acknowledged significant advice may be disseminated office_of_chief_counsel internal_revenue_service memorandum sca released cc dom it a spshepherd tl-n-5148-98 date oct to assistant district_counsel kansas-missouri district from assistant chief_counsel income_tax accounting returns subject significant service_center advice regarding refund from adjustments to balance due this responds to your request for significant service_center advice dated date regarding the application of sec_6611 of the code to the computation of interest on tax refunds disclosure statement unless specifically marked acknowledged significant advice may be disseminated above this memorandum is not to be circulated or disseminated except as provided in paragraphs iii d and iv a of notice n this document may contain confidential information subject_to the attorney-client and deliberative_process privileges therefore this document shall not be disclosed beyond the office or individual s who originated the question discussed herein and are working the matter with the requisite need to know in no event shall it be disclosed to taxpayers or their representatives issue sec_1 is interest on a tax_refund computed under sec_6611 or sec_6611 of the code if the tax_return shows a balance due but the service issues a refund because the taxpayer made an error or errors on the return which the service corrects is interest on a tax_refund computed under sec_6611 of the code sec_6611 of the code or both sections if a return is filed claiming a refund and the service determines that the taxpayer is entitled to a larger refund than the amount claimed on the return in the case of a tax_refund resulting from a service-initiated adjustment under sec_6611 of the code does the interest-free period under sec_6611 include the interest-free period under sec_6611 conclusion sec_1 interest on the refund is computed under sec_6611 of the code both sec_6611 and sec_6611 of the code apply the former section applies to the amount claimed as a refund on the return the latter section applies to the additional_amount that the service determines is payable to the taxpayer the interest-free period under sec_6611 does not include the interest- free period under sec_6611 the two interest-free periods run consecutively rather than concurrently under current administrative practice the total interest-free period i sec_58 days for individuals and days for corporations discussion sec_6611 of the code provides in general that interest is paid on any overpayment of any internal revenue tax at the overpayment rate established under sec_6621 sec_6611 of the code provides that in the case of a refund interest is paid from the date of the overpayment to a date to be determined by the secretary preceding the date of the refund check by not more than days under current administrative practice the interest-free period is days if the refund is payable to an individual and days if the refund is payable to a corporation the interest-free period prescribed under b allows the service to compute interest due at a fixed point in time and then process the refund check without additional interest accruing before the taxpayer receives the check see 997_f2d_335 7th cir sec_6611 provides that no overpayment interest will be paid if the overpayment is refunded within days after the last date prescribed for filing the return determined without regard to any extension of time for filing the return or if the return is filed after such last date the refund is made within days after the return is filed sec_6611 provides that if the taxpayer files a claim for a credit or refund for any overpayment_of_tax and such overpayment is refunded within days after the filing_date of the claim no overpayment interest is paid from the filing_date of the claim until the refund date sec_6611 provides that if an adjustment initiated by the service results in a refund_or_credit of an overpayment overpayment interest will be computed by subtracting days from the number of days interest is otherwise allowed under sec_6611 section of the revenue reconciliation act of obra amended sec_6611 by enacting subsections e e and e the purpose of the amendment was to provide parallel rules applicable to all tax refunds whether arising from an original tax_return an amended_return or claim_for_refund or a service-initiated adjustment in determining whether subsection e e or e applies the source or origin of the refund must be determined if a refund arises from an original return sec_6611 applies if the refund arises from a service-initiated adjustment sec_6611 applies see h_r conf_rep no 103d cong 1st sess issue if a return is filed showing a balance due but a refund is paid because the taxpayer made an error or errors on the return which the service corrects the refund arises from action initiated by the service rather than from the filing of the return the computation of the interest is therefore governed by sec_6611 issue this issue may be illustrated by an example in which the return claims a dollar_figure refund and the service determines that the taxpayer is entitled to a dollar_figure refund which is dollar_figure more than the amount claimed on the return sec_6611 applies to the amount claimed on the return dollar_figure and sec_6611 applies to the additional_amount payable to the taxpayer as determined by the service dollar_figure it would be improper to apply sec_6611 or sec_6611 to the entire dollar_figure refund the dollar_figure refund arises in part from the filing of the return and in part from action initiated by the service issue if a refund arises from a service-initiated adjustment under sec_6611 overpayment interest is computed by subtracting days from the number of days interest would otherwise be allowed with respect to the overpayment this language indicates that the sec_6611 interest-free period and the sec_6611 interest-free period operate independently of each other therefore the interest free- period of sec_6611 is not subsumed into the larger interest-free period under sec_6611 and the two interest-free periods run consecutively rather than concurrently thus under current administrative practice the total interest-free period for a service-initiated adjustment would be days for individuals and days for corporations if you have any questions regarding this memorandum please call sara shepherd pincite0 jody j brewster by ___ s ___________________ george j blaine chief branch copy to cc dom fs


internal_revenue_service department of the treasury index no washington dc person to contact a number telephone number refer reply to cc dom it a 09-plr-122593-98 date mar this is in reference to a request filed on behalf of x the partnership for consent to adopt the current_expense method of deducting the research_and_experimental_expenditures relating to y pursuant to the provisions of revenue code for the week tax_year beginning january sec_174 of the internal year of adoption it is represented that the partnership elected the expense method for all research_and_experimental_expenditures however after a more detailed analysis of expenses_incurred in partnership discovered that certain various cost centers were being treated as inventoriable costs recovered through cost_of_goods_sold its books_and_records the sec_174 a provides that a taxpayer may treat research_and_experimental_expenditures which are paid_or_incurred by him during the taxable_year in connection with his trade_or_business as expenses which are not chargeable to the capital_account the expendituresso treated shall be allowed as a deduction sec_1_174-3 of the income_tax regulations provides that a taxpayer may with the consent of the commissioner adopt at any time the current_expense method further this method shall be applicable only to expenditures paid_or_incurred during the taxable_year for which the request is made and in subsequent taxable years sec_1_174-3 provides that once the current_expense method is adopted it must be used consistently unless permission is granted to change to another method with respect to part or all of the expenditures pursuant to the facts presented consent is hereby granted the partnership to adopt the current_expense method of deducting the research_and_experimental_expenditures relating to y paid_or_incurred on or after the first day of the year of adoption to the extent that the expenditures constitute research_and_experimental_expenditures pursuant to the provisions of sec_1_174-2 provided this condition is the partnership keeps its books_and_records for the year_of_change and for subsequent taxable years provided they are not closed for that year on the date it receives this on the method_of_accounting granted letter in this letter considered satisfied if the partnership reconciles the results obtained under the method used in keeping its books_and_records and the method used for federal_income_tax purposes and maintains sufficient records to support such reconciliation the partnership currently deducts all research_and_experimental_expenditures as defined in sec_1_174-2 adoption and later tax years unless permission is granted to change to another method with respect to part or all of the expenditures the partnership deducts the balance of research_and_experimental_expenditures capitalized into ending inventory prior to the first day of the year of in accordance with its present method of change amortizing such expenditures paid_or_incurred during the year of in connection with the consent granted in this letter should be understood that the responsibility for making to whether the expenditures paid_or_incurred determinations as by the partnership in connection with the partnership's trade_or_business constitute research or experimental expenditure sec_174 and the regulations thereunder is within the meaning of a matter to be considered by the district_director upon examination of the partnership's return it b45 the partnership should attach a copy of this letter to its tax_return for the year of adoption as evidence of its authority for adopting the current_expense method this ruling is directed only to the partnership who requested it sec_6110 provides that this letter may not be used or cited as precedent sincerely yours assistant chief_counsel income_tax accounting arles strifkland a chiff branch i no d be


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 fip b03 plr-116977-04 date date legend taxpayer ----------------------------------------------------------------------------------- dear -------------------------- this is in response to taxpayer’s letter dated date and subsequent correspondence requesting a ruling on the term to be used to allocate debt issuance costs for purposes of '1 of the income_tax regulations in the case of callable debt that bears interest at a step rate facts taxpayer generally funds its business operations through the issuance of debt securities to the public taxpayer regularly issues short-term debt and long-term callable and non-callable debt the rates of interest on the debt issued by taxpayer include fixed rates variable rates and step rates that is fixed rates that are different during different periods over the stated term of the debt in issuing its debt taxpayer incurs debt issuance costs within the meaning of sec_1_446-5 in taxpayer issued a number of debt securities that provide for stated_interest at a step rate the debt generally also is subject_to one or more call options for example taxpayer issued debt with a stated term of years however the debt is redeemable at the option of taxpayer beginning on or after the one-year anniversary date of the debt’s issue_date for an amount equal to the debt’s stated principal_amount plus accrued interest the debt provides for stated_interest at a step rate in which the interest rate increases each year the debt would be outstanding taxpayer represents that under sec_1_1272-1 the term of the debt is one year exercise of the call option on plr-116977-04 the one-year anniversary date would minimize taxpayer’s yield however taxpayer represents that if the rules under sec_1_1272-1 were to be applied by using the issue_price determined under sec_1_446-5 the term of the debt would be two years exercise of the call option on the second-year anniversary date would minimize taxpayer’s yield law under sec_1_446-5 solely for purposes of determining the amount of debt sec_1_446-5 provides rules for allocating debt issuance costs over the term of the debt for which the costs were incurred the term debt issuance costs means those transaction costs incurred by an issuer of debt that is a borrower that are required to be capitalized under sec_1_263_a_-5 if these costs are otherwise deductible they are deductible by the issuer over the term of the debt as determined under sec_1_446-5 issuance costs that may be deducted in any period debt issuance costs are treated as if they adjusted the yield on the debt to effect this adjustment the issuer treats the costs as if they decreased the issue_price of the debt see sec_1_1273-2 to determine the issue_price of a debt_instrument thus debt issuance costs increase or create original_issue_discount and decrease or eliminate bond_issuance_premium under sec_1_446-5 any resulting original_issue_discount is taken into account by the issuer under the rules in sec_1_163-7 which generally require the use of a constant_yield_method as described in sec_1_1272-1 to compute how much original_issue_discount is deductible for a period however see sec_1_163-7 for special rules that apply if the total original_issue_discount on the debt is de_minimis under sec_1_446-5 any remaining bond_issuance_premium is taken into account by the issuer under the rules of sec_1_163-13 which generally require the use of a constant_yield_method for purposes of allocating bond_issuance_premium to accrual periods instruments issued on or after date debt instruments that provide for an alternative payment schedule or schedules applicable upon the occurrence of a contingency or contingencies for example under sec_1_1272-1 if a debt_instrument provides for certain call options the issuer is deemed to exercise or not exercise the options in a manner that minimizes the yield on the instrument sec_1_1272-1 provides rules to determine the yield and maturity of certain sec_1_446-5 applies to debt issuance costs paid_or_incurred for debt ruling based on the information and representations submitted by taxpayer in the case of its callable debt that bears interest at a step rate taxpayer must use the term of the debt as determined under sec_1_1272-1 determined without regard to the decreased plr-116977-04 issue_price computed under sec_1_446-5 to allocate the debt issuance costs related to the debt for purposes of sec_1_446-5 this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent except as specifically set forth above no opinion is expressed regarding the federal tax consequences of the transactions described above under any other provisions of the code or regulations for example no opinion is expressed regarding whether taxpayer’s determinations under sec_1_1272-1 are affected by other provisions of the original_issue_discount regulations a copy of this letter_ruling should be attached to taxpayer’s federal_income_tax return for the appropriate year 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 william e blanchard senior technician reviewer branch financial institutions products enclosure sec_6110 copy cc -


third party communication none date of communication not applicable office_of_chief_counsel internal_revenue_service memorandum number release date cc ita b04 sspflanz presp-136922-09 uilc date date to roland barral area_counsel cc lm f from michael j montemurro chief branch office of associate chief_counsel income_tax accounting subject sba arc loan program this chief_counsel_advice addresses an issue under your jurisdiction this advice may not be used or cited as precedent issue must a qualified_small_business borrower include in gross_income under sec_61 of the internal_revenue_code interest on a loan that the small_business administration pays to a lender under the america’s recovery capital loan program conclusion a qualified_small_business borrower does not include in gross_income under sec_61 any interest_paid by the small_business administration to the lender and correspondingly has no interest_deduction for this payment facts sec_506 of the american_recovery_and_reinvestment_act_of_2009 p l 123_stat_115 the act authorizes the small_business administration sba to carry out a temporary program to provide loans to help viable small businesses experiencing immediate financial hardship under the act’s authority the sba designed the presp-136922-09 america’s recovery capital loan program arc loan program allowing a qualified_small_business borrower borrower to receive a loan from an sba-approved lender lender to make payments on qualifying small_business loans the arc loan program extends through date or until the appropriated funds run out whichever comes first under the terms of the arc loan program a borrower receives a loan of up to dollar_figure from a lender arc loan to help make up to six months of principal and interest payments on qualifying small_business loans some examples of qualifying small_business loans include credit card obligations for the borrower’s business capital leases for major equipment and vehicles and notes payable to suppliers or vendors the proceeds from an arc loan are disbursed over a six-month period and repayment of the loan principal is deferred for at least months after the last disbursement of the proceeds repayment of an arc loan may extend up to five years however the borrower is required to pay the principal over the repayment period under the terms of an arc loan the sba pays monthly interest to the lender and provides a guaranty of payment to the lender see also sec_506 of the act the borrower has no obligation to pay any interest on the loan finally the act and the arc loan program prohibit the sba and the lender of an arc loan from charging any fees including points for arc loans law and analysis sec_61 provides that gross_income means all income from whatever source derived in general sec_7872 defines a below-market_loan as any loan on which the interest rate charged is less than the applicable_federal_rate afr sec_7872 provides that the borrower of a below-market term_loan is treated as having received from the lender on the date the loan is made cash in an amount equal to the excess of the amount_loaned over the present_value of all payments required under the loan the imputed transfer sec_7872 further provides that a below-market term_loan is treated as having original_issue_discount oid in an amount equal to the imputed transfer which is in addition to any other oid on the loan determined without regard to sec_7872 sec_1_7872-5t of the temporary income_tax regulations provides that notwithstanding any other provision of sec_7872 and the regulations thereunder sec_7872 does not apply to the loans listed in sec_1_7872-5t because the interest arrangements of those loans do not have a significant effect on the federal tax_liability of the borrower or the lender sec_1_7872-5t provides however that if a taxpayer structures a transaction as a loan exempt under sec_1_7872-5t and one of the principal purposes of so structuring the transaction is the avoidance of federal tax then the transaction will be recharacterized as a tax_avoidance loan under sec_7872 sec_1_7872-5t provides an exemption for loans that are subsidized by a presp-136922-09 federal state or municipal government or any agency_or_instrumentality thereof and that are made available under a program of general application to the public in authorizing the arc loan program under sec_506 of the act congress does not impose on the borrower any obligation to pay interest on the arc loans it would be inconsistent with the statutory purpose of not imposing any interest obligation on the borrower to treat the sba’s payment of interest to the lender as resulting in gross_income to the borrower under sec_61 the borrower however is not entitled to an interest_deduction for this loan in addition sec_7872 would not apply to arc loans the arc loan program was designed to carry out a temporary program to provide loans to help viable small businesses experiencing immediate financial hardship as part of the arc loan program the sba rather than the borrower is obligated to pay the interest on an arc loan a purpose of this interest arrangement is to alleviate the financial hardships of small businesses the interest arrangements of the arc loans are therefore not structured with a principal purpose of avoiding federal tax furthermore even if the arc loans were considered below-market loans within the meaning of sec_7872 the loans would qualify for exemption under sec_1_7872-5t this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call -------------------------at if you have any further questions


tcmemo_2003_274 united_states tax_court isaac baranowicz and lora d baran f k a loraine d baranowicz petitioners v commissioner of internal revenue respondent docket nos filed date steven d blanc for petitioner isaac baranowicz lora d baran pro_se gary s stirbis for respondent memorandum findings_of_fact and opinion swift judge in these consolidated cases the parties have stipulated deficiencies in petitioners’ federal income taxes for and as follows year deficiency dollar_figure big_number big_number big_number the parties have also stipulated that these deficiency amounts constitute substantial underpayments of tax attributable to tax- motivated transactions under sec_6621 and that there are no additions to tax due from petitioners for and under sec_6653 and the issue for decision is whether petitioner lora d baran lora is entitled to relief from joint_and_several_liability from the above deficiencies and additional interest which relate to investments in equipment_leasing partnerships findings_of_fact some of the facts have been stipulated and are so found at the time the petitions were filed petitioners resided in los angeles california lora did not graduate from high school lora earned an associate’s degree in art but she never completed a 4-year college degree in petitioners married between and lora was employed at various times as a clerical employee at banks and as a legal secretary in with the arrival of unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue petitioners’ son lora ceased employment outside the home and became a housewife and mother between and lora also attended college courses pertaining to interior decorating and design lora has no training in finance tax_accounting or business early in petitioners’ marriage petitioner isaac baranowicz isaac attended college and earned a bachelor’s degree master’s degree and a certified_public_accountant c p a license in isaac began working for an accounting firm in which by he had become a partner in isaac formed i b management inc the firm to establish his own accounting and financial planning firm isaac as sole owner and a board member of the firm made lora the secretary of the firm but lora’s only responsibility as secretary was to sign the minutes of the firm’s board meetings during petitioners’ marriage isaac handled all family financial matters because of isaac’s education and experience lora relied on and trusted isaac to handle properly the family’s finances isaac managed and handled the family’s checkbooks retirement accounts and other investments when a financial matter required lora’s signature isaac instructed lora where to sign and lora did so without question through one of isaac’s clients isaac was introduced to certain equipment_leasing partnerships isaac invested in several of these partnerships isaac generally withdrew funds from a joint bank account owned by lora and himself to make the partnership investments but the investments were made only in the name of isaac upon referral by isaac some of isaac’s clients also invested in the equipment_leasing partnerships isaac charged these clients fees for his advice relating to the investments specifically regarding isaac’s investments in the equipment_leasing partnerships lora relied on isaac’s accounting and tax expertise occasionally isaac provided lora with general information about the equipment_leasing partnership investments he made lora was not familiar with the tax opinions that were associated with the promotion of the equipment_leasing partnership investments and did not understand the at_risk_rules of the internal_revenue_code petitioners timely filed their joint federal_income_tax returns for and isaac prepared these income_tax returns and instructed lora to sign the returns in each of these tax returns isaac claimed deductions for interest_expense and partnership losses relating to the equipment_leasing partnerships lora signed the tax returns even though she did not understand the equipment_leasing partnership transactions or how they were reported on the tax returns in february of petitioners separated and on date their divorce became final in the divorce decree several of the investments previously held only in isaac’s name were designated as owned by isaac and lora jointly including the equipment_leasing partnership investments giving rise to the stipulated deficiencies on audit of petitioners’ joint federal_income_tax returns for and respondent determined deficiencies in petitioners’ federal income taxes based largely on the disallowance of claimed interest_expense and partnership losses relating to two of the equipment_leasing partnerships specifically respondent determined that the partnership losses claimed with respect to the equipment_leasing partnerships were not allowable because petitioners did not establish that the alleged partnership transactions constitute bona_fide arm’s- length transactions entered into at fair_market_value that such transactions were entered into for profit or that such transactions had any economic_substance respondent also determined that the claimed interest_expense deductions relating to the equipment_leasing partnerships were not allowable because petitioners had not shown that the claimed expenses arose from a bona_fide debtor-creditor relationship on date lora filed a form_8857 request for innocent spouse relief with regard to the above income_tax deficiencies for through on date before respondent replied to lora’s request for relief lora filed an amended petition specifically requesting relief under sec_6015 and c from joint_and_several_liability on date respondent determined lora was entitled to relief from joint_and_several_liability under sec_6015 for each year in issue isaac disputes respondent’s determination that lora is entitled to relief from joint_and_several_liability opinion taxpayers filing joint federal_income_tax returns are generally jointly and severally liable for all taxes due sec_6013 relief from joint liability is available in limited circumstances under sec_6015 sec_6015 c f lora claims she is entitled to relief from joint_and_several_liability under sec_6015 and c lora makes no claim for equitable relief under sec_6015 generally relief is available under sec_6015 with respect to taxpayers who are divorced legally_separated or living apart from the spouse with whom he or she filed a joint income_tax return for the year in issue such relief is available only to taxpayers who establish that the items giving rise to the deficiency are allocable to the former spouse relief is not available where respondent establishes that a taxpayer had actual knowledge of the items allocable to the former spouse sec_6015 and d 116_tc_189 in the context of a disallowed deduction actual knowledge under sec_6015 requires proof that the spouse seeking relief had actual knowledge of the factual circumstances which made the item disallowable as a deduction 117_tc_279 116_tc_198 isaac argues that the investments in the equipment_leasing partnerships were allocable to lora and himself and that lora had actual knowledge of those investments as a consequence isaac contends that lora should not be entitled to relief under sec_6015 lora argues that the investments in the equipment_leasing partnerships were allocable to isaac and that she lacked actual knowledge of the underlying circumstances resulting in the disallowance of the deductions relating to these investments lora contends and respondent has determined that she meets the requirements for relief from joint liability under sec_6015 we conclude that the equipment_leasing partnership transactions are allocable to isaac isaac made these investments in his name only isaac was a c p a isaac actively sought out the investments and he marketed the investments to his own clients on the evidence before us we conclude lora did not have actual knowledge of the underlying circumstances resulting in the disallowance of the deductions related to the equipment_leasing partnership investments isaac sought out these equipment_leasing partnership investments lora was a homemaker mother and part-time student of interior decorating lora was only generally familiar with the existence of the investments in the equipment_leasing partnerships isaac invested in the equipment_leasing partnerships in his own name and isaac independently of lora used the information relating to those investments in preparation of the joint income_tax returns lora relied on isaac’s professional experience as a c p a in signing the joint income_tax returns based on all the facts before us we agree with lora and respondent that lora did not have actual knowledge of the underlying equipment_leasing partnership transactions giving rise to the stipulated deficiencies and therefore that lora is entitled to relief from joint liability under sec_6015 for the years in issue herein we need not address arguments regarding whether lora is entitled to relief under sec_6015 other arguments made by petitioners that are not specifically addressed have been considered and rejected based on the foregoing appropriate decisions will be entered


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 b3 plr-124840-17 date date internal_revenue_service number release date index number --------------------- ------------------------------- ---------------------------- -------------------------------- legend estate -------------------------------- --------------------------- x ------------ date -------------- date --------------------- -- date ---------------------- dear ----- --------------------- this responds to the letter dated date submitted on behalf of estate requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_663 of the internal_revenue_code facts estate files its federal_income_tax return on a fiscal_year basis with the year ending date the estate made a distribution in the amount of dollar_figurex distribution within the first sixty- five days of the year ending date and intended to have the distribution considered to be paid or credited on the last day of the year ending date as permitted under sec_663 however due to inadvertence the estate did not timely make an election under sec_663 plr-124840-17 law and analysis sec_663 provides that in general if within the first days of any taxable_year of an estate or a_trust an amount is properly paid or credited such amount shall be considered paid or credited on the last day of the preceding_taxable_year sec_663 provides that sec_663 shall apply with respect to any taxable_year of an estate or a_trust only if the executor of such estate or the fiduciary of such trust as the case may be elects in such manner and at such time as the secretary prescribes by regulations to have sec_663 apply for such taxable_year sec_1_663_b_-2 of the income_tax regulations provides that if a_trust return is required to be filed for the taxable_year of the trust for which the election is made the election shall be made in the appropriate place on such return the election under sec_1_663_b_-2 shall be made not later than the time prescribed by law for filing such return including extensions thereof such election shall become irrevocable after the last day prescribed for making it sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules 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 code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that estate has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 as a result estate is granted an extension of time of days from the date of this letter to file an election under sec_663 the election should be made by filing an income_tax plr-124840-17 return for year ending date amended to include the election with the appropriate service_center a copy of this letter should be attached to the amended_return except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election finally we express or imply no opinion concerning whether the distributions were property paid or credited and in the proper amounts this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to estate’s authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely bradford r poston senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


department of the treasury ya internal_revenue_service p o box irs cincinnati oh release number release date uil code date date employer id number contact person id number contact telephone number form you must file tax years dear this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final because you don’t qualify as a tax-exempt_organization under sec_501 of the code donors can’t deduct contributions to you under sec_170 of the code you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we’ l also notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed determination_letter under sec_6104 of the code you should contact your state officials if you have questions about how this determination will affect your state responsibilities and requirements we’ll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action letter rev catalog number 47632s if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 sincerely stephen a martin director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 c redacted letter final adverse determination under sec_501 - no protest letter rev catalog number 47632s gz y department of the treasury internal_revenue_service cincinnati oh legend c formation date d objects related to club purposes e membership criteria f meeting place h particular type of club event dear date date employer id number contact person id number contact telephone number contact fax number uil issues do you qualify for exemption under sec_501 of the code no for the reasons stated below facts you are an unincorporated association formed on c as a social organization that promotes individuality and self-expression of members and the public through education and the display exhibition and celebration of d in a non-judgmental and encouraging environment we considered your application_for recognition of exemption from federal_income_tax under sec_501 a of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records you are governed by the council new members of which are selected from the general membership by the unanimous vote of the council your membership is limited to e members must agree to abide by your charter and bylaws and must reside within a -mile radius of the club’s home f they must attend at least one club event each quarter and pay annual dues dues are used to cover incidental costs such as website and entry fees for activities such as parades members have the right to purchase club patches and pins with the club’s insignia club events include h club socials club fundraisers or other club sanctioned events you have monthly socials at a f or other public establishments it is unclear how h differ from club socials however a flyer you shared indicates that h are held monthly the events are also open to the general_public you charge no fees for the monthly socials however you collect donations at the monthly social events and contribute them to selected charities you offer hands-on training in certain skills and techniques of interest to your members occasionally you provide educational opportunities about community history and you sponsor an annual pageant h are posted on a public facebook page educational events are posted on a private facebook page the member hosting the educational event informs h attendees of the event and after screening those interested in participating invites participants to the event venue you estimate that devoted to educational activities -_ percent of your total time is devoted to social events and percent of your total time is your projected income includes donations from your members donations received from monthly f socials and annual fundraising income from educational events law sec_501 of the code describes corporations organized and operated exclusively for charitable purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that for an organization to be exempt under sec_501 of the code it must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational or operational_test it is not exempt sec_1 c -1 b iv of the regulations provides that in no case shall an organization be considered organized exclusively for one or more exempt purposes if by the terms of its articles the purposes for which such organization is created are broader than the purposes specified in sec_501 sec_1_501_c_3_-1 provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 provide that the term charitable is used in sec_501 in its generally accepted legal sense and includes relief of the poor and distressed or of the underprivileged advancement of religion advancement of education or science erection or maintenance of public buildings monuments or works lessening of the burdens of government promotion of social welfare sec_1_501_c_3_-1 defines education as a the instruction or training of the individual for the purpose of improving or developing his capabilities or b the instruction of the public on subjects useful to the individual and beneficial to the community revrul_77_366 1977_2_cb_192 describes a nonprofit organization that arranges and conducts winter cruises during which activities to further religious and educational_purposes are provided in addition to extensive social and recreational activities it did not operate exclusively for exempt purposes and therefore did not qualify for exemption revrul_78_305 1978_2_cb_172 describes an organization formed to educate the public about homosexuality in order to foster an understanding and tolerance of homosexuals and their problems which letter rev catalog number 47630w qualifies for exemption under section s01 c of the code the organization collects factual information relating to the role of seminars forums and discussion groups to the public materials distributed to the public include copies of surveys summaries of opinion polls scholarly statements publications of government agencies and policy resolutions adopted by educational medical scientific and religious organizations the organization accumulates factual information through the use of opinion polls and independently compiled statistical data from research groups and clinical organizations all materials disseminated by the organization contain a full documentation of the facts relied upon to support conclusions contained therein in society and disseminates this information through in better business bureau v united_states 326_us_278 the court held that an organization is not operated exclusively for charitable purposes and thus will not qualify for exemption under sec_501 if it has a single non-charitable purpose that is substantial in nature this is true regardless of the number or importance of the organization's charitable purposes application of law you are not described in sec_501 of the code because you are not organized and operated exclusively for charitable or educational_purposes as required by sec_1_501_c_3_-1 of the regulations organizational_test your charter does not contain the required purpose and dissolution provisions of sec_501 of the code your stated purpose to provide social events to promote individuality and self-expression for your membership are broader than the purposes specified in sec_501 and sec_1_501_c_3_-1 regulations iv of the percent is devoted to social activities furthermore the collection of donations for charity always although you state you contribute any donations you receive during your events to charitable organizations and provide educational opportunities for your membership more than an insubstantial amount of your total activities appears to occur in the context of your social events as incidental to them for example your flyer only promotes attendance at h making no mention of charitable or educational activities your club functions therefore appear to primarily serve a social purpose any charitable purpose being subordinate social activities do not further charitable purposes described in sec_1_501_c_3_-1 or educational_purposes described in sec_1_501_c_3_-1 therefore you are not engaged primarily in activities which accomplish one or more such exempt purposes specified in sec_501 as required by sec_1 c - c of the income_tax regulations you are like the organization in revrul_77_366 which carries on religious and charitable activities but does not qualify for exemption because a substantial amount of its time is devoted to social activities like the organization in better business bureau a single non-charitable purpose that is substantial in nature defeats exemption for you regardless of the number or importance of your charitable and educational_purposes operational_test you are distinguished from the organization described in revrul_78_305 the activities you have described as educational are not open to the public anyone attending your educational events must go through your social event to be screened and privately invited to the events the activities have the character of personal instruction and are not designed to foster understanding and tolerance through public seminars forums and discussion groups and publications letter rev catalog number 47630w conclusion organizational based on the above we find that you are not organized and operated for exempt purposes within the meaning of sec_501 of the code specifically you do not meet the organizational_test for exemption because your organizing document does not contain the necessary c language operational you do not meet the operational_test for exemption because more than an insubstantial amount of your activities is social in order to qualify for exemption under sec_501 your activities must be exclusively educational and or charitable more than an insubstantial amount of your activities is devoted to social activities accordingly we conclude you do not qualify for exemption under sec_501 of the code if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with e anexplanation of why you disagree including any supporting documents the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative e e e one of the following declarations the law or authority if any you are relying on for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t letter rev catalog number 47630w a ys already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we’ll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we'll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter enclosure publication sincerely stephen a martin director exempt_organizations rulings and agreements letter rev catalog number 47630w


internal_revenue_service number release date index number --------------------------------------------- ------------------------------------ ------------------------------------ - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc ita b03 plr-125774-06 date date legend taxpayers --------------------------------------------- year ------- year ------- year ------- year ------- accountant ------------------- company ---------------------------- dollar_figurea -------- dollar_figureb -------- dollar_figurec -------- dollar_figured -------- dollar_figuree ----- dollar_figuref ----- dear --------------------------------------------- this responds to your letter dated date which requests an extension of time under sec_301_9100-1 and -3 of the procedure and administration regulations for you to make a late election to treat qualified dividends as investment_income under sec_163 and sec_163 of the internal_revenue_code for year sec_2 and facts taxpayers filed form_1040 for year sec_2 and taxpayers had investment_interest expense in year of dollar_figurea and in year of dollar_figureb this investment_interest arose from a promissory note used to purchase the stock of company which was executed in year in year sec_2 and taxpayers received qualified dividends from company in the amounts plr-125774-06 of dollar_figurec in year and dollar_figured in year the only other investment_income taxpayers had was taxable interest_income in the amounts of dollar_figuree in year and dollar_figuref in year taxpayers relied on accountant to complete and timely file their year and year form 1040’s pursuant to the jobs and growth tax relief reconciliation act of accountant was aware that taxpayers could not consider qualified dividends as investment_income for purposes of computing the allowable investment_interest deduction unless taxpayers elected to have the dividends taxed at the ordinary_income tax_rates however accountant was unaware of the need to file form_4952 to make the election to treat the qualified dividends as investment_income on both the year and year form_1040 accountant treated the dividends received from company as nonqualified so they would be taxed at the ordinary_income tax_rates and took the investment_interest expense deduction however accountant failed to file form_4952 electing to include the qualified dividends in investment_income so although the tax was computed correctly for electing to treat the dividends as investment_income the form_4952 for making the election was not filed taxpayers were unaware of the need to file the election on form_4952 in addition accountant did not discuss the treating of the qualified dividends as nonqualified ordinary dividends with the taxpayers with respect to either the year or year form 1040’s while preparing taxpayers’ year tax_return accountant discovered the mistake and notified taxpayers of the need to seek a letter_ruling granting permission to file a late election law sec_163 of the code provides that in the case of a taxpayer other than a corporation the amount allowed as a deduction for investment_interest for any taxable_year shall not exceed the net_investment_income of the taxpayer for the taxable_year sec_163 of the code provides in part that investment_income means the sum of- i gross_income from property_held_for_investment other than any gain taken into account under clause ii l ii the excess if any of- i the net gain attributable to the disposition of property_held_for_investment over ii the net_capital_gain determined by only taking into account gains and losses from dispositions of property_held_for_investment plus iii so much of the net_capital_gain referred to in clause ii ii or if lesser the net gain referred to in clause ii i as the taxpayer elects to take into account under this clause such term shall include qualified_dividend_income as defined in sec_1 only to the extent the taxpayer elects to treat such income as investment_income for purposes of this subsection plr-125774-06 sec_1_163_d_-1 of the regulations provides that the election for qualified_dividend_income must be made on or before the due_date including extensions of the income_tax return for the taxable_year in which the qualified_dividend_income is received sec_301_9100-1 through of the procedure and administration regulations provide the standards the commissioner uses to determine whether to grant an extension of time to make a regulatory election for this purpose sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 of the regulations provides that requests for extensions of time for regulatory elections other than automatic changes covered under sec_301 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 of the regulations provides that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer- i requests relief before the failure to make the regulatory election is discovered by the service ii inadvertently failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 of the regulations provides that a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer- i seeks to alter a return position for which an accuracy-related_penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief sec_301_9100-3 of the regulations provides that the commissioner will grant a reasonable extension of time only when the interests of the government will not be prejudiced by the granting of relief under paragraph c i the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower plr-125774-06 tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made under paragraph c ii the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment conclusion taxpayers’ election is a regulatory election as defined under sec_301_9100-1 because the due_date of the election is prescribed in the regulations under sec_1_163_d_-1 in the present situation the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been satisfied the information and representations made by taxpayers establish that taxpayers acted reasonably and in good_faith with this request taxpayers relied on accountant a qualified_tax professional to prepare and file their tax returns and accountant failed to make or advise taxpayers to make the election taxpayers are not seeking to alter a return position for which an accuracy- related penalty has been or could be imposed under sec_6662 at the time relief is requested the facts provided in the ruling_request establish that the facts have not changed since the original election deadlines and that hindsight is not a factor in requesting relief furthermore granting an extension will not prejudice the interests of the government it is represented that the taxpayers will not have a lower tax_liability in the aggregate for all taxable years affected by the election if given permission to make the election at this time than taxpayers would have had if the election had been made by the original deadline for making the election furthermore the taxable_year in which the regulatory election should have been made and any taxable years that would have been affected by the election had it been timely made are not closed by the period of assessment accordingly taxpayers are granted an extension of time for making the election until days following the date of this ruling the election should be made by filing a form_4952 including a copy of this ruling for both year and year 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 taxpayers requesting it sec_6110 of the code 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 plr-125774-06 the rulings contained in this letter are based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by the appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely _____________________ christopher f kane branch chief branch income_tax accounting cc


internal_revenue_service p o box cincinnati oh number release date date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil b foundation c state x scholarship amount dear we have considered your request for advance approval of your grant-making program under sec_4945 of the internal_revenue_code dated date our records indicate that you b were recognized as exempt from federal_income_tax under sec_501 of the code and that you are classified as a private_foundation as defined in sec_509 your letter indicates that b will operate a scholarship program the purpose of the program is to provide scholarships to high school graduates born in the state of c b expects to award nine to thirteen scholarships per year in the amount of x made payable to a qualified educational_institution the grants would be specifically for tuition textbooks and on-campus or school operated room and board services at a vocational institute university or college eligible applicants will be high school graduates born in the state of c the scholarships are advertised on b’s website to apply an individual must complete an application packet that is postmarked no earlier than january and no later than june of the year of graduation applications will not be considered eligible for scholarships a complete application packet include sec_1 the application form an applicant’s statement employment history contact information for three references a copy of a certified birth certificate of the applicant a copy of the acceptance letter from the institution the applicant will be attending and a complete copy of their most recent high school transcript incomplete applications for the continuation of scholarships will include a complete application packet as outlined above plus the year’s end transcript from the institution the applicant attends scholarships shall be awarded by august the selection committee consists of two law professionals who are familiar with b the selection criteria will be a academic performance past and present b community participation c financial need and d not be a disqualified_person as defined in sec_4946 of the code scholarships and grants will be awarded by the selection committee selection is made on a nondiscriminatory objective basis based on the aforementioned criteria an applicant will be notified via us mail of their acceptance and further outlining the requirements to maintain the scholarship the procedures for the confirmation of the terms and conditions of the award are as follows each recipient will be required to sign and return to b an attachment to the letter outlining the terms of the scholarship b will pay scholarship funds directly to the educational_institution such arrangement will include an agreement with the educational_institution that the funds will be used to defray the recipient’s expenses for tuition textbooks and on-campus or school operated room and board services any portion of scholarship funds not used during the scholastic year of the designated scholarship must be returned to b failure to comply with these terms will require the scholarship recipient to repay b for the entire scholarship random reviews of the scholarship amount used details of how it was used and confirmation that the student completed their courses will be held at the discretion of b b will retain all records relating to individual grants including information obtained to evaluate grantees identify whether a grantee is a disqualified_person establish the amount and purpose of each grant and establish that b undertook the supervision and investigation of grants sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170gi the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i its grant procedure includes an objective and nondiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are excludable from the gross_income of the recipients subject_to the limitations provided by sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110g of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours robert choi director exempt_organizations rulings and agreements


internal_revenue_service number release date index number ---------------------------- -------------------------------------------- ------------------------------------------- ------------------------------- in re -------------------------- ---------------- --------------------------- department of the treasury washington dc person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc intl - plr-104520-03 date date taxpayer ---------------------------------------------------------------------------------------------- legend ------------------------ -------------------- -------------------------------------- individual a tax_year y ------- cfc dear ------------------- this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file the election statement described in sec_1_954-2 with respect to cfc for tax_year y additional information was submitted in a letter dated date and date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process individual a is the vice president of taxpayer’s worldwide tax services the affidavit of individual a and the facts submitted describe the circumstances that led to the discovery that taxpayer had inadvertently failed to file the election statement described in sec_1_954-2 for tax_year y taxpayer believes that it has acted reasonably and in good_faith because the irs did not discover the failure_to_file the election statement prior to taxpayer requesting relief plr-104520-03 sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation the election statement described in sec_1_954-2 is a regulatory election within the meaning of sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards set forth in sec_301_9100-3 based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to file the election statement described in sec_1 g with respect to cfc for tax_year y as provided in a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the election statement this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter should be associated with the election statement no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented plr-104520-03 pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to taxpayer and to your other authorized representative sincerely associate chief_counsel international by s allen goldstein allen goldstein reviewer attachment copy for purposes


internal_revenue_service number release date index number 1397c ------------------------------------- ------------------------- ------------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ----------------- telephone number --------------------- refer reply to cc ita b07 plr-147079-10 date date re request for private_letter_ruling regarding sec_1397c re request for private_letter_ruling regarding sec_1397c taxpayer state state location year year year b c d e f g h i j k --------------------------------------------------- ------------- ------------ ------------------------ ------- ------- ------- ------- --------------- --------- ------------------------------ ------------------------------ -------------------------- --- --- ------------ ---- dear ------------------ this letter is in response to your letter dated date and subsequent correspondence submitted on behalf of taxpayer requesting a letter_ruling under sec_1397c of the internal_revenue_code plr-147079-10 facts taxpayer represents that the facts are as follows taxpayer is a c-corporation incorporated under the laws of state and is headquartered in location taxpayer produces and transmits sports programming in state taxpayer primarily provides live transmissions of b c and d sports and e games on television and the internet in year taxpayer was founded and began providing live transmissions of state c sports on the internet beginning in year taxpayer began providing sports programming on digital channels of several local television stations for broadcast to television viewers in state taxpayer pays each television station a fee for access and use of a 24-hour 7-day a week digital channel taxpayer has not acquired any licensing rights or ownership in these television stations taxpayer does not have any affiliation agreements with any cable operator to provide programming the local television stations on which taxpayer has purchased access and use of a digital channel have contracts with cable operators to retransmit the local television station’s programming to the cable operators for distribution to subscribers including taxpayer’s programming taxpayer is not a party to these contracts and does not share in any revenue the television stations receive from the cable operators including subscriber fees taxpayer also uploads its programming to satellite as a result a cable operator may pull down taxpayer’s programming from the satellite taxpayer does not receive any payment from the satellite or cable operators most of the sports programming produced by taxpayer is live sports events for which taxpayer obtains the rights to broadcast taxpayer also has acquired from the f the rights to broadcast certain of its g games taxpayer currently has one primary source_of_income and it is advertising revenue taxpayer’s advertising revenue is derived primarily from sales of local spot advertising and infomercial advertising taxpayer generally retains this advertising revenue however in some cases where taxpayer does not pay a fee for the right to broadcast a sports event the advertising revenue from that event is split between taxpayer and the party of the event for the year taxable_year taxpayer earned approximately h percent of its gross revenue from advertising for the current taxable_year taxpayer projects that it will earn approximately i percent of its gross revenue from advertising plr-147079-10 taxpayer currently does not receive any income including subscriber fees from the local television stations cable operators or satellite operators for taxpayer’s programming although taxpayer projects receiving dollar_figurej in license fees during its current taxable_year which is approximately k percent of its projected gross revenue for the current taxable_year there is not currently any licenses in place or contracts in place for license fees for prior taxable years taxpayer did not receive any income including subscriber fees from the local television stations cable operators or satellite operators for taxpayer’s programming ruling requested taxpayer requests that the service issue the following ruling the trade_or_business currently conducted by taxpayer does not constitute a trade_or_business consisting predominantly of the development or holding of intangibles for sale or license pursuant to sec_1397c for purposes of determining whether taxpayer’s trade_or_business is a qualified_business under sec_45d law and analysis sec_45d provides the rules for the new_markets_tax_credit for purposes of sec_45d the term qualified_business is defined in sec_45d as having the meaning given to such term by sec_1397c except that a in lieu of applying sec_1397c the rental of others of real_property located in any low-income_community is treated as a qualified_business if there are substantial improvements located on such property and b sec_1397c does not apply sec_1397c provides that except as otherwise provided in sec_1397c the term qualified_business means any trade_or_business sec_1397c provides that the term qualified_business shall not include any trade_or_business consisting predominantly of the development or holding of intangibles for sale or license taxpayer's trade_or_business is the production and transmission of sports programming which extensively involves the use of intangibles taxpayer acquires or creates intangibles eg licenses from third parties for the rights to broadcast their sports events and from its own self-created programming in the cases where taxpayer does not pay a fee for the right to broadcast the sports event but taxpayer splits the advertising revenue from that event with the party of the event we view the portion of the advertising revenue provided by taxpayer to the party to be in the nature of a license fee paid_by taxpayer for its right to broadcast the event plr-147079-10 currently taxpayer receives advertising revenue related to its sports programming or to infomercials for the year taxable_year taxpayer’s advertising revenue was at least percent of its gross revenue for the current taxable_year taxpayer estimates that its advertising revenue also will be at least percent of its projected gross revenue taxpayer currently does not receive any subscriber fees or other revenue from the local television stations cable operators or satellite operators for taxpayer’s programming while the local television stations on which taxpayer has purchased access and use of a digital channel may sell or otherwise exploit taxpayer’s programming to cable operators without taxpayer’s permission taxpayer is not a party to these contracts or arrangements between the local television stations and cable operators although taxpayer projects that it will receive license fees during the current taxable_year the projected amount of dollar_figurej is less than percent of taxpayer’s projected gross revenue for the current taxable_year accordingly taxpayer has demonstrated that its trade_or_business does not consist predominantly of developing or holding intangibles for sale or license conclusion based solely on the facts and representations submitted and the relevant law and analysis as set forth above we conclude that taxpayer’s trade_or_business of producing and transmitting sports programming as currently conducted by taxpayer does not constitute a trade_or_business consisting predominantly of the development or holding of intangibles for sale or license pursuant to sec_1397c except as set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provisions of the code specifically no opinion is expressed or implied on whether the requirements of the new_markets_tax_credit under sec_45d are satisfied whether taxpayer is a qualified active low- income community business under sec_45d or whether taxpayer satisfies sec_1397c as modified by sec_45d or sec_1397c in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer’s authorized representative we are also sending a copy of this letter to the appropriate operating division director plr-147079-10 this letter_ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely kathleen reed kathleen reed chief branch office of associate chief_counsel income_tax and accounting enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index nos and p o box ben franklin station washington dc person to contact telephone number refer reply to cc ita plr-135425-01 date ein taxpayer x state y dollar_figurea dollar_figureb dollar_figurec dollar_figured dollar_figuree dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dear this responds to your letter dated date requesting a ruling on the proper federal_income_tax treatment of a proposed fund-raising activity involving the sale of the right to use niches and cenotaphs to members of the roman catholic community at a price which significantly exceeds the fair_market_value requested rulings taxpayer’s proposal of offering columbarium niches and cenotaphs for greater than fair_market_value falls within the guidelines for qualifying as a charitable_contribution with a partial consideration component under sec_170 of the internal_revenue_code no part of the payments received by taxpayer with respect to rights to use the columbarium under the proposed donor agreement will be unrelated_business_income under sec_511 applicable facts taxpayer is a parish of the roman catholic church with principal offices located at x in state y taxpayer is a tax-exempt_entity under sec_501 of the internal_revenue_code and is classified as a church and as an organization which is not a private_foundation under sec_170 and sec_509 the functions of taxpayer include ownership and operation of church property within the parish taxpayer represents that conducting funeral masses burying the dead and performing other sacraments for the dying and the bereaved are basic religious functions of the roman catholic church directly associated with its fundamental doctrines as part of its ministry the church has for many centuries provided consecrated burial grounds and crypts more recently columbaria for the internment of deceased loved ones taxpayer is currently constructing a columbarium on the church’s property which will include niches for the internment of cremated remains and cenotaphs for remembrances of loved ones buried elsewhere taxpayer proposes to initiate a fund- raising program under which members of the catholic community may purchase the right to use the niches and cenotaphs at a price which significantly exceeds the fair_market_value fmv it is proposed that a buyer donor wishing to use a niche or cenotaph will execute a donor’s agreement the donor’s agreement does not obligate taxpayer to furnish other goods or services customarily offered by funeral homes nor does taxpayer intend to do so the proposed payments pre-development and post- development and the estimated fmv for these donations are as follows item pre-development post-development fmv hillside companion niche cenotaph dollar_figurea dollar_figurec dollar_figureb dollar_figurec dollar_figured dollar_figuree law and analysis requested ruling no sec_170 permits a deduction for a charitable_contribution as defined in sec_170 sec_170 defines a charitable_contribution as a contribution or gift to or for_the_use_of certain qualifying organizations a contribution or gift_for the purposes of sec_170 is a voluntary transfer of money or property made by the transferor without receipt or expectation of a financial benefit commensurate with the money or property transferred see sec_1_170a-1 of the income_tax regulations revrul_67_246 1967_2_cb_104 states that to be deductible as a charitable_contribution for federal_income_tax purposes under sec_170 a payment to or for_the_use_of a qualified charitable_organization must be a gift to be a gift_for such purposes there must be among other requirements a payment of money or transfer of property without adequate_consideration the supreme court has stated that the sine qua non of a charitable_contribution is a transfer of money or property without adequate_consideration 477_us_105 revrul_67_246 establishes a two-part test for determining when part of a dual character payment is deductible first the payment is deductible only if and to the extent it exceeds the market_value of the benefit received second the excess payment must be made with the intention of making a gift revrul_67_246 further states generally where a transaction involving a payment is in the form of a purchase of an item of value the presumption arises that the gift was not made for charitable_contribution purposes the presumption being that the payment in such a case is the purchase_price if a charitable_contribution_deduction is claimed with respect to the payment the burden is on the taxpayer to establish that the amount_paid is not the purchase_price of the privileges or benefits and that part of the payment in fact does qualify as a gift thus in showing that a gift has been made it is essential for the taxpayer to establish that the portion of the payment that is claimed as a gift represents the excess of the total amount_paid over the fmv of any substantial privileges or benefits received in return accordingly revrul_67_246 states that if payments solicited for a charitable fund-raising activity are designed to be partly a gift and partly the purchase_price of certain privileges or benefits the organization conducting the activity should employ procedures that make clear not only that a gift is being solicited in connection with the activity but also the amount_of_the_gift being solicited to do this the amount of property attributable to the purchase of privileges or benefits and the amount solicited as a gift should be determined in advance of solicitation in making such a determination the fmv of any substantial privileges or benefits attributable to the purchase must be taken into account after making such a determination the charitable_organization should notify its donors of the amounts allocable to each component of the payment see revrul_67_246 c b pincite revproc_90_12 1990_1_cb_471 in the instant case taxpayer proposes a charitable fund-raising activity designed to be partly a gift and partly the purchase_price of certain privileges or benefits specifically taxpayer plans to offer the right to use the columbarium’s niches and cenotaphs on its property to members of the catholic community at a price which significantly exceeds fmv taxpayer is employing procedures that make clear not only that a gift is being solicited in connection with the activity but also the amount_of_the_gift being solicited taxpayer informs potential buyer donors of the fmv of the niches and cenotaphs along with pre- and post-development prices taxpayer notifies buyers donors of the amounts allocable to each component of the payment by way of a donor’s agreement which states that the fmv for a niche is dollar_figured and dollar_figuree for a cenotaph based on the facts presented the proposed transactions clearly take the form of a purchase and contribution taxpayer has satisfied the two-part test in revrul_67_246 thus taxpayer’s proposal of offering columbarium niches and cenotaphs for greater than fmv falls within the guidelines for qualifying as a charitable_contribution with a partial consideration component under sec_170 requested ruling no sec_501 provides for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable and religious purposes sec_511 imposes a tax on the unrelated_business_taxable_income of organizations otherwise exempt from federal_income_tax under sec_501 sec_512 defines unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business as defined in sec_513 regularly carried on by it less the allowable deductions which are directly connected with the carrying on of such trade_or_business sec_513 defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis for its exemption under sec_501 sec_513 provides that the term trade_or_business includes any activity carried on for the production_of_income from the sale_of_goods or the performance of services sec_1_511-2 provides that beginning in but with certain transitional rules covering tax years beginning before date churches are subject_to the tax on unrelated_business_taxable_income under sec_511 sec_1_513-1 provides that unless one of the specific exceptions of sec_512 or sec_513 applies the gross_income of an exempt_organization subject_to sec_511 is includible as unrelated_business_income if the income is from a trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related aside from the need for or the production or use of the funds to the organization’s performance of its exempt functions sec_1_513-1 provides that for purposes of sec_513 the term trade_or_business has the same meaning that it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services sec_1_513-1 provides that in determining whether a trade_or_business from which a particular amount of gross_income derives is regularly carried on within the meaning of sec_512 regard must be had to the frequency and continuity with which the activities productive of the income are conducted and the manner in which they are pursued sec_1_513-1 provides that for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes in senate report number 91st congress 1st session 1969_3_cb_469 on the tax reform act of public law the committee on finance stated that in the case of churches the term unrelated_business_income will not include the operation and maintenance of cemeteries as long as they are carried on in connection with the church revrul_79_359 1979_2_cb_226 holds that an organization providing traditional religious burial services qualifies for recognition of exemption under sec_501 it states that provision of burial services to members of a religion in compliance with the requirements of the religion’s laws perpetuates traditional religious customs and obligations and contributes to the advancement of religion in the instant case the proposed sales of niches and cenotaphs will be a trade_or_business carried on within the meaning of sec_1_513-1 and c thus the issue here depends on whether such activity is substantially related to the parish’s exempt purposes as required by sec_513 the parish church’s columbarium’s niches and cenotaphs will be used for decedents with respect to whom the roman catholic church has conducted or expects to conduct a funeral ceremony or ceremony in which roman catholic ordained clergy or those under vows preside or participate based on the legislative_history cited above a church’s operation and maintenance of a cemetery or this columbarium with niches and cenotaphs for decedents of the church’s religious denomination would not be an unrelated_trade_or_business as in revrul_79_359 providing traditional burial services that directly support and maintain basic tenets and beliefs of a religion regarding the burial of its members furthers the religious and charitable purpose of advancement of religion and thus is related to furtherance of exempt purposes under sec_501 accordingly based on the facts presented we rule as follows taxpayer’s sales of the rights to use the columbarium’s niches and cenotaphs in connection with anticipated funeral ceremonies to be performed there or elsewhere by the roman catholic church with respect to the decedents will be substantially related aside from the production_of_income to the parish’s exempt religious and charitable purposes under sec_501 and thus will not be an unrelated_trade_or_business under sec_513 and will not result in unrelated_business_taxable_income under sec_511 rulings based solely on the facts and representations submitted we conclude and rule as follows taxpayer’s proposal of offering columbarium niches and cenotaphs for greater than fmv falls within the guidelines for qualifying as a charitable_contribution with a partial consideration component taxpayer’s sales of the rights to use the columbarium’s niches and cenotaphs will be substantially related aside from the production_of_income to the parish’s exempt religious and charitable purposes under sec_501 and thus will not be an unrelated_trade_or_business under sec_513 and will not result in unrelated_business_taxable_income under sec_511 disclaimers and limitations except as specifically ruled above no opinion is expressed as to the federal tax treatment of the transaction under any other provisions of the code and the income_tax regulations that may be applicable or under any other general principles of federal income_taxation neither is any opinion expressed as to the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above ruling this ruling is directed only to the taxpayer s who requested it sec_6110 of the code provides that it may not be cited as precedent sincerely yours clifford m harbourt senior technician reviewer branch associate chief_counsel income_tax accounting cc