internal_revenue_service department of the treasury index numbers washington dc person to contact number release date telephone number refer reply to cc intl plr-118948-98 date dec legend parent sub sub country x country y country z foreign_entity company a company b tax law ordinance c business a plr-118948-98 cc intl cc intl bank date effective date area area area amount a amount b amount c amount d amount e amount f amount g dear this letter is in reply to your letter dated date requesting a ruling substantially identical to the private_letter_ruling plr issued to parent on date the subject of that ruling was the creditability under sec_901 and sec_903 of the internal_revenue_code of amounts payable to country x by sub under of a production_sharing_contract letters dated date and date were submitted with respect to this supplemental request specifically sub has requested that the prior ruling letter be issued to sub in addition to parent and that the word parent in the accordingly paragraph on the bottom of page of the prior ruling letter be changed to sub additional conforming changes have been made the rulings contained in this letter are predicated upon facts and representations submitted by parent and sub 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 rulings verification of the factual information representations and other data may be required as part of the audit process the information submitted for consideration is summarized below parent a domestic_corporation is the common parent of an affiliated_group of plr-118948-98 cc intl cc intl corporations that join in the filing of u s consolidated income_tax returns on a calendar_year basis using the accrual_method of accounting sub is a wholly-owned domestic subsidiary of parent and a member of parent’s consolidated_group sub is a wholly owned domestic subsidiary of sub and a member of parent’s consolidated_group sub is engaged in business a in country x country x is the sovereign owner of land within country x’s territorial boundaries and all of that land’s mineral and petroleum resources foreign_entity is a corporation established under ordinance c and authorized under the laws of country x to exercise country x’s rights to explore develop exploit produce process refine and market petroleum resources on country x’s land company a and company b are corporations organized under the laws of country y and country z respectively and engaged in business a in country x sub makes the following representations the production_sharing_contract agreement on date parent entered into an agreement agreement with an effective date through sub to participate in an existing production_sharing_contract psc between foreign_entity company a company b and country x for the exploitation of country x’s petroleum rights in certain designated contract areas under the agreement parent was admitted as an additional participant in the psc and thus became a working_interest holder in oil_and_gas concession interests acquired under the psc the term petroleum under the psc includes all hydrocarbons oil and natural_gas the nature of the oil_and_gas concession interests subject_to the psc are as a practical matter such that natural_gas or natural_gas liquids ngls are the only commercially exploitable product in the contract areas which areas are located offshore contractors’ obligations and liabilities under the psc are joint_and_several contractors receive no compensation_for services or reimbursement for their expenditures other than their share of petroleum production from area sec_1 and and bear all costs of exploration and development of the contract areas up to the point of commercial production title to all assets acquired and owned by contractors in connection with psc petroleum operations is transferred to the foreign_entity who becomes the owner of the assets when the asset is landed in country x if purchased outside county x or delivered to the contract area if purchased within country x subject_to contractors’ use during the contract term plr-118948-98 cc intl cc intl contractors are obligated to make certain payments to the foreign_entity under the psc a discovery bonus of amount a is payable after each commercial discovery followed by production bonuses of amount a amount b amount c and amount d respectively based upon defined incremental sustained production from the particular contract area contractors are required to make contributions towards research_and_development activities determined by the foreign_entity and an annual service fee of amount e contractors are also required to train country x personnel in all aspects of the petroleum operations under the psc contractors are permitted to use cost-free petroleum oil or natural_gas produced from the contract area for on-site petroleum production operations production in excess of such usage or net petroleum production is split between the parties to the psc agreement contractors are entitled to a dispropor- tionate share of net petroleum production after a cost_recovery allowance as limited by the cost_recovery limitation profit production is split between contractors and foreign_entity according to type ie oil natural_gas or liquid natural_gas and amount of petroleum production_expenditures with respect to area are not recoverable from production in area total recoverable costs are limited depending upon whether oil natural_gas or natural liquid gas is produced the location of such production and the estimated initial recovery amount for example where estimated initial recovery_of natural_gas exceeds amount g the maximum cost_recovery is for on-shore gas and of other gas eg off-shore gas the maximum cost_recovery for natural liquid gas is if the cost_recovery amount in any given year exceeds the cost_recovery limitation this amount is carried over the succeeding year if the cost_recovery amount in any given year is less than cost_recovery available in that year this amount is reclassified as profit production the parties may take their production share in-kind the psc sets certain limitations upon the price of petroleum produced under the agreement depending upon whether the production is oil natural_gas or natural_gas liquids and whether it is sold for consumption within or without country x the value of oil from the contract area is tied to the price in world markets based on prevailing market conditions in area contractors are however required to sell up to of their share of profit_oil at a discount price to meet internal demand of country x natural_gas which is sold for consumption within country x is priced according to a marker price which is the arithmetic average of certain daily published quotes of high sulfur fuel oil hsfo based on thermal energy equivalents fob country x for a rolling six-month period ending the last day second month before the calendar_quarter of the marker price if no hsfo the parties shall reset the price gas produced on-shore is set at of the marker price gas produced elsewhere is set at a price higher than the on-shore gas price or of the marker price the plr-118948-98 cc intl cc intl gas price is subject_to a floor and ceiling price of and per metric tonne hsfo respectively the gas which may be produced in the contract areas is off-shore gas natural_gas in the form of natural_gas liquids ngls may be exported for consumption without country x ngls sold to third parties is to be priced at its fair_market_value at export point and such price must be preapproved by foreign_entity contractors may purchase the foreign entity’s share of ngls at the same fair_market_value price less all processing and transportation costs although contractors are held harmless against certain taxes and duties imposed by country x contractors agree under the psc to be subject_to and comply with country x’s tax law as it relates to filing returns and maintenance of books_and_records furthermore the foreign_entity agrees to assume pay and discharge on behalf of contractors each contractor’s country x’s tax law taxes out of the sums received by the foreign_entity from the sale_or_other_disposition of the foreign entity’s share of petroleum under the psc for this purpose the total taxable_income of a contractor for any calendar_year shall be an amount calculated in accordance with country x’s accounting principles and country x’s tax law the foreign entity’s share of petroleum production from the contract areas includes an amount equal in value to the above assumed obligation it is represented that the foreign_entity will take amounts as a deduction and not as a credit for purposes of computing its tax_liability contractors are however responsible for paying their own taxes on any income derived in country x other than income from petroleum operations in the contract areas including for example income from processing or refining petroleum extracted from the contract areas sub has a letter from country x and countersigned by all other parties to the psc which effectively amends the psc to provide contractors with protection against changes in country x law the letter incorporates as a matter of contract the u s and country y bilateral investment treaties with country x and also is a part of a natural_gas purchase contract between country x and contractors country x tax law the tax law of country x is incorporated within its tax law residents of country x pay tax under the tax law based upon worldwide income while nonresidents pay tax on income accruing or arising from or received in country x taxable_income under the tax law is computed according to various heads of income including salaries interest on securities income from house property agricultural income income from business or profession capitals gains and income from other sources such as dividends royalties and certain rents income from business or profession plr-118948-98 cc intl cc intl profits and gains from any business or profession are expressly included in taxable_income included in income under this category are recovery_of previously written-off bad_debts and similar items gains on sale of machinery and equipment in excess of adjusted cost_basis ie original cost less depreciation and recovery_of certain previously expensed scientific research expenditures separate provisions apply to the taxation of insurance_companies and to taxpayers involved in the explora- tion and production of petroleum and other mineral deposits in the case of a corporation the calculation of taxable_income under the tax law is on an entity-by- entity basis the following deductions are allowed from income from a business or profession under the tax law rents repairs interest insurance premiums depreciation including investment allowances local_taxes employee bonuses and commissions bad_debts certain scientific research expenditures and any other expenditure not in the nature of a capital_expenditure incurred for the purpose of the business or profession of the assessee an assessee is the person by whom any_tax is payable under the tax law salaries are deductible except the assessee is required to withhold tax at the time of payment against salary and if such withheld tax has not been paid to country x the deduction on account of salary allowance is not allowable profits and gains calculated in the year a transfer of a capital_asset takes place are taxable and computed by subtracting the amount_realized from the adjusted cost_basis provisions are available whereby a capital_gain may be deferred and reflected in a reduced cost_basis of defined replacement_property the gain from a sale of country x securities or shares of stock of public companies listed with a stock exchange in country x are exempt from tax in general losses in one category may offset income under another category except that losses from any speculation business or capital losses may only offset gains from any speculation business or capital_gain respectively net losses from a business or profession not used to offset capital_gain may in general be carried forward for six years to offset future income from that trade_or_business losses from any speculation business or capital losses may also be carried forward for six years subject_to certain limitations in the case of capital losses there are certain conditions and limitations on the carryforward of losses including rules which integrate the depreciation provisions with the loss carryover provisions income from the exploration and production of petroleum and other mineral deposits profits and gain from oil_and_gas exploration and production are taxable under the general rules of the tax law as adjusted under a separate schedule schedule dealing with oil_and_gas taxation the schedule provides that where any person including a corporation carries on or is deemed under an agreement with country x to plr-118948-98 cc intl cc intl carry on any business which consists of or includes exploration and production of petroleum the profits or gains of such shall be computed separately from the income profits or gains from any other business furthermore the sum of payments to country x and taxes on income subject_to the provisions of the schedule shall be as provided for in the agreement with the assessee in calculating gross_income under the schedule the sale price of oil is deemed to be the oil’s well head value which term has the same meaning as that assigned in the agreement between the assessee and country x it is unclear whether payments of a contractor’s psc tax law liabilities by foreign_entity is included within the gross_income base of the contractor the deductions which are allowed other businesses and professions are also permitted subject_to certain adjustments under the schedule the schedule allows the following additional deductions a unsuccessful exploration efforts - subject_to the agreement between the assessee and country x expenditures allocable to a surrendered area and to the drilling of a dry hole may be recovered in either of two ways the loss may offset any category of income other than dividends of that year and to the extent not utilized may be carried forward for six years or the loss may be carried forward to offset oil_and_gas income in the year commercial production commences and to the extent not utilized may be carried forward for ten years unsuccessful exploration expenses include dry hole and abandonment losses except that under the accounting procedures for the psc any interest_expense relating to unsuccessful exploration or appraisal operations is not deductible b pre-commercial production_expenditures other than under a above - after commencement of commercial production all expenditures not represented by physical assets and not previously recovered under a shall be allowed as a deduction but not in an amount greater than ten percent of the unamortized amount per year other pre-commercial production expenses include inter alia geological and geophysical costs as well as intangible drilling and developments costs on successful wells incurred prior to commencement of commercial production c expenditures after commencement of commercial production - expenses plr-118948-98 cc intl cc intl in connection with exploration and production shall be allowed as a deduction if an expenditure is capital in nature and subject_to the allowance for depreciation depreciation shall be calculated in accordance with the provisions of the third schedule expenses in this category may include intangible_drilling_and_development_costs on infill natural_gas wells incurred after the commencement of commercial production lease operating_expenses and post-commercial production interest_expenses fall into this category as well as discovery and production bonuses paid_by contractors under the psc the tax law provides that only the assessee who owns a fixed asset is entitled to depreciation on that asset since title to fixed assets used in petroleum operations under the psc belongs to the foreign_entity contractors are not allowed to depreciate such assets the taxing authorities for country x have issued to sub an opinion that there is no bar to claiming the costs of these assets as revenue expenditures but in such a case foreign_entity may not claim depreciation for not using the assets and for having zero cost in their hands although they become the owners of the asset sub 2’s tax accountants however doubt whether for tax purposes sub can claim the cost of assets as revenue expenditure despite clearance from country x’s taxing authorities because under the psc the costs of assets transferred to the foreign_entity are recoverable in sub 2’s production share and therefore not a real cost to sub d deductions in b and c in excess of income - if the deductions under sec_29 of the tax law and under b and c above exceed gross_receipts from the sale of petroleum such excess shall be offset against other income other than a dividend and carried forward in the manner and subject_to the limitations concerning set-off of losses carry forward of business_losses and conditions and limitations of carry forward of losses generally losses may be carried forward for six years under these provisions the third schedule also provides for a depletion_allowance of percent of the gross_receipts representing the well head value of the production from the business limited to percent of the profits or gains computed without regard to the depletion deduction law and analysis overview sec_901 of the internal_revenue_code allows a foreign_tax_credit for the amount of any income_war_profits_and_excess_profits_taxes ’income taxes’ paid_or_accrued during the taxable_year to any foreign_country a foreign levy is an income_tax if and only if it is a tax and the predominant character of that tax is that of an income_tax in the u s sense sec_1_901-2 furthermore sec_903 plr-118948-98 cc intl cc intl of the code provides that the term income_war_profits_and_excess_profits_taxes includes a tax paid in lieu of a tax on income war profits or excess profits otherwise generally imposed by a foreign_country a foreign levy is a tax in lieu of an income_tax if and only if it is a tax within the meaning of sec_1_901-2 of the regulations and it meets the substitution requirement set forth in sec_1_903-1 of the regulations sec_1_903-1 sec_1_901-2 of the regulations provides that only the person by whom the tax is considered paid for purposes of sec_901 and sec_903 of the code is the person on whom foreign law imposes legal liability for such tax even if another person remits such tax for purposes of sec_1_901-2 sec_1_901-2a and sec_1 of the regulations the person on whom foreign law imposes such liability is referred to as the taxpayer sec_1_901-2 moreover sec_1_901-2 of the regula- tions provides that a tax is considered paid_by the taxpayer even if another party to a direct or indirect transaction with the taxpayer agrees as part of the transaction to assume the taxpayer's foreign tax_liability for the purposes of sec_901 and sec_903 of the code whether a single levy or separate levies is imposed by a foreign_country depends upon u s principles and not on whether foreign law imposed the levy or levies in a single or separate statute sec_1_901-2 if a foreign law imposing a levy is modified for one or more persons subject_to the levy by a contract entered into by such person or persons and the foreign_country then foreign law is considered for purposes of sec_901 and sec_903 of the code to impose a separate_levy for all persons to whom such contractual modifications of the levy applies as contrasted to the levy as applied to all persons to whom such contractual modification does not apply sec_1_901-2 sec_1_901-2a of the regulations provides separate_levy rules for dual capacity taxpayers as defined by sec_1_901-2 of the regulations under these rules if the application of a foreign levy is different either by the terms of the levy or in practice for dual capacity taxpayers from its application to other persons then unless the only such difference is that a low rate but not the same base applies to dual capacity taxpayers such difference is considered to be related to the fact that dual capacity taxpayers receive directly or indirectly a specific_economic_benefit from the foreign_country and thus to be a difference in_kind and not merely of degree sec_1_901-2a in such cases notwithstanding any contrary provision of sec_1_901-2 of the regulations sec_1_901-2a of the regulations provides the levy as applicable to such dual capacity taxpayers is a separate_levy within the meaning of sec_1_901-2 from the levy as applicable to such other persons and each of the levy as applied to dual capacity taxpayers and the levy as applied to other persons must be analyzed separately to determine plr-118948-98 cc intl cc intl whether it is an income_tax within the meaning of sec_1_901-2 and whether it is a tax in lieu of an income_tax within the meaning of sec_1_903-1 tax law and psc tax_liabilities pursuant to sec_1_901-2 and sec_1_901-2a of the regulations the tax law as applied to income from business or profession general tax law levy and the tax law as applied to petroleum operations within country x as modified by the psc psc tax law levy constitute separate levies sub has represented that it will elect to apply the safe_harbor provisions pursuant to sec_1_901-2a and sec_1_901-2a of the regulations in determining the amount of the separate_levy that is an income_tax under sec_901 or sec_903 of the code first it must be determined whether the psc tax law levy is a creditable tax under sec_901 or sec_903 the predominant character of the general tax law levy is that of an income_tax because the levy is likely to reach net gain in the normal circumstances in which it applies and satisfies each of the realization gross_receipts and net_income requirements of sec_1_901-2 of the regulations and is a tax in addition the general tax law levy is not a soak-up_tax within the meaning of sec_1_901-2 of the regulations the psc tax law levy however raises certain issues concerning whether judged on the basis of predominant character the psc tax law levy satisfies the gross_receipts and net gain requirements of sec_1_901-2 of the regulations as to the gross_receipts_test an issue is raised whether the market_value for natural_gas and oil sold for consumption without country x satisfies the gross_receipts requirements of sec_1_901-2 of the regulations because there has not yet been production issues are also raised as to whether judged upon the basis of predominant character the psc tax law levy satisfies the net_income requirements of sec_1_901-2 of the regulations because of disallowed interest_expenses attributable to exploration and appraisal these issues are raised but not answered here because it is determined that the psc tax law levy qualifies as a tax in lieu of an income_tax under sec_903 of the code and the attendant regulations to the extent such levy constitutes a tax within the meaning of sec_1_901-2 of the regulations the psc tax law levy is imposed in substitution for and not in addition to the general tax law levy which levy qualifies as a creditable income_tax under sec_901 of the code and is not dependant by its terms or otherwise on the availability of a credit for the foreign tax against income_tax_liability to another country plr-118948-98 cc intl cc intl accordingly based on the information submitted and representations made it is held to the extent that sub establishes by use of the facts and circumstances or safe_harbor method the amounts paid and accrued by the sub under country x tax law as applied to petroleum operations and modified by the psc agreement which are paid with respect to the distinct element that constitutes a tax such amounts will be considered payments of a creditable tax paid in lieu of an income_tax within the meaning of sec_903 of the code no opinion is expressed as to the actual amount if any paid_by sub as a dual_capacity_taxpayer pursuant to the country x’s tax law as modified by the psc that is not paid in exchange for a specific_economic_benefit no opinion is expressed as to the amount if any which is paid_or_accrued within the meaning of sec_1_901-2 and sec_1_903-1 by sub our analysis and conclusions are based upon a translation of the tax law provided by parent and on representations about those laws made by parent and sub this ruling is conditioned on the accuracy of that translation and those representations the internal_revenue_service has made no independent verification of the accuracy of the translation of the foreign law supplied except as specifically ruled upon we express no opinion on the application of any other section of the code or regulations to the facts submitted a copy of this ruling should be attached to all relevant income_tax returns this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours office of the associate chief_counsel phyllis e marcus chief branch international prior written_determination number


t c memo united_states tax_court richard kay jr petitioner v commissioner of internal revenue respondent docket no filed date richard kay jr pro_se mindy s meigs for respondent memorandum findings_of_fact and opinion cohen judge respondent determined deficiencies and penalties as follows penalty year deficiency sec_6662 dollar_figure dollar_figure big_number dollar_figure the issues for decision are whether petitioner was a trader in securities during and whether petitioner is entitled to claim a net_operating_loss nol_carryover from in and whether petitioner must include a state_income_tax refund in his taxable_income in and whether petitioner is liable for the penalties under sec_6662 unless otherwise indicated all section references are to the internal_revenue_code code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference at the time the petition was filed petitioner resided in california petitioner holds a degree in economics from san diego state university during the years in issue petitioner operated a ball bearing manufacturing and distribution business clean wave management inc clean wave an s_corporation petitioner has been clean wave’s sole shareholder officer and director from the date of its incorporation in to the present during the relevant period petitioner resided in one unit of a duplex with clean wave operating out of the other unit clean wave had three additional employees who worked with petitioner throughout the years in issue on his form sec_1040 u s individual_income_tax_return as amended petitioner reported wages paid_by clean wave of dollar_figure dollar_figure and dollar_figure respectively on clean wave’s forms 1120s u s income_tax return for an s_corporation as amended the corporation reported net_income of dollar_figure dollar_figure and dollar_figure petitioner traded securities prior to and throughout petitioner made a mark-to-market_election under sec_475 in and did not revoke that election through the number of days petitioner traded securities and the number of transactions he engaged in from was as follows trading activity no of trading trans days trading activity trading no of days trans trading activity no of trading days trans jan feb mar apr may june1 july aug sept oct nov dec total 1the record does not include complete information for date the totals include the data that is available in the record on the basis of what the record does provide the missing data would not have significantly changed the number of days petitioner traded securities or the number of transactions he completed there were total trading days in and and trading days in in the total value of the securities petitioner purchased was over dollar_figure million and the total value of the securities petitioner sold was also over dollar_figure million petitioner bought and sold the same stock on the same day on only six occasions in in the total value of the securities purchased and sold was dollar_figure and dollar_figure respectively he bought and sold the same stock on the same day on only four occasions in in the total value of the securities purchased and sold was dollar_figure and dollar_figure respectively he bought and sold the same stock on the same day on only three occasions in petitioner attached a schedule c profit or loss from business to his form_1040 where he reported his income losses_and_expenses from his sales of securities on that form he listed his principal business or profession as day trade on his schedule c petitioner reported a net_loss of dollar_figure arising from dollar_figure in losses from sales of stocks and dollar_figure in expenses petitioner offset other ordinary taxable_income by deducting some of these losses on his amended schedule c petitioner reported a net_loss of dollar_figure arising from dollar_figure in losses from the sale of stocks and dollar_figure in expenses he also reported an nol of dollar_figure carried over from on hi sec_2002 schedule c petitioner reported a net_loss of dollar_figure arising from dollar_figure in losses from the sale of stocks and dollar_figure in expenses on hi sec_2002 return he also reported the same dollar_figure nol carried over from some of which he used to offset other ordinary_income petitioner claimed a deduction of dollar_figure for state_and_local_income_taxes on hi sec_2001 return at the time he filed his return he reported a negative income and thus did not receive a tax_benefit from the deduction however in the notice_of_deficiency the irs disallowed the ordinary losses for as described above consequently the notice_of_deficiency included an additional dollar_figure of income in after the irs became aware that during petitioner had received a refund of that amount from his state taxes opinion trading activities respondent disallowed deductions for ordinary losses beyond the limit of dollar_figure under sec_1211 for losses arising from petitioner’s trading of securities during and see sec_165 respondent also disallowed deductions for an nol carried over from to the years in issue arising from similar trading activity we may determine the correct amount of taxable_income or nol for a year not in issue whether or not the assessment of a deficiency for that year is barred as a preliminary step in determining the correct amount of an nol_carryover to a taxable_year in issue 61_tc_436 affd without published opinion 510_f2d_970 3d cir in general for federal tax purposes a person who purchases and sells securities falls into one of three distinct categories dealer trader or investor see 89_tc_445 the parties have not argued that petitioner was a dealer for the years in issue sec_475 provides generally that a taxpayer engaged in business as a securities trader may elect to use the mark-to-market method_of_accounting for securities held in a business under the mark-to-market method_of_accounting a taxpayer generally recognizes at the end of the year ordinary gain_or_loss on all securities held in the business as if the securities were sold at the end of the year for fair_market_value sec_475 f a i lehrer v commissioner tcmemo_2005_167 affd 279_fedappx_549 9th cir ordinary losses are thereby made available to offset ordinary_income and are not subject_to the dollar_figure limitation as relevant here imposed by sec_1211 on the deduction of capital losses in excess of capital_gains see 126_tc_279 petitioner made a timely mark-to-market_election pursuant to sec_475 however sec_475 applies only to those engaged in a trade_or_business as traders in securities traders are engaged in the trade_or_business of selling securities for their own account see king v commissioner supra pincite investors likewise buy and sell for their own account but they are not considered to be in the trade_or_business of selling securities see arberg v commissioner tcmemo_2007_244 unlike an investor a trader’s expenses are deducted in determining adjusted_gross_income rather than as itemized expenses whether petitioner’s activities constituted a trade_or_business is a question of fact see 312_us_212 cameron v commissioner tcmemo_2007_260 in determining whether a taxpayer is a trader nonexclusive factors to consider are the taxpayer’s intent the nature of the income to be derived from the activity and the frequency extent and regularity of the taxpayer’s securities transactions 530_f2d_1332 9th cir affg tcmemo_1974_164 for a taxpayer to be a trader the trading activity must be substantial which means ‘frequent regular and continuous enough to constitute a trade or business’ ball v commissioner tcmemo_2000_245 quoting hart v commissioner t c memo a taxpayer’s activities constitute a trade_or_business where both of the following requirements are met the taxpayer's trading is substantial and the taxpayer seeks to catch the swings in the daily market movements and to profit from these short-term changes rather than to profit from the long-term holding of investments king v commissioner supra pincite mayer v commissioner tcmemo_1994_209 with respect to the first requirement when evaluating whether a taxpayer’s trading activities were substantial we have considered the number of executed trades in a year and the amount of money involved in those trades when the number of trades made and the amount of money involved in those trades is small in a given year a taxpayer’s trading activity is insubstantial see 721_f2d_810 fed cir finding trades in one year and trades in the following year was insubstantial holsinger v commissioner tcmemo_2008_191 finding trades with aggregate sales of dollar_figure in one year at issue was insubstantial when the number of trades and the amount of money involved in those trades is large a taxpayer’s trading activity is substantial see mayer v commissioner supra big_number sales and purchases with gross_receipts of more than dollar_figure million in each year at issue was substantial paoli v commissioner tcmemo_1991_351 sales of stocks with gross_receipts of more than dollar_figure million in the year at issue was substantial we have also considered the amount of time petitioner spent buying and selling securities a taxpayer’s trading activity is insubstantial when the taxpayer trades only for a small portion of the trading days in the particular year see holsinger v commissioner supra finding it doubtful whether the trades were conducted with the frequency continuity and regularity indicative of a business when trades occurred on approximately to 45-percent of the trading days in the years at issue in addition a taxpayer engaged in sufficiently substantial trading activity to qualify as a trade_or_business will generally rely on that activity as their sole or primary source_of_income see chen v commissioner tcmemo_2004_132 with respect to the second requirement for classification as a trader a taxpayer must have sought to profit from short-term swings in the stock market see mayer v commissioner supra thus investors generally hold securities for relatively long periods of time while traders hold securities for short periods see holsinger v commissioner supra holding that taxpayers did not demonstrate that they sought to profit from short-term swings in the market because they rarely bought and sold the same stock on the same day and held a significant amount for more than days see also estate of yaeger tcmemo_1988_264 affd 889_f2d_29 2d cir the number of trades petitioner engaged in during the years and was not substantial in and petitioner executed trades trades and trades respectively we found similar numbers of trades to be insubstantial in the cases discussed above in however the total amount of money involved in trading was substantial in that year petitioner made over dollar_figure million in purchases and a similar amount in sales in and petitioner’s gross purchases and gross_sales which ranged between dollar_figure million and dollar_figure million were less substantial in any case managing a large amount of money is not conclusive as to whether petitioner’s trading activity amounted to a trade_or_business see moller v united_states supra pincite petitioner’s trading activity was infrequent in the years and petitioner conducted trading activity on just percent percent and percent of the possible trading days in each year respectively income from clean wave was his primary source_of_income despite petitioner’s assertion that he spent the majority of his time as a day trader the number of days he actually made trades show otherwise petitioner generally did not hold stocks for intervals that demonstrate an intention to profit from day trading the majority of the stocks he purchased and sold in each of the years at issue were held for over days petitioner rarely purchased and sold the same stock on the same day overall petitioner has not met the requirements for his trading activity to be treated as a trade or a business thus he is limited to a dollar_figure deduction of losses arising from the purchase and sale of securities in and under sec_1211 and may not carry forward the nol generated in state_income_tax refund petitioner bears the burden of proving that the determination of unreported income in the notice_of_deficiency is erroneous see rule a 290_us_111 generally under sec_111 and the regulations thereunder if a tax was deducted on a prior year’s return that resulted in a reduction of tax and a tax_benefit to the taxpayer the taxpayer’s subsequent recovery_of the tax must be included in gross_income in the year the recovery is received prewitt v commissioner tcmemo_1995_24 kadunc v commissioner tcmemo_1992_61 affd without published opinion 981_f2d_1251 4th cir petitioner reported a deduction for state income taxes of dollar_figure on hi sec_2001 tax_return because we here determine that his income in was not offset by the securities trading losses he will receive a tax_benefit from that deduction petitioner did not address this issue in the petition or at trial and did not submit any briefs accordingly as respondent determined in the notice_of_deficiency the refund of state_income_tax received in is includable in gross_income for that year accuracy-related_penalty sec_6662 and b and imposes a 20-percent accuracy-related_penalty on any underpayment of federal_income_tax attributable to a taxpayer’s negligence or disregard of rules or regulations or substantial_understatement_of_income_tax sec_6662 defines negligence as including any failure to make a reasonable attempt to comply with the provisions of the code and defines disregard as any careless reckless or intentional disregard disregard of rules or regulations is careless if the taxpayer does not exercise reasonable diligence to determine the correctness of a return position that is contrary to the rule_or_regulation sec_1_6662-3 income_tax regs a substantial_understatement_of_income_tax exists if the understatement exceeds the greater of percent of the tax required to be shown on the return or dollar_figure sec_6662 under sec_7491 the commissioner bears the burden of production with regard to penalties and must come forward with sufficient evidence indicating that it is appropriate to impose penalties see 116_tc_438 however once the commissioner has met the burden of production the burden_of_proof remains with the taxpayer including the burden of proving that the penalties are inappropriate because of reasonable_cause or substantial_authority see rule a higbee v commissioner supra pincite considering the erroneous nature of the deductions and the amounts of the resulting underpayment_of_tax respondent has satisfied the burden of producing evidence that the penalty is appropriate for and the accuracy-related_penalty under sec_6662 is not imposed with respect to any portion of the underpayment as to which the taxpayer acted with reasonable_cause and in good_faith sec_6664 higbee v commissioner supra pincite the decision as to whether a taxpayer acted with reasonable_cause and in good_faith is made on a case-by-case basis taking into account all of the pertinent facts and circumstances see sec_1_6664-4 income_tax regs petitioner does not separately address the penalty issue he failed to allege that the commissioner’s imposition of a penalty was erroneous in his petition and the issue is therefore deemed conceded see rule b 118_tc_358 in any event petitioner has not demonstrated reasonable_cause petitioner is a sophisticated investor but his references to his accountant at trial were insufficient to prove that he relied on professional advice or otherwise sought to determine the appropriate tax treatment of his transactions petitioner is liable for the penalty for and we have considered the other arguments of the parties and they either are without merit or need not be addressed in view of our resolution of the issues for the reasons explained above decision will be entered for respondent


department of the treasury internal_revenue_service washingfon d c tax_exempt_and_government_entities_division uniform issue list war -8 2ui0 seit epa fs legend taxpayer a ira x financial_institution l financial_institution m finacial advisor w amount m amount o date date date month enrolled_agent w dear this is in response to your letters dated date and date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ a kn i comnts page the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age maintained an individual_retirement_account ira ira x with financial_institution l taxpayer a asserts that on date taxpayer a received a distribution of amount m from ira x and that her failure to accomplish a rollover of amount m within the 60-day period prescribed by sec_408 of the code was due to financial advisor w error relying on advice from advisor w of financial_institution l taxpayer a requested a direct transfer of amount o which had been held in an ira at financial_institution m on date amount o was transferred in a trustee-to-trustee transfer from taxpayer a’s ira at financial_institution m to ira x maintained by financial_institution l in month because of losses_incurred by ira x taxpayer a contacted financial advisor w and stated she wished to withdraw all of ira x before she incurred any further losses taxpayer a informed financial advisor w of her intent to reinvest the funds in a certificate of deposit at a credit_union in the discussion about the withdrawal from ira x financial advisor w advised taxpayer a to be sure to tell the bank that it was an ira when cashing the check but failed to inform her of the 60-day rollover period or the possibility of a trustee- to-trustee transfer financial advisor w completed a distribution request form for taxpayer a and on date financial_institution l issued a check in amount m to taxpayer a which was a total_distribution of ira x during month taxpayer a received a check for amount m and placed the un- cashed check in a safe deposit box pending her return from a trip to take care of her sister upon returning taxpayer a attempted to establish a rollover ira at a credit_union but was told that she could not because the 60-day rollover period had expired approximately one week earlier based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount m contained in sec_408 of the code ‘the code’ sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers page sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code page revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a rollover of amount m within the 60-day period prescribed by sec_408 of the code was due to financial advisor w error therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount m from ira x pursuant to this ruling letter taxpayer a is granted a period of days measured from the date of the issuance of this letter_ruling to make a rollover_contribution of an amount equal to amount m to an ira or iras described in code sec_408 provided all other requirements of code sec_408 except the 60-day requirement are met with respect to such ira contribution the contribution will be considered a rollover_contribution within the meaning of code sec_408 please note that pursuant to code sec_408 this ruling letter does not authorize the rollover of the code sec_401 minimum required distributions no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling is sent to your authorized representative pursuant to the provisions of a power_of_attorney on file in this office page if you have any questions please contact xxxxxxxxxxxxxxxxxxkx by phone at xxxxxxxxxxxx or fax at xxxxxxkx sincerely yours rances v sloan manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si 5-plr-103069-00 date date legend partnership seller project authority state a b city c d corp m corp n b c d e f g h t1 t2 t3 t4 t5 t6 t7 t8 t9 t10 dear this ruling letter responds to your letter dated date and subsequent correspondence submitted on behalf of partnership requesting a private_letter_ruling that will waive for the project the 10-year holding_period requirement for existing buildings of sec_42 of the internal_revenue_code under the authority of the exception for the acquisition of certain federally-assisted buildings provided in sec_42 partnership was organized on t1 as a state a limited_partnership to acquire rehabilitate and operate an apartment complex the project partnership consists of corp m as the general_partner with a b percent partnership_interest and individual b as the limited_partner with a c percent partnership_interest at some future date partnership plans to syndicate the partnership interests the project consists of d apartment units housed in e residential buildings with f units each and an additional common usage building containing an office laundry and a maintenance storage area the project located in city c was constructed and placed_in_service by a prior owner in t2 federal assistance for the project was initially provided by a loan from the farmers home administration fmha under sec_515 of the housing act of partnership represents that in t3 corp n purchased the general_partnership from individual d in t4 corp m the general_partner of partnership acquired corp n and the related general_partnership in the project during both of these acquisitions the limited partners remained the same during t10 corp m bought out the limited partners and effected a termination of the partnership under the provisions of sec_708 on t5 corp m transferred the general_partnership in the project from corp n to itself you represent that on t6 the project was acquired by partnership as the result of a servicing action by the rural housing service rhs of the u s department of agriculture formerly fmha to advert federal funds being at risk the rural housing service has submitted a letter dated t7 to the internal_revenue_service designating the project as a troubled project based on a history of financial distress and mortgage default you state that on t6 partnership’s general_partner corp m completed all the transactions involved in the acquisition of the project from the prior owner consideration for the project was the assumption of a renegotiated loan with rhs in the amount of dollar_figureg partnership further represents that it intends to spend approximately dollar_figureh to rehabilitate the project under the state low-income_housing limitations provided by sec_42 partnership applied for and received a t8 reservation for an allocation of the low-income_housing tax_credit dollar amount from the state a housing finance authority authority since the interval between when the project was last placed_in_service t10 and the date_of_acquisition t6 is less than years partnership has failed to meet the year holding_period requirement of sec_42 for existing buildings as federal funds are at risk partnership has submitted this request for a waiver of the holding_period requirement under the authority of the exception granted by sec_42 partnership has made the following representations and certifications concerning the project the acquisition of the buildings in the project is by purchase as defined under sec_179 and as further restricted by sec_42 partnership acquired the buildings in the project to provide affordable housing to qualified low-income households on t9 authority signed a reservation letter for a t8 allocation for the low- income housing_credit_dollar_amount for partnership to comply with the limitation of low-income_housing credits to state a as required by sec_42 the buildings in the project were not previously placed_in_service by partnership or by a person who was a related_person as defined in sec_42 to partnership at the time the buildings were last placed_in_service as of t6 the buildings in the project were federally-assisted buildings as defined in sec_42 and sec_1_42-2 of the income_tax regulations as of t6 federal mortgage funds for the project were at risk within the meaning of sec_1_42-2 there have been no nonqualified substantial improvements to the buildings in the project since it was last placed_in_service on t10 to the best of knowledge of partnership and its representatives no prior owner of the project was allowed a low-income_housing_credit under sec_42 for the project all terms and conditions of sec_42 and related sections including substantial rehabilitation in excess of the minimum provided by sec_42 will be met except for sec_42 partnership asks that this requirement be waived under the authority granted the secretary_of_the_treasury by sec_42 and this application_for the waiver is timely filed as it is within_12_months after the acquisition of the project for an existing_building to qualify for the 30-percent present_value housing tax_credit sec_42 requires there be a period of at least years between the date of the building’s acquisition by the taxpayer and the later of the date the building was last placed_in_service or the date of most recent nonqualified_substantial_improvement of the building sec_42 provides an exception to the 10-year holding_period requirement of sec_42 upon application by the taxpayer the secretary may waive this requirement for any federally-assisted_building if the secretary after consultation with the appropriate_federal_official determines that such waiver is necessary to avert an assignment of the mortgage secured_by property in the project of which such building is a part to the department of housing and urban development or the farmers home administration sec_42 defines the term federally-assisted_building as including any building that is substantially assisted financed or operated under i of the united_states housing act of ii sec_221 or of the national housing act or iii sec_515 of the housing act of as such acts are in effect on the date of enactment of the tax_reform_act_of_1986 date sec_1_42-2 contains requirements that must be satisfied before the secretary will grant the waiver referred to in sec_42 you have represented that partnership is in compliance with these requirements based solely upon the above facts and partnership’s representations we have determined that the buildings in the project are federally-assisted buildings within the meaning of sec_42 and that federal funds are at risk under sec_42 therefore we rule as follows the 10-year holding_period requirement of sec_42 is waived for partnership’s acquisition of the project no opinion is expressed or implied regarding the application of any other provision in the code or regulations specifically no opinion is expressed or implied regarding whether partnership’s costs of acquisition and rehabilitation of the buildings in the project will qualify otherwise for the low-income_housing_credit under sec_42 this ruling is directed only to partnership which requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter should be filed with the federal_income_tax return for partnership and its partners for the first taxable_year in which the low-income_housing_credit for the project is claimed sincerely yours harold e burghart assistant to the branch chief branch office of the assistant chief_counsel


department of the treasury internal_revenue_service washington d c date number info release date cc tege eoeg et1 - genin-117418-03 uilc memorandum for director internal_revenue_service center cincinnati oh attn technical unit from subject office of division counsel associate chief_counsel tax exempt and government entities cc tege eoeg et1 - genin-117418-03 railroad retirement act tax status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act effective date we have reviewed the opinion of the rrb and based upon the information submitted to the rrb we also conclude that became an employer under the railroad_retirement_tax_act effective date please take the appropriate action regarding this business will e mcleod cc


internal_revenue_service number release date index number 468a ------------------------ --------------------------------- ------------------------------------------------------------ ---- ---------------------- ------------------------------------------------------ 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 b6 plr-112754-07 date april re schedule of deductions ---------------------------------------------------------------- legend taxpayer plant parent operator director location date date commission method fund dear -------------- ----------------------------------------------------- ------------------- ---------------------------------------------------------------- ----------------------------- ---------------- ------------------------------ --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ----------------------------------- ------------------ --------------------------- ---------------------------------------------------------- --------------------------------------------------- ------------------------------------------- this letter responds to your request dated --------------------- for a revised schedule of ruling amounts and a schedule of deduction amounts pursuant to sec_468a of the internal_revenue_code and sec_1_468a-8t of the temporary income_tax regulations taxpayer was previously granted schedules of ruling amounts most recently on date information was submitted pursuant to sec_1_468a-3t e taxpayer submitted additional information by letter dated ------------------------- and by letter dated --------------------- plr-112754-07 taxpayer represents the facts and information relating to its request for a schedule of deduction amounts as follows taxpayer a subsidiary of parent is included in a consolidated_return filed by parent taxpayer has a joint and undivided ownership_interest of ------ percent in the plant the plant is operated by operator the plant is situated at location plant’s operating license is scheduled to expire on date the estimated base cost for decommissioning plant is based on an independent study and the proposed method of decommissioning the plant is method taxpayer is subject_to the jurisdiction of commission commission has not amended any aspects of taxpayer’s recovery_of decommissioning costs since the most recent schedule of ruling amounts based upon the assumptions used in taxpayer’s most recent schedule of ruling amounts as adopted by commission it is estimated that fund assets will earn an after-tax rate of return of -- percent the total cost of decommissioning plant is estimated to be dollar_figure----------------- ------- dollars of this total dollar_figure--------------- is taxpayer’s share based on its ownership percentage this base cost of decommissioning plant is escalated at a -- percent yearly rate resulting in a total future cost of decommissioning plant of dollar_figure------------------- ------- dollars of this total dollar_figure----------------- ------- dollars is taxpayer’s share based on its ownership percentage under ratemaking assumptions used during the first proceeding before commission the plant would no longer be included in rate base in --------------- in the prior schedule of ruling amounts issued under sec_468a of the code as in effect prior to the estimated_useful_life of the plant is ---- years --------------- and the estimated period for which the fund is to be in effect is ---- years --------------- thus the percentage of the total estimated costs qualifying for deduction in the schedule of ruling amounts under prior_law was -------- percent sec_468a as amended by the energy tax incentives act of the act publaw_109_58 119_stat_594 allows an electing taxpayer to deduct payments made to a nuclear decommissioning reserve fund sec_468a limits the amount that may be paid into the nuclear decommissioning fund in any year to the ruling_amount applicable to that year prior to the changes made by the act the deduction was limited to the lesser_of the amount included in the utility’s cost of service for ratemaking purposes or the ruling_amount generally as a result only regulated utilities could take advantage of sec_468a the act amendment of sec_468a eliminated the cost-of-service limitation accordingly decommissioning costs of an unregulated nuclear power plant may now be funded by deductible contributions to a qualified nuclear decommissioning fund plr-112754-07 sec_468a provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund the total nuclear decommissioning cost of that nuclear power plant over the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate prior to the changes made by the act deductible contributions were limited to the amount necessary for an electing taxpayer to fund the plant’s post-1983 nuclear decommissioning costs determined as if decommissioning costs accrued ratably over the estimated_useful_life of the plant provided that the taxpayer elected to establish a fund in prior_law also did not allow a taxpayer electing to establish a fund later than to contribute to that fund any amount in excess of that amount necessary to fund the ratable portion of the plant’s nuclear decommissioning costs beginning in the year the fund is established sec_468a now allows a taxpayer to contribute to a nuclear decommissioning fund the entire cost of decommissioning the plant including both the pre-1984 amount that was denied under the law prior to the act as well as any amount attributable to any year after in which a taxpayer had not established a fund under sec_468a sec_468a provides that the deduction for the contribution of the previously-excluded amount is allowed ratably over the remaining useful_life of the nuclear plant sec_468a provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within 2½ months after the close of the tax_year this section applies to payments made pursuant to either a schedule of ruling amounts or a schedule of deduction amounts sec_1_468a-1t a provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1t b of the regulations is a taxpayer that has a qualifying interest in any portion of a nuclear power plant a qualifying interest is among other things a direct ownership_interest sec_1_468a-2t b provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the ruling_amount applicable to the nuclear decommissioning fund for such plr-112754-07 taxable_year the limitation on the amount of cash payments for purposes of sec_1_468a-2t b does not apply to any special transfer permitted under sec_1_468a-8t sec_1_468a-3t a provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3t a provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on reasonable assumptions concerning the after-tax rate of return to be earned by the amounts collected for decommissioning the total estimated cost of decommissioning the nuclear plant and the frequency of contributions to a nuclear decommissioning fund for a taxable_year under sec_1_468a-3t a the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3t a provides that the taxpayer bears the burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the regulations and that it is based on reasonable assumptions that section also provides additional guidance regarding how the service will determine whether a proposed schedule of ruling amounts is based on reasonable assumptions for example if a public_utility commission established or approved the currently applicable rates for the furnishing or sale by the taxpayer of electricity from the plant the taxpayer can generally satisfy this burden_of_proof by demonstrating that the schedule of ruling amounts is calculated using the assumptions used by the public_utility commission in its most recent order in addition a taxpayer that owns an interest in a deregulated nuclear plant may submit assumptions used by a public_utility commission that formerly had regulatory jurisdiction over the plant as support for the assumptions used in calculating the taxpayer’s proposed schedule of ruling amounts with the understanding that the assumptions used by the public_utility commission may be given less weight if they are out of date or were developed in a proceeding for a different taxpayer the use of other industry standards such as the assumptions underlying the taxpayer's most recent financial assurance filing with the nrc are described by the temporary regulations as an alternative means of demonstrating that the taxpayer has calculated its proposed schedule of ruling amounts on a reasonable basis sec_1_468a-3t a further provides that consistency with financial_accounting statements is not sufficient in the absence of other supporting evidence to meet the taxpayer’s burden_of_proof plr-112754-07 sec_1_468a-3t b provides that in general the ruling_amount for any_tax year in the funding_period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3t c the funding_period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the last day of the estimated_useful_life of the nuclear power plant to which the fund relates sec_1_468a-3t c provides rules for determining the estimated_useful_life of a nuclear plant for purposes of sec_468a in general under sec_1_468a-3t c i a if the plant was included in rate base for ratemaking purposes for a period prior to date the date used in the first such ratemaking proceeding as the estimated date on which the nuclear plant will no longer be included in the taxpayer’s rate base is the end of the estimated_useful_life of the nuclear plant sec_1_468a-3t c i b provides that if the nuclear plant is not described in sec_1_468a-3t c i a the last day of the estimated_useful_life of the nuclear plant is determined as of the date the plant is placed_in_service under sec_1_468a-3t c i c any reasonable method may be used in determining the estimated_useful_life of a nuclear power plant that is not described in sec_1_468a-3t c i a sec_1_468a-3t d provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant sec_1_468a-3t d provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3t e enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3t f provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3t e the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year sec_1_468a-8t a provides that under the provisions of sec_468a as described above a taxpayer may make a special transfer of cash or property to the nuclear decommissioning fund this special transfer is not subject_to the sec_468a limitation the amount of the special transfer is the present_value of the pre-2005 nonqualifying percentage of the estimated future costs of decommissioning the nuclear plant that was disallowed under sec_468a prior to the act plr-112754-07 sec_1_468a-8t a defines the pre-2005 nonqualifying percentage as equal to percent reduced by the sum of the qualifying percentage used in determining the taxpayer’s last schedule of ruling amounts for the fund under sec_468a as it existed prior to the act and the percentage transferred in any previous special transfer sec_1_468a-8t a provides that the taxpayer is not required to transfer the entire amount eligible for the special transfer in one year but must take any prior special transfers into account in calculating the pre-2005 qualifying percentage further pursuant to sec_1_468a-8t c a taxpayer making a special transfer in more than one year must request a new schedule of deduction amounts in connection with each special transfer sec_1_468a-8t b provides that the deduction for the special transfer is allowed ratably over the remaining useful_life of the nuclear plant under sec_1_468a-8t b iii the deduction for property contributed in a special transfer is limited to the lesser_of the fair_market_value of the property or the taxpayer’s basis in the property under sec_1_468a-8t b the taxpayer recognizes no gain_or_loss on the special transfer of property the taxpayer’s basis in the fund is not increased by reason of the special transfer of property and the fund’s basis in the property transferred in the special transfer is the same as the transferee’s basis in that property immediately prior to the special transfer sec_1_468a-8t c provides that taxpayer may not make a special transfer to a qualified nuclear decommissioning fund unless the taxpayer requests from the irs a schedule of deduction amounts in connection with such transfer a request for a schedule of deduction amounts may be made in connection with a request for a schedule of ruling amounts but in such case the calculations for both the schedule of ruling amounts and the schedule of deduction amounts must be separately_stated as stated above prior to the changes made by the act deductible contributions were limited to the lesser_of the amount necessary to fund the plant’s post-1983 nuclear decommissioning costs or the amount necessary to fund the plant’s decommissioning costs for that portion of the plant’s estimated_useful_life for which a fund had been established under that prior_law taxpayer was allowed to contribute ------- percent of the amounts necessary to fully decommission its share of the plant sec_468a allows a taxpayer to contribute to the nuclear decommissioning fund the pre-1984 amount that was denied under the law prior to the act thus taxpayer is able to contribute the additional ------- percent of the amounts necessary to decommission its ownership share of plant taxpayer’s share of the total future decommissioning costs is dollar_figure----------------- ------- dollars and -------- percent of that amount is dollar_figure--------------- ------- dollars the present_value of that amount is dollar_figure------------- ------- dollars plr-112754-07 we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we conclude that the taxpayer may make a special transfer of dollar_figure-------------- in ------- and may ratably deduct the amount contributed for the ------- through ------- tax years as set forth below schedule of deduction amounts year deduction amount each year --------------- dollar_figure------------ the special transfer amount stated above is the maximum amount permitted to be transferred to the fund under sec_468a if taxpayer transfers a lesser amount to the fund the taxpayer may deduct that lesser amount ratably over the period of years described above further in the event that taxpayer transfers a lesser amount in ------- ------ in order to make an additional special transfer in a later year including a special transfer of the difference between the special transfer amount stated above and the lesser amount transferred in ------- taxpayer must request a new schedule of deduction amounts and in that request must take the ------- transfer into account and recalculate the pre-2005 qualifying percentage in such request we note that if taxpayer elects to make a special transfer of property for all or a portion of this special transfer the amount of the transfer is the lesser_of the fair_market_value of the property transferred or the basis of the property in the hands of the taxpayer immediately prior to the transfer in either event the deduction of the taxpayer with respect to the property is limited to the taxpayer’s basis in the property the mandatory review for the taxpayer’s prior schedule of ruling amounts was -- --------------------- accordingly we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we reach the following conclusions pursuant to sec_1_468a-3t a taxpayer has met its burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the code and regulations and is based on reasonable assumptions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1t b of the regulations plr-112754-07 taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3t d of the regulations taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3t a and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commission and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the ruling_amount applicable to the fund as set forth under sec_1_468a-2t b of the regulations based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts year each year --------------- commission dollar_figure--------------- approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3t f occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above plr-112754-07 this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides 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 the taxpayer we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7t a a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch passthroughs special industries


significant index no third party contact - plan participant sec_2 department of the treasury internal_revenue_service washington d c jun government entities division re union dear this letter is to inform you that with respect to the above-named plan your request for an extension for amortizing the unfunded liabilities described in sec_412 of the internal_revenue_code code and sec_302 of the employee_retirement_income_security_act_of_1974 erisa effective with the plan_year beginning january has been denied sec_412 provides that the period of years required to amortize any unfunded_liability of any plan may be extended for a period of time not in excess of years if it is determined that such extension would carry out the purposes of the employee_retirement_income_security_act_of_1974 and would provide adequate protection for participants under the plan and their beneficiaries and if it is determined that the failure to permit such extension would result in a substantial risk to the voluntary continuation of the plan or a substantial curtailment of pension benefit levels or employee compensation and be adverse to the interests of plan participants in the aggregate the funded status of the plan which is a multiemployer defined_benefit_plan has improved as a result of its recent merger with another plan also projections prior to the merger showed that the plan was not expected to experience a funding deficiency until the end of the plan_year after substantial changes in the minimum_funding requirements under the pension_protection_act of ppa would take effect the effect of these changes in the funding rules on the plan’s funding requirements is not yet known but ppa also provides additional avenues to obtain relief through the extension of amortization periods if such relief is needed at that time because there is no projected funding deficiency for several years an extension for carry out the purposes of erisa furthermore failure to permit an extension for does not pose a substantial risk to the voluntary continuation of the plan accordingly the request for extension of the amortization period has been denied would not you were notified in a letter dated date that your request for an extension of the period to amortize the plan’s unfunded liabilities had been tentatively denied this letter also informed you of your right to a conference to review this decision and present any additional information that you believed the service should take into account before finalizing this ruling your authorized representative declined the opportunity for this conference in a telephone conversation with date of this office on this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent we have sent a copy of this letter to the manager authorized representative pursuant to a power_of_attorney on file in this office manager and to your if you require further assistance in this matter please contact sincerely yours é wallel james e holland jr manager employee_plans technical