_holding_company_income includes dividends plr-125270-09 in relevant part sec_1_952-2 provides in general that the gross_income of a foreign_corporation for any taxable_year shall be determined by treating such foreign_corporation as a domestic_corporation taxable under sec_11 and by applying the principles of sec_61 and the regulations thereunder sec_1_952-2 provides in general that the taxable_income of a foreign_corporation for any taxable_year shall subject_to the special rules of sec_1_952-2 be determined by treating such foreign_corporation as a domestic_corporation taxable under sec_11 and by applying the principles of sec_63 sec_63 provides that except as provided in sec_63 for purposes of subtitle a of the code the term taxable_income means gross_income minus the deductions allowed by sec_1 through other than the standard_deduction sec_243 provides that in the case of a corporation there shall be allowed as a deduction an amount equal to a certain percentage of the amount received as dividends from a domestic_corporation which is subject_to taxation under this chapter sec_243 provides that in the case of any dividend received from a 20-percent_owned_corporation the appropriate percentage i sec_80 percent for this purpose the term 20-percent_owned_corporation means any corporation if percent or more of the stock of such corporation by vote and value is owned by the taxpayer also for this purpose stock described in sec_1504 shall not be taken into account sec_245 provides that in the case of dividends received by a corporation from a qualified_10-percent_owned_foreign_corporation there shall be allowed as a deduction an amount equal to the percent specified in sec_243 for the taxable_year of the u_s_-source_portion of such dividends sec_245 provides that a qualified_10-percent_owned_foreign_corporation is any foreign_corporation other than a passive_foreign_investment_company if at least percent of the stock of such corporation by vote and value is owned by the taxpayer sec_245 provides that the u_s_-source_portion of any dividend is an amount which bears the same ratio to such dividends as the post-1986_undistributed_u_s_earnings bears to the total post-1986_undistributed_earnings sec_245 provides that the term post-1986_undistributed_earnings has the meaning given to such term by sec_902 sec_245 provides that post-1986_undistributed_u_s_earnings includes the portion of the post-1986_undistributed_earnings attributable to any dividend received directly or through a wholly owned foreign_corporation from a domestic_corporation at least percent of the stock of which by vote and value is owned directly or through plr-125270-09 such wholly owned foreign_corporation by the qualified_10-percent_owned_foreign_corporation earnings_and_profits of a corporation are not decreased by an amount allowed as a deduction for dividends received 33_bta_594 rulings the target e_p succeeded to by foreign newco pursuant to sec_381 as a result of the outbound reorganization shall not be included in foreign newco’s post- undistributed_earnings pre-1987 accumulated_profits or pre-1987 sec_960 earnings_and_profits for purposes of calculating foreign newco’s net foreign_base_company_income subject_to applicable limitations including those provided under sec_246 foreign newco shall be allowed as a deduction an amount equal to percent of the amount received as dividends from us newco sec_243 and c subject_to applicable limitations including those provided under sec_246 acquirer shall be allowed as a deduction an amount equal to percent of the u s - source portion of dividends received from foreign newco sec_245 and sec_243 and c for purposes of ruling the post-1986_undistributed_u_s_earnings taken into account in computing the u_s_-source_portion of the dividends received includes the portion of the post-1986_undistributed_earnings attributable to dividends received from us newco sec_245 foreign newco’s earnings_and_profits shall not be decreased by the amount allowed as a deduction described in ruling acquirer’s earnings_and_profits shall not be decreased by the amount allowed as a deduction described in ruling 33_bta_594 caveats 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 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 we express no opinion about the tax treatment of the transactions under plr-125270-09 other provisions of the code and regulations or on the tax treatment of any condition existing at the time of or effects resulting from the transaction that are not specifically covered by the above rules for example no ruling is provided as to the application of sec_243 to acquirer including the applicable_percentage of any amount eligible for a deduction with respect to dividends from foreign newco attributable to the target e_p succeeded to by foreign newco pursuant to sec_381 as a result of the outbound reorganization this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent a copy of this letter 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely john j merrick special counsel international


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 2-plr-158595-02 date date legend x a b c d d1 year dear this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the represented facts are as follows x was incorporated on d1 a b c and d the shareholders of x on d1 intended x to be an s_corporation effective for the year taxable_year but form_2553 election by a small_business_corporation was not filed timely this intent is evidenced by the stockholders’ agreement dated d1 which states plr-158595-02 that x will elect to be taxed under subchapter_s accordingly x requests a ruling that it will be treated as an s_corporation effective d1 sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x’s year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x sincerely yours j thomas hines j thomas hines chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c no united_states tax_court michael e nestor petitioner v commissioner of internal revenue respondent docket no 5372-00l filed date this opinion addresses petitioner’s p through tax years respondent r issued notices of deficiency to petitioner p for tax years through p received the notices of deficiency for tax years but did not file a petition for redetermination with the court r issued to p a notice_of_intent_to_levy with respect to p’s taxes due for tax years p requested and r held a hearing pursuant to sec_6330 i r c relating to p’s tax years in his request for a hearing p requested that r provide him copies of the assessment records at the hearing r did not permit p to challenge his underlying tax_liability for tax years after the hearing r sent a notice_of_determination to p stating that collection of his tax_liability for would proceed r provided assessment records to p after the hearing and before the trial in this case held p may not contest his underlying tax_liability for tax years because p received notices of deficiency for those years sec_6330 held further r’s determination to proceed with collection with respect to p’s tax years was not an abuse_of_discretion michael e nestor pro_se david c holtz for respondent colvin judge on date respondent sent petitioner a notice_of_determination concerning collection action s under sec_6320 and or the lien or levy determination in which respondent determined to proceed with collection of deficiencies in petitioner’s income_tax additions to tax interest and the frivolous_return penalty1 for through in this opinion we decide whether petitioner may contest his underlying tax_liability for tax years we hold that he may not whether respondent’s determination to proceed with collection with respect to petitioner’s tax years was an abuse_of_discretion we hold that it was not we will dismiss for lack of jurisdiction the portion of this case that relates to the frivolous_return penalties for tax years 115_tc_324 section references are to the internal_revenue_code as amended findings_of_fact some of the facts have been stipulated and are so found petitioner resided in california when he filed the petition in this case a petitioner’s tax returns and the notices of deficiency petitioner filed purported federal_income_tax returns for in date and he timely filed a purported return on date on each return he reported that he had no wages other income or tax_liability after petitioner filed those tax returns and before date when respondent issued the notice_of_intent_to_levy discussed at paragraph b below respondent assessed the frivolous_return penalty under sec_6702 for respondent issued notices of deficiency to petitioner for each of his tax years determining deficiencies and additions to tax as follows petitioner’s return bears the date the parties stipulated that petitioner filed his return on or before date year deficiency sec_6651 sec_6654 additions to tax dollar_figure dollar_figure dollar_figure big_number dollar_figure dollar_figure big_number dollar_figure -0- big_number dollar_figure -0- big_number dollar_figure -0- big_number dollar_figure -0- big_number dollar_figure dollar_figure big_number dollar_figure -0- petitioner received the notices of deficiency for but he did not file a petition for redetermination of the deficiencies for b the lien and levy proceeding on date respondent issued to petitioner a notice_of_intent_to_levy and notice of your right to a hearing relating to petitioner’s tax years on date petitioner filed a request for a collection_due_process_hearing form for tax years in which he contended there was no valid underlying assessment of taxes he did not receive the statutory ‘notice and demand’ for payment of the taxes at issue he did not receive a valid notice_of_deficiency and he had no underlying tax_liability in his request for a hearing petitioner asked that the appeals officer have at the hearing verification that the the record is silent as to why petitioner requested a hearing with respect to tax_year because respondent’s notice_of_intent_to_levy did not include that year is not in issue here requirements of any applicable law or administrative procedure have been met for example a copy of the statutory notice_and_demand for payment a copy of form 23c summary record of assessment and the pertinent parts of the assessment which set forth the name of the taxpayer the date of the assessment the character of the liability assessed the taxable_period and the amount assessed delegation of authority from the secretary to the person other than the secretary who signed the verification required under sec_6330 and proof that notices of deficiency were sent to petitioner c the sec_6330 hearing and respondent’s notice_of_determination on date respondent’s appeals_office conducted a hearing in petitioner’s case for tax years petitioner attended the hearing he was not given an opportunity to challenge his underlying tax_liability for at the hearing at the hearing he asked the appeals officer to provide verification that the requirements of any applicable law or administrative procedures had been met to give him copies of a notice_and_demand for payment and to show him anything that indicated he owed income_tax or that he was required to pay federal_income_tax the appeals officer did not comply with petitioner’s requests and told petitioner that the hearing was limited to alternatives to collection at the hearing petitioner did not challenge the appropriateness of the intended method of collection offer an alternative means of collection or raise a spousal defense to collection on date respondent sent petitioner a notice_of_determination concerning collection action s under sec_6320 and or the determination_letter in which respondent stated that all applicable laws and administrative procedures had been met and that collection from petitioner of his tax_liability for would proceed on date petitioner filed a petition for lien or levy action under sec_6320 or sec_6330 opinion a whether petitioner may contest his underlying tax_liabilities for petitioner contends that he was improperly precluded at the sec_6330 hearing from challenging his underlying tax_liability for tax years he bases this on the claim that the notices of deficiency he received were not valid because they were not prepared or issued by the secretary and because the director of the service_center who prepared and issued them did not give petitioner a copy of the order delegating authority from the secretary to her petitioner’s contention lacks merit the secretary or_his_delegate may issue notices of deficiency sec_6212 sec_7701 and a i the secretary’s authority to issue notices of deficiency was delegated to the district_director and also to the director of the service_center who issued the notices of deficiency in this case see 95_tc_624 affd without published opinion 956_f2d_1168 9th cir 88_tc_167 44_tc_382 affd 373_f2d_45 10th cir sec_301_6212-1 sec_301_7701-9 proced admin regs a taxpayer may contest the existence or amount of the underlying tax_liability at the sec_6330 hearing only if the taxpayer did not receive a notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability sec_6330 sec_6330 bars petitioner from contesting the existence or amount of his tax_liabilities for because he received notices of deficiency for those years b whether respondent’s determination to proceed with collection as to petitioner’s tax years was an abuse_of_discretion the appeals officer verified that the internal_revenue_service irs had met the requirements of any applicable laws and administrative procedures see sec_6330 sec_301 e proced admin regs the second sentence of sec_6203 provides that the secretary shall upon request of the taxpayer provide the taxpayer a copy of the record of assessment petitioner points out that the appeals officer did not have at the hearing the documents the notice_and_demand for payment verification that the requirements of applicable law or administrative procedure have been met form 23c other assessment records and the delegation_order to the person other than the secretary who signed the verification that petitioner had requested in his request for a sec_6330 hearing petitioner contends that he was entitled to receive assessment records under sec_6203 petitioner also contends that the appeals officer’s verification was incorrect and that the assessments were invalid because he did not receive those documents at the hearing the appeals officer used forms certificate of assessments and payments to verify the assessments even though petitioner specified form 23c it was not an abuse_of_discretion for the appeals officer to use forms for purposes of complying with sec_6330 115_tc_35 sec_6330 does not require the appeals officer to give the taxpayer a copy of the verification that the requirements of any applicable law or administrative procedure have been met sec_301_6330-1 proced admin regs supra requires that the appeals officer obtain verification before issuing the determination not that he or she provide it to the taxpayer there is no requirement under internal revenue laws or regulations that the appeals officer give the taxpayer a copy of the delegation of authority from the secretary to the person other than the secretary who signed the verification required under sec_6330 the appeals officer did not give petitioner a copy of the record of assessment at or before the hearing as petitioner had requested respondent gave petitioner copies of the forms prior to the trial in this case the forms that respondent gave petitioner before trial showed that the amounts at issue were properly assessed and petitioner did not show at trial any irregularity in the assessment procedure that would raise a question about the validity of the assessments requiring the appeals officer to provide petitioner with a second copy of petitioner’s forms at this time would delay disposition of this case petitioner was not prejudiced in any way by the fact that he first received copies of those records after the sec_6330 hearing thus whether or not the second sentence of sec_6203 is an applicable law or administrative procedure referred to in sec_6330 it is clear that no bona_fide interest would be served by further delaying the collection of petitioner’s tax_liability for petitioner contends that the notice_of_intent_to_levy improperly failed to identify the code sections which establish his alleged tax_liability he contends that the assessment of tax was improper because he filed tax returns for which showed that he owed no income taxes for those years he also asserts that respondent may not assess tax because sec_6201 provides for self-assessment and only petitioner can determine what tax he owes petitioner’s contentions are frivolous there is no requirement that the notice_of_intent_to_levy identify the code sections which establish the taxpayer’s liability for tax additions to tax or penalties sec_6330 permits a taxpayer to challenge the appropriateness of the intended method of collection offer alternatives to collection or raise a spousal defense to collection petitioner gives no bona_fide basis for his claim that the collection action was not appropriate we conclude that respondent’s determination to proceed with collection of the tax_liabilities assessed against petitioner for those years was not an abuse_of_discretion accordingly an appropriate order will be issued reviewed by the court wells cohen gerber ruwe whalen halpern and thornton jj agree with this majority opinion marvel j concurs in result only we also hold herein that petitioner’s contentions discussed in par b slip op pp lack merit for years swift j concurring arguably the majority opinion treats all assessment records as if they are the same and states overly broadly majority op p that sec_6330 does not require the appeals officer to give the taxpayer a copy of the verification that the requirements of any applicable law or administrative procedure have been met the quoted language is susceptible of being read to mean that appeals officers need not give or show to taxpayers copies of computerized transcripts of account or forms surely we need not so hold in this case petitioner is not making that argument at the appeals hearing herein the appeals officer had a copy of the computerized transcript of account or forms relating to petitioner and nothing in the opinion suggests that the appeals officer refused to provide petitioner with a copy of those specific documents repeatedly in connection with the appeals hearing and the litigation herein petitioner insisted that he be provided not with a transcript of account or a form_4340 but rather with a form 23c and with the summary record of assessment as provided for in sec_301_6203-1 proced admin regs at the appeals hearing petitioner was not interested in obtaining from respondent a copy of the transcript of account or the form_4340 like many other tax protesters petitioner does not regard a computerized transcript of account or a form_4340 as satisfying either the verification requirements of sec_6330 or the documentation provisions of sec_301_6203-1 proced admin regs e g 117_tc_183 115_tc_35 as we noted in 115_tc_35 procedures in collection hearings under sec_6330 were intended by congress to be handled in a manner similar to procedures used in traditional appeals hearings for years as far as i know without exception and long before enactment of sec_6320 and sec_6330 respondent’s audit and appeals representatives in all collection contexts have provided to taxpayers copies of transcripts of account and of forms relating to the taxpayers i hope that this opinion will not be read to suggest that such documents easily and routinely obtained by respondent’s collection personnel and by respondent’s appeals officers need no longer be made available to taxpayers and to their representatives particularly in collection contexts the new collection procedures under sec_6320 and sec_6330 should not be interpreted to change the routine availability to taxpayers from respondent's representatives of transcripts of account and of forms in light of comments made in judge foley’s dissenting opinion regarding the relationship of the verification requirements of sec_6330 with taxpayers’ rights under sec_6203 and the related regulations to obtain from respondent a copy of the record of the assessment some further comments are appropriate regarding those two quite different statutory provisions in collection hearings respondent has certain specified verification requirements under sec_6330 relating to proposed collection activity we held in davis v commissioner supra pincite that absent irregularities the verification requirement with regard to the existence of an assessment an applicable administrative procedure is satisfied if the appeals officers obtain forms or transcripts of account which corroborate the relevant assessment information regarding the taxpayers under sec_6203 taxpayers have a right to request and to receive a copy of the record of assessment and if not delivered to the taxpayers by respondent taxpayers may have a right to sue respondent under the freedom_of_information_act u s c sec_552 and sec_601_702 statement of procedural rules to require respondent to provide the documents requested see eg dickstein v irs 846_f2d_1382 9th cir in my opinion that right of taxpayers under sec_6203 is not part of respondent’s verification requirements under sec_6330 further consideration of other provisions of sec_6330 buttresses this analysis it is helpful to look closely at the specific language not only of sec_6330 but also of sec_6330 and sec_6330 imposes the affirmative verification requirements on respondent with regard to applicable law or administrative procedure the verification requirements are independent of any issue raised by taxpayers in this case any holding that respondent has not satisfied that duty would be inconsistent with davis v commissioner supra sec_6330 then provides that taxpayers may raise at collection hearings any relevant issue it does not say that taxpayers may raise any issue or that the appeals officers should guess as to what issues the taxpayers might have raised sec_6330 provides similar express language limiting the scope of collection hearings sec_6330 states that appeals officers need only consider the issues raised by taxpayers and sec_6330 states that only legitimate concerns of taxpayers need be taken into account in considering the need for efficient collection action accordingly and particularly where taxpayers are making tax_protester arguments in collection hearings under sec_6330 and in subsequent court proceedings only issues that are actually raised by taxpayers and that constitute relevant legitimate and good_faith issues need be considered by appeals officers and by the courts the referenced statutory language suggests strongly to me and i would so hold that issues not raised as well as tax_protester issues need not be considered by appeals officers in collection hearings under sec_6330 and that tax_protester issues may and should be summarily dismissed by the courts further appeals officers and the courts need not speculate about what issues taxpayers might have raised were they not tax protesters or were they represented by other lawyers petitioner herein is a flagrant tax_protester petitioner did not file his income_tax returns until on the late-filed tax returns petitioner reflected no financial information petitioner claimed his wages were not income at the evidentiary hearing before the court petitioner asserted since income taxes are based on self assessment under code sec_6201 i alone can determine what i owe at the appeals hearing and at the hearing before the tax_court in this case petitioner raised no relevant legitimate or good_faith issue and we have no business speculating as to whether petitioner may ever raise any such issue the maxim justice delayed is justice denied applies not only to cases eventually decided in favor of taxpayers but also to cases to be in the final regulations under sec_6330 the position is taken that taxpayers may raise in court only issues that actually were raised by the taxpayers at the appeals hearings t d 2002_6_irb_466 t d q a-f5 2002_6_irb_477 decided in favor of respondent particularly those involving a postponement of tax collection respectively in my opinion arguments made by taxpayers in administrative and court hearings under sec_6320 and sec_6330 that implicate only frivolous arguments and that implicate the postponement of the collection_of_taxes owed should be dealt with by respondent’s appeals_office and by this court summarily and decisively halpern j concurring i agree with the majority that if in determining to proceed with collection respondent erred in informing petitioner that all applicable laws and administrative procedures had been met such error was harmless error i write separately to express my views as to why the majority is correct i introduction petitioner requested and received a so-called collection_due_process_hearing at that hearing the appeals officer was required to obtain verification that the requirements of any applicable law or administrative procedure had been met sec_6330 following the hearing the appeals officer informed petitioner that all applicable laws and administrative procedures had been met and that collection from petitioner of his tax_liability for through would proceed petitioner contends that he was entitled to receive assessment records under sec_6203 the majority finds the appeals officer did not give petitioner a copy of the record of assessment at or before the hearing a sec_1 sec_6203 provides sec_6203 method of assessment the assessment shall be made by recording the liability of the taxpayer in the office of the secretary in accordance with rules or regulations prescribed by the secretary upon request of the taxpayer the secretary shall furnish the taxpayer a copy of the record of the assessment emphasis added petitioner had requested respondent gave petitioner copies of the forms prior to the trial in this case the forms that respondent gave petitioner before trial showed that the amounts at issue were properly assessed and petitioner did not show at trial any irregularity in the assessment procedure that would raise a question about the validity of the assessments petitioner was not prejudiced in any way by the fact that he first received copies of those records after the sec_6330 hearing majority op p emphasis added as will be shown a person seeking judicial review of agency actions bears the burden of demonstrating prejudice from any error since petitioner did not show prejudice the rule_of prejudicial error is applicable and petitioner is entitled to no relief ii administrative_procedure_act i have previously stated my belief that various provisions of the administrative_procedure_act u s c secs hereafter sections of which are cited a sec_5 u s c inform our authority under sec_6330 to review a determination made by an appeals officer pursuant to sec_6330 117_tc_159 halpern j concurring among the applicable apa provisions i sec_5 u s c sec_706 which in pertinent part provides scope of review to the extent necessary to decision and when presented the reviewing court shall decide all relevant questions of law interpret constitutional and statutory provisions and determine the meaning or applicability of the terms of an agency action the reviewing court shall-- compel agency action unlawfully withheld or unreasonably delayed and hold unlawful and set_aside agency action findings and conclusions found to be-- a arbitrary capricious an abuse_of_discretion or otherwise not in accordance with law d without observance of procedure required_by_law in making the foregoing determinations the court shall review the whole record or those parts of it cited by a party and due account shall be taken of the rule_of prejudicial error emphasis added the rule_of prejudicial error otherwise the doctrine_of harmless error as applied to an administrative action provides that the reviewing court shall disregard procedural errors unless the complaining party was prejudiced thereby as recently summarized by the court_of_appeals for the first circuit the doctrine_of harmless error is as much a part of judicial review of administrative action as of appellate review of trial_court judgments indeed the administrative_procedure_act u s c sec_706 says that in reviewing agency action the court shall take due account of the rule_of prejudicial error ie whether the error caused actual prejudice and while many of the decisions involve harmless substantive mistakes no less an authority than judge friendly in kerner v celebrezze 340_f2d_736 2d cir has applied the harmless error rule to procedural error as has the circuit_court of appeals for the district of columbia circuit that most often reviews agency action 269_f3d_49 1st cir fn ref omitted the court_of_appeals added obviously a court must be cautious in assuming that the result would be the same if an error procedural or substantive had not occurred and there may be some errors too fundamental to disregard but even in criminal cases involving constitutional error courts may ordinarily conclude that an admitted and fully preserved error was harmless beyond a reasonable doubt agency missteps too may be disregarded where it is clear that a remand would accomplish nothing beyond further expense and delay id pincite emphasis added citations omitted the party seeking judicial review of an agency action bears the burden of demonstrating prejudice from any error 169_f3d_21 d c cir under the apa we will not set_aside agency action unless the party asserting error can demonstrate prejudice from the error internal quotation marks and brackets omitted it is no bar to application of the doctrine_of harmless error that the agency error complained of is the omission of a statutory prerequisite see eg hydro engg inc v united in certain circumstances sec_7491 imposes on the commissioner the burden_of_proof in connection with factual issues relevant to determining the liability of the taxpayer for any income estate or gift_tax see sec_7491 even if sec_7491 is applicable to the determination of whether petitioner has demonstrated prejudice petitioner has failed to introduce credible_evidence of prejudice and thus must carry the burden_of_proof see sec_7491 states 37_fedclaims_448 the standard of review for the denial of a procedural right at the agency level even one that is statutory is harmless error emphasis added the reviewing court must consider whether deviation from the requirements of the statute would affect the interests that the statute is designed to protect and must take into account the general principle that public rights should not be prejudiced because of immaterial errors on the part of public servants 83_f3d_391 fed cir citing 476_us_253 in which the court said we would be most reluctant to conclude that every failure of an agency to observe a procedural requirement voids subsequent agency action especially when important public rights are at stake iii discussion sec_6203 provides that on request of the taxpayer the secretary shall furnish the taxpayer a copy of the record of assessment sec_6203 does not provide any remedy for the secretary’s failure to comply in 510_us_43 in connection with agency disregard of statutorily imposed timing requirements the supreme court stated we have held that if a statute does not specify a consequence for noncompliance with statutory timing provisions the federal courts will not in the ordinary course impose their own coercive sanction the court relied on 495_us_711 failure to comply with bail reform act's prompt hearing provision for the following proposition there is no presumption or general_rule that for every duty imposed upon the court or the government and its prosecutors there must exist some corollary punitive sanction for departures or omissions even if negligent see also 63_f3d_1107 fed cir an agency’s violation of a statutory procedural requirement does not necessarily invalidate the agency action especially where congress has not expressed any consequences for such a procedural violation in effect sec_6330 provides that prior to making his determination to proceed with collection an appeals officer shall obtain verification that all applicable laws or administrative procedures have been met see sec_6330 a as judges foley’s and swift’s separate opinions in this case show it is debatable whether sec_6203 is an applicable law assuming that it is however the majority has concluded that petitioner was not prejudiced in any way by the delay in providing him with the required record the appeals officer’s verification that all applicable laws had been met may have been in error nevertheless the majority has in effect concluded that it was harmless error given the lack of a specific remedy in sec_6203 and respondent’s eventual compliance with the statute without demonstrable prejudice to petitioner i agree with the majority’s conclusion requiring the appeals officer to provide petitioner with a second copy of petitioner’s forms at this time would needlessly delay disposition of this case majority op p iv conclusion if the appeals officer committed error at all it was harmless petitioner has failed to show that the appeals officer’s determination would have differed in the slightest if petitioner had been provided the assessment record prior to or at the appeals hearing the majority is correct whalen and thornton jj agree with this concurring opinion beghe j concurring the majority acknowledge that sec_6203 requires the secretary upon request of the taxpayer to furnish the taxpayer a copy of the record of the assessment but observe that neither sec_6330 nor the regulations thereunder require the appeals officer to furnish the taxpayer a copy of the verification that the requirements of any applicable law or administrative procedure have been met majority op p nor i would add does sec_6330 by its terms require the appeals officer to furnish a copy of the record of the assessment at the hearing however as the dissent points out it is difficult to see how the appeals officer could have verified that the requirements of all applicable laws had been met when respondent had not complied with sec_6203 in any event it should be standard procedure in collection cases for the appeals officer no later than the commencement of the hearing to furnish the taxpayer a form_4340 confirming the assessment in so doing the appeals officer will provide the taxpayer minimum assurance that the amounts claimed by the service in the lien or levy proceeding notice are due and owing by furnishing the taxpayer a form_4340 at or before the hearing the service will remove any excuse of the taxpayer for not coming to grips with the relevant issues described in sec_6330 in the case at hand the appeals officer’s failure to furnish the taxpayer a form_4340 at or before the hearing was harmless error as the majority correctly hold no purpose would be served by remanding this case for a hearing when the only defect was the appeals officer’s failure to provide a document that has now been provided and which conclusively establishes the obligation that the service seeks to enforce because petitioner has already shown a penchant for causing delay and taking frivolous and groundless positions this is not an appropriate case for imposing any sanction on respondent for delay in furnishing the form_4340 however a taxpayer who could show that he suffered genuine harm as a result of the service’s delay in furnishing the form_4340 should be entitled to a remedy cf 112_tc_183 for example a taxpayer who shows that respondent’s delay in furnishing form_4340 caused the taxpayer to incur additional interest and that no significant aspect of the delay can be attributed to the taxpayer might be entitled to an abatement of interest under sec_6404 from the date of the administrative hearing until the service furnishes the taxpayer form_4340 by providing evidence of the assessment at or before the hearing as a matter of course the service satisfies sec_6203 and avoids unnecessary delay and expense and any possible sanction i dissented in dismay in 117_tc_204 from the court’s continued abstention from taking jurisdiction in collection disputes over the dollar_figure sec_6702 frivolous_return penalty our decision in johnson required that the case be dismissed entitling a taxpayer patently seeking delay to achieve his goal by refiling in the district_court i concur that the johnson precedent requires us to dismiss the portion of the case at hand that relates to the frivolous_return penalties this will allow petitioner to refile the frivolous_return penalty issue for all years in the district_court even as collection of the assessed deficiencies in petitioner’s income_tax additions to tax and interest for the years goes forward the resultant splitting of what should have been and remained one collection proceeding will entail an absurd waste of time and other resources i renew my plea for congressional enactment of an explicit grant of jurisdiction to this court to provide one-stop shopping in all cases under sec_6320 and sec_6330 a possible model is the amendment of sec_6214 by the tax_reform_act_of_1986 publaw_99_514 sec a 100_stat_2754 which furnished jurisdiction to the tax_court to review the commissioner’s determination to collect the addition_to_tax under sec_6651 see downing v commissioner t c slip op pincite laro j concurring in result the majority holds that respondent’s determination to proceed with collection of the tax_liabilities assessed against petitioner for those years was not an abuse_of_discretion maj op p on the basis of this court’s opinion in 117_tc_183 lunsford ii a decision with which i dissented and continue to disagree but for which i shall respectfully follow as the view of this court i agree with the majority’s holding as was true in lunsford ii petitioner has failed to advance in this proceeding any bona_fide argument that makes it either necessary or productive to remand this case to irs appeals to consider id pincite a holding for respondent is therefore appropriate i also write to clarify my understanding of the court’s rejection of petitioner’s argument that the appeals officer i note in passing however that lunsford ii appears to have been sapped of some of its vitality by the treasury department’s recent release of final regulations under sec_6330 the majority in lunsford ii did not require the office of appeals appeals to conduct a face-to-face collection_due_process cdp hearing with the taxpayers even though the taxpayers had alleged in their petition that they wanted such a face-to-face hearing and that the absence of a face-to-face hearing deprived them of their right to present their case 117_tc_183 laro j dissenting whereas the final regulations under sec_6330 observe that a cdp hearing need not be held face-to-face the regulations indicate that the taxpayer may demand that a cdp hearing be scheduled face-to-face the regulations mandate that a taxpayer who requests a face-to- face cdp hearing must be offered an opportunity for a hearing at the appeals_office closest to the taxpayer’s residence or in the case of a business taxpayer the taxpayer’s principal_place_of_business sec_301_6330-1 q a-d6 and d7 proced admin regs failed to verify that the requirements of any applicable law or administrative procedures had been met maj op p as was true here and as was true in 115_tc_35 the case upon which the majority relies to reject that argument the court did not hold that an appeals officer’s reliance on form_4340 certificate of assessments and payments was sufficient to meet sec_6330’s requirement that the appeals officer shall at the hearing obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met in davis v commissioner supra pincite and as was true here majority op p the narrow holding of the court was that an appeals officer may at the hearing rely on form_4340 to verify that the taxes in question were assessed the fact that form_4340 is insufficient compliance with sec_6330 in its entirety is seen by a plain reading of the relevant legislative_history the senate_finance_committee report provides that during the hearing the irs is required to verify that all statutory regulatory and administrative requirements for the proposed collection action have been met irs verifications are expected to include but not be limited to showings that the revenue_officer recommending the collection action has verified the taxpayer’s liability the estimated expenses of levy and sale will not exceed the value of the property to be seized the revenue_officer has determined that there is sufficient equity in the property to be seized to yield net_proceeds from sale to apply to the unpaid tax_liabilities and with respect to the seizure of the assets of a going business the revenue_officer recommending the collection action has thoroughly considered the facts of the case including the availability of alternative collection methods before recommending the collection action s rept pincite 1998_3_cb_537 form_4340 simply does not meet each of these verification requirements form_4340 was sufficient both here and in davis because the only irregularity alleged as to the verification requirement concerned the proper assessment vasquez and gale jj agree with this concurring in result opinion the fact that this quoted text relates solely to the verification requirement of sec_6330 is seen not only by reading the quoted text but by reading the text that appears immediately thereafter that text which relates to sec_6330 provides the taxpayer or affected third party is allowed to raise any relevant issue at the hearing issues eligible to be raised include but are not limited to challenges to the underlying liability as to existence or amount appropriate spousal defenses challenges to the appropriateness of collection actions and collection alternatives which could include the posting of a bond substitution of other assets an installment_agreement or an offer-in-compromise s rept pincite 1998_3_cb_537 foley j dissenting in the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_746 congress enacted sec_6320 and sec_6330 to provide safeguards for persons subject_to collection actions sec_6320 and sec_6330 generally provide that respondent cannot proceed with collection until the taxpayer has been given notice and the opportunity for an appeals_office hearing see sec_6330 b e in the case of any hearing conducted under sec_6330 the appeals officer shall at the hearing obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met sec_6330 petitioner contends that respondent’s verification was incorrect because respondent did not at the sec_6330 hearing provide him with proof of assessments i agree despite respondent’s purported verification that all statutory or administrative procedures were met respondent did not satisfy sec_6203's requirement that the secretary provide a copy of the record of assessment eg form_4340 certificate of assessments payments and other specified matters form to the taxpayer upon his request accordingly respondent’s verification was erroneous sec_6203 provides that the assessment shall be made by recording the liability of the taxpayer in the office of the secretary in accordance with rules or regulations prescribed by the secretary upon request of the taxpayer the secretary shall furnish the taxpayer a copy of the record of the assessment the majority choose not to decide whether the second sentence of sec_6203 is an ‘applicable law or administrative procedure’ referred to in sec_6330 c majority op p sec_6203 in its entirety is such a law assessment is an integral part of the collection process and the method by which respondent makes an assessment is prescribed in sec_6203 in addition regulations promulgated by respondent provide that if the taxpayer requests a copy of the record of assessment he shall be furnished a copy of the pertinent parts of the assessment which set forth the name of the taxpayer the date of assessment the character of the liability assessed the taxable_period if applicable and the amounts assessed sec_301_6203-1 proced admin regs furnishing form_4340 to the taxpayer satisfies the requirements of sec_6203 see eg 10_f3d_1440 9th cir respondent however failed to adhere to sec_6203 and sec_301_6203-1 proced admin regs thus the appeals officer incorrectly determined that the requirements of applicable laws were met see sec_6330 prior to the sec_6330 hearing respondent did not provide petitioner with forms moreover at the hearing respondent did not allow petitioner to discuss the assessments thus respondent deprived petitioner of his right to raise relevant issues relating to the assessments see sec_6330 the appropriate remedy is to have a further hearing on this matter the majority may wonder what bona_fide interest would be served in short the bona_fide interest served is compliance with the provisions of sec_6330 chiechi j agrees with this dissenting opinion