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 ita b04 plr-131347-05 date date -------------- -------------------------- ---------------------------------------------- ----------------------------------------------------------------------------------------- trust --------- -------------------------------------------------- s corp -------------------------------------------------- buyer a dear -------------- this responds to your request for a private_letter_ruling dated date regarding sec_1031 of the internal_revenue_code statement of facts trust and s corp are related_persons within the meaning of sec_1031 trust owns building and s corp owns building trust has transferred building including land and improvements the tangible_personal_property leases and other assets associated with building to buyer trust wants to defer the recognition of the gain on the transfer of building therefore trust will acquire building including land and improvements as one of its identified replacement properties in exchange for building in a transaction intended to qualify for nonrecognition treatment under sec_1031 s corp will also engage in an exchange of building for other like-kind_property in a transaction intended to qualify for nonrecognition treatment under sec_1031 plr-131347-05 to facilitate their exchanges trust and s corp will enter into exchange agreements with a qualified_intermediary qi described in sec_1_1031_k_-1 pursuant to trust's exchange_agreement qi will for purposes of sec_1031 and the regulations thereunder be treated as the seller of building to buyer moreover qi will be treated as acquiring building from s corp and transferring it to trust in exchange for building similarly pursuant to s corp's exchange_agreement qi will be treated as acquiring property to replace building s corp's replacement_property and transferring it to s corp in exchange for building s corp's replacement_property is prior to its transfer to qi owned by a party that is not related to either trust or s corp once all the transactions are completed trust will own building s corp will own s corp's replacement_property and buyer will own building trust represents that it will not dispose_of building within two years of its receipt as replacement_property s corp represents that it will not dispose_of s corp's replacement_property received in exchange for building within two years of its receipt as replacement_property for purposes of these representations both taxpayers assert that the principles of sec_1031 apply trust and s corp each seek a ruling regarding the application of sec_1031 to their respective exchanges after trust acquires building qi will still hold approximately dollar_figurea of the proceeds of the sale of building to buyer trust has designated and intends to acquire additional like- kind properties from unrelated third parties in the transaction that will qualify under sec_1031 in the event that trust is unable to acquire such like-kind_property these funds will be distributed by qi to trust trust also requests a ruling that if it receives such cash proceeds they will cause trust to recognize gain on the transfer of building but not in excess of the amount of cash distributed outright to trust from qi statement of law sec_1031 generally provides that no gain_or_loss shall be recognized on the exchange of property held for productive use in a trade_or_business or for investment if such property is exchanged solely for property of like_kind which is to be held either for productive use in a trade_or_business or for investment sec_1031 provides that if an exchange would be within sec_1031 but for the fact that cash or other non-like kind property is received in the exchange gain is recognized but in an amount not in excess of the cash or other non-like kind property received in the exchange sec_1031 sets forth special rules for exchanges between related_persons sec_1031 provides that if a a taxpayer exchanges property with a related_person b there is nonrecognition_of_gain_or_loss to the taxpayer in accordance with sec_1031 with respect to the exchange and c within years of the date of the last transfer that was part of the exchange either the taxpayer or the related_person disposes of the property plr-131347-05 received in the exchange then there is no nonrecognition_of_gain_or_loss in the exchange in other words the gain_or_loss that was deferred under sec_1031 must be recognized any gain_or_loss the taxpayer is required to recognize by reason of sec_1031 is taken into account as of the date of the disposition of the property received in the exchange the second_disposition sec_1031 provides that certain dispositions will not be taken into account for purposes of sec_1031 these include any disposition a after the earlier of the death of the taxpayer or the death of the related_person or b in a compulsory or involuntary_conversion within the meaning of sec_1033 if the exchange occurred before the threat or imminence of such conversion the excepted dispositions also include a disposition with respect to which it is established to the satisfaction of the secretary that neither the exchange nor the second_disposition had as one of its principal purposes the avoidance of federal_income_tax sec_1031 provides that sec_1031 shall not apply to any exchange that is part of a transaction or series of transactions structured to avoid the purposes of sec_1031 thus if a transaction is set up to avoid the restrictions on exchanges between related_persons sec_1031 operates to prevent nonrecognition of the gain_or_loss on the exchange in revrul_2002_83 2002_2_cb_927 a taxpayer transfers relinquished_property to a qualified_intermediary in exchange for replacement_property formerly owned by a related_party as part of the transaction the related_party receives cash for the replacement_property the ruling holds that because the taxpayer's use of the qualified_intermediary was to avoid the application of sec_1031 the taxpayer under sec_1031 was not entitled to nonrecognition treatment under sec_1031 analysis in the present case sec_1031 is not applicable to currently tax trust's disposition of building because trust is exchanging property with a qualified_intermediary who is not a related_party however sec_1031 provides that sec_1031 shall not apply to any exchange that is part of a transaction or series of transactions structured to avoid the purposes of sec_1031 thus sec_1031 will not apply if trust's exchange is structured to avoid the purposes of sec_1031 both the ways_and_means_committee report and the senate_finance_committee print describe the policy concern that led to enactment of this provision because a like-kind_exchange results in the substitution of the basis of the exchanged property for the property received related parties have engaged in like-kind_exchanges of high basis property for low basis property in anticipation of the sale of the low basis property in order to reduce or avoid the recognition of gain on the subsequent sale basis shifting also can be used to accelerate a loss on retained property the plr-131347-05 committee believes that if a related_party exchange is followed shortly thereafter by a disposition of the property the related parties have in effect 'cashed out' of the investment and the original exchange should not be accorded nonrecognition treatment h_r rep no 101st cong 1st sess s print no pincite the committee reports also included the following example of when sec_1031 applies if a taxpayer pursuant to a pre-arranged plan transfers property to an unrelated party who then exchanges the property with a party related to the taxpayer within years of the previous transfer in a transaction otherwise qualifying under sec_1031 the related_party will not be entitled to nonrecognition treatment under sec_1031 h_r rep no pincite s print no pincite in revrul_2002_83 the service discussed and applied sec_1031 to the following facts individual a owns real_property property with a fair_market_value of dollar_figurex and an adjusted_basis of dollar_figurex individual b owns real_property property with a fair_market_value of dollar_figurex and an adjusted_basis of dollar_figurex both property and property are held for investment within the meaning of sec_1031 a and b are related_persons within the meaning of sec_267 c an individual unrelated to a and b wishes to acquire property from a a enters into an agreement for the transfers of property and property with b c and a qualified_intermediary qi qi is unrelated to a and b pursuant to their agreement on date a transfers property to qi and qi transfers property to c for dollar_figurex on date qi acquires property from b pays b the dollar_figurex sale proceeds from qi's sale of property and transfers property to a in analyzing these facts under sec_1031 the service quoted the legislative_history cited above for the proposition that sec_1031 is intended to apply to situations in which related parties effectuate like-kind_exchanges of high basis property for low basis property in anticipation of the sale of the low basis property in such case the original exchange should not be accorded nonrecognition treatment under the facts in the revenue_ruling a and b were attempting to sell property to an unrelated party while using the substituted_basis rule_of sec_1031 to reduce the gain on such sale from dollar_figurex to dollar_figure this allowed the parties to cash_out of their investment in property without the recognition of gain the service concluded that the transaction was structured to avoid the purposes of sec_1031 and therefore a had gain of dollar_figurex on its transfer of property the legislative_history underlying sec_1031 provides that any second_disposition by exchanging parties will not be taken into account for purposes of sec_1031 if it can be established to the satisfaction of the secretary that neither the initial exchange nor the second_disposition had as one of its principal purposes the avoidance of federal plr-131347-05 income_tax in that regard the conference committee report which adopted the senate amendment noted that the senate_finance_committee report provided that the non-tax avoidance exception generally will apply to dispositions in nonrecognition transactions h_r rep no 101st cong 1st sess in the present case the only disposition contemplated by the parties after trust receives building as replacement_property is the acquisition by s corp of s corp's replacement_property in another exchange under sec_1031 a nonrecognition_transaction thus because s corp is structuring its disposition of building as an exchange for like- kind replacement_property so that the gain on the transfer of building is eligible for nonrecognition treatment under sec_1031 sec_1031 and revrul_2002_83 are not applicable trust's exchange and s corp's exchange are structured as like-kind_exchanges qualifying under sec_1031 there is no cashing out of either party's investment in real_estate upon completion of the series of transactions both related parties will own property that is like-kind to the property they exchanged moreover neither party will have ever been in receipt of cash or other non-like kind property other than boot received in the exchange in return for the relinquished_property finally under sec_1031 any receipt of cash by trust from qi will result in gain to trust not in excess of the cash received based on the facts and representations submitted by the taxpayer we rule as follows sec_1031 will not apply to trigger recognition of any gain realized in trust's exchange of building for building or s corp's exchange of building for s corp's replacement_property provided that trust does not dispose_of building within two years of its receipt as replacement_property and s corp does not dispose_of s corp's replacement_property received in exchange for building within two years of its receipt as replacement_property if trust does not acquire replacement_property in addition to building and receives a distribution of dollar_figurea from qi receipt of such cash will cause trust to recognize gain on the building transaction but not in excess of the dollar_figurea distributed to it from qi disclaimers these rulings relate only to the application of sec_1031 to the exchanges described above no opinion is expressed regarding whether the other requirements of sec_1031 have been satisfied further even if the other requirements of sec_1031 are met nonrecognition treatment does not apply to the extent of any boot in the form of cash or other nonlike-kind real personal or intangible_property received by trust and s corp in the exchanges at issue see sec_1031 and revrul_67_255 1967_2_cb_270 finally except as specifically provided above no opinion is expressed as to the federal tax treatment of the transaction under any other provisions of the internal_revenue_code plr-131347-05 and the income_tax regulations that may be applicable or under any other general principles of federal income_taxation 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 this ruling is directed only to the taxpayers requesting it sec_6110 of the code 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 we enclose a copy of the letter for this purpose also enclosed is a copy of the letter showing the deletions proposed to be made when it is disclosed under sec_6110 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely michael j montemurro branch chief income_tax accounting cc


significant index nos department of the treasury internal_revenue_service washington d c tax exempt and government entities _ ‘ division ep raital in re company date date date date date date date amount ‘ amount amount amount this letter is in response to your request for a ruling concerning the plan which was submitted by your authorized representative on date and modified by a letter from your authorized representative dated date the company and its related companies historically provided products and services related to customers to wholesale and retail t on date the company and certain of its subsidiaries filed voluntary petitions for relief under chapter of the u s bankruptcy code since this date the company and its related companies have engaged in sales and other_disposition of a significant portion of their assets the remaining operations and the interests therein will be distributed to creditors in the manner described in the bankruptcy plan the plan is a single-employer defined benefit pension_plan effective date benefit accruals in the plan ceased the latest determination_letter received by the plan is dated date section of the plan provides that the employer’s contributions are contingent upon the deductibility of such contributions under sec_404 of the internal_revenue_code to the extent that a deduction for contributions is disallowed such contributions shall upon the written demand of the employer be returned to the employer by the trustee within one year after the date of disallowance in a motion dated date the company sought the authorization of the bankruptcy court to pursue the standard termination of the plan on date the motion was approved the company in coordination with the pension_benefit_guaranty_corporation pbgc’ has been proceeding with the standard termination of the plan and expects to complete the process within the next few months the plan was terminated effective date the plan’s assets have been allocated among all participants on date the company purchased two annuity_contracts that will fully fund the remaining pension liabilities for the plan on a termination basis the estimate to fully fund the pension liabilities in the plan is approximately amount however the assets in the plan are only estimated at amount hence the company contributed approximately amount to the plan to effect the standard termination actuaries servicing the plan considered numerous factors in calculating the pension in order to be sure that there were sufficient assets in the plan to liabilities in the plan effect a standard termination the actuaries used reasonable but conservative actuarial assumptions to estimate the amount necessary to fully fund the plan on a termination basis consequently the conservative estimate of the amount necessary to satisfy all plan liabilities is expected to be greater than the actual benefit liabilities of the plan once all benefits are paid hence the company expects that the plan will be overfunded at that time the amount of the overfunding will be returned to the company accordingly you have asked us to rule that the return to the company of amount will not violate sec_401 of the internal_revenue_code code and the return to the company of amount does not constitute an employer_reversion under sec_4980 of the code _ sec_401 of the code generally prohibits prior to the satisfaction of all liabilities with respect to employees and beneficiaries under the trust the diversion of trust assets for purposes other than for the exclusive benefit of the employees or beneficiaries for whom an employer maintains a qualified_pension plan ‘ sec_1_401_a_-2 of the income_tax regulations regulations provides that sec_1_401-2 a regulation promulgated prior to the employee_retirement_income_security_act_of_1974 erisa provides rules under sec_401 of the code and that regulation is applicable unless otherwise provided sec_1_401-2 of the regulations provides rules under sec_401 of the code for the impossibility of diversion under the trust instrument sec_1_401-2 provides that the intent and purpose in sec_401 of the code of the phrase prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust is to permit the employer to reserve the right to recover at the termination of the trust and only at such termination any balance remaining in the trust which is due to erroneous actuarial computations during the previous life of the trust a balance due to an erroneous actuarial computation is the surplus arising because actual requirements differ from the expected requirements even thought the latter were based upon previous actuarial valuations of liabilities or determinations of costs of providing pension benefits under the plan and were made by a person competent to make such determinations in accordance with reasonable assumptions and correct procedures related to the method of funding sec_404 of the code provides for the deduction for contributions of an employer to a qualified_plan sec_404 provides that in the case of any defined_benefit_plan except as provided in regulations the maximum amount deductible under sec_404 shall not be less than the unfunded_current_liability determined under sec_412 sec_404 provides that for certain terminating plans the limitation on the amount deductible under sec_404 is the amount required to make the plan sufficient for benefit liabilities revrul_91_4 1991_1_cb_57 provides that language providing for a return of contributions in the circumstances specified in sec_403 of erisa may be included in a plan intended to qualify under sec_401 of the code thus plans that are amended to include language that allows the return of a contribution made by an employer to a plan if the contribution is conditioned on its deductibility under sec_404 of the code and the deduction is subsequently disallowed will not fail to satisfy sec_401 of the code solely as the result of such an amendment revproc_90_49 1990_2_cb_620 sets forth the procedure whereby under certain circumstances a disallowance of the deduction of employer contributions to a qualified defined benefit pension_plan may be obtained thereby fulfilling a condition under which such contributions could revert to the employer sec_4980 of the code provides for a tax of percent on the amount of any reversion of plan assets to the employer from a qualified_plan sec_4980 provides that the tax imposed ey plan sec_4980 shall be paid_by the employer maintaining the sec_4980'of the code provides in part that the term qualified_plan means any plan meeting the requirements of sec_401 or sec_403 of the code other than a plan maintained by an employer if such employer has at all times been exempt from tax under subtitle a such term shall include any plan which at any time has been determined by the secretary_of_the_treasury to be a qualified_plan sec_4980 of the code defines the term employer_reversion to mean the amount of cash and the fair_market_value of other_property received directly or indirectly by an employer from the qualified_plan sec_4980 of the code provides in pertinent part that the term employer_reversion shall not include i except as provided in regulations any amount distributed to or on behalf of any employee or his beneficiaries if such amount could have been so distributed before termination of such plan without violating sec_401 or ii any distribution to the employer allowable under sec_401 in the case of a plan other than a multiemployer_plan by reason of mistake of fact or in the case of any plan by reason of the failure of the plan to initially qualify or the failure of the contributions to be deductible because the plan has received favorable determination letters the plan has been determined to be a qualified_plan under sec_401 of the code the company has made a contribution of amount to the plan in order to effect the standard termination of the plan this amount amount was determined by the actuaries servicing the plan using conservative assumptions so that annuity_contracts could be purchased for participants under the plan because reasonable but conservative assumptions were used in making the determination the company expects that amount will remain in the plan after all the plan’s benefit liabilities are satisfied amount would be considered the result of erroneous actuarial computations within the meaning of sec_1_401-2 of the regulations the return of this portion of the contribution to the company will not occur until after the satisfaction of all liabilities with respect to employees and beneficiaries of the trust of the plan accordingly the return to the company of amount will not violate sec_401 of the code amount is not deductible under sec_404 of the code because any amount contributed to the plan by the company is conditioned on deductibility one of the requirements of revrul_91_4 is satisfied by this ruling letter under the authority of revproc_90_49 we hereby disallow amount accordingly amount may be returned to the company under sec_401 of the code by reason of its failure to be deductible moreover amount is described in sec_4980 of the code and thus the return to the company of amount does not constitute an employer_reversion under sec_4980 of the code this ruling only addresses the two issues that we have ruled upon in particular we are not expressing any opinion as to deductibility of any particular contribution to the plan under sec_404 of the code 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 manager ep classification in to the manager ep compliance unit in and to your authorized representative pursuant to a power_of_attorney on file i in this office if you require further assistance in this matter please contact at sincerely yours jew e lohner f james e holland jr manager employee_plans technical


number release date id office uilc cca-129914-08 ---------- from ------------------- sent tue am to ------------------------------ cc ---------------------------- subject fw vs hi ------- - the answer provided by ------------ to the poa question is below it looks like the tax director can sign a please let me know if i can provide you with any more information thanks ---------- based on the facts provided the tax director of the u s branch may represent the taxpayer as a bona_fide officer of the corporate tmp circular_230 provides the regulations governing practice_before_the_irs part ii of form_2848 declaration of representative attempts to encapsulate the provisions of circular_230 for example items a b c g and r in part ii of form_2848 are listed within section of circular_230 which generally governs who may practice before the service items d e f k h and l in part ii of form_2848 are described by section of circular_230 who via section are eligible to practice to the extent provided in section section c iii permits a general_partner to represent a partnership section c iv permits a bona_fide officer of a corporation including a parent subsidiary or other affiliated_corporation association or organized group to represent a corporation association or organized group while form_2848 does not use the exact language of circular_230 in discussing officers we feel the language under section c iv governs therefore the tax director may represent the tmp via c iv and then via c iii can represent the taxpayer if the tax director still is reluctant to sign a form_2848 irm describes the information a non-irs document must contain for the service to accept such document as a power_of_attorney although such information includes a signed and dated statement from the representative that contains the declaration at issue as provided on the form_2848 please let me know if you have any further questions


internal_revenue_service number release date index numbers ----------------------------------------- -------------------------------------------------------- ------------------------------------- --------------------------------- 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 plr-118351-16 date december ----------------------------------------- x ------------------------------------------ -------------- state date ---------------------------- dear ---------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an election under sec_754 of the internal_revenue_code code facts the information submitted states that x is a state limited_liability_company that is classified as a partnership for federal tax purposes x’s tax_return for the taxable_year ended date was timely filed but a sec_754 election to adjust the basis of partnership property was inadvertently not filed with the return x represents that it has acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government law sec_754 provides in part that if a partnership files an election in accordance with the regulations prescribed by the secretary the basis of partnership property is adjusted in the case of a distribution_of_property in the manner provided in sec_734 and in the case of a transfer of a partnership_interest in the manner provided in sec_743 such an election shall apply with respect to all distributions of property by the partnership and plr-118351-16 to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides in part that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1_6031_a_-1 including extensions thereof for filing the return for the taxable_year sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than 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_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election under sec_754 effective for its taxable_year ended date and thereafter the election should be made in a written_statement filed with the appropriate service_center for association with x’s return for its taxable_year ended date a copy of this letter should be attached to the statement filed except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code and the regulations thereunder plr-118351-16 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to x's authorized representatives sincerely associate chief_counsel passthroughs and special industries by ______________________________ mary beth carchia senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service national_office technical_advice_memorandum index uil no case mis no tam-109035-99 sep district_director taxpayer's name taxpayer's address taxpayer's identification no years involved date of conference legend taxpayer location city state a b date date date date date bank bank x issues whether the infrastructure items such as street sewage and utility systems constitute tangible or intangible_property to taxpayer whether the infrastructure items such as street sewage and utility systems have determinable lives such that they constitute depreciable_property what is the effect on taxpayer's method_of_accounting as a result of the conclusions reached on the previous two issues as to whether taxpayer can depreciate amounts expended to build infrastructure including street sewage and utility systems in order to develop two commercial projects 2s tam-109035-99 conclusions 200u17046 the infrastructure items such as street sewage and utility systems constitute intangible_property to taxpayer the infrastructure items such as street sewage and utility systems do not have determinable lives such that they do not constitute depreciable_property the effect on taxpayer's method_of_accounting as a result of the conclusion that taxpayer cannot depreciate amounts expended to build infrastructure including street sewage and utility systems in order to develop two commercial projects is that it constitutes a change in method_of_accounting facts taxpayer is a corporation that sought to develop property it owns in location its two development projects are titled a and b which is located in city approved a map partitioning the two projects and dedicating certain streets development plans were finalized and approved by the planning commission and adopted by city in date certain improvements city’s final approval was contingent upon taxpayer building in date city in date taxpayer and city entered into an acquisition financing agreement under which public improvements built by taxpayer for a and b were to be dedicated to city city in turn would transfer the proceeds from a sale of bonds to taxpayer such an agreement is required under state law where public improvements have not been completed but a final map has been approved by the loca government title to the improvements passed to city on or before date maintenance repair and reconstruction of the improvements city is responsible for the the improvements include streets sewer system water system and storm drainage infrastructure street improvements for a include the widening of four roads street improvements for b include the widening two roads adding left turn lanes traffic signals and pedestrian barriers fire hydrants and sidewalks were also added taxpayer began depreciating the costs it incurred in building the improvements on date the basis was taxpayer's actual cost in the amount of dollar_figurex taxpayer is depreciating this amount over years using the declining balance method taxpayer did not participate in the submission of the request for technical_advice taxpayer's arguments however are evidenced by two letters that were submitted with the request for technical_advice additionally taxpayer declined a conference of right with regard to the issuance of this technical_advice_memorandum z00u0l7v046 tam-109035-99 law and analysis tangible vs intangible_property the threshold issue is whether the infrastructure items such as street sewage and utility systems constitute tangible or intangible_property to taxpayer sec_167 of the internal_revenue_code provides that there shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion wear_and_tear including a reasonable allowance for obsolescence of property_used_in_the_trade_or_business of the taxpayer or of property_held_for_the_production_of_income sec_1_167_a_-2 of the regulations provides that the depreciation allowance in the case of tangible_property applies only to that part of the property which is subject_to wear_and_tear to decay or decline from natural causes to exhaustion and to obsolescence the allowance does not apply to land apart from the improvements of physical development added to it sec_1_167_a_-3 of the regulations provides that if an intangible asset is known from experience or other factors to be of use in the business or in the production_of_income for only a limited period such an intangible asset may be the subject of a depreciation allowance an intangible asset the useful_life of which is not limited is not subject_to the allowance for depreciation no allowance will be permitted merely because in the unsupported opinion of the taxpayer the intangible asset has a limited useful_life revrul_68_607 1968_2_cb_115 involves a developer who incurred costs for improvements made on a state-owned highway right-of-way to provide ingress and egress to a shopping center developed on leased land after construction of the improvements the developer formally transferred ownership of them to the state the improvements will be maintained and replaced when necessary by the state the ruting held that the taxpayer acquired no tangible_property interest in the improvements to the state-owned highway right-of-way rather it acquired a long-term direct business advantage an intangible asset the ruling further held that the period of economic usefulness to the taxpayer is limited in duration to the lease_term of years the ruling provided that if the taxpayer had owned the land on which the shopping center was constructed the useful_life of the business advantage would not be limited since not only the maintenance of the improvements but also their replacement when necessary will be provided by the state thus the improvements would indefinitely benefit such land gladding dry goods co v c lr 2_bta_336 supports the assertion in revrul_68_607 that the taxpayer must have a capital_investment in the property in order to be entitled to depreciation_deductions the court in gladding states depreciation’ is an allowance for the recovery_of a capital_investment citing aus tam-109035-99 cases it is not predicated upon ownership of the property but rather upon an investment in property which is thereafter used the important question is not in whom vests the fee or when it vested but who made the investment of the capital which is to be recovered over the period of the exhaustion of the property the one who made the investment is entitled to its return the taxpayer's capital_expenditure results in a direct business advantage the useful_life of such benefits is not limited and therefore the cost of such benefits would not be recoverable by means of periodic depreciation_deductions allowed under sec_167 of the code in order to have a depreciable_interest in a tangible asset several factors are considered including whether the taxpayer has a proprietary interest in the asset whether the taxpayer uses the asset directly in his business and whether the taxpayer will maintain and replace the asset as necessary the third factor is the critical one according to the facts underlying revrul_68_607 the taxpayer had no proprietary interest in the assets and the state assumed liability for both the maintenance and replacement of the assets the taxpayer therefore gave up all connection with the tangible elements of the improvements all the taxpayer retained was the benefit of improved access to its shopping center this benefit has no relationship to the life of any tangible asset and should not be treated as a tangible asset of the taxpayer in 51_f2d_644 cir the taxpayer was required by special_assessments to make expenditures on account of paving curbing and sidewalk improvements abutting the taxpayer's property the court noted that the taxpayer needs to have some sort of proprietary interest in the property which has depreciated to incur a loss due to the depreciation the increase in value which the taxpayer has received from the improvements does not diminish by reason of its exhaustion wear_and_tear but by reason of the exhaustion wear_and_tear of property in which the taxpayer has no special pecuniary interest and on account of whose exhaustion wear_and_tear the taxpayer is entitled to no deduction the court found that the improvements benefit the taxpayer's business but they are not in the business and are not a part of it even if the owner may have constructed them although the improvements incidentally benefit the taxpayer they primarily are used in the business and for the service of the public in 29_tc_1205 the taxpayer constructed sidewalks curbs paved streets sewers and water mains concurrently with the construction of housing units upon completion of the improvements the local_government took over all the functions of maintenance of these facilities and they became part of the street systems for public use and convenience the court noted that since the improvements were public property the taxpayer does not have a pecuniary interest in the property the fact that the-taxpayer owned all of the adjoining properties is without controlling significance in view of the fact that the improvements are used primarily in the public business see also 148_fsupp_938 s d calif as tam-109035-99 in 31_tc_1155 the taxpayer developed subdivisions on property owned by the taxpayer and constructed improvements such as roads curbs gutters waterlines and storm sewers the court asserted that the improvements were not used_in_the_trade_or_business of the taxpayer rather they were held for disposal either as part of each lot sold or by dedication to public use the improvements were capital expenditures allocable to the basis of the unsold lots to be realized upon the ultimate sale of the property the court explicitly stated that it did not consider the argument that the improvements have been dedicated to public use and thus the taxpayer has lost whatever depreciable_interest he might have had therein it ruled that the costs of in the present case taxpayer is required by city to construct certain transportation and utility improvements taxpayer then dedicated the streets to city and granted city easements with the rights of ingress and egress for the construction and maintenance of sewer and drainage facilities and slope rights therefore taxpayer relinquishes its proprietary interest in the improvements since the streets were dedicated to city city is responsible for both the maintenance and replacement of the streets taxpayer ends up with a capital_expenditure resulting in a benefit consisting of improved access to its developments this benefit has no relationship to the life of any tangible asset and constitutes an intangible asset determinable vs indeterminable life the second issue is whether the intangible assets obtained by taxpayer through its construction of the improvements constitutes depreciable_property under sec_1_167_a_-3 an intangible asset the useful_life of which is not limited is not subject_to the allowance for depreciation no allowance will be permitted merely because in the unsupported opinion of the taxpayer the intangible asset has a limited useful_life similar to the ruling in revrul_68_607 taxpayer owns the land on which the developments are being constructed and the useful_life of the business advantage due to the improvements is not limited since not only the maintenance of the improvements but also their replacement when necessary will be provided by the state thus the improvements have an unlimited useful_life and are therefore not depreciable taxpayer cites revrul_73_188 1973_1_cb_62 in support of its position in that revenue_ruling a city made assessments against business property owners for their share of the expense of converting a downtown city street into an enclosed pedestrian mall title to the mall remained with the city but the assessed landowners maintained the mall and paid the costs of heating and air conditioning it the mall was expected to provide the affected landowners with a business advantage for a period of ten years it was held that the assessments incurred by the property owners were capital expenditures that may be depreciated over the ten-year period in which the mall is expected to provide a business advantage sb tam-109035-99 according to revrul_73_188 the assessment constitutes a capital_expenditure in acquisition of an intangible asset in the form of an economic benefit that may be recovered through depreciation ratably over the period the economic benefit is expected to exist if the payment of a tax assessed against local benefits produces or improves an asset that is used_in_the_trade_or_business or for the production_of_income and that has a determinable useful_life such asset is subject_to depreciation under code sec_167 the differences between revrul_73_188 and the present case are who is responsible for maintenance and whether the intangible asset has a determinable useful_life useful_life of ten years whereas in the present case the economic benefit of the streets and other improvements have an unlimited useful_life and are therefore not depreciable under sec_167 see sec_1_167_a_-3 in revrul_73_188 the economic benefit of the pedestrian malt had a taxpayer also cites 34_tc_776 in support of its position in this case the taxpayer built a warehouse adjacent to a dead end dirt road the taxpayer then paved the road because otherwise the warehouse would have been inaccessible by truck initially the taxpayer asked the city to do the paving but it refused the road had not needed any repairs but the taxpayer maintained the road the court ruled that the taxpayer was allowed to depreciate its paving expenditures it found that the city refused to pave the road and that although the road was open to public use it was not used primarily in the public business but was a dead end street used primarily in the taxpayer's business however the court in loveman made a distinction between that case and the case in algernon blair the court stated that algernon blair was not in point because in that case the improvements had been turned over by the taxpayer to the city the city maintained the improvements the streets and roads involved had been incorporated into the city road system and the improvements were used primarily in the public business rather than in taxpayer's business the facts in the present case are more closely aligned to those of algernon blair than loveman thus loveman is not in point taxpayer cites 70_tc_916 in which a city ordinance required the taxpayer to connect properties to the city’ dollar_figures sewer system as a condition to continued use of the properties the taxpayer was also required to pay an initial tap fee to the city which gave the taxpayer the indefinite right to use the sewer system subject also to a monthly charge the purpose of the tap fee was to pay the cost of expanding the sewage treatment plant the court ruled that the sewer tap fee is a capital_expenditure and stated that the benefits use of the new plant obtained by payment of the sewer tap fee have a life coextensive with the life of the system thus the court decided that the taxpayer obtained an intangible right that has the same life as the tangible asset to which the right pertains in this case the court found that the sewage treatment plant had a life of years again in noble the intangible right received by the taxpayer was depreciable because it had a determinable life whereas in the present case taxpayer's intangible right has an indeterminable life so that an opposite result is reached tam-109035-99 if city will assess taxpayer for the costs of reconstruction of the improvements the case of noble would be more applicable to the present case if taxpayer would have to pay the costs of reconstruction of the improvements then the current improvements would be deemed to have a determinable life the useful_life of the improvements consequently taxpayer would have obtained an intangible right that has the same life as the tangible asset to which the right pertains in this case the improvements street sewage and utility systems since city currently has an obligation to replace the improvements when necessary and since there is no indication city will assess taxpayer or a subsequent landowner for replacement costs taxpayer has an intangible right with an indeterminable life such that the costs are not depreciable under sec_167 see sec_1_167_a_-3 change in method_of_accounting the third issue is what is the effect on taxpayer's method_of_accounting as a result of the conclusion that taxpayer cannot depreciate amounts expended to build infrastructure including street sewage and utility systems in order to develop two commercial projects sec_446 of the code provides that a taxpayer who changes the method_of_accounting on the basis of which the taxpayer regularly computes income in keeping books shall before computing taxable_income under the new method secure the consent of the secretary sec_1_446-1 of the regulations provides that a change in the method_of_accounting includes a change in the overall plan of accounting for gross_income or deductions or a change in the treatment of any material_item used in such overall plan a change from depreciating amounts expended to build infrastructure to not depreciating them constitutes a change in method_of_accounting sec_481 of the code provides that in computing the taxpayer's taxable_income for any taxable_year if such computation is under a method_of_accounting different from the method under which the taxpayer's taxable_income for the preceding_taxable_year was computed then there shalt be taken into account those adjustments which are determined to be necessary solely by reason of the change in order to prevent amounts from being duplicated or omitted sec_481 of the code provides that if the method_of_accounting from which the change is made was used by the taxpayer for the two taxable years preceding the year_of_the_change and the increase in taxable_income for the year_of_the_change which results solely by reason of the adjustments required by sec_481 exceeds dollar_figure then the tax attributable to such increase in taxable_income shall not be greater than the aggregate increase in the taxes which would result if one-third of such increase in taxable_income were included in taxable_income for the year_of_the_change and one- third of such increase were included for each of the two preceding_taxable_years tam-109035-99 in 891_f2d_1579 fed cir cert_denied 498_us_823 the taxpayer had treated replacement modules for automated bank teller machines as inventory on its original returns for the years in issue the taxpayer subsequently filed amended returns treating the modules as capital assets and claiming depreciation_deductions the federal_circuit held that the reclassification from inventory_property to depreciable_property is a change in method_of_accounting the court explained t here is no question that a change from treating the replacement modules as nondepreciable inventory where there is no deduction until the modules are removed from service to treating them as capital assets where there is a depreciation deduction in each year of useful_life raises the question of the taxable_year in which income is reduced by the cost or a portion of the cost of manufacturing the replacement modules that is a question of timing f 2d pincite in the present case the change results from treating the cost of the property as depreciable to treating it as nondepreciable_property taxpayer's treatment of the cost of this property as depreciable_property on its original returns affects when not whether taxpayer's cost of that property will be deducted by treating the property as depreciable_property taxpayer was deducting the cost of the property through depreciation over a certain recovery_period nondepreciable taxpayer would have deducted its cost at the time of disposition under either treatment taxpayer is entitled to the same amount_of_deductions consequently taxpayer's incorrect treatment of the cost of the property as depreciable_property on its original returns affects the timing of deductions thus the change in the timing of the deduction for the cost of the property resulting from treating the cost as depreciable_property to treating the cost as nondepreciable_property is a change in method_of_accounting if taxpayer had treated the property as thus for the first taxable_year under review an adjustment should be made not only for the depreciation taken for the infrastructure in that taxable_year but also for al previous taxable years in which depreciation was taken for the infrastructure since taxpayer's depreciation method is being changed for each subsequent taxable_year under review an adjustment should be made only for the depreciation taken for the infrastructure in that taxable_year caveat s a copy of this technical_advice_memorandum is to be given to the taxpayer s sec_6110 of the code provides that it may not be used or cited as precedent ff soc nant pe attr rst rename smn am cam mmnt nnt ene oc ca np


department of the treasury internal_revenue_service washington d c tax exempt and government entities oct u i l xxxxxxxkxkxxxkxk xxxxxxkxxkkkxxkk xxxxxxxkkxxxkkk legend taxpayer a xxxxkxkkxkxkkkxkkkkkn taxpayer b kxxkxxxkxkkkxkxkkkkkk amount c xxxxxxxxxxkxkxxkxkkkk amount d xxxkxkxkxxkkxkkkkk amount e xkxxkkxkkxkkkkkkkk amount f xxkxkxxxxkkxkkkxkkkkk ira x xkkxkkkkkxkkkkkkkkk xxxkkkkkxkkkxkkkkkk account t xxxkxxkxxxxkkkkxkkk bank s xxkkxxkkkkxkkkkkkkkkk bank r xxkkxxkkxxxkkkkkkkkk individual n xxxkkxxkxkkkkkkkkkk dear this is in response to a request dated date submitted on your behalf by your authorized representative for a letter_ruling to waive the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code correspondence dated date supplemented the request the following facts and representation have been submitted under penaities of perjury in support of the ruling requested xxxxxxxkxxxxkxxxkk page taxpayer a states that he maintained a simplified_employee_pension plan sep -individual retirement arrangement ira x with bank s taxpayer a states that he became unhappy with the return on his investments with bank s and thought that he could better manage the funds himself taxpayer a further to directly transfer amount c from ira x to an states that he instructed bank s account at bank r documentation submitted by taxpayer a shows that on date amount c was transferred from ira x to bank r which was deposited into account t account t is described as a joint savings account taxpayer a and his spouse taxpayer b already maintained with bank r documentation submitted by taxpayer a also shows that on date amount d was transferred from to individual n taxpayer a states that he invested amount d with account t individual n and that individual n pays a retum on such investment which is always deposited into account t further taxpayer a states that on date he purchased a certificate of deposit with bank s in the amount of amount f amount f consists of amount e the balance of the ira x funds transferred from bank s and taxpayer a and taxpayer b's personal funds taxpayer a states that in a meeting with his accountant in late he learned that a qualified retirement account may not have been set up at bank s even though taxpayer a has not submitted any documentation or evidence that shows that he instructed bank s to set up an ira and bank s failed to do so or that he completed an application form to establish an ira with bank s and bank s failed to establish such an account taxpayer a states that he refers to account t as a retirement account that the funds transferred from ira x have been invested in allowable ira investments and that such funds have never been used for any other purposes taxpayer a states that he did not realize that account t which is described as a joint savings account per account statements submitted with this request was not an eligible retirement account based on the above facts and representations taxpayer a requests that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount c from ira x sec_408 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 xkxxxxkxxkkkkkkkkkk page sec_408 of the code provides that sec_408 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 ii 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 day after the day on which the individual receives the payment or distribution or 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 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 that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 d a xi from an ira which was not includible in gross_income because of the application of sec_408 d sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 d d of the code where failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occur after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 d3 xi the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to compete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information and documentation submitted in this case shows that amount c was transferred from ira x and deposited into account t on date the facts indicate that the ability to timely complete a rollover of amount c wa sec_90u804025 xxx xkxkxkkokkkkkkkk page at all times within taxpayer a's control as he has not submitted any documentation or other evidence to the service that shows how any of the factors outlined in revrul_2003_16 affected his ability to timely roll over amount c to another ira within the applicable 60-day time period therefore pursuant to sec_408 of the code the service hereby declines to waive the 60-day rollover requirement with respect to the distribution of amount c from ira x no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_6110 kx3 of the code provides that it may not be used or cited by others as precedent pursuant to a power of attomey on file with this office a copy of this ruling letter is being sent to your authorized representative if you have any questions please contact ' sincerely yours signed dovos b floyd joyce e floyd manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice


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-124862-09 date legend x ------------------------------------------ ---------------------------------------------------- state ------------- date ------------------------- dear -------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an entity classification election the facts submitted and representations made are summarized as follows x is a professional limited_liability_company formed on date under the laws of state x failed to file forms entity classification election electing to treat x as a corporation for federal tax purposes effective date sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides that an eligible_entity with at least two members may elect to be classified as either an association and thus a corporation under sec_301_7701-2 or as a partnership and an eligible_entity with a single owner can plr-124862-09 elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election the effective date of the election cannot be more than seventy-five days prior to the date the form is filed and cannot be more than twelve months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file forms with the appropriate service_center to elect to be treated as a corporation for federal tax purposes effective date a copy of this letter should be attached to the forms a copy is enclosed for that purpose 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 this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent plr-124862-09 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely curtis g wilson associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date number release date conex-118314-11 uil the honorable rich nugent member u s house of representatives spring hill drive brooksville fl attention ----------------------- dear congressman nugent i am responding to your inquiry of date on behalf of your constituent ------------------------------ --------------------asked why reimbursement of phone concession for post-divestiture retirees who reside outside of the former company’s local service area is subject_to federal_insurance_contribution_act taxes fica while reimbursement of phone concession for pre-divestiture retirees is not fica_taxes consist of the old-age survivors and disability oasdi portion and the hospital insurance portion medicare_tax employers compute these taxes as a percentage of wages they pay to an employee sec_3101 sec_3111 sec_3121 of the internal_revenue_code the code wages for fica purposes are defined as all remuneration for employment including the cash_value of all remuneration including benefits paid in any medium other than cash however any fringe benefit which is excludable under sec_132 of the code is not wages for fica purposes sec_3121 of the code an employee’s gross_income does not include any fringe benefit that qualifies as a no- additional-cost service sec_132 of the code the law defines a no-additional- cost service as a service that sec_132 of the code is for the employee’s use is for sale to customers in the ordinary course of the employer’s business is for sale in the line_of_business in which the employee works does not cause the employer to incur any substantial additional cost including forgone revenue in providing the service conex-118314-11 with respect to no-additional-cost services the term employee includes any individual who the employer formerly employed in that line_of_business and who separated from service due to retirement sec_132 of the code prior to the divestiture of the bell system retired bell system employees receiving free telephone service could exclude the value of the service from income as a no- additional-cost service under sec_132 of the code however after the divestiture the system changed and a single provider no longer provided telephone services throughout the united_states instead several regional bell operating companies rbocs were created to provide telephone services in different regions of the country each of these rbocs is a different employer for purposes of the no-additional-cost fringe benefit provisions the exclusion from income for no-additional-cost services only applies to services an employer provides to its own employees or retired employees thus employees who had retired from the bell system prior to divestiture risked losing eligibility to exclude the value of free telephone service from their income because an entity other than their employer ie an rboc had become the provider of the benefit the congress took action to enable employees who had retired from the bell system prior to its divestiture to continue excluding the value of their free telephone service from income the congress accomplished this by revising the law to allow pre-divestiture retirees to treat telephone service an rboc provided as a no-additional-cost_service section d of the tax_reform_act_of_1986 pub_l_no revising section of the tax_reform_act_of_1984 pub_l_no as a result for employees who retired before date the law treats all rbocs as a single employer in the same line_of_business it also treats payment an rboc makes of all or part of the cost of local_telephone_service that a person other than an rboc provides to the retiree including a rebate of the amount the retiree paid for the service and payment to the person providing the service as telephone service a single employer_provided the senate report on the tax_reform_act_of_1986 s rep no pincite stated that the purpose of this provision was to apply an intended transitional rule under which the fair_market_value of free telephone service provided to employees of the bell system who had retired prior to divestiture of the system on date is excluded from income and wages of such pre-divestiture retired employees the senate report further stated that this provision does not apply to any employee who separated from service on or after date unfortunately the congress enacted these special rules to apply only to pre-divestiture retirees the normal rules for no-additional-cost services apply to post-divestiture retirees to exclude the value of free telephone service from income as a no-additional- cost service the employer or former employer must provide the service to its own employee or retired employee if a post-divestiture retiree receives telephone service conex-118314-11 or a reimbursement for payment for telephone services from an entity other than that retiree’s former employer the retiree must include the value of the service or the amount of the reimbursement in income additionally the payment constitutes wages for fica purposes because it represents remuneration for past services i hope this information is helpful if you have any questions please contact me or ------- -------------------- at --------------------- sincerely lynne camillo exempt_organizations employment_tax branch chief employment_tax branch government entities tax exempt and government entities


internal_revenue_service number release date index number ----------------------------- -------------------------------- -------------------------- -------------- ------------------------------------ department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc intl b02 plr-124022-08 date september ty ------- ty ------- legend taxpayer ------------------------- --------------------------------------------------- year year year fc country x country y trust ------- ------- ------- --------------------------------------------- ------------------ ----------- ------------------------- trustee o trustee r ---------------------------- ------------------------------ law firm p law firm q ------------------------------------------------------------------------------------------ ---------------------- ---------------------------------------------------------- dear ------------------ this is in response to your letter received by our office on date submitted by your authorized representative requesting the consent of the commissioner of the internal_revenue_service to make a retroactive qualified electing plr-124022-08 fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 with respect to your investment in fc the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalties of perjury statement executed by the appropriate parties 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 facts taxpayer is a u s citizen and a named beneficiary of the trust established under the laws of country x by taxpayer's grandmother a citizen and resident of country y in year the trust acquired shares in fc a corporation organized under the laws of country y at all times since its formation the trust was administered and managed by various foreign nationals who served as the trustees of the trust trustee o who served as a trustee of the trust at all times since inception is an attorney with substantial experience in transnational tax planning and was a partner at law firm p during all the years at issue trustee o is competent to render international tax_advice trustee o and the other trustees had full access to all the records of the trust and trustee o was aware at all relevant times that taxpayer resided permanently in the united_states taxpayer is not a tax professional and has no experience in international tax matters taxpayer represents that as a beneficiary of the trust taxpayer had no control_over the assets of the trust and relied on the trustees to manage the assets of the trust at all times the trustees and in particular trustee o never informed taxpayer that the trust held shares of fc that fc was a passive_foreign_investment_company pfic under sec_1297 of the code for u s federal_income_tax purposes and of the consequences of such investment and of the possibility of making any elections qef or otherwise with respect to such shareholdings for u s federal_income_tax purposes in year after the death of taxpayer's father taxpayer engaged law firm q and others to determine the extent of the family's assets in year during its evaluation of the trust's assets law firm q determined that fc had been a pfic since year and informed taxpayer of fc's characterization as a pfic at that time taxpayer has submitted an affidavit signed under penalties of perjury describing the events that led to the failure to make the qef election by the election due_date plr-124022-08 including the role of the trustees taxpayer has also submitted affidavits of trustee o and trustee r corroborating the representations made by taxpayer taxpayer represents that as of the date of this request_for_ruling the pfic status of fc has not been raised by the irs on audit for any of the taxable years at issue ruling requested taxpayer requests the consent of the commissioner of the internal_revenue_service to make a retroactive qef election with respect to fc for year under sec_1_1295-3 law sec_1295 of the code provides that any pfic shall be treated as a qef with respect to a taxpayer if an election by the taxpayer under sec_1295 applies to such company for the taxable_year and the company complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company under sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic under sec_1_1295-3 a taxpayer may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united state sec_3 government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe plr-124022-08 the events which led to the failure to make a qef election by the election due_date the discovery of such failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on such professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made with taxpayer’s ruling_request we conclude that taxpayer has satisfied sec_1_1295-3 accordingly consent is granted to taxpayer to make a retroactive qef election with respect to fc for year provided that taxpayer complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election this private_letter_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 a copy of this ruling must be attached to any_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer's authorized representative sincerely ethan a atticks senior technical reviewer branch 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 b01 plr-117329-00 date oct legend x state d1 this responds to the letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated under state law x’s shareholders intended that x be a subchapter_s_corporation effective d1 however an s_corporation_election under sec_1362 was not timely filed s_corporation sec_1362 provides that a small_business_corporation may elect to be an law and analysis sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made if an s election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed for making such election for such taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year cc psi b01 plr-117329-00 x did not timely file an election under sec_1362 to be treated as an s_corporation effective d1 x however has established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and assuming that x otherwise qualifies as a subchapter_s_corporation as of d1 we conclude that x will be recognized as an s_corporation effective as of d1 x should file a completed form_2553 with a copy of this ruling attached reflecting its election of subchapter_s_corporation status as of d1 with the applicable service_center within days of the date of this letter 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 specifically no opinion is expressed concerning whether x otherwise satisfies the s_corporation eligibility requirements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent s dianna k miosi sincerely chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


number release date id office uilc cca_2010102109152937 ---------- from ------------------- sent thursday date am to -------------------- cc ----------- subject re tefra question --------- correct if an nbap has been issued then any aar issues would be resolved in the fpaa and no separate petition of the aars could be filed i r c a b in addition we cannot issue any affected_item notices of deficiency until after the partnership proceeding is complete gaf v commissioner