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 b01 plr-127933-09 date date legend x -------------------------------------------------------- ----------------------------------------- y date date country ------------------------ -------------------------- ----------------------- -------------------------- dear -------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a partnership for federal tax purposes facts the information submitted states that x is a_trust formed on date under the laws of country on date y acquired an interest in x x represents that x is classified as a business_trust and not as an ordinary_trust and that x is a foreign_entity eligible to elect to be treated as a partnership x intended to be treated as a partnership effective date due to inadvertence x failed to file a timely form_8832 entity classification election electing to treat x as a partnership effective date plr-127933-09 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes 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 except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability or b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-127933-09 conclusion based solely on the facts 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 make an election to be treated as a partnership for federal tax purposes effective date x must make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent 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 curt g wilson curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number re washington dc person to contact telephone number refer reply to cc psi 4-plr-152879-01 date date legend year date date date date husband wife trust trust child child law firm state dear this is in response to your letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an allocation of the generation-skipping_transfer gst_exemption this letter responds to your request the facts and representations submitted are summarized as follows on date husband and wife the taxpayers established an irrevocable_trust trust for the benefit of child and child 1’s descendants and an irrevocable_trust trust for the benefit of child and child 2’s descendants the assets transferred to trust and trust collectively referred to as trusts constituted the community_property of husband under state law a community_property_state paragraph c of article iii of trusts provides that trusts are to terminate upon the date of termination that is twenty-one years after the death of the last survivor of taxpayers child and child 1’s lineal_descendants living on the date of the execution of trust or the death of the last survivor of taxpayers child and child 2’s lineal_descendants living on the plr-152879-01 date of the execution of trust thereupon the trustee is to distribute the remaining properties of trusts as follows to the lineal_descendants per stirpes of child who are living on the date of termination of trust or to the lineal_descendants per stirpes of child who are living on the date of termination of trust or if there are none to the lineal_descendants per stirpes of taxpayers who are living on the date of termination of trusts notwithstanding the foregoing if at the time of a distribution in accordance with this paragraph any such distributee is a beneficiary of a_trust created under trusts then the distribution which but for this sentence would have been made to such distributee instead is to be transferred into and become a part of that trust held for the benefit of such person paragraph aa of article vii of trusts provides that the trustee of trusts has the full power and authority to divide the property of any trust created by trust with an inclusion_ratio as defined in sec_2642 of neither one nor zero into two separate trusts representing two fractional shares one with an inclusion_ratio of one and the other with an inclusion_ratio of zero it is represented that the value of the transferred assets to trusts when added to prior taxable_gifts of taxpayers was less than the applicable gift and estate_tax exemption for taxpayers and also less than the gst_exemption of taxpayers for many years law firm advised taxpayers on estate_planning issues by signed affidavit a partner in law firm stated that the issue of the allocation of gst_exemption to the gift of the transferred assets to the trusts was discussed with taxpayers the partner further stated that law firm advised taxpayers that the gifts of the transferred assets would qualify for the gst_exemption if the appropriate allocation of exemption was made on a timely filed gift_tax_return taxpayers relied upon law firm to prepare and file timely gift_tax returns and to make timely gst allocations in year taxpayers provided law firm with an appraisal establishing the value of the transferred assets on date a partner in law firm received a letter from a representative of the taxpayers inquiring as to the status of form sec_709 and notices of allocations on date law firm discovered that due to an oversight it had not filed the form sec_709 and notices of allocations for taxpayers law firm proceeded to contact accountants for taxpayers to determine the basis of the transferred assets and allocations of the appraised value to specific assets so that this information could be set forth correctly on the gift_tax returns of taxpayers law firm filed gift_tax returns for taxpayers with the service on date the gst allocations were not made at that time because of the uncertainty as to the proper procedure for making late allocations taxpayers have requested the following rulings an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make allocations of taxpayers’ gst exemptions and that such allocations are to be made based on the value of the transferred assets to trusts as of date the date of the original transfers sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under plr-152879-01 sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_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_26_2632-1 of the estate_tax regulations provides 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 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 its value at the time of the close of the estate_tax_inclusion_period and such allocation shall be effective on and after the date of such transfer 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 sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under 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 sec_301_9100-1 of the procedure and administration regulations 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 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_9100-3 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 and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 the time 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 plr-152879-01 statute accordingly 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 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayers are granted an extension of time of days from the date of this letter to make allocations of taxpayers’ available gst exemptions with respect to taxpayers’ transfers to trusts the allocations will be effective as of date the date of the transfers to trusts and the gift_tax value of the transfers to trusts will be used in determining the amount of gst_exemption to be allocated to trusts 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 specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code this rulings are directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent this election should be made on a supplemental form_709 united_states gift and generation-skipping_transfer_tax return and filed with the dallas service_center a copy of this letter should be attached to the supplemental form_709 a copy is enclosed for this purpose sincerely paul f kugler associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


tax_exempt_and_government_entities_division kakkeeekekeerereeeeeukeekre eek eekekeekeeek kekrkkekkekekrekeererenhkererer department of the treasury internal_revenue_service washington d c jan pulleys seit ep rats uniform list 408a legend decedent spouse trust t krerkueakrenhekkankk rererekrkkkkkkkaaik hakkeaeeakeaerekeukeemreearerererueeereeekekrkereeee ira x hhkkahaaakiketia aieee iki eere treat eerrerereeerereeeeeeerhkeeeek beaker eerererereeeerereeeerereee company m huekeekekeeakeerererere amount kerekwureruekereeer date date date date month rerkrarmeauekrereek krekrekekekkekerkeak rekeuhereraerereeek rekuekeekkkeeekaerkaak rekkkhaek dear rxkkererekkkkike rrrrrererrenere asabe ss semrera rrr rrr eere eee this is in response to the letter as supplemented by correspondence dated in which your authorized representative on your behalf requests several rulings under sec_408 of the internal_revenue_code code kekkhekekeeeakkrrakkkk and yllisugs eakkkkkhkak page of the following facts and representations have been submitted under penalty of perjury in support of the rulings requested decedent whose date of birth was date died on date having attained age decedent was survived by his wife spouse at his death decedent maintained an individual_retirement_account ira x on date decedent and spouse created trust t by means of a beneficiary designation decedent and spouse named trust t as the beneficiary of his ira x the trust provides in relevant part that i during decedent's and spouse’s joint lifetimes the trustee will distribute the net_income and the principal of the trust as either of them may direct sec_2_1 of trust and ii at the decedent's death the trustee will continue to hold the assets of decedent and spouse held by the trustee at the death of the decedent in trust for the spouse and the trustee will distribute those assets as directed paragraph of the trust to the spouse as if the decedent and spouse were both still living sec_2 of trust on date spouse signed a distribution form with respect to decedent's ira x on which she indicated that trust t was to receive a one-time only distribution of the full amount standing in ira x spouse represents that this distribution from ira x to trust t was based on the advice of her financial expert spouse further represents that company m presented various forms relating to ira x and offered no explanation of these forms or options available to spouse regarding the distribution of amount in month spouse’s certified_public_accountant prepared her tax filing for the year and explained the distribution from the decedent's ira and the tax implications incurred by the distribution to spouse spouse represents that it was on this occasion that she became aware of the taxable consequences and the options that were originally available to her at the distribution of ira x this request for letter_ruling soon followed spouse represents that amount has not been used or expended in anyway since date eee based on the facts and representations you request the following rulings that ira x does not constitute an inherited ira within the meaning of code sec_408 that spouse will be treated for purposes of sec_408 of the code as the distributee of the distribution from ira x kaa erk page of po1a e n t z u n o y a n e n a a x e that pursuant to sec_408 of the code spouse will be eligible to roll over amount minus distributions required under sec_401 of the code distributed from ira z into an ira set up and maintained in her name within sixty days from the x date of the issuance of the requested ruling that pursuant to sec_408 of the code pursuant to sec_408 of the code the internal_revenue_service the service waive the 60-day rollover requirement with respect to the distribution from ira x of amount because the failure to waive such requirement would be against equity or good conscience that pursuant to a favorable ruling_amount after it is rolled over to one or more iras maintained in the spouse's name within days of the date of this ruling will not be included in income for with respect to your ruling requests 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 provides the rules applicable to ira_rollovers 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 the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 of the code received by an individual from an ira if at any time during the -year period ending on the day of such receipt such individual received any other amount described in sec_408 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides in summary that the rollover rules of sec_408 of the code do not apply to inherited iras rakkkkkrkiea page of pulte sur38 sec_408 of the code provides that the term inherited ira means an ira obtained by an individual other than the ira owner's spouse as a result of the death of the ira owner thus in short under circumstances that conform with the requirements of sec_408 of the code a surviving_spouse who acquires a decedent's ira after and as a result of the death of an ira owner will be able to roll over the decedent's ira into an ira set up and maintained in the name of the surviving_spouse sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that paragraph d shall not apply to any amount to the extent such amount is required to be distributed under subsection a or b sec_401 required minimum distributions sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the 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 occurred after date are eligible for the waiver under sec_408 of the code on date final income_tax regulations publications were published in the federal_register with respect to code sec_401 and sec_408 see also r b date sec_1_408-8 of the regulations question and answer provides that a surviving_spouse of an ira owner may elect to treat the spouse's entire_interest as a beneficiary in an individual's ira as the spouse's own ira in order to make this election the spouse must be the sole beneficiary of the ira and have an unlimited right to withdraw amounts from the ira if a_trust is named as beneficiary of the ira this requirement is not satisfied even if the spouse is the sole beneficiary of the trust the preamble to the regulations provides in relevant part that a surviving_spouse who actually receives a distribution from an ira is permitted to roll that distribution over into his her own ira even if the spouse is not the sole beneficiary of the deceased's ira as long as the rollover is accomplished within the requisite day period a rollover may be accomplished even if ira assets pass through either a_trust or an estate revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed bya rekkkhkkkkk page of colit ey ag 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 with respect to the first second and third ruling requests the ira x account balance remaining at decedent a's death was payable to trust t created under the terms of the beneficiary designation in relevant part the provisions of trust t provide that certain amounts shall be payable to spouse and that spouse has the right to direct any and all trust t amounts furthermore generally if either a decedent's plan or ira proceeds pass through a third party g an estate_or_trust and then are distributed to the decedent's surviving_spouse said spouse will be treated as acquiring them from the third party and not from the decedent thus generally said surviving_spouse will not be eligible to roll over either the qualified_plan or the ira proceeds into his her ira however in the present case decedent's interest in ira x passed to his trust t of which spouse was the primary beneficiary with the right to direct any and all amounts from trust t without restriction as such pursuant to the terms of trust t spouse could have demanded in writing that the full ira x balance be paid to her and the trustee s of said trust t would have been obligated to comply with said demand under this set of circumstances no third party could have prevented spouse from rolling over or transferring by means of a trustee-to-trustee transfer the full amount standing in ira x into either an ira set up and maintained in spouse's name or another ira set up and maintained in the name of decedent under this set of circumstances the service will not apply the general_rule set forth above therefore we conclude as follows with respect to your first three ruling requests first that ira x does not constitute an inherited ira within the meaning of code sec_408 second that spouse will be treated for purposes of sec_408 of the code as the distribute of the distribution from ira x and third that spouse is eligible pursuant to sec_408 of the code to roll over ira x into an ira set up and maintained in her name within sixty days from the date of the issuance of this ruling with respect to your fourth and fifth ruling_request as noted above amount was not rolled into another ira within days of the date it was distributed from ira x however the facts adduced in this case indicate that the distribution of amount from ira x was the result of spouse’s reliance on the advice of her financial expert 2lvuiliti5ua8 page of furthermore it has been asserted that the forms which spouse signed at the direction of her financial expert did not reflect her intent as her financial expert failed to explain the forms and the her financial expert failed to advise her of her options as primary beneficiary of trust t and holding the right to direct any and all amounts of trust t including amount specifically her financial expert failed to explain that she had the exclusive right to direct amount and therefore could rollover amount into her own ira additionally while making these financial decisions spouse was significantly impacted by her husband’s recent death and the attendant family issues in short the failure to accomplish a valid contribution of amount into another ira was a result of spouse's reliance on the advice of her financial expert and the trauma caused by her husband's recent death therefore based on the above facts pursuant to sec_408 of the code the service hereby waives the sixty day rollover requirement with respect to the distribution of amount from ira x thus you are granted a period of sixty days from the issuance of this ruling letter to accomplish the rollover of amount into either an ira set up and maintained in the name of spouse or an ira set up and maintained in the name of decedent provided all other requirements of sec_408 of the code are met with respect to such contributions the amounts deposited into said ira will be considered rollover_contributions within the meaning of sec_408 of the code if done so within sixty days of the issuance of this letter if accomplished in the manner stated above the amounts deposited will not be considered income for this ruling does not authorize the rollover of amounts if any that are required to be distributed by sec_401 of the code 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 letter is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as precedent a copy of this letter has been sent to your authorized representatives in accordance with a power_of_attorney on file in this office if you wish to inquire about this ruling please contact menrerenseeeaaeetess esquire id lalalaalalalaicelelaiailalaiai via phone eicilelaiailelalalaiciaiaied or fax alelalalalalalaiaielalalalatalad correspondence to raa please address all aka kk 2u11i15028 sincerely yours vag ladle eke manager employee_plans technical group page of enclosures deleted copy of ruling letter notice of intention to disclose kkkhkhhekhkkeheke ratan naw cku reca hkkernanekkrnrh kkkhhkhkkhhkkhhhhk hekkkakkannaareeakik raine


department of the treasury internal_revenue_service washington d c date number info release date cc tege eoeg et1 - genin-117420-03 uilc memorandum for director internal_revenue_service center cincinnati oh attn technical unit from subject office of division counsel associate chief_counsel tax exempt and government entities cc tege eoeg et1 - genin-117420-03 railroad retirement act tax status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business will become an employer under the railroad retirement act and the railroad unemployment insurance act effective date we have reviewed the opinion of the rrb and based upon the information submitted to the rrb we also conclude that will become an employer under the railroad_retirement_tax_act effective date please take the appropriate action regarding this business will e mcleod cc


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa esmcbrearty posts-142599-11 uilc date date to lisa piehl policy manager specialty estate and gift_tax small_business self-employed from richard g goldman branch chief procedure administration subject gift imaging system gis this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent this responds to your request for our comments on a proposed gift imaging system gis that is intended to replace original paper gift_tax returns with electronic copies the gis project that you propose would scan historical and current gift_tax returns form sec_709 that are currently stored at the c-site in independence missouri into a searchable computer database you have told us that the gis project would involve the scanning of gift_tax returns and attachments into a computer database after scanning the original documents would be destroyed the electronic copies would then be used by internal_revenue_service employees as though the copies were the original documents paper duplicates could be created from the electronic copies you have also told us that the records will be maintained in accordance with the records disposition handbook irm though the specific storage media for the electronic records has not yet been determined you have proposed that the historical gift_tax returns that will be stored in electronic records could be used in the following situations the examination of an estate_tax_return that may or may not include penalties the examination of a gift_tax_return of the taxpayer including spouse posts-142599-11 the request of the executor in the preparation of a complete estate_tax_return and special requests for other divisions eg disclosure lb_i sbse exam and or soi in addition to scanning gift_tax returns you have also proposed purging gift_tax returns where the donor’s date of death is prior to you would determine returns to be purged by searching idrs for dates of death you have asked for our guidance on the following questions regarding retention of the scanned returns and the purge process scanned returns a return and attachments will be prepared for scanning by removing all staples clips covers binders etc after the return and attachments are run through the scanner what type of reassembly is required what is the retention period of the paper return after it has been scanned can the scanned copy be used as evidence in court proceedings or in response can we destroy the original documents and rely on the duplicate copies for all of to foia requests the situations listed above purged returns when a taxpayer has been confirmed as deceased prior to can the paper return be destroyed without scanning you believe that authorization for this is already in place in irm exhibit dollar_figure item no b a if the taxpayer does not have a filing requirement if so what is the process for destruction you believe that records management has a process already in place see sf job number n1-058- to address your questions we have coordinated with beth levine in the ethics general government law branch in chief counsel's general legal services division and daniel bennett chief of the office of records and information management servicewide records officer analysis scanned returns a return and attachments will be prepared for scanning by removing all staples clips covers binders etc after the return and attachments are run through the scanner what type of reassembly is required posts-142599-11 see the below discussion of quality review and the process for destruction after scanning on page what is the retention period of the paper return after it has been scanned if there is no separate business need for the paper gift_tax_return after it has been scanned into an electronic recordkeeping system meeting the national archive and records administration’s nara requirements and the scanned version contains all of the information that appears on the original and can be authenticated if necessary then the electronic copy of the paper gift_tax_return will become the official record and will be subjected to the year retention schedule can the scanned copy be used as evidence in court proceedings or in response to foia requests whether the electronic copy resulting from a scan of the original paper return can be used as evidence in court proceedings or in response to foia requests requires an examination of whether the electronic copy would be admissible as an original or duplicate under the so-called best evidence rule as codified in the federal rules of evidence the best evidence rule provides that to prove the content of a writing the original writing is required except as otherwise provided in the rules of evidence or by act of congress fed r evid additionally t he original is not required and other evidence of the contents of the writing is admissible if all originals are lost or have been destroyed unless the proponent lost or destroyed them in bad faith fed r evid a duplicate is admissible to the same extent as an original unless the authenticity of the original is questionable or it would be unfair to admit the duplicate in lieu of the original fed r evid an electronic record that is considered to be a duplicate under the federal rules of evidence will generally be treated as an original and be admissible as such see brodsky v commissioner tcmemo_2001_240 duplicates offered at trial would be admissible to the same extent as the originals thorpe v commissioner tcmemo_1992_160 a duplicate or copy is admissible to the same extent as an original unless a genuine question is raised regarding the authenticity of the original a gift_tax_return that can be matched and associated with an estate_tax_return is required to be disposed of in accordance with the disposition authority for estate_tax returns irm item rather than the authority for gift_tax returns irm item estate_tax returns are destroyed years after the end of the processing year irm item b gift_tax returns that are not associated with an estate_tax_return are retired to a federal records center frc when no longer needed for current business irm item b gift_tax returns will be retained at the frc until they are associated with an estate_tax_return or the taxpayer is deceased and the gift_tax returns are purged from the collection for destruction under irm item b a item b a provides that gift_tax returns previously filed by a taxpayer who is deceased and whose estate was not required to file an estate_tax_return will be purged every years and destroyed months after confirmation that the gift_tax returns will not be associated with an estate_tax_return posts-142599-11 fed r evid provides that if data are stored in a computer or similar device any printout or other output readable by sight shown to reflect the data accurately is an ‘original ’ however if an electronic record is prepared from an existing paper record for example when information from a paper record is entered by hand or electronically by scanning or faxing the information into computer memory the electronic record could be considered a duplicate see fed r evid see also 111_f3d_983 1st cir microform copy of a check was a duplicate of the original check and was admissible subject_to the limitations of fed r evid 976_fsupp_1327 d nev photographic reproductions or copies are considered duplicates under fed r evid this distinction was illustrated in the notes of the advisory committee for proposed rule a bank’s microfilm records of checks cleared is the original as a record however a print of the microfilm offered as a copy of a check whose contents are in controversy is a duplicate in addition to the federal rules of evidence specific statutory provisions confirm the admissibility of electronic copies of scanned documents to the same extent as originals sec_7513 of the code authorizes the service to employ the services of federal agencies for processing microfilm and other storage media for reproducing returns documents and other materials sec_6103 provides that reproductions of service documents will be afforded the same legal status as originals and will be admissible in evidence in any judicial or administrative_proceeding regardless of whether the original is lost provided they are properly authenticated section of title provides that original documents may be destroyed if a department or governmental agency keeps accurate reproductions of the originals in the regular course of business for example on microfilm under section copies of government records and papers when properly identified are admissible to the same extent as the original itself based on your description of your plans to scan and maintain returns and attachments we conclude that electronic copies of these documents will be generally admissible in evidence under the federal rules of evidence and other federal evidentiary law and are the equivalent of originals for other purposes such as foia since the scanned copies would be admissible to the same extent as the original documents you can rely on the scanned copies for all of the situations you have described can we destroy the original documents and rely on the duplicate copies of all of the situations described above you may destroy the original paper return and rely on an electronic version if the electronic version is a federal record and the system used to maintain it meets nara’s recordkeeping requirements a federal record includes books papers and other documentary materials regardless of physical form or characteristics made or received by an agency of the united_states posts-142599-11 government under federal_law or in connection with the transaction of public business and preserved or appropriate for preservation by that agency or its legitimate successor as evidence of the organization functions policies decisions procedures operations or other activities of the government or because of the informational value of the data in them u s c sec_3301 an electronic record is any information that is recorded in a form that only a computer can process and that satisfies the definition of a federal record in u s c sec_3301 the term includes both record content and associated metadata that the agency determines is required to meet agency business needs c f_r see also irm an electronic version of an original paper document created or received by the service may serve as the official record provided the electronic recordkeeping system on which it is stored and retrieved provides a method of all authorized users of the system to retrieve desired documents such as an indexing or text system an appropriate level of security to ensure integrity of all documents a standard interchange format when necessary to permit the exchange of documents on electronic media between agency computers using different software operating systems and the conversion or migration of documents on electronic media from one system to another and for the disposition of the documents including when necessary the requirements for transferring permanent records to nara irm see also c f_r sec_12 dollar_figure appropriate recordkeeping systems for electronic records must contain functionalities allowing it to declare records capture import records from other sources organize records with an approved records control schedule maintain records security manage access and retrieval preserve records and executive disposition the agency is required to maintain adequate and up-to-date technical documentation for its recordkeeping systems that produce use and store data files c f_r sec_1234 b the use of an electronic recordkeeping system can become out-of-date or obsolete given that gift_tax returns are maintained for years the agency will be required to ensure that all gift_tax returns can be retrieved and are usable for the length of their nara-approved retention period see c f_r sec_1236 b where records will be maintained beyond the life of the system agencies must plan for the migration of records and associated metadata to new storage media to avoid loss due to media decay or technology obsolescence posts-142599-11 if the electronic recordkeeping system into which the original paper gift_tax returns are scanned and stored meets nara’s electronic recordkeeping requirements and the scanned version contains all the information that appears on the original gift_tax_return and can be authenticated if necessary then the original paper document can be destroyed if it serves no additional purpose the agency can treat the electronically scanned stored version as its official record we are not aware of any regulation that would prohibit the agency from designating an electronic version of a document to be its official record provided the electronic recordkeeping system meets nara’s standards we suggest however that you confirm with the irs records officer’s staff records information management office awss that the electronic recordkeeping system to be used by the gis project either meets nara’s requirements or is a nara-compliant electronic recordkeeping system the irs currently has licenses for emc documentum which is a dod std-certified compliant records management application and may meet estate and gift tax’s recordkeeping needs irm nara bulletin re endorsement of dod electronic records management application rma design criteria standard version http www archives gov records-mgmt bulletins html purged returns when a taxpayer has been confirmed as deceased prior to can the paper return be destroyed without scanning you believe that authorization for this is already in place in irm exhibit dollar_figure item no b a if the taxpayer does not have a filing requirement gift_tax returns are appropriately scheduled under irm item item b a stipulates that the gift_tax returns of deceased taxpayers whose estate at the time of death did not exceed the threshold for filing of a form_706 united_states estate_tax_return can be destroyed months after confirmation that they will not be used to calculate taxes owed on an estate ie will not be associated with a form_706 because culling the files is a labor intensive task that can only be efficiently conducted with accumulated volume the service is advised under the retention instructions contained in item b to conduct a purge approximately every five years there is no statutory requirement to do so ie wait five years the only such requirement being that the forms cannot be destroyed earlier than months following identification that there is no tax administrative requirement to associate a particular form_709 with a taxpayer's form_706 therefore program personnel are correct in their assessment that present plans to destroy all pre-2007 returns for taxpayers identified as deceased nara’s faq page contains questions and answers about the advantages and disadvantages of imaging systems one significant disadvantage is technological obsolescence particularly for images that have a significant retention period such as gift_tax returns associated with estate_tax returns nara frequently asked questions about imaged records http www archives gov records- mgmt faqs imaged html imaging posts-142599-11 and whose form sec_709 were not required to be associated with a form_706 can be destroyed are compliant with nara-approved records disposition under nara federal records appraisal job number n1-058-04-02 if so what is the process for destruction you believe that records management has a process already in place see sf job number n1-058-04-2 it has been determined by both gls and the records officer that the original paper textual records can be destroyed following a quality review that ensures the scanned image is fully viable including of course fully readable the records officer has worked with program offices to put into place processes that ensure this by requiring the use of pdf-a or tif and other adopted international standards such as a filming standard of at least dpi dots per inch quality review and other similar requirements once the quality review has ensured viability the textual records can be destroyed subsequently the only requirement for reassembly of the scanned textual records is found in the need to relocate and use them should a scanned image or images not meet appropriate quality reviews in that case the documents would need to be re-scanned and locating them arranging them etc would be paramount to this process please call if you have any further questions


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 corp b05 plr-137201-13 date date ty ------- ------------------------------------------------ ------------------------ --------------------------------- ----------------------------------------------- ------------------------ ----------------------------------------------------------- ------------------------ ------------------------------------------------------------ ------------------------ --------------------------- ---------------------------- -------------------------------------------------------------------------------------------------- -------- -------------------------------------------------------------------------------------------------- -------------- legend parent subsidiary subsidiary subsidiary date date company official a company official b dear ---------------- plr-137201-13 this is in response to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election the extension is being requested for parent to file an election under sec_1_1502-21 of the income_tax regulations to relinquish the entire carryback period for the consolidated_net_operating_loss cnol of the consolidated_group of which parent is the common parent for the taxable_year ending date the election additional information was submitted in letters dated date and date the material information submitted for consideration is summarized below parent is the common parent of a consolidated_group parent group parent group includes among other corporations subsidiary subsidiary and subsidiary parent group incurred a cnol for its taxable_year ending date the date cnol parent intended to make the election the election was required to be filed by date but for various reasons parent failed to file a valid election parent subsequently submitted its request under sec_301_9100-3 for an extension of time to file the election parent has represented that the parent group has not and will not carry back any portion of the date cnol to a prior consolidated_return_year it has also been represented by appropriate parties that no portion of the date cnol attributable to subsidiary subsidiary or subsidiary has been carried back nor will be carried back to a separate_return_year within the meaning of sec_1_1502-1 of these subsidiaries parent has further represented that none of the date cnol is attributable within the meaning of sec_1_1502-21 to any other member of parent group that had a separate_return_year within the meaning of sec_1_1502-1 in the carryback period parent has represented that it is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 of the internal_revenue_code at the time it requested relief sec_1_1502-21 provides that a consolidated_group may make an irrevocable election to relinquish the entire carryback period with respect to a cnol for any consolidated_return_year the election is made in a separate statement entitled this is an election under sec_1_1502-21 to waive the entire carryback period pursuant to sec_172 for the insert consolidated_return_year cnols of the consolidated_group of which insert name and employer_identification_number of common parent is the common parent sec_1_1502-21 also provides that the statement must be filed with the group’s income_tax return for the consolidated_return_year in which the loss arises under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than plr-137201-13 six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1 b i therefore the commissioner has discretionary authority under sec_301 to grant an extension of time for parent to file the election provided parent shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official a and company official b explain the circumstances that resulted in the failure to timely file the election the information establishes that parent reasonably relied upon a qualified_tax professional who failed to make or advise parent to make the election and that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the representations that have been made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and are satisfied and granting relief will not prejudice the interests of the government accordingly we grant an extension of time under sec_301_9100-3 until days from the date on this letter for parent to file the election with respect to the relinquishment of the entire carryback period for the date cnol as described above the above extension of time is conditioned on parent group’s tax_liability if any not being lower in the aggregate for all years to which the election applies than it would have been if the election had been made timely taking into account the time_value_of_money no opinion is expressed as to parent group’s tax_liability for the years involved a determination thereof will be made upon audit of the federal_income_tax returns involved parent should file the election in accordance with sec_1_1502-21 parent group’s return must be amended to attach the election statement required by sec_1 b i a copy of this letter should be attached to the election statement alternatively if parent files its returns electronically it may satisfy this latter requirement plr-137201-13 by attaching a statement to its return that provides the date and control number plr- of this letter_ruling we express no opinion as to the tax effects or consequences of filing the election late under the provisions of any other section of the code or regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by parent company official a and company official b however the director should verify all essential facts moreover notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any still apply this ruling is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely _ken cohen_____________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc


t c memo united_states tax_court estate of mary catherine ix gaynor deceased paul gaynor administrator d b n c t a petitioner v commissioner of internal revenue respondent docket no filed date patrick j corcoran for petitioner michael p breton for respondent memorandum opinion swift judge respondent determined a deficiency of dollar_figure in petitioner’s federal estate_tax unless otherwise indicated all section references are to the internal_revenue_code in effect as of the date of decedent’s - - death and all rule references are to the tax_court rules_of_practice and procedure after settlement of some issues the issue remaining for decision is whether predeath transfers of decedent’s property with a value of dollar_figure and made for no consideration were revocable under connecticut law and includable in decedent’s gross_estate under sec_2038 background this case was submitted fully stipulated under rule on date mary catherine ix gaynor decedent died a resident of branford connecticut on date approximately years prior to decedent’s death decedent executed a general power_of_attorney poa under the connecticut statutory short_form power_of_attorney act the act conn gen stat ann secs to west in the poa decedent appointed an attorney and decedent’s son gerald gaynor as attorneys-in-fact to act in decedent’s stead the poa consisted of a standard form poa under connecticut law and explicitly authorized decedent’s attorneys-in-fact to act in decedent’s stead with respect to decedent’s ownership interests in real_estate chattels and goods stocks and bonds banking insurance claims and litigation personal relationships and affairs military pensions records reports and statements and all other matters the poa did not explicitly authorize decedent’s attorneys-- in-fact to make gifts of decedent’s property under the act attorneys-in-fact are not explicitly authorized to make or prohibited from making gifts of a principal’s property section of the act provides that the words all other matters in a poa indicate that the principal authorized the agent to act as an alter ego of the principal with respect to any matters and affairs not enumerated in sections to 1-54a inclusive and which the principal can do through an agent in and decedent’s attorneys-in-fact made for no consideration transfers of decedent’s property with a value of dollar_figure the evidence does not indicate to whom the transfers were made as stated on date decedent died on date decedent’s federal estate_tax_return was filed by the administrator of the estate a resident of connecticut on the return the dollar_figure value of the transferred property was not included in decedent’s gross_estate respondent determined that the above transfers of decedent’s property constituted revocable transfers under connecticut law - - and that the dollar_figure value of the property should be included in decedent’s gross_estate discussion for federal estate_tax purposes all interests in property that a decedent possesses at the time of death are includable in the gross_estate sec_2033 96_tc_675 also the value of property transferred by a decedent prior to death without consideration and with respect to which a decedent retains a power_to_revoke the transfer is includable in the decedent’s gross_estate sec_2038 46_fedclaims_388 the legal effect of gifts of property made under a poa is controlled by state law 309_us_78 estate of swanson v united_states supra in the absence of a decision or interpretation of state law by a state’s highest court we look to lower state court rulings and holdings 387_us_456 the supreme court of connecticut has not addressed whether attorneys-in-fact are authorized under the act to make gifts of their principal’s property without express language in the poa authorizing gifts to be made this issue however has been involved in three opinions of the connecticut superior court judicial district of hartford-new britain in wosczyna v estate of antone wl at conn super ct date in a declaratory_judgment action to quiet title to an interest_in_real_property on motion for summary_judgment to void a transfer made for no consideration by an attorney-in-fact the court quoted the following language of the act in a statutory short_form power_of_attorney the language conferring general authority with respect to real_estate transactions shall be construed to mean that the principal authorizes the agent to sell to exchange to convey either with or without covenants to guit claim or otherwise to dispose_of any estate or interest in land with no further analysis the connecticut superior court summarily concluded that attorneys-in fact in connecticut were not prohibited from making gifts of their principal’s property and denied the motion for summary_judgment id at in estate of antone v staphos wl at conn super ct date a subsequent case involving the same underlying facts as those involved in wosczyna the connecticut superior court acknowledged that the act might be interpreted to authorize attorneys-in-fact to make gifts of their principal’s property upon further consideration however the connecticut superior court specifically concluded that absent express language in a poa to the contrary the act does not authorize - - attorneys-in-fact to make gifts of their principal’s property id at the connecticut superior court noted that most courts that have considered this issue have concluded that under general poass attorneys-in-fact do not have the authority to make gifts of their principal’s property id at see also king v bankerd a 2d md and the numerous cases from alaska to utah cited therein am jur 2d agency sec_31 supp in discussing the extensive case authority on this issue the connecticut superior court emphasized the following policy considerations that have been recognized an attorney-in-fact owes to the principal the highest duty_of loyalty gifts of a principal’s property generally will be adverse to the interests of the principal and if a principal wished to make a gift of property the principal could do so on his or her own estate of antone v staphos supra at king v bankerd supra pincite in estate of antone the connecticut superior court noted expressly that the broad catchall language in the act such as otherwise to dispose_of should not be interpreted to convey a power to make gifts of a principal’s property see also aiello v clark p 2d alaska - j- as a result of the above legal analysis the connecticut superior court in estate of antone denied a motion for summary_judgment thereafter the above cases were consolidated for trial and opinion on the legal issue as to whether attorneys-in-fact were authorized to make gifts under the act and on the factual issue as to whether the attorney-in-fact violated his fiduciary duty to his principal by making the gifts wosczyna v estate of antone wl conn super ct date in its opinion the connecticut superior court did not decide the legal issue and simply held that the attorney-in-fact had acted in his own self- interest had violated his fiduciary duty_of loyalty to his principal and that the gift was revocable id at petitioner contends that since the broad language of the act authorizes attorneys-in-fact to act as alter egos of their principals decedent’s attorneys-in-fact herein were implicitly authorized under the act to make gifts on decedent’s behalf and therefore that the dollar_figure value of decedent’s transferred property need not be included in decedent’s gross_estate respondent contends that the act and the poa neither explicitly nor implicitly authorize decedent’s attorneys-in-fact to make gifts on decedent’s behalf and respondent contends that until decedent’s death the transfers of decedent’s property were revocable by decedent --- - absent express language in a poa providing otherwise and particularly in light of estate of antone v staphos supra and the persuasive analysis contained therein we believe that the supreme court of connecticut would conclude that under the act a general poa does not include the power to make an irrevocable transfer of a principal’s property without consideration on brief petitioner alleges that decedent expressly authorized and intended decedent’s attorneys-in-fact to make gifts of decedent’s property and that under estate of pruitt v commissioner tcmemo_2000_287 and estate of bronston v commissioner tcmemo_1988_510 the transfers made by decedent’s attorneys-in-fact should be treated as irrevocable gifts in estate of pruitt and estate of bronston we concluded that oregon and new jersey law respectively did not necessarily prohibit attorneys-in-fact from making gifts in appropriate circumstances and we held that the poas in those cases contained express language broad enough to authorize the attorneys--in-fact to make irrevocable gifts in those cases the taxpayers also established that the decedents intended for their attorneys-in- fact to continue with a pattern of gift giving that had been established by the taxpayer and that the attorneys-in-fact had not committed fraud abuse or self-dealing with respect to the gifts estate of pruitt v commissioner supra estate of bronston v commissioner supra even if our interpretation of connecticut law is mistaken and the supreme court of connecticut would allow under general poas gifts to be made by attorneys-in-fact the evidence in the instant case does not indicate that decedent herein had established a pattern of gift giving or that decedent intended to give a poa that included the power to transfer decedent’s property without consideration we conclude that prior to her death decedent retained the power under connecticut law to revoke the transfers of the property with a value of dollar_figure under sec_2038 the value of that property is to be included in decedent’s estate to reflect the foregoing decision will be entered under rule


t c summary opinion united_states tax_court hector prowse petitioner v commissioner of internal revenue respondent docket no 17121-05s filed date hector prowse pro_se marc l caine for respondent couvillion special_trial_judge this case was heard pursuant to sec_7463 in effect when the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies of dollar_figure and dollar_figure respectively in petitioner’s federal income taxes for the year sec_2002 and an addition_to_tax under sec_6651 for the year in the amount of dollar_figure an additional tax under sec_72 in the amount of dollar_figure for the year a liability of dollar_figure for self-employment_tax under sec_1401 for the year and a negligence_penalty under sec_6662 for both years in a trial memorandum respondent notes that prior to trial respondent conceded a capital_gain loss of dollar_figure for the year that had been disallowed in the notice_of_deficiency and therefore petitioner is entitled to a capital_loss deduction of dollar_figure for and a carryover capital_loss deduction of dollar_figure to as a result of this concession the deficiencies the addition_to_tax and the penalties were reduced to the following amounts addition_to_tax penalty year deficiency sec_6651 sec_6662 dollar_figure dollar_figure dollar_figure big_number -- subsequent to these concessions respondent filed an answer alleging that petitioner is liable for the fraud_penalty under sec_6663 for the year sec_2002 and in the amounts of dollar_figure and dollar_figure respectively after concessions the issues for decision are whether for and petitioner is entitled to deductions for various expenses on schedules a itemized_deductions whether for and petitioner is liable for the civil_fraud penalty under sec_6663 or in the alternative the accuracy- related penalty under sec_6662 and whether for petitioner is liable for the late-filing addition_to_tax under sec_6651 respondent’s apparent motivation for asserting fraud was prompted by this court’s holding in prowse v commissioner tcmemo_2006_120 that petitioner was liable for the sec_6663 fraud_penalty for the year sec_6663 provides that if any portion of an underpayment is attributable to fraud the entire underpayment shall be deemed to be attributable to fraud except as to the portion the taxpayer establishes is not due to fraud thus a finding of fraud preempts or trumps the negligence_penalty of sec_6662 determined in the notice_of_deficiency see sec_6662 two adjustments in the notice_of_deficiency were not addressed at trial and are therefore deemed conceded one of these adjustments relates to dollar_figure petitioner received during that he reported as dividend income on hi sec_2002 return in the notice_of_deficiency respondent determined that the dollar_figure was not a dividend but was a distribution from a qualified_plan as defined in sec_4974 and therefore petitioner is liable for the 10-percent additional tax under sec_72 the second adjustment that is also deemed conceded relates to a dollar_figure payment petitioner received during pursuant to a form 1099-misc miscellaneous income from sci engineering surveying p c for nonemployee compensation respondent determined that petitioner is liable for self- employment_tax on that distribution under sec_1401 with a corresponding deduction for one-half of that tax under sec continued background some of the facts and exhibits were stipulated and those facts are so found at the time the petition was filed petitioner was a legal resident of middle village new york from date until date petitioner was employed as a mechanical hvac engineer for keyspan engineering associates keyspan associates in that capacity petitioner worked on several design projects in the office after petitioner left keyspan associates on date continued f a witness from the payor testified at trial regarding this payment and the court is satisfied that respondent correctly determined the payment to be self-employment_income which petitioner reported on his return petitioner however presented no evidence challenging the determination that petitioner is liable for self-employment_tax on the distribution consequently the court deems that issue as conceded sec_7491 generally shifts the burden_of_proof to the commissioner with regard to any factual issue relevant to ascertaining the taxpayer’s liability sec_7491 limits this rule only with respect to issues to which the taxpayer has complied with the requirements for substantiation of any item has maintained all records with respect to such items and has cooperated with reasonable requests by the secretary for witnesses information documents and interviews etc regarding the matters at issue since petitioner did not cooperate with respondent in providing records to substantiate the items on his return the burden_of_proof does not shift however as to fraud under sec_6663 sec_6663 provides that with respect to any portion of an underpayment that is attributable to fraud the entire underpayment is treated as attributable to fraud except for any portion of the underpayment that the taxpayer establishes is not attributable to fraud sec_7454 provides that in any proceeding involving fraud the burden_of_proof as to such issue is upon the secretary thus the burden_of_proof on the fraud issue in this case is on respondent petitioner thereafter received unemployment_compensation from the state of new york in petitioner was a contract employee working on behalf of sci engineering and surveying p c in that capacity petitioner worked as a cost estimator for projects related to the u s customs building in newark new jersey on or about date petitioner filed his federal_income_tax return for the tax_year on the return petitioner reported wages of dollar_figure taxable interest of dollar_figure ordinary dividends of dollar_figure and unemployment_compensation of dollar_figure his adjusted_gross_income was dollar_figure on schedule a of the return petitioner claimed itemized_deductions of dollar_figure consisting of medical and dental expenses deductible portion dollar_figure state and local income taxe sec_416 charitable gifts big_number job expenses big_number total dollar_figure dollar_figure with respect to the dollar_figure claimed as medical and dental expenses on the return petitioner included a statement with his return which listed the dollar_figure claimed as medical and dental expenses as follows medical and dental dollar_figure dr rogers miles rose ambulance transportation elmhurst hospital medicines orthopaedic sports association dr fred d cushner dr ambrose pipia laboratory service sec_115 dr guillermo davila dentist big_number southshore opticians eyeglasses transportation total all expenses dollar_figure thus petitioner’s medical_expenses totaled dollar_figure yet he claimed dollar_figure on his return for this discrepancy was not brought up at trial and appears to be a computational error resulting in a claim for medical_expenses of dollar_figure in excess of the numbers presented to the court no explanation was provided at trial with respect to this discrepancy nor did respondent move to reduce the claimed amount to dollar_figure on or about date petitioner filed his income_tax return for he reported adjusted_gross_income in the amount of dollar_figure on the return petitioner reported wages of dollar_figure and taxable interest_income of dollar_figure petitioner also attached to the return a form 1099-misc miscellaneou sec_5 although the tax_return was filed late respondent did not determine the sec_6651 addition_to_tax as to that year presumably because petitioner’s and returns were under audit at the time the return was filed and petitioner attached a note to the return noting that income issued by sci engineering for nonemployee compensation of dollar_figure on schedule a of the return petitioner claimed itemized_deductions of dollar_figure consisting of the following medical and dental expenses deductible portion charitable gifts job expenses total dollar_figure dollar_figure big_number big_number dollar_figure to substantiate his claimed medical and dental expenses petitioner attached to hi sec_2002 and returns various receipts purporting to show various medical and dental expenses all of the receipts reflected cash payments petitioner claimed an itemized_deduction on hi sec_2002 tax_return for state and local_taxes in the amount of dollar_figure the amount was derived from petitioner’s form_w-2 wage and tax statement for during petitioner received a distribution from donaldson lufkin jenrette in the amount of dollar_figure petitioner attached a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc to hi sec_2002 tax_return petitioner however reported this income as dividend income on schedule b interest and ordinary dividends of his return petitioner claimed itemized_deductions for job expenses and other miscellaneous items in the amounts of dollar_figure and dollar_figure respectively on hi sec_2002 and tax returns for the deduction the dollar_figure claimed was based on schedule a of the return job expenses and most other miscellaneous deductions and comprised the following unreimbursed employee_expenses dollar_figure tax preparation fees other expenses big_number total dollar_figure less sec_67 2-percent limitation deduction claimed dollar_figure the dollar_figure for unreimbursed employee_expenses consisted of the following architectural engineering plans for bid on new project dollar_figure parking tolls transportation lead asbestos licenses meals travel expense sec_110 total dollar_figure the dollar_figure for other expenses consisted of the following job search dollar_figure telephone calls and faxe sec_250 printing resume sec_50 traveling to interviews mail box and safe deposit box rent sec_120 total dollar_figure as to the deduction the dollar_figure claimed for job expenses and most other miscellaneous deductions was derived as follows on schedule a of the return unreimbursed employee_expenses dollar_figure tax preparation fees other expenses big_number total dollar_figure less sec_67 2-percent limitation deductible amount1 dollar_figure 1petitioner appears to have made a mathematical error because he claimed dollar_figure as a deduction on his return and since the dollar_figure discrepancy was not addressed at trial it appears to the court that the correct mathematical computation is dollar_figure and not the dollar_figure claimed on schedule a of petitioner’s return the dollar_figure in unreimbursed employee_expenses consisted of vehicle expenses dollar_figure parking fees tolls etc meals and entertainment total dollar_figure the other expenses of dollar_figure consisted of job search dollar_figure faxes telephone calls etc printing resume sec_50 traveling for interviews safety glasses tools work gloves etc big_number total dollar_figure the charitable gifts claimed on schedules a of petitioner’ sec_2002 and tax returns consisted of cash gifts to a church and noncash contributions of property to the salvation army with respect to the cash gifts petitioner’s schedules a for both years showed cash contributions to a church of dollar_figure per week for a total of dollar_figure and dollar_figure for and respectively with respect to the noncash contributions petitioner attached receipts to hi sec_2002 and tax returns from the salvation army dated date and date respectively the receipts listed the items of donated property assigned a value to each item and a total for the contribution for the total was dollar_figure and for the total was dollar_figure the receipt showed that the contribution was received by isabel lopez and the receipt showed that the contribution was received by patricia rojas both receipts were from the salvation army at astoria new york petitioner did not attach to hi sec_2002 and returns any substantiation of his cash gifts to the church nor did he substantiate the gifts during the examination of his returns respondent examined petitioner’ sec_2002 and tax returns as a result of respondent’s audit of petitioner’ sec_2001 return respondent determined fraud under sec_6663 for the tax_year based on the determination that petitioner overstated his schedule a itemized_deductions and falsified documentation to substantiate the claimed deductions a petition was filed with this court and the court held in prowse v commissioner tcmemo_2006_120 that petitioner was liable for an increased deficiency as well as the civil_fraud penalty based on the court’s finding that petitioner fraudulently claimed schedule a itemized_deductions on hi sec_2001 federal_income_tax return while the case in prowse v commissioner supra was pending respondent issued the statutory_notice_of_deficiency upon which this case is based determining that petitioner was not entitled to any of the claimed itemized schedules a deductions on hi sec_2002 and tax returns following this court’s opinion involving petitioner’ sec_2001 tax_year and the finding of fraud under sec_6663 for that year supra note respondent moved in this case to impose the sec_6663 fraud_penalty against petitioner for the and tax years in the alternative respondent asserted an accuracy-related_penalty for both years schedule a deductions for the years at issue petitioner claimed on his income_tax returns deductions on schedules a for the year the deductions claimed were medical and dental expenses dollar_figure taxe sec_416 charitable gifts big_number job expenses and other miscellaneous expenses big_number total dollar_figure for the year the claimed deductions were medical and dental expenses dollar_figure charitable gifts big_number job expenses and other miscellaneous expenses big_number total dollar_figure in the notice_of_deficiency respondent disallowed some of these expenses and by motion asserted that petitioner was liable for fraud under sec_6663 with respect to some of the claimed deductions sec_213 allows a taxpayer who itemizes his or her deductions to deduct among other expenses medical and dental expenses to the extent such expenses exceed percent of adjusted_gross_income in this case petitioner claimed itemized_deductions for medical and dental expenses in the amounts of dollar_figure and dollar_figure for and respectively petitioner attached receipts to his returns in substantiation of these expenses respondent determined that the documentation petitioner submitted for these expenses was falsified and disallowed all of petitioner’s claimed schedule a deductions at trial respondent presented several witnesses including doctors who petitioner claimed had provided services these doctors testified that no medical services had been provided by them to petitioner during the years at issue and that the receipts petitioner relied on were for services provided to him in prior years that had been altered to reflect dates in and the court notes that the receipts offered into evidence are virtually identical to those provided in substantiation of claimed expenses on petitioner’ sec_2001 federal_income_tax return except for altered dates and slight changes in dollar amounts the court found in prowse v commissioner supra that the claimed receipts were falsified and some if not all of the signatures shown on the documents were forged the court held therefore that none of the documents substantiated any of petitioner’s claimed medical_expenses for likewise the court in this case holds that none of the receipts in this case for and substantiate or establish petitioner’s claimed medical and dental expenses for the years at issue the documentation in support of these claimed expenses is also held to be false accordingly the court sustains respondent’s disallowance of petitioner’s claimed medical and dental expenses petitioner claimed an itemized_deduction on hi sec_2002 tax_return of dollar_figure for state_and_local_income_taxes based on the amounts reported on petitioner’ sec_2002 form_w-2 issued by keyspan associates respondent conceded that if petitioner’s allowed itemized_deductions are greater than the standard_deduction petitioner is entitled to a deduction for the state and local_taxes paid for sec_170 authorizes a taxpayer to claim a deduction for any charitable_contribution during the tax_year petitioner claimed charitable_contribution deductions on schedules a of hi sec_2002 and tax returns for cash gifts to a church and noncash gifts the only documentation produced were two receipts for and from the salvation army regarding the noncash contributions at trial respondent challenged the authenticity of both salvation army receipts a salvation army representative credibly testified that the salvation army did not issue prepare or utilize the itemized receipts petitioner presented in substantiation of the contributions on petitioner’ sec_2002 and federal_income_tax returns petitioner offered no explanation or other evidence to challenge this testimony additionally petitioner did not testify or otherwise substantiate his claimed cash contributions to a church consequently there is no credible_evidence to support petitioner’s claimed charitable_contributions for the years at issue accordingly respondent’s determination on this issue with respect to petitioner’ sec_2002 and tax years is sustained sec_162 authorizes a taxpayer to deduct ordinary and necessary business_expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business an ordinary_expense the salvation army witness testified that the receipt forms presented by petitioner were not used by the salvation army during the years at issue due to revisions in the forms that were required by changes in the internal_revenue_code is one incurred in a transaction that frequently or commonly occurs in the type of business involved 308_us_488 a necessary expense is one that is appropriate and helpful to the taxpayer’s business 290_us_111 expenses allowable under sec_162 must be directly connected with or pertaining to the taxpayer’s trade_or_business sec_1_162-1 income_tax regs personal_living_and_family_expenses are not deductible sec_262 an employee is generally recognized as being in the trade_or_business of being an employee and may deduct employment-related_expenses if the requirements of sec_162 are met 326_us_465 however a trade_or_business expense deduction is not allowable to an employee to the extent that the employee is entitled to reimbursement from his or her employer for an expenditure related to his or her status as an employee 79_tc_1 if an employee could have requested reimbursement from his employer and fails or neglects to do so he may not claim a deduction for the expenses under sec_162 id see also 788_f2d_1406 9th cir affg tcmemo_1984_533 56_tc_936 affd without published opinion 456_f2d_1335 2d cir petitioner claimed deductions for unreimbursed employee business_expenses totaling dollar_figure and dollar_figure for and respectively petitioner attached some documentation of these expenses for both years however respondent demonstrated to the court’s satisfaction that the documentation did not reflect that petitioner incurred such expenses in that regard petitioner reported traveling big_number miles during and deducted expenses based on that mileage respondent established that petitioner’s employers did not expect or require petitioner to travel as part of his job moreover respondent also demonstrated at trial that both of petitioner’s employers had reimbursement plans to cover legitimate employee business_expenses during and petitioner did not present at trial or on brief a plausible explanation for the mileage claimed the complete lack of credible_evidence to substantiate petitioner’s claimed employee_expenses and respondent’s presentation convinces the court that the unreimbursed employee business_expenses were properly disallowed as to the other miscellaneous expenses claimed on schedules a of petitioner’ sec_2002 and returns such as tax preparation fees job search expenses traveling expenses and annual fees for a safety deposit box petitioner failed to substantiate these expenses as required by sec_6001 and related regulations sec_6001 sec_1_6001-1 e income_tax regs consequently the court sustains respondent’s determination disallowing these expenses sec_6663 penalty the next issue is whether petitioner is liable for fraud under sec_6663 for the years at issue generally in any case involving the issue of fraud with intent to evade tax the burden_of_proof is on the commissioner sec_7454 rule b see supra note respondent has the burden of proving by clear_and_convincing evidence that petitioner underpaid his tax for each year at issue and some part of the underpayment was due to fraud sec_6663 94_tc_654 fraud means actual intentional wrongdoing and the intent required is the specific purpose to evade a tax believed to be owing 635_f2d_1272 7th cir 398_f2d_1002 3d cir 118_f2d_308 5th cir revg 40_bta_424 76_tc_623 the commissioner must show that the taxpayer intended to evade taxes by conduct calculated to conceal mislead or otherwise prevent the collection_of_taxes stoltzfus v united_states supra 70_tc_562 affd without published opinion 621_f2d_439 5th cir fraud is a question of fact that must be considered based on an examination of the entire record and the taxpayer’s entire course of conduct 92_tc_661 91_tc_874 80_tc_1111 fraud is never presumed and must be established by independent evidence of fraudulent intent petzoldt v commissioner supra pincite recklitis v commissioner supra pincite fraud is never imputed or presumed and courts will not sustain fraud on circumstances that at most create only suspicion 234_f2d_823 5th cir affg in part and revg in part tcmemo_1955_9 184_f2d_86 10th cir 66_tc_538 mere suspicion does not prove fraud and the fact that the court does not find the taxpayer’s testimony wholly credible is not sufficient to establish fraud 314_f2d_478 3d cir affg in part and revg in part tcmemo_1961_192 27_tc_561 affd 252_f2d_681 6th cir although mere suspicion is not enough fraud may be proven by circumstantial evidence and reasonable inferences may be drawn from the facts because direct evidence is rarely available 96_tc_858 affd 959_f2d_16 2d cir petzoldt v commissioner supra pincite delvecchio v commissioner tcmemo_2001_130 affd 37_fedappx_979 11th cir circumstantial evidence that may give rise to a finding of fraud includes understatement of income inadequate records failure_to_file tax returns providing implausible or inconsistent explanations of behavior concealment of assets failure to cooperate with taxing authorities filing false forms w-4 employee’s withholding allowance certificate failure to make estimated_tax payments dealing in cash engaging in illegal activity attempting to conceal illegal activity engaging in a pattern of behavior that indicates an intent to mislead and filing false documents 796_f2d_303 9th cir affg tcmemo_1984_601 99_tc_202 christians v commissioner tcmemo_2003_130 however these badges_of_fraud are not exclusive niedringhaus v commissioner supra pincite 94_tc_316 additionally the taxpayer’s background may be examined to establish fraud 317_us_492 niedringhaus v commissioner supra pincite walters v commissioner tcmemo_1995_543 a consistent pattern of understating income may be strong evidence of fraud delvecchio v commissioner supra citing 348_us_121 420_f2d_283 8th cir affg tcmemo_1968_12 respondent contends that the following badges_of_fraud exist in this case inadequate records implausible or inconsistent explanations a pattern of behavior indicating an intent to mislead and filing false documents on brief petitioner presented frivolous and irrelevant arguments as to the credibility of the various witnesses ignoring the documentation and receipts at issue the court agrees with respondent the record establishes without a doubt that petitioner maintained and presented inadequate and false records with respect to the deductions claimed on hi sec_2002 and returns respondent clearly and convincingly showed through the use of credible witnesses that a substantial number of documents attached to petitioner’ sec_2002 and returns in an effort to establish the propriety of his deductions for both years were forged or falsified moreover the documents presented for this case are strikingly similar to those submitted to substantiate petitioner’s claimed deductions in prowse v commissioner tcmemo_2006_120 and which the court likewise found were altered several professionals such as doctors testified at trial that while they had provided services to petitioner in prior years they had not provided services to petitioner as purportedly claimed on the receipts that were submitted to the court for the years at issue in this case that testimony was corroborated by persons who maintained the books_and_records including billings for services rendered at trial petitioner admitted to fabricating a receipt for hi sec_2002 return by reusing a doctor’s form that had been used for hi sec_2001 tax_return in an attempt to mislead respondent and the court petitioner went to great lengths to provide a variety of implausible and unconvincing arguments regarding the receipts at issue the totality of the evidence clearly and convincingly establishes to the court’s satisfaction that petitioner deliberately overstated his deductions for and and falsified documents supporting the overstated and unsubstantiated deductions to mislead respondent and to evade his proper income_tax_liability for and respondent determined that petitioner’s actions constituted fraud and the court sustains that determination therefore petitioner is liable for the sec_6663 penalties for and sec_6651 addition_to_tax sec_6651 provides for an addition_to_tax for failure_to_file timely federal_income_tax returns unless the taxpayer shows that such failure was due to reasonable_cause and accordingly there is no need to address respondent’s alternative argument that petitioner is liable for the accuracy- related penalty under sec_6662 for both years not willful neglect 469_us_241 84_tc_859 81_tc_806 affd without published opinion 767_f2d_931 9th cir under sec_7491 the secretary has the burden of production in any court_proceeding with respect to the liability of any individual for any penalty addition_to_tax or any additional_amount under that title of the internal_revenue_code petitioner’ sec_2002 federal_income_tax return was due to be filed on date it was filed on date petitioner did not advance any reason for his failure_to_file the income_tax return for that year timely accordingly petitioner is liable for the addition_to_tax under sec_6651 for reviewed and adopted as the report of the small_tax_case division decision will be entered under rule


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si plr-111558-99 date date legend x sub1 sub2 sub3 sub4 sub5 sub6 sub7 d1 this responds to the letter dated date submitted on behalf of x cc dom p si plr-111558-99 requesting a waiver of the five-year waiting_period imposed by sec_1361 of the internal_revenue_code to permit x to make qualified_subchapter_s_subsidiary qsub elections under sec_1361 x is an s_corporation incorporated under state law facts on d1 x acquired all of the outstanding shares of sub1 and sub4 stock prior to the acquisition sub1 wholly-owned sub2 and sub3 sub4 wholly-owned sub5 and sub6 and sub6 wholly-owned sub7 subchapter_s elections had been filed with respect to sub1 and sub4 and qsub elections had been filed with respect to sub2 sub3 sub5 sub6 and sub7 x has filed qsub elections for sub1 and sub4 and seeks a waiver of the five- year waiting_period to make qsub elections for sub2 sub3 sub5 sub6 and sub7 law and analysis sec_1361 provides that except as provided in regulations prescribed by the secretary for purposes of the code i a corporation which is a qsub shall not be treated as a separate corporation and ii all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines a qsub as a domestic_corporation that is not an ineligible_corporation if percent of the stock of the corporation is owned by the s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1361 provides that for purposes of the code if any corporation which was a qsub ceases to meet the requirements of sec_1361 the corporation shall be treated as a new corporation acquiring all of its assets and assuming all of its liabilities immediately before the cessation from the s_corporation in exchange for its stock sec_1361 provides that if a corporation's status as a qsub terminates such corporation and any successor_corporation shall not be eligible to make i an election under sec_1361 to be treated as a qsub or ii an election under sec_1362 to be treated as an s_corporation before the 5th taxable_year for which the termination was effective unless the secretary consents to the election in explaining sec_1361 the joint_committee on taxation states as follows cc dom p si plr-111558-99 it is expected that the secretary will provide waivers of the five-year rule in appropriate instances for example if the stock of the qsub is distributed to the individual shareholders of the subsidiary’s parent the subsidiary will no longer be a qsub and would be subject_to the five-year rule if the parent_corporation retains its subchapter_s_election and the secretary determines that the distribution was not made for tax_avoidance it would seem appropriate for the secretary to waive the five-year rule joint_committee on taxation general explanation of tax legislation enacted in 104th congress jcs-12-96 104th cong 2d sess conclusion based solely on the facts submitted and the representations made the service waives the five-year waiting_period imposed by sec_1361 and consents to x’s qsub elections for sub2 sub3 sub5 sub6 and sub7 under sec_1361 effective d1 and thereafter unless otherwise terminated except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision 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 the power_of_attorney on file with this office a copy of this ruling is being sent to your authorized representative sincerely signed david r haglund david r haglund senior technician reviewer branch office of the assistance chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes