internal_revenue_service number release date index number ------------------------------------ -------------------- ------------------------------ re ----------------- 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 b04 plr-144517-10 date april legend husband wife daughter son daughter-in-law date date date date date circuit_court state statute state statute state statute trust a_trust b_trust trust a dear ------------- ------------------------ ---------------------- ---------------------- ------------------------ ------------------------- ------------------ -------------------------- -------------------------- ----------------------- -------------------------- ---------------------------------------------- ------------------------------------------------- ----------------------------------------------- ---------------------------------------------- ----------------------------------------------------- ------------------------------------------------------ ----------------------------------------------------------------------------------- -------------------------------------------------- ----------------------------------------------------------------------------------- -------------------------------------------------- --------- this letter responds to a letter from your authorized representative dated date requesting a ruling on the income and generation-skipping_transfer_tax gst consequences of the proposed consolidation of trust and trust the facts and representations submitted are summarized as follows plr-144517-10 on date a date prior to date wife and husband each executed separate wills wife’s will provided for the creation of trust a for the benefit of husband if he survives wife and their issue husband’s will provided for the creation of trust b for the benefit of wife if she survives husband and their issue on date a date prior to date wife died and trust a became irrevocable on date a date prior to date husband died and trust b became irrevocable_trust a and trust b contain identical provisions with respect to the distribution and termination of the trusts for the beneficiaries trust a and trust b provide that the trustee is to distribute to husband and wife respectively so much of the net_income of the trust as the trustee in his sole and absolute discretion deems advisable for the husband’s and wife’s care support comfort and pleasure and distribute the balance of the net_income to such of the issue of husband and wife and in such proportions as the trustee in his sole and absolute discretion deems advisable for the purposes of support maintenance care comfort and education upon the death of husband or wife the trustee is to divide the property then in trust into two shares of equal value to be set apart held and administered by the trustee as separate trusts one trust is to be known as daughter’s trust and the other is to be known as son’s trust trust is son’s share of trust a and trust is son’s share of trust b_trust and trust provide that during the lifetime of son or daughter-in-law the trustee is to distribute to son if he is living or to daughter-in-law if son is deceased so much of the net_income of the trust as the trustee in his sole and absolute discretion deems advisable the balance of any income may be distributed to son’s issue in the sole discretion of the trustee for the purposes of support maintenance care comfort and education after the death of both son and daughter-in-law the trustee is to distribute the net_income to son’s issue per stirpes the trustee may also at any time during the term of the trusts distribute to or for the benefit of son daughter-in-law or son’s issue such amounts if any of the principal of the trusts aggregating not more than dollar_figurea as to all beneficiaries in any calendar_year as the trustee may deem advisable for the purposes of support maintenance care comfort and education the trusts are to terminate upon the earlier of the death of son daughter-in-law and all of son’s issue years after the death of the last survivor of son daughter-in-law or the currently living grandchildren of husband and wife or the time when all property in the trust has been distributed upon termination the property in the trusts is to be distributed to son’s issue per stirpes on date circuit_court issued an order in accordance with state statute and state statute that the trustee may distribute each year to the beneficiaries who would otherwise be entitled to a distribution of income under the terms of trust and trust an amount not to exceed the product of a a percentage not to exceed percent multiplied by b the average market_value of the trusts’ assets as of december for plr-144517-10 the three years preceding the year in which the distributions are to be made trust and trust have also been modified respecting the appointment of trustees these modifications were also identical state statute provides that after notice to the qualified beneficiaries a trustee may combine two or more trusts into a single trust or divide a_trust into two or more separate trusts if the result does not materially impair rights of any beneficiary or adversely affect achievement of the purposes of the trust on date circuit_court issued an order authorizing the consolidation of trust and trust into a single trust the consolidated trust the order provides that the interests of the income beneficiaries will remain the same as their interests under the original trusts and the timing of the termination of the trusts will remain the same as the timing of the terminations under the original trusts the beneficiaries will not have different rights to trust income or materially diminished rights to principal than currently provided the trustees represent that no additions have been made to the principal of either trust or trust after date you have requested the following rulings the consolidation of trust and trust into the consolidated trust will not constitute a generation-skipping_transfer under sec_2601 of the internal_revenue_code any subsequent generation-skipping_transfer from the consolidated trust will remain exempt from the gst provided that there are no post-consolidation additions to the consolidated trust no gain_or_loss will be recognized under sec_1001 by either trust or trust or by any of the beneficiaries of those trusts as a result of the proposed consolidation the assets distributed from trust and trust into the consolidated trust will have the same basis and holding periods under sec_1015 and sec_1223 before and after the proposed consolidation law and analysis ruling sec_1 and sec_2601 imposes a tax on each generation-skipping_transfer the term ageneration-skipping transfer is defined in sec_2611 as a taxable_distribution a taxable_termination or a direct_skip plr-144517-10 sec_2602 provides that the amount of the gst tax is determined by multiplying the taxable_amount by the applicable_rate sec_2641 provides that the term applicable_rate means with respect to any generation-skipping_transfer the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the gst tax shall not apply to any generation-skipping_transfer under a_trust that was irrevocable on date but only to the extent that the transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 will not cause the trust to lose its exempt status the regulation provides that the rules contained in the paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraph sec_26_2601-1 b or c by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a generation-skipping_transfer or the creation of a new generation-skipping_transfer a modification that is administrative in nature that only indirectly increases the amount transferred will not be considered to shift a beneficial_interest in the trust sec_26_2601-1 example considers a situation where in grantor establishes an irrevocable_trust for grantor's child and the child's issue in grantor's spouse also established a separate irrevocable_trust for the benefit of the same child and issue the terms of the spouse's trust and grantor's trust are identical in the appropriate local court approved the merger of the two trusts into one trust to save administrative costs and enhance the management of the investments plr-144517-10 the merger of the two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the merger in addition the merger does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the example concludes that the trust that resulted from the merger will not be subject_to the provisions of chapter in this case trust and trust will be consolidated into the consolidated trust the date proposed consolidation will not result in a shift of any beneficial_interest in the trusts to any beneficiary who occupies a generation lower than the persons holding the beneficial interests further the date proposed consolidation will not extend the time for vesting of any beneficial_interest in the new trust beyond the period provided for in trust and trust before the consolidation trust and trust were in existence and funded prior to date the trustees represent that no additions have been made to the principal of either trust after date accordingly based on the facts presented and representations made we conclude that the consolidation of trust and trust into the consolidated trust will not constitute a generation-skipping_transfer under sec_2601 furthermore any subsequent generation-skipping_transfer from the consolidated trust will remain exempt from the gst provided that there are no post-consolidation additions to the consolidated trust while you have not requested a ruling on the date circuit_court order to confer the trustee with the power to make adjustments between principal and income pursuant to state statute we note that this modification is similar to example of sec_26_2601-1 and would not result in the loss of gst exempt status for either trust or trust ruling sec_1001 provides that the gain from the sale_or_other_disposition of property is the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in sec_1011 over the amount_realized sec_1001 defines the amount_realized from the sale or disposition of property as the sum of any money received plus the fair_market_value of any property received sec_1001 provides that except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides as a general_rule that except as otherwise provided in subtitle a the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or loss sustained plr-144517-10 an exchange of property results is the realization of gain under sec_1001 if the properties exchanged are materially different 499_us_554 there is a material difference when the exchanged properties embody legal entitlements different in_kind or extent or if they confer different rights and powers u s pincite in the present case there will be no sale_or_exchange because there will be no transfer of money or property the beneficiaries will possess the same interests after the consolidation of trust and trust into the consolidated trust as before the proposed transaction is merely a consolidation of the assets for administrative convenience accordingly based on the facts presented and representations made we conclude that neither the trusts trust and trust nor the beneficiaries will recognize gain_or_loss under sec_1001 as a result of the consolidation of the trusts into the consolidated trust ruling sec_1015 provides that the basis in property acquired by a transfer in trust is the same as it would be in the hands of the grantor with adjustments for gain and loss recognized sec_1_1015-2 provides that in the case of property acquired after date by a transfer in trust other than a transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased by the amount of gain or decreased in the amount of loss recognized to the grantor under the law applicable to the year in which the transfer was made sec_1_1015-2 applies the uniform basis principles in sec_1_1015-1 for determining the basis_of_property where more than one person acquires an interest in property by transfer in trust under sec_1_1015-1 property acquired by gift has a single or uniform basis although more than one person may acquire an interest in the property the uniform basis of the property remains fixed subject_to proper adjustment for items under sec_1016 and sec_1017 sec_1223 provides that in determining the period for which the taxpayer has held property however acquired there shall be included the period for which such property was held by any other person if under chapter of the code such property has for the purpose of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in the taxpayer's hands as it would have in the hands of such other person plr-144517-10 in this case sec_1001 does not apply to the proposed transaction thus based upon the facts provided and the representations made we conclude that the assets distributed from trust and trust into the consolidated trust will have the same basis under sec_1015 and holding_period under sec_1223 both before and after the proposed consolidation in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives except as expressly provided herein we express no opinion on the federal tax consequences of the transactions under the cited provisions or under any other provisions of the code the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely _____________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


office_of_chief_counsel internal_revenue_service memorandum number release date cc psi 2gl-159877-01 dyatrakis uilc date april to cc sb mil from matthew lay senior technician reviewer cc psi subject hub group inc subsidiaries this memorandum responds to your request for advice in accordance with i r c ' k this memorandum should not be cited as precedent we recommend the following revisions in your draft form 886a explanation of items relating to hub group incorporated and subsidiaries a miscellaneous comments facts should be added relating to the absence of income and loss allocations on schedule_k-1 that was issued with respect to mr yeager and the absence of any partnership income or loss prior to date delete or explain the phrase aper the tax_return for at the bottom of page it is our understanding that this paragraph relates to financial reporting rather than tax reporting in the seventh paragraph on page delete the phrase a sec_755 regulations and insert the phrase a sec_708 regulations retitle exhibit a to refer to alimited partner interest detail and revise any references to the exhibit because all but one of these interests confers an interest of cc psi gl-159877-01 more than they are not minority interests revise the fifth paragraph on page accordingly and any other references to aminority interests page add to the end of the sixth full paragraph of page abecause the hub group s and federal_income_tax returns reflected no goodwill this misleading statement surely refers to the erroneous misallocation of basis to other acquired assets in your discussion of regulations under sec_1060 refer to sec_1_1060-1t rather than sec_1_1060-1 b the following text should be inserted at the beginning of the section titled aother items of analysis which begins on page other items of analysi sec_1 validity of partnerships prior to date the hub partnerships should not be recognized as valid partnerships prior to first david yeager lacked the intent to form a partnership accordingly he was not a bona_fide partner and no partnerships were formed the primary inquiry as to whether individuals have joined together as partners is whether the parties had the intent to join together to operate a business and share in its profits and losses 327_us_280 337_us_733 in commissioner v culbertson the court asserted that test ais not whether the service or capital contributed by a partner are of sufficient importance to meet some objective standard but whether considering all the facts-- the agreement the conduct of the parties in execution of its provisions their statements the testimony of disinterested persons the relationship of the parties their respective abilities and capital contributions the actual control of income and the purpose for which it is used and any other facts throwing light on their true intentbthe parties in good_faith and acting with a business_purpose intended to join together in the present conduct of an enterprise u s pincite federal_law controls for income_tax purposes irrespective of how the parties are treated for state law purposes the inquiry is factual and all relevant facts and circumstances should be taken into account in this case david yeager did not intend to share in the hub partnerships profits losses or business operations the schedule_k-1 issued to david yeager indicates a contribution of only dollar_figure of capital to the each of the hub partnerships immediately after the transfers of general_partnership interests his interest was extinguished david yeager thus did not share in the risk of the enterprise he was redeemed early on in the transaction and made only a de_minimis capital_contribution his inconsequential cc psi gl-159877-01 page capital_contribution and his redemption within a few weeks clearly indicates that he did not intend to be a partner who would share in the profits and losses of the hub partnerships in fact the hub partnerships allocated no income gain loss deduction or credit to mr yeager partnership anti-abuse regulation even if david yeager were a bona_fide partner the anti-abuse provisions of ' of the income_tax regulations would apply sec_1_701-2 provides that where a partnership is formed_or_availed_of in connection with a transaction a principal purpose of which is to reduce substantially the present_value of the partners aggregate federal tax_liability in a manner that is inconsistent with the intent of subchapter_k the commissioner can recast the transaction for federal tax purposes the hub partnerships participated in the transaction in order to artificially increase the basis of partnership assets through the application of c and b b as taxpayer s financial statements reveal taxpayer was aware of the transaction s tax benefits taxpayer intended to avail itself of these tax benefits many times over the transaction was mirrored by many transactions all of which would have produced identical tax benefits however only three transactions were able to take advantage of the interaction between sec_732 prior to its amendment for distributions after date and the regulations under sec_708 prior to their amendment on for transactions after date in the three relevant transactions the hub partnerships were terminated approximately within months months and a year from their respective formations in partnership assets were sold and due to the assets unusually high basis taxpayer claimed an inflated ' loss of dollar_figure and large depreciation_deductions taxpayer s clear recognition of the tax benefits the many identical transactions the rapid termination of the hub partnerships and the sales of assets having inflated bases soon after the transactions all indicate that a principal purpose of the transaction was to reduce the taxpayer s federal tax_liability by artificially inflating the basis of the hub partnerships assets under ' the hub partnerships should be disregarded and the transfer of the general_partnership interests on date should be treated as a transfers of a interest in each of the assets held by the partnerships on that date a summary of the taxpayer s points addressing the validity of the hub partnerships is attached as exhibit ac page cc psi gl-159877-01 c the sentence on page which begins aa summary of the taxpayer s points addressing the validity of the partnership should be deleted item should be renumbered as item and retitled and should begin as follows application of sec_1060 to the date transfers d if the hub partnerships were not recognized as valid partnerships prior to date or the transfers of interests therein on date are recharacterized under sec_1_701-2 as transfers of assets then sec_1060 requires the use of the residual_method to value the assets that were the subject of the date transfers e add to the end of sec_3 the following language if ' applies to the purchases by hub city terminals inc then a majority of the purchase prices would required to be allocated to goodwill or other intangibles when an interest in the partnerships is later purchased triggering a technical_termination of the partnerships under sec_708 b and c would result in an allocation of the partners bases in their partnership interests among the assets deemed to be received as required by the statute the regulations under ' adopt the same residual_method of allocation as prescribed under the ' regulations see temp_reg ' 1060-1t sec_1060 generally requires that the allocation of consideration be made using the aresidual method in connection with aapplicable asset acquisitions occurring after date under the residual_method any portion of the transferee s initial basis that is in excess of the fair_market_value of identifiable tangible and intangible assets other than goodwill and going_concern_value must be allocated to goodwill and going_concern_value see temp_reg ' 1t d if ' applies to the purchase by hub city terminals inc then the consideration paid_by hub city terminals inc in each deemed transfer of an undivided percentage interest in assets represented by the sale of a general_partnership interest in form would be allocated among the assets pursuant to the allocation rules of ' 1060-1t d the four classes described in the regulations prior to date were as follows aclass i assets were cash deposits in banks and similar items aclass ii assets were certificates of deposit u s government securities certain marketable stocks and securities foreign_currency and similar items aclass iv assets were intangible assets in the nature of goodwill and going_concern_value all assets not described above specifically including cc psi gl-159877-01 page accounts_receivable were aclass iii assets temporary regulations published in provided that goodwill and going_concern_value will be assigned to a true residual class class v t d 1997_1_cb_85 f for transfers occurring before date if ' does not apply to any of the transferred assets the provisions of the regulations in effect prior to date allocating among four classes of assets apply for transfers occurring before date if ' applies to any of the transferred assets the taxpayer may consistently a apply the provisions of the ' 1060-1t d as in effect for transfers on or after date allocating among five classes of assets b apply the provisions of ' 1060-1t d as in effect before date or c apply the provisions of ' 1060-1t d as in effect before date but treat all amortizable ' intangibles as class_iv_assets see ' 1060-1t a ii under any of these rules a majority of the purchase_price would be allocated to goodwill or other intangible assets item should be renumbered as item and should be replaced with the following language effect on the subsequent purchases of partnership interests for distributions on or before date ' b iv provided that the following is deemed to occur when a partnership terminates by a sale_or_exchange of an interest first the partnership distributes its properties to the purchaser and the other remaining partners in proportion to their respective interests in the partnership properties second immediately thereafter the purchaser and the other remaining partners contribute the property to a new partnership the distribution_of_property deemed to occur under ' b iv is treated like an actual distribution for federal tax purposes therefore the basis rules of ' apply to the deemed_distribution sec_732 provides that the basis_of_property other than money distributed by a partnership to a partner in liquidation of the partner s interest shall be an amount equal to the adjusted_basis of such partner s interest in the partnership reduced by any money distributed in the same transaction for distributions on or before date sec_732 provided that the basis of distributed properties to which subsection b is applicable shall be allocated first to any unrealized_receivables and inventory_items in an amount equal to the adjusted_basis of each such property to the partnership and to the extent of any remaining basis to any other distributed properties in proportion to their adjusted_basis to the partnership cc psi gl-159877-01 page under these rules when additional interests in the hub partnerships were purchased between date the date of the original purchases and date ' b b technical terminations would be triggered as a result of the technical terminations the relevant hub partnerships would be deemed to distribute all of their assets to the remaining partners followed immediately by a recontribution of the assets to new partnerships sec_732 would determine the basis of the distributed assets pursuant to ' c to the extent that there is basis remaining after the allocation to unrealized_receivables and inventory_items that excess would be allocated among other distributed properties in proportion to their adjusted bases goodwill or other intangibles would have received a large basis when a share of these items were deemed purchased on date accordingly goodwill or other intangibles would receive the majority of the partners outside bases sec_197 f we suggest that you determine whether any goodwill or going_concern_value or other sec_197 intangible for which depreciation or amortization would not have been allowed but for sec_197 held by the hub partnerships are amortizable by the partnerships under sec_197 under ' f these intangibles are not amortizable ' intangibles if they were held or used at any time on or after date by the taxpayer or a related_person sec_197 provides that a person is related to any person if the related_person bears a relationship to such person specified in ' b or ' b in applying ' b or ' b percent is substituted for percent sec_197 provides that a person is related to any person if the related_person and such person are engaged in trades_or_businesses under common_control within the meaning of subparagraphs a and b of ' f see also sec_41 defining acontrolled group of corporations as having the same meaning as given to such term in ' a except that amore than shall be substituted for aat least percent each place it appears in ' a and sec_197 providing that with respect to any increase in the basis of partnership property under sec_732 sec_734 or sec_743 determinations under sec_197 shall be made at the partner level and each partner shall be treated as having owned and used such partner s proportionate share of the partnership s assets this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse impact on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views by matthew lay senior technician reviewer branch office of the associate chief_counsel passthroughs special industries


t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n department of the treasury internal_revenue_service washington d c ------------ contact person contact number identification_number employer_identification_number number release date se t eo ra t date uniform issue list legend m n o p q r s dear ------------------ we have considered the ruling_request dated date submitted on behalf of m o and r by their authorized representative relating to the federal_income_tax consequences under sec_501 sec_509 and sec_513 of the internal_revenue_code arising from the merger of o and r into m in a fax communication dated date the representative withdrew ruling_request involving sec_170 sec_2055 and sec_2522 of the code facts m is an n nonprofit corporation formed in m has been recognized by the internal_revenue_service as exempt from federal_income_tax as an organization described in sec_501 of the code and as other than a private_foundation under sec_509 m’s principal purpose is to promote the study of the law the diffusion of knowledge of the law and the continuing education of prosecuting attorneys lawyers law enforcement personnel and other members of the interested public prosecuting attorneys and attorneys general who act as district attorneys associate - assistant or associate prosecuting attorneys armed_forces attorneys various federal m is a membership_organization with five classes of members as follows active - chief the goal of o training is to help prosecutors fulfill their responsibilities efficiently o is a p nonprofit corporation formed in with the assistance of m the american bar prosecuting attorneys and certain foreign governmental attorneys alumni - former members of the m board_of directors whose term has expired law student and honorary -past presidents of m who are no longer eligible for active membership in addition m has approximately ten full-time employees association the american college of trial lawyers and the international academy of trial lawyers o has been recognized by the service as tax exempt under sec_501 of the code and as other than a private_foundation under sec_509 and sec_170 a school for years o was housed in a certain identified law school but in it relocated to another law school the principal purpose of o is to provide continuing legal education and advocacy training for prosecuting attorneys through programs specifically tailored to meet their needs o is the only institution devoted exclusively to training prosecutors o has approximately full-time employees effectively and ethically to this end o conducts approximately national courses each year at various locations around the united_states these four and five day courses provide prosecutors as well as their investigators and administrative personnel with specialized training on such topics as trial advocacy civil law forensic evidence white collar crime victim advocacy and the prosecution of drug homicide sexual assault and other violent crimes course is designed for prosecutors who have at least one year of felony trial experience it is a two week in-depth study of the critical role which the prosecutor plays within the criminal justice system the second course is open only to elected or appointed prosecuting attorneys and first assistants it provides a forum whereby senior policy making prosecutors share ideas and learn techniques to improve the administration of their offices the third special course is a multi- disciplinary conference geared to increase participants’ effectiveness in investigating prosecuting and handling post-sentence management of domestic violence cases and offenders and to increase awareness and the quality of treatment of victims of domestic violence their family members and their communities in addition to these national programs o contracts with state associations and state and local and military prosecutors’ offices to present training programs tailored to meet the specific needs of prosecutors in those jurisdictions highest ethical standards for prosecutors an advisory committee includes representatives from m the national association of prosecutor coordinators and the us department of justice among others rules and decisions and ethics advisory opinions of interest to prosecutors as well as proposals by bar associations state prosecution associations and state and national defense lawyer associations and to provide assistance and information relating to these areas to state and local prosecutors in addition q provides assistance to o m state and local prosecutors’ q created in by o and an identified law school is dedicated to the promotion of the among the national courses offered each year by o are three special courses the first the purpose of q is to study and to objectively analyze legislative enactments judicial r is an s nonstock corporation formed in the service has recognized r as tax offices and organizations and the various states in designing courses of instruction conducting educational programs and developing strategies for the implementation of rules of professional responsibility empathetic to the uniqueness of the prosecutorial function a fundamental asset of q is its website a resource center for prosecutors in the field who face on a daily basis ethical issues registration for the website is free and available to all full- time and part-time prosecutors who have no connection to or involvement with the representation or giving of advice to persons or entities charged with or suspected of committing crimes a forum for prosecutors to solicit information from and share information with prosecutors from across the country is also available in the members-only portion of the website another major project of q will be the revision of the m prosecution standards they were last completely reviewed and revised in a special committee will be appointed to conduct this review under the direction of q and will ultimately submit its recommendations to the m board_of directors exempt under sec_501 of the code and as other than a private_foundation on the basis that it is a publicly_supported_organization described in sec_509 and sec_170 the principal purpose of r is to provide prosecutors at all levels of government with the latest information research training and technical assistance on a wide variety of issues including gun violence strategies dna forensics child abuse juvenile justice traffic law violence against women and white collar crime r acts as a national clearinghouse for information on the prosecutorial function r’s staff includes veteran prosecutors and researchers access to comprehensive justice medical and scientific data resources including a nationwide network of working prosecutors ensures that information provided by r is up to date practical and accurate r staff conducts research on a broad range of criminal justice issues that are of interest to prosecutors r has approximately full-time employees or business activities and do not own any unrelated debt-financed_property he further represents that m o and r have no plans to commence any such unrelated_trade_or_business activity or to acquire any such unrelated debt-financed_property after the merger provisions of n and p law and r with and into m pursuant to applicable provisions of n and s law in each case m will be the surviving entity each such merger is subject_to approval under the articles of incorporation and bylaws of the entities involved and under the applicable state laws the authorized representative states that while m o and r are pursuing their exempt purposes diligently and successfully they nevertheless seek to merge because the merger can help them to identify services that would facilitate the efforts of the nation’s district attorneys improve the delivery of services by each of the formerly separate entities reduce or eliminate duplicative administrative functions and costs and eliminate the requirement to file your authorized representative states that m o and r do not conduct any unrelated trade m o and r plan to effect mergers of o with and into m pursuant to applicable the authorized representative has cited the respective state statutes for n p and s following the merger the governance of the merged entity will be effected in accordance annual federal forms for the two merged entities reducing total_tax compliance costs in addition the merger should make it possible for the surviving entity to perform all of its functions better and more comprehensively which allow for the merger of domestic ie in-state nonprofit_corporations with foreign ie out of state nonprofit_corporations with n corporate law by the board_of directors of m the present m board_of directors will continue to serve as the initial board_of the surviving entity that board however will receive substantial guidance and assistance from two advisory boards established pursuant to n law and applicable provisions of m’s articles of incorporation and bylaws one board will be established for the o operating division and a second board will be established for the r operating division the anticipation is that the initial members of these advisory boards will be the current members of the o board_of regents and the r board_of directors as advisory board members are not covered under director-related statutes m will revise the indemnity provisions of its articles of incorporation and bylaws to so cover them it is also contemplated that the present officers of o and r will become officers of m with responsibility for their respective divisions expectation is that the o and r divisions of m that succeed these separate corporations after the merger will preserve the o and r names under applicable assumed or fictitious name laws of pertinent states by filing the required state specific registrations the present activities of m o and r will be continued by m after the merger under sec_509 of the code or under sec_509 and sec_170 rulings requested although the separate_entity status of o and r will cease as a result of the transaction the it is contemplated that following the merger m will satisfy the public support requirements you request that we rule as follows the merger of r with and into m will not affect the exemption of m under sec_501 of the code or the pre-merger exemption of r under sec_501 the merger of o with and into m will not affect the exemption of m under sec_501 of the code or the pre-merger exemption of o under sec_501 the merger of r with and into m will not adversely affect the status of m as an organization that is not a private_foundation under sec_509 of the code or the pre-merger status of r as an organization that is not a private_foundation under sec_509 and sec_170 the merger of o with and into m will not adversely affect the status of m as an organization that is not a private_foundation under sec_509 of the code or the pre-merger status of o as an organization that is not a private_foundation under sec_509 and sec_170 the transfer of funds and assets as a result of the merger of r with and into m will not result in gain_or_loss being recognized by any party to the transfer the acquisition by m of the assets of r as successor by merger to r will not cause unrelated_business_taxable_income to be attributed to m or r under sec_511 through of the code the transfer of funds and assets as a result of the merger of o with and into m will not result in gain_or_loss being recognized by any party to the transfer the acquisition by m of the assets of o as successor by merger to o will not cause unrelated_business_taxable_income to be attributed to m or o under sec_511 through of the code sec_501 of the code provides for the exemption from federal_income_tax of sec_1_501_c_3_-1 of the income_tax regulations provides that in order to qualify sec_1_501_c_3_-1 of the regulations provides that in general an organization is law organizations that are organized and operated exclusively for charitable religious educational or other specified exempt purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual for exemption under code sec_501 an organization must be both organized and operated exclusively for one or more exempt purposes failure to meet either the organizational or operational_test will disqualify an organization from exemption under sec_501 organized exclusively for one or more exempt purposes only if its articles of organization limit the purposes of such organization to one or more exempt purposes and do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more exempt purposes under code 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 thus in construing the meaning of the phrase exclusively for educational_purposes in better business bureau v united_states 236_us_279 the supreme court of the united_states stated this plainly means that the presence of a single noneducational purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly educational_purposes code sec_501 in its generally accepted legal sense and includes the advancement of sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded sec_1_501_c_3_-1 of the regulations states that the term charitable is used in in 78_tc_921 the tax_court held that sec_1_501_c_3_-1 of the regulations provides that the term educational relates to education or science and the promotion of social welfare through various means including efforts to defend human and civil rights secured_by law 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 an organization which is devoted to the improvement of the administration of justice through various means qualifies for exemption under sec_501 of the code revrul_65_60 1965_1_cb_231 describes an organization formed for the primary purpose of developing and disseminating a body of new knowledge relating to the social sciences the organization’s research staff consists of persons qualified by education and experience to perform scientific research in these fields the organization conducts scientific research pursuant to contracts with governmental agencies and holds seminar courses attended by qualified members of the public a tuition fee is charged for each course in order to recover the cost of presenting the seminar including salaries of the professional staff the organization’s research findings are communicated to the public through seminar courses lectures and public discussions and through publications distributed free to depositary libraries revrul_65_60 cites the definition of the term educational in sec_1_501_c_3_-1 of the regulations and the definition of the term scientific in sec_1_501_c_3_-1 which states that a scientific_organization must meet two tests it must engage in research carried on in furtherance of a scientific purpose and the scientific research must be carried on in the public interest for purposes of code sec_501 the term scientific includes the carrying on of research in the physical or social sciences educational within the meaning of the cited regulations and that the research activities conducted pursuant to contracts with governmental agencies is in the public interest and accordingly scientific within the definition cited above held the organization qualifies for exemption under sec_501 of the code an educational program for bank employees in a particular urban_area the organization furnishes classrooms and employs local university professors and specialists in banking law to teach courses on various banking subjects course work is given credit by universities the organization provides textbooks at cost to students it publishes a professional magazine and sponsors occasional social affairs to stimulate interest in its educational programs of the regulations and states that an organization that instructs or trains individuals to improve their business or professional capabilities may be exempt from tax under sec_501 of revrul_68_504 cites the definition of the term educational in sec_1_501_c_3_-1 revrul_68_504 1968_2_cb_211 describes a nonprofit organization formed to conduct revrul_65_60 concludes that the seminars conducted by the organization depicted are revrul_71_506 1971_2_cb_233 describes a nonprofit organization composed full membership in the society is limited to persons who have had more than eight years the society’s primary activity is research carried on continuously by a full-time paid staff in the code see revrul_65_298 1965_2_cb_163 held the organization qualifies for exemption under sec_501 principally of heating and air conditioning engineers although its membership also includes architects educators and others who have a professional interest in the fields of heating and air conditioning it was formed to advance the arts and sciences of heating ventilating and air conditioning and the allied arts and sciences for the benefit of the general_public by providing facilities for research and the dissemination of scientific knowledge experience in the sciences relating to heating ventilating or air conditioning and who have actively practiced the profession at least four years during which they have been in charge of important work consisting of design construction research development or teaching there are also associate members junior members and student members all of whom must meet requirements as to age training and experience its own laboratory some subjects of investigation include solar radiation through various materials the phenomena of heat flow and transfer development of data on air friction the problems of panel heating and the physiological effects of air conditioning upon the human body the organization does not perform commercial tests nor does it issue reports on commercial products further it has no financial interest in the scientific information it develops all such information is made freely available to the public the organization has conducted research and studies on a cost_basis for universities and government agencies monographs relevant to its field the library is open to members of the engineering profession architects scientists teachers and students as well as others who are seriously interested in its contents there is no charge imposed for use of the library presented at society meetings are disseminated through the society’s three regular publications an annual volume a monthly journal and an annual guide over the years these data have been assembled into more than a score of model codes of minimum standards for heating ventilating and air conditioning the society does not engage in activities directed at or concerned with the protection or promotion of the business interests of any of the professions represented by its membership receipts from publications and contributions regulations see above and concludes that the society is operating in conformance therewith as follows scientific research is carried on in the public interest if the results are made available to the public on a nondiscriminatory basis as for example information published in a treatise at its headquarters the society maintains a library of books periodicals studies and revrul_71_506 cites the definitions of the terms educational and scientific in the the society receives support from three sources membership dues and fees the results of the society’s research and the research papers of its members as concerning the unrelated_business_income_tax issues presented sec_511 of the code imposes a normal_tax and a surtax on the unrelated business sec_512 of the code provides that the term unrelated_business_taxable_income thesis trade publication or in any form that is available to the interested public and by operating the library disseminating the research results and making the model codes available to the public the society is educational in that it is instructing the public on subjects useful to the individual and beneficial to the community held the organization qualifies for exemption under sec_501 of the code taxable_income defined in sec_512 of organizations exempt from tax under sec_501 of the code means the gross_income derived by any organization from any unrelated_trade_or_business 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 of the code provides that the term unrelated_trade_or_business means in the case of any organization subject_to the tax imposed by sec_511 any trade_or_business the conduct of which is not substantially related to the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis for its exemption sec_1_513-1 of the regulations provides that a trade_or_business is related to exempt purposes only where the conduct of the business activities has causal relationship to the achievement of exempt purposes other than through the production_of_income further it is substantially related for purposes of sec_513 only if the causal relationship is a substantial one for this relationship to exist the production or the performance of the service from which the gross_income is derived must contribute importantly to the accomplishment of exempt purposes whether the activities productive of gross_income contribute importantly to such purposes depends in each case upon the facts and circumstances involved include a percentage of the net_income derived from debt-financed_property this percentage in general has as its numerator and denominator the average_acquisition_indebtedness and the average_adjusted_basis respectively for the year with respect to the debt-financed_property sec_514 of the code defines the term debt-financed_property to mean property that is held to produce income and with respect to which there is an acquisition_indebtedness except that such term does not include any property substantially_all the use of which is substantially related aside from the need of the organization for income or funds to the exercise or performance by such organization of its charitable educational or other exempt purposes with respect to any debt-financed_property the unpaid amount of - sec_514 a of the code defines the term acquisition_indebtedness to mean sec_514 of the code defines the term unrelated_business_taxable_income to a the indebtedness incurred by the organization in acquiring or improving such property b the indebtedness incurred before the acquisition or improvement of such property if such indebtedness would not have been incurred but for such acquisition or improvement and c the indebtedness incurred after the acquisition or improvement of such property if such indebtedness would not have incurred but for such acquisition or improvement and the incurrence of such indebtedness was reasonably foreseeable at the time of such acquisition or improvement concerning the ruling requests with respect to foundation status sec_509 of the sec_1_514_b_-1 of the regulations excludes from the definition of debt-financed_property any property the use of which is substantially related to the exercise or performance of an organization’s charitable educational or other exempt_purpose if percent or more of such property is devoted to the organization’s exempt purposes code provides that a sec_501 organization is other than a private_foundation if a it normally receives more than one-third of its support in each taxable_year from any combination of - gifts grants contributions or membership fees and gross_receipts from admissions sales of merchandise performance of services or furnishing of facilities in an activity which is not an unrelated_trade_or_business excluding receipts from any person or from a governmental agency which exceed the greater of dollar_figure or percent of the organization’s support in such taxable_year and b it normally receives not more than one-third of its support in each taxable_year from the combined sum of gross_investment_income and the excess if any of the amount of the unrelated_business_taxable_income as defined in sec_512 over the amount of the tax imposed by sec_511 sec_509 of the code provides that a sec_501 organization is other than a private_foundation if it is described in sec_170 other than in clauses vii and viii an organization described in sec_170 is one which is referred to in sec_170 and which normally receives a substantial part of its support exclusive of income received in the exercise or performance of its charitable educational or other purpose or function constituting the basis for its exempt status from a governmental_unit referred to in sec_170 or from direct or indirect_contributions from the general_public sec_1 b iii a of the regulations provides that the determination of whether an organization is publicly supported depends on the facts and circumstances in each case however a mechanical test is set forth in paragraph b where in effect substantial support is interpreted to mean one-third or more from governmental units and the general_public of total support for the current taxable_year and the four years immediately preceding analysis the basis for the merger of o and r into m is the expectation that it will effect certain operational efficiencies including the elimination of duplicative administrative functions and the research advisory and educational programs of m including the operating divisions costs and a reduction in total_tax compliance costs m o and r will continue to engage in the activities which have been deemed to be charitable and or educational within the meaning of sec_501 of the code the merger is an organizational change whereby o and r will become operating divisions of m the surviving entity the operational changes which flow from the merger will not negate the performance by o and r of their charitable and educational functions of o and r are designed to bring about improvements in the administration of the criminal justice system in the various states the federal courts and military courts the tax_court in kentucky bar foundation cited above held that essentially the same purpose warranted recognition of tax exemption under code sec_501 the research conducted by the entities herein is scientific in that it is clearly in the public interest see sec_1 c - d of the regulations research in the social sciences is considered scientific see the holding in revrul_65_60 cited supra the continuing legal education and advocacy training for prosecuting attorneys now to be provided by o as an operating division of m is comparable to the courses on banking subjects provided by the organization described in revrul_68_504 also cited above that organization qualified for exemption under code sec_501 on the basis of its educational_purposes the activities of operating division r may be compared to those of the organization depicted in revrul_71_506 discussed above in that r provides prosecutors at all levels of government with the latest information research training and technical assistance on such issues as gun violence strategies dna forensics juvenile justice child abuse etc all at no charge and as with the organization described in revrul_71_506 neither m nor r has any financial interest in the research and information which they develop and then disseminate will cause any of these entities to fail the organizational_test under code sec_501 and the merged entity m will continue to operate in furtherance of charitable and educational_purposes under sec_501 further the proposed merger does not involve the transfer of any assets to any for profit entity or to any private parties thus no prohibited private benefit or inurement will result from the proposed transaction accordingly m o and r will remain in conformance with the organizational and operational requirements stated in sec_1_501_c_3_-1 sec_1 and c of the regulations the code the proposed merger herein should not result in the carrying on of any unrelated_trade_or_business within the meaning of code sec_513 by the merged entity m it will continue to carry on the activities for which it has been recognized as tax exempt albeit under a new organizational structure also the two organizations which will merge into m ie o and r will continue to perform their exempt_activities but now as operating divisions of m the point is that the merger will not entail the introduction of activities which are outside the scope of their exempt purposes and thus be subject_to unrelated_business_income_tax under sec_511 further the merger will not result in the acquisition of any debt-financed_property within the meaning of sec_514 because the facts indicate that all property involved in the concerning the ruling requests involving the unrelated_business_income_tax provisions of there is nothing in the proposed changes in the articles and bylaws of m o and r that transfer will be devoted to the promotion of exempt purposes within the meaning of sec_501 concerning foundation status up until the time of the proposed merger all three entities m o and r should continue to operate and receive financial support in essentially the same manner which provided the basis for determining that they qualify for classification as other than private_foundations although under different code sections from one another ie there are differing bases for their qualification the surviving entity m should continue to qualify for non- private_foundation_status under sec_509 of the code following the merger because its sources of support should continue to conform to the relevant support_test under sec_509 and it should otherwise conform to the requirements under sec_509 rulings based on the foregoing we rule as follows the merger of r with and into m will not adversely affect the tax exempt status of m under sec_501 of the code or the pre-merger tax exemption of r under sec_501 the merger of o with and into m will not adversely affect the tax exempt status of m under sec_501 of the code or the pre-merger tax exemption of o under sec_501 the merger of r with and into m will not adversely affect the status of m as an organization that is other than a private_foundation because it is an organization described in sec_509 of the code or the pre-merger status of r as other than a private_foundation on the basis that it is an organization described in sec_509 and sec_170 the merger of o with and into m will not adversely affect the status of m as an organization that is other than a private_foundation because it is an organization described in sec_509 of the code or the pre-merger status of o as other than a private_foundation on the basis that it is an organization described in sec_509 and sec_170 the transfer of funds and assets as a result of the merger of r with and into m will not result in gain_or_loss being recognized by any party to the transfer the acquisition by m of the assets of r as successor by merger to r will not cause unrelated_business_taxable_income to be attributed to m or r under sec_511 through of the code the transfer of funds and assets as a result of the merger of o with and into m will not result in gain_or_loss being recognized by any party to the transfer the acquisition by m of the assets of o as successor by merger to o will not cause unrelated_business_taxable_income to be attributed to m or o under sec_511 through of the code this ruling is based on the understanding that there will be no material changes in the we are also sending a copy of this ruling to the ohio te_ge customer service office pursuant to a power_of_attorney on file in this office we are sending a copy of this letter to facts upon which it is based any changes that may have a bearing upon the tax exempt status of m o or r should be reported to the ohio tax exempt and government entities te_ge customer service office the mailing address is internal_revenue_service te_ge customer service p o box cincinnati oh the telephone number there is a toll free number the authorized representative for m o and r because this letter could help resolve any questions about the exempt status of m o and r it should be kept with the permanent records of these organizations telephone number are shown in the heading of this letter code provides that it may not be used or cited as precedent this ruling is directed only to the organizations that requested it sec_6110 of the if there are any questions about this ruling please contact the person whose name and thank you for your cooperation sincerely jane baniewicz manager exempt_organizations technical group enclosure notice


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info conex-152447-09 release date uil the honorable mike johanns united_states senator railway street suite c102 scottsbluff ne attention ---------------- dear senator johanns this letter responds to your inquiry dated date on behalf of your constituent ----------------------- he asked if congress had extended the period for reinvesting proceeds from the sale of livestock on account of drought the law generally provides for nonrecognition of gain when property is involuntarily converted and replaced with property that is similar_or_related_in_service_or_use sec_1033 of the internal_revenue_code the code we treat a sale_or_exchange of livestock that a taxpayer held for draft breeding or dairy purposes as an involuntary_conversion if the taxpayer sells or exchanges the livestock solely on account of weather-related conditions to the extent the number sold is in excess of the number that the taxpayer would have sold following the taxpayer’s usual business practices sec_1033 of the code the nonrecognition treatment applies in general if a taxpayer purchases replacement_property within years after the close of the first taxable_year in which the taxpayer realizes any gain from an involuntary_conversion sec_1033 of the code however the law extends the 2-year replacement_period to a 4-year period if an involuntary_conversion is solely on account of weather-related conditions that result in the federal government designating the area as eligible for assistance sec_1033 of the code the secretary_of_the_treasury may extend this 4-year replacement_period on a regional basis if the weather-related conditions that resulted in the federal government designating the area as eligible for assistance continue for more than years sec_1033 of the code we issued notice_2006_82 2006_2_cb_529 which provides that we will extend the conex-152447-09 4-year replacement_period until the taxpayer’s first taxable_year ending after the first drought-free year for the applicable region the first drought-free year ends on the august in or after the last year of the taxpayer’s 4-year replacement_period and does not include a weekly period of drought conditions for example assuming a taxpayer’s 4-year replacement_period would otherwise expire on date we would only extend the replacement_period if the applicable region experienced drought conditions in the year ending date notice_2006_82 also provides that we will publish an annual list of counties that experienced drought conditions which taxpayers can use to determine whether we extended the 4-year replacement_period we have issued annual lists notice_2006_91 2006_2_cb_688 notice_2007_80 2007_2_cb_867 notice_2008_86 2008_42_irb_925 and notice_2009_81 2009_40_irb_455 i am enclosing these notices for your information i hope this information is helpful if we can assist you further please contact me or ------ ---------------------at --------------------- sincerely john aramburu acting branch chief branch office of associate chief_counsel income_tax and accounting enclosures


internal_revenue_service department of the treasury index number washington dc person to contact number release date telephone number refer reply to cc dom p si 1-plr-106972-99 date date legend x date this responds to a letter submitted on behalf of x that requests relief under sec_1362 of the internal_revenue_code facts x was incorporated on date the shareholders desired s_corporation treatment for x effective date but an election to be treated as an s_corporation was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months plr-106972-99 of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not file a timely election to be treated as an s_corporation under sec_1362 effective on date x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter please submit a copy of this letter and a copy of a properly executed form_2553 to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code this ruling is directed only to the taxpayer on whose behalf it was requested sec_6110 provides that it may not be cited or used as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely yours signed dianna k miosi dianna k miosi chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for purposes


internal_revenue_service number release date index no cc psi - plr-110292-00 date trust a b date x state dear this responds to your letter dated date submitted on behalf of trust requesting a ruling under sec_1361 of the internal_revenue_code the information submitted states that trust was established on date by a grantor for the benefit of the living children of the grantor’s child b or failing such living children for the living children of grantor’s other children trust currently holds stock in x a state corporation which intends to elect to be an s_corporation trust represents that trust has not made an election to be a qualified_subchapter_s_trust trust is not exempt from tax under subtitle a of the code and each trust_beneficiary is an individual article one of trust provides that the trustees shall hold manage invest and reinvest the trust property shall collect the income therefrom and shall pay the net_income in convenient installments in such proportions and with such exclusions as the trustees shall deem advisable among the living children of b or failing such living children at any time of payment among the living children of grantor’s other children or the trustees shall have the right to and are authorized to accumulate any or all of such net_income as they shall deem advisable and add the same to the principal of the trust property any payments of net_income may be made by the trustees either directly to or indirectly in trust or otherwise for the benefit of the beneficiary concerned article one of trust further provides that in the event that any payment of income authorized under article one to any individual beneficiary shall be insufficient in the opinion of the trustees to defray the expenses of any illness accident or other emergency or to provide for the proper maintenance support and education of such beneficiary the trustees are authorized to use from time to time so much of the principal of the trust property as the trustees may deem advisable therefor article two of trust provides that trust shall continue in effect unless sooner terminated until twenty-one years after the death of the last to die of the four children of grantor and the grandchildren of grantor living at the date of the trust agreement article two of trust further provides that in the event of the death of b without children living any undistributed portion of the trust property shall be divided equally among and added to the other three trusts established by grantor on the same day trust was established failing all such takers the said undistributed portion shall be transferred delivered and paid over to such charitable_organization or organizations as the trustees shall select sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect sec_1362 of the code provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 c have a nonresident_alien as a shareholder and d more than one class of stock under sec_1361 of the code an electing_small_business_trust is an eligible shareholder of an s_corporation sec_1361 defines electing_small_business_trust sec_1361 of the code provides that except as provided in sec_1361 the term electing_small_business_trust means any trust if - i such trust does not have as a beneficiary any person other than i an individual ii an estate or iii an organization described in paragraph or of sec_170 ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 of the code provides that the term electing_small_business_trust shall not include - i any qualified_subchapter_s_trust as defined in sec_1361 if an election under sec_1361 applies to any corporation the stock of which is held by such trust ii any trust exempt from tax under subtitle a of chapter and iii any charitable_remainder_annuity_trust or charitable_remainder_unitrust as defined in sec_664 sec_1361 of the code provides that for purposes of sec_1361 the term potential_current_beneficiary means with respect to any period any person who at any time during such period is entitled to or at the discretion of any person may receive a distribution from the principal or income of the trust notice_97_49 1997_2_cb_304 provides that for purposes of sec_1361 the term beneficiary does not include a distributee trust but does include those persons who have a beneficial_interest in the property held by the distributee trust furthermore the notice provides that for purposes of sec_1361 if a distributee trust becomes entitled to or at the discretion of any person may receive a distribution from principal or income of the esbt then the trust will become a potential_current_beneficiary and the s_corporation_election will terminate unless the distributee trust is a_trust described in sec_1361 accordingly based on the representations made and the information provided and the assumption that the interest of any contingent charitable_beneficiary of trust described in sec_170 is so remote as to be negligible and that such contingent charitable beneficiaries are therefore not beneficiaries of trust as described in sec_1361 we conclude that for purposes of sec_1361 the beneficiaries of trust are individuals and are qualified beneficiaries with respect to the power given to the trustees under article one to make certain distributions either directly to or indirectly in trust or otherwise for the benefit of the beneficiary concerned this is a power to make a distribution for purposes of sec_1361 however since there are currently no distributee trusts identified or currently in existence the power to distribute to these trusts will be disregarded for purposes of sec_1361 thus there is no distributee trust that is a potential_current_beneficiary if a distributee trust is identified or otherwise comes into existence in any period then the distributee trust will become a potential_current_beneficiary and the s_corporation_election will terminate unless the distributee trust is a_trust described in sec_1361 furthermore the beneficiary of any such new trust must satisfy the shareholder restrictions of sec_1361 accordingly upon trust making a valid and timely election under sec_1361 trust will satisfy the requirements of sec_1361 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney of file with this office we are forwarding a copy of this letter to trust sincerely yours j thomas hines acting branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


id office uilc cca_2012110810151526 ------------- number release date from ------------------ sent thursday november am to ----------------- cc subject election i agree that the amount that could have been deferred under sec_6166 when the estate_tax_return was filed can't be made subject_to sec_6166 when a deficiency that’s not attributable to the closely-held business is later determined the estate full-paid the tax_shown_on_the_return and it’s now too late to make the sec_6166 election and there’s no relief available for the election even if an argument could be made for relief and as the tax was full-paid the estate didn’t try to make a protective_election with the estate_tax_return under sec_20_6166-1 as that election only defers payment of any portion of tax remaining unpaid where no election is made when the return is filed and later a deficiency is determined the sec_6166 election for certain deficiencies only allows that portion of the deficiency attributable to a closely-held business to be paid in installments under sec_6166 sec_20_6166-1 the sec_6166 election doesn’t apply to any_tax originally determined to be due sec_20_6166-1 sec_20_6166-1 doesn't allow any_tax originally determined to be due to be subject_to the sec_6166 election that provision only sets a cap on the amount of the deficiency attributable to the closely-held business the cap is determined by seeing what's left after using the adjusted figures to set the maximum amount that could be paid in installments and reducing it by any amount already elected please give me a call if you want to discuss