seb tax_exempt_and_government_entities_division release number release date vil code department of the treasury internal_revenue_service te_ge eo examination ne commerce ms dal dallas texas date mar employer_identification_number person to contact id number contact numbers voice fax last datefor filing a petition with the tax_court certified mail - return receipt requested dear october you were 20xx in which we determined that your tax-exempt status under sec_501 of the internal_revenue_code is not affected grantors and contributors may rely on this determination unless the internal_revenue_service publishes anctice tothe contrary because this letter could help resolve any questions about your private_foundation_status please keep it with your permanent records this is a final_determination regarding your foundation classification this modifies our letter dated an organization described in sec_509 of the internal_revenue_code code we have modified your foundation status to that of a public charity described in sec_509 of the code effective for tax years beginning january 20xx we previously provided you a report of examination explaining the proposed modification of your tax-exempt status at that time we informed you of your right to contact the taxpayer_advocate as well as your appeal rights on january 20xx you signed form_6018 cansent to proposed action - sec_7428 in which you agreed to the modification of your foundation classification to a organization this is a final_determination letter with regard to your federal tax-exempt status under sec_501 a of the code you are required to file form_990 return of organization exempt from income_tax form_990 must be filed by the 15th day of the fifth month after the end of your annual accounting periods a penalty of dollar_figure a day is charged when a return és filed late unless there is a reasonable_cause for the delay however the maximum penalty charged cannot exceed dollar_figure or percent of your gross_receipts for the year whichever is less in addition organizations with gross_receipts exceeding dollar_figure for any year will be charged a penalty of dollar_figure a day when a return is filed late however the maximum penalty charged cannot exceed dollar_figure these penalties may also be charged if a return is not complete so be sure your return is complete before you file it if you are subject_to the tax on unrelated_business_income under sec_511 of the code you must also file an income_tax return on form 990-t exempt_organization business income_tax return if you decide to contest this determination incourt you must initiate a suit for a declaratory_judgment inthe united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the 91st day after the date this final_determination letter was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment you may write to the tax_court at the following address united_states tax_court second street washington d c the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your rights we can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for our assistance which is always free we will do everything possible to help you visit taxpayeradvocate irs gov_or call lf you have any questions please call the contact person at the telephone number shown in the heading of this letter thank you for your cooperation sincerely at jara heoke maria hooke director exempt_organizations examinations department of the treasury internal_revenue_service tax_exempt_and_government_entities_division irs exempt_organizations examination date dec taxpayer id number form tax periods ended person to contact employee id number telephone number fax adaress manager’s contact information employee id number telephone number response due_date certified mail - return receipt requested dear why you’re receiving this letter we enclosed a copy of our audit report form 886-a explanation of items explaining that we propose to modify your organization’s foundation status under internal_revenue_code irc sec_509 your exempt status under sec_501 is still in effect if you agree if you haven’t already please sign the enclosed form_6018 consent to proposed action and return it to the contact person shown at the top of this letter we'll issue a final letter modifying your foundation status if you disagree request a meeting or telephone conference with the manager shown at the top of this letter send any information you want us to consider file a protest with the irs appeals_office if you request a meeting with the manager or send additional information as stated in and above you'll still be able to file a protest with irs appeals_office after the meeting or after we consider the information the irs appeals_office is independent of the exempt_organizations division and resolves most disputes informally if you file a protest the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax this is to allow the irs appeals_office enough time to consider your case for your protest to be valid it must contain certain specific information including a statement of the facts applicable law and arguments in support of your position for specific information needed for a valid protest refer to publication how to appeal an irs determination on tax-exempt status fast track mediation ftm referred to in publication the examination process generally doesn’t apply now that we’ ve issued this letter letter rev catalog number 34811r request technical_advice from the office of associate chief_counsel tax exempt government entities if you feel the issue hasn’t been addressed in published precedent or has been treated inconsistently by the irs if you’re considering requesting technical_advice contact the person shown at the top of this letter if you disagree with the technical_advice decision you will be able to appeal to the irs appeals_office as explained above a decision made in a technical_advice_memorandum however generally is final and binding on appeals if we don’t hear from you if you don't respond to this proposal within calendar days from the date of this letter we'll issue a final letter modifying your foundation status contacting the taxpayer_advocate office is a taxpayer right the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for tas assistance which is always free tas will do everything possible to help you visit www taxpayeradvocate irs gov or call additional information you can get any of the forms and publications mentioned in this letter by visiting our website at www irs gov forms-pubs or by calling 800-tax-form if you have questions you can contact the person shown at the top of this letter sincerely maria hooke director exempt_organizations examinations enclosures report of examination f 4621-a f form 886-a exhibit a b c d e publication publication letter rev catalog number 34811r form 886-a date name of taxpayer department of the treasury - internal_revenue_service explanations of items tax identification_number last digits schedule number at exnibl year period ended 20xx issue whether should be reclassified from a publicly_supported_organization described in sec_509 and sec_170 of the internal_revenue_code the code to a type_iii_functionally_integrated_supporting_organization described in sec_1_509_a_-4 facts was formed in the state of on april 20xx purposes are charitable and educational and include a conduct of programs to improve and support education and economic development in the south promote educational and charitable efforts of organizations that qualify as exempt_organizations under sec_115 or sec_501 of the internal_revenue_code by acting as a property holding and management company for such organizations city area and b to the organization receives financial support in the form of gross rents for services to is a school described in sec_170 for the 4-year period immediately preceding the year under examination the organization received the following support exhibit a form_990 20xx schedule a public charity status and public support part il support schedule for organizations described in sec_170 and sec_170 computation of the public support percentage for tax_year ending december 20xx is zero percent or more and fails as an organization described in sec_170 does not meet the required support percentage of exhibit b form_990 20xx schedule a public charity status and public support part iil support schedule for organizations described in sec_509 computation of the public support percentage for tax_year ending december 20xx is zero percent or more and fails as an organization described in sec_509 does not meet the required support percentage of exhibit c form_990 20xx schedule a public charity status and public support part iv supporting organizations catalog number 20810w page www irs gov form 886-a rev schedule a explanations of items department of the treasury - internal_revenue_service form 886-a date name of taxpayer tax identification_number last digits exnibi year period ended 20xx provides of its support to a 501_c_3_organization described in sec_170 see exhibit d exemption_letter from the internal_revenue_service to list as a supported_organization by name in its by-laws see exhibit e by-laws of board_of directors the board_of directors of investment policies and directs the use of gives the authority to elect its determine assets sole supported_organization is to conduct its operations as a state-sponsored charter school provides buildings and other facilities classrooms necessary for works directly with to identify buildings and all of other facilities necessary for its operations as a state-sponsored charter school then acquires and maintains the buildings and other facilities specifically for use by facilities for use by classrooms are used by maintained for necessary_working_capital day-to-day operations building and facilities classrooms are necessary for to provide a state-sponsored education program to children in elementary_school middle school and high school without and maintain its own buildings and facilities classrooms assets are used to provide the necessary buildings and real_property and a relatively small bank account is involvement all of would have to acquire law sec_509 of the code provides that the term private_foundation means a domestic or foreign organization described in sec_501 other than an organization described in sec_170 other than clauses vii or viii this includes organizations described in sec_170 of the code that normally receive a substantial part of its support from a governmental_unit or from direct or indirect_contributions from the general_public catalog number 20810w page www irs gov form 886-a rev schedule number or exhibit explanations of items department of the treasury - internal_revenue_service form 886-a date name of taxpayer tax identification_number last digits year period ended 20kx the treasury regulations treas regs sec_1_170a-9 further define an organization as publicly supported if contributions made by the general_public it receive sec_33 percent of its total support from sec_509 of the code excludes from the term private_foundation an organization that 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 that is related to the exempt_function and does not receive more than one-third of its support in each taxable_year from the sum of gross_investment_income and unrelated_business_income sec_1_170a-9 states that organizations dependent primarily on gross_receipts from related activities will not be treated as satisfying the percent-of- support_test under a if it receives almost all of its support from gross_receipts from related activities and an insignificant amount of its support from contributions made by the general_public sec_1 a --4 supporting organizations a in general sec_509 excluded from the definition of private_foundation those organizations which meet the requirements of subparagraphs a b and c thereof a sec_509 a a organization provides that all times thereafter operated exclusively for the benefit of must be section to organized and at or to carry out the purposes of one or more specified perform the functions of organizations described in sec_509 or sec_509 describes the nature of the support or benefit which a sec_509 organization must provide to one or more section for purposes of sec_509 paragraph b of this section generally describes the organizational and - operational tests paragraph c of this section describes permissible purposes under the organizational_test paragraph d of this section describes the requirement of supporting or benefiting one or more specified publicly supported organizations and paragraph e of this section describes permissible beneficiaries and activities under the operational_test organizations a or sec_509 provides that a sec_509 organization must be operated supervised or controlled in connection with one or more organizations described in sec_509 or sec_509 and paragraph f of this section describe the nature of the relationship which must exist between the sec_509 and for purposes of sec_509 paragraph g of this section defines operated supervised or controlled organizations a or section by or catalog number 20810w page www irs gov form 886-a rev form 886-a date schedule number ct exhibi year period ended explanations of items tax identification_number last - internal_revenue_service t of the epariment ovine name of taxpayer tr easury digits depart 20xx by paragraph h of this section defines supervised or controlled in connection with and paragraph i of this section defines operated in connection with sec_509 provides that a sec_509 organization must not be foundation controlled managers or organizations described in sec_509 or sec_509 and paragraph j of this section prescribe a limitation on the control_over the sec_509 organization disqualified indirectly persons directly other than by or for purposes of this section the term supporting_organization means either an an organization seeking section organization described in a status depending upon its context for purposes of this section the term publicly_supported_organization means an organization described in sec_509 or a or section for purposes of paragraph i of this section the term supported_organization means a specified publicly_supported_organization described in paragraphs d iv or d of this section b organizational and operational tests under subparagraph a of sec_509 in order to qualify as a supporting_organization an organization must be both organized and operated exclusively for the benefit of to perform the functions of or to carry out the purposes of hereinafter referred to in this section as being publicly organized and operated to support or benefit one or more specified supported organizations if an organization fails to meet either the organizational or the operational_test it cannot qualify as a supporting_organization c organizational test- in general an organization is organized exclusively for one or more of the purposes specified in sec_509 only if its articles of organization as defined in sec_1_501_c_3_-1 i limit the purposes of such organization to one or more of the purposes set forth in sec_509 ii do not expressly empower the organization to engage in activities which are not in furtherance of the purposes referred to in subdivision i of this subparagraph iii state the specified publicly supported organizations on whose behalf such organization is to be operated within the meaning of paragraph qd of this section and catalog number 20810w page www irs gov form 886-a rev schedule number ct explanations of items form 886-a date t of the depart epariment ofthe internal_revenue_service treasury - exhibi t name of taxpayer tax identification_number last digits year period ended 20xx iv do not expressly empower the organization to operate to support or benefit any organization other than the specified publicly supported organizations referred to in subdivision iii of this subparagraph purposes in meeting the organizational_test the organization’s purposes as it otherwise meets the other requirements of this paragraph stated in its articles may be as broad as or more specific than the purposes set forth in sec_509 therefore an organization which by the terms of its articles is formed for the benefit of one or more specified publicly supported organizations shall if be considered to have met the organizational_test similarly articles which state that an organization is formed to perform the publishing functions of a specified university are sufficient to comply with the organizational_test an organization which is operated supervised or controlled by within the meaning of paragraph g of this section or supervised or controlled in connection with within the meaning of paragraph h of this section one or more sec_509 or organizations to carry out the purposes of such organizations will be considered as meeting the requirements of this paragraph if the purposes set forth in its articles are similar to but no broader than the purposes set forth in the articles of its controlling sec_509 or organizations if however the organization by which it is operated supervised or controlled is a publicly supported sec_501 or organization deemed to be a sec_509 organization for purposes of sec_509 under the provisions of sec_509 the supporting_organization will be considered as meeting the requirements of this paragraph if its articles require it to carry on charitable etc activities within the meaning of sec_170 any than other organization in subparagraph iii limitations an organization is not organized exclusively for the purposes set forth its articles expressly permit it to operate to support or in sec_509 if supported benefit of this paragraph thus for organizations referred to example an organization will not meet the organizational_test under sec_509 if its articles expressly empower it to pay over any part of its income any organization other than those publicly to supported organizations specified in its articles within the meaning of paragraph d of this section the fact that the actual operations of such organization have been exclusively for the benefit of the specified publicly supported organizations shall not be sufficient to permit it to meet the organizational_test or perform any service for specified publicly those d specified organizations- in general in order to meet the requirements of sec_509 an organization must be organized and operated exclusively to support or benefit one or more specified publicly supported organizations the manner in which the catalog number 20810w form 886-a rev www irs gov page form 886-a date name of taxpayer department of the treasury - internal_revenue_service eparime sury explanations of items schedule number eo exhibi tax identification_number last digits year period ended 20xx publicly supported organizations must be specified in the articles for purposes of sec_509 will depend upon whether the supporting_organization is operated supervised or controlled by or supervised or controlled in connection with within the meaning of paragraphs g and h is operated in connection with within the meaning of paragraph i of this section such organizations of this section such organizations or whether it except as nondesignated publicly supported provided in subdivision iv of this subparagraph in order to meet the requirements of subparagraph of this paragraph the articles of the supporting_organization must designate each of the specified organizations by name unless organizations requirements i a the supporting_organization is operated supervised or controlled by within the meaning of paragraph g of this section or is supervised or controlled in connection with of this section one or more publicly supported organizations and within the meaning of paragraph h b the articles it be operated to support or benefit one or more beneficiary organizations which are designated by class or purpose and which include of organization of the supporting_organization require that the publicly supported organizations referred to in a of this subdivision without designating such organizations by name or in purpose or publicly supported organizations which are closely related function to those publicly supported organizations referred to in subdivision i a or name subparagraph organization designating without such this by ii if a supporting_organization is described in subdivision i a of this subparagraph it will not be considered as failing to meet the requirements of subparagraph of this paragraph that the publicly supported organizations be specified merely because its articles of organization permit the conditions described in subparagraphs i ii and iii and i a and b of this paragraph iv a supporting_organization will meet the requirements of subparagraph of this paragraph even though its articles do not designate each of the specified organizations by name if a there has been an historic and continuing relationship between the supporting_organization and the sec_509 or organizations and catalog number 20810w www irs gov page form 886-a rev form 886-a date name of taxpayer department of the treasury - internal_revenue_service eparime y explanations of items tax identification_number last digits schedule number act exhibi year period ended 20xx b by reason of such relationship there has developed a substantial identity of interests between such organizations nondesignated publicly supported organizations scope of rule if the requirements of subparagraph i a of this paragraph are met a supporting_organization will not be considered as failing the test of being organized for the benefit of specified organizations solely because its articles i permit the substitution of one publicly_supported_organization within a designated class for another publicly_supported_organization either different class designated in the articles the same or in a ii permit the supporting_organization to operate for the benefit of new or additional publicly supported organizations of the same or a different class designated in the articles or iii permit the supporting_organization to vary the amount of its support among different publicly supported organizations within the class or classes of organizations designated by the articles such organization or organizations if an organization is organized and designated publicly supported organizations i is operated in operated to support one or more publicly supported organizations and it connection with in then except as subparagraph iv of this paragraph its articles of organization must for purposes of satisfying the organizational_test under sec_509 designate the specified organizations by name under the circumstances described in this subparagraph a supporting_organization which has one or more specified organizations designated by name in its articles will not be considered as failing the test of being organized for the benefit of specified organizations solely because its articles provided a permit a publicly_supported_organization which is designated by class or purpose be substituted for the publicly_supported_organization or rather than by name to organizations designated by name in is conditioned upon the occurrence of an event which is beyond the control of the supporting_organization such as loss of exemption substantial failure or abandonment of operations or dissolution of the publicly_supported_organization or organizations designated in the articles if such substitution but only articles the permit the supporting_organization to operate for the benefit of b a beneficiary organization which is not a publicly_supported_organization but only if such supporting_organization is currently operating for the benefit of a publicly_supported_organization and publicly supported the benefit of other than its operating for possibility the of a catalog number 20810w www irs gov form 886-a rev page form 886-a date name of taxpayer depart t of the t epariment orme explanations of items reasury - internal_revenue_service tax identification_number last digits schedule number cn exhibi year period ended 20xx organization is a remote contingency or c permit the supporting_organization to vary the amount of its support between different designated organizations so long as it meets the requirements of the integral part test set forth at least one beneficiary organization of this section with respect to in paragraph i ii if the beneficiary organization referred to in subdivision i b of this subparagraph is not a publicly_supported_organization the supporting_organization will not then meet the operational_test of paragraph e of this section therefore if a supporting_organization substituted in accordance with such subdivision i b a beneficiary other than a publicly_supported_organization and operated in support of such beneficiary organization the supporting_organization would not be described in sec_509 e operational test- permissible beneficiaries a supporting_organization will be regarded as operated exclusively to support one or more specified publicly supported it engages solely in organizations hereinafter referred to as the operational_test only if activities which support or benefit the specified publicly supported organizations such activities may include making payments to or providing services or facilities for individual members of the charitable_class benefited by the specified publicly_supported_organization or for_the_use_of permissible activities a supporting_organization is not required to pay over its income to the publicly supported organizations in order to meet the operational_test it may satisfy the test by using its income to carry on an independent activity or program which supports or benefits the specified publicly supported organizations all such support must however be limited to permissible beneficiaries in accordance with subparagraph of this paragraph the supporting_organization may also engage in fund raising activities such as solicitations fund raising dinners and unrelated_trade_or_business to raise funds for the publicly supported organizations or for the permissible beneficiaries of required between relationship organizations- section f nature a b describes the nature of the relationship required between a sec_501 organization and one or more publicly supported organizations in order for such sec_501 organization to qualify under the provisions of sec_509 to meet the requirements of sec_509 an organization must be operated supervised or controlled by or in connection with one or more publicly supported organizations if an organization does not stand in one of such relationships as provided in this paragraph to one or more publicly supported organizations it is not an organization described in sec_509 general in form 886-a rev catalog number 20810w www irs gov page department of the treasury - internal_revenue_service p y explanations of items form 886-a date name of taxpayer tax identification nur digits types of relationships sec_509 sets forth relationships n subparagraph of this paragraph thus a supporting organi one of which must be met order to in i operated supervised or controlled by ii supervised or controlled in connection with or iii operated in connection with one or more publicly supported organizations requirements of relationships although more than one type of relationship may exist in any one case any relationship described in sec_509 must insure that i the supporting_organization will be responsive to the needs of demands of one or more publicly supported organizations and ii the supporting_organization will constitute an integral part of significant involvement in organizations or maintain a or more publicly supported operations of one the or or by one more publicly operated controlled supervised the case of supporting organizations which are supervised or controlled general description of relationships in the case of supporting organizations which are supported organizations the distinguishing feature of this type of relationship is the presence of a substantial degree of direction by the publicly supported organizations over the conduct of the supporting_organization as described in paragraph g of this section in in connection with one or more publicly supported organizations the distinguishing feature is the presence of common supervision or control among the governing bodies of all organizations involved such as the presence of common directors as described in paragraph h of this section in the case of a supporting_organization which is operated in connection with one or more publicly supported organizations the distinguishing feature and significantly involved in the operations of the publicly_supported_organization as described section the supporting_organization is responsive to paragraph that this i of is in g meaning of operated supervised or controlled by i each of the items operated by supervised by and controlled by as used in sec_509 presupposes a substantial degree of direction over the policies programs and activities of a supporting_organization by one or more publicly supported organizations the relationship required under any one of these terms is comparable to that of a parent and subsidiary where the catalog number 20810w page www irs gov form 886-a rev schedule number ct exhibi year period ended explanations of items form 886-a date name of taxpayer tax identification_number last - internal_revenue_service department of the epariment or easury treasury ine digits 20xx subsidiary is under the direction of and accountable or responsible to the parent organization this relationship is established by the fact that a majority of the officers directors or trustees of the supporting_organization are appointed or elected by the governing body members of the governing body officers acting in their official capacity or the membership of one or more publicly supported organizations ii a supporting_organization may be operated supervised or controlled by one or more publicly supported organizations within the meaning of sec_509 even though its governing body is not comprised of representatives of the specified publicly supported organizations for whose benefit it is operated within the meaning of sec_509 a supporting_organization may be operated supervised or controlled by one or more publicly supported organizations within the meaning of sec_509 and be operated for the benefit of one or more different publicly supported organizations within the meaning of sec_509 only if it can be demonstrated that the purposes of the former organizations are carried out by benefitting the latter organizations h meaning of supervised or controlled in connection with in order for a supporting_organization to be supervised or controlled in connection with one or more publicly supported organizations there must be common supervision or control by the persons supervising or controlling both the supporting_organization and the publicly supported organizations to insure that the supporting_organization will be responsive to the needs and requirements of the publicly supported organizations therefore in order to meet such requirement the control or management of the supporting_organization must be vested in the same persons that control or manage the publicly supported organizations a supporting_organization will not be considered to be supervised or controlled in connection with one or more publicly supported organizations if such organization merely makes payments mandatory or discretionary to one or more named publicly supported organizations even if the obligation to make payments to the named beneficiaries is enforceable under state law by such beneficiaries and the supporting organization’s governing instrument contains provisions whose effect is described in sec_508 and b such arrangements do not provide a sufficient connection between the payor organization and the needs and requirements of the publicly supported organizations to constitute supervision or control in connection with such organizations i meaning of operated in connection with- general_rule for each taxable_year a supporting_organization is operated in connection with one or more supported organizations that is is not disqualified by reason of to acceptance of contributions from controlling donors or paragraph f a type ill supporting organization’ only if relating is it www irs gov form 886-a rev catalog number 20810w page form 886-a date name of taxpayer depart t of the t - internal_revenue_service epariment of explanations of items reasury ine tax identification_number last digits schedule number ct exhibi year period ended 20xx paragraph i satisfies- relating to foreign supported organizations of this section and it i the notification requirement which is set forth in paragraph i of this section ii the responsiveness test which is set forth in paragraph i of this section and iii the integral part test which is satisfied by maintaining significant involvement in the operations of one or more supported organizations and providing support on which the supported_organization s are dependent in order to satisfy this test the supporting_organization must meet the requirements either for- a functionally integrated type_iii_supporting_organizations set forth in paragraph i of this section or b non-functionally integrated type_iii_supporting_organizations set forth in paragraph i of this section notification requirement- i annual notification for each taxable_year a type ill supporting_organization must provide the following documents to each of its supported organizations a a written notice addressed to a principal officer of the supported_organization describing the type and amount of all of the support the supporting_organization provided to the supported_organization during the supporting organization’s taxable_year immediately preceding the taxable_year in which the written notice is provided and during any other taxable_year of the supporting_organization ending after december 20xx for which such support information has not previously been provided b a copy of the supporting organization’s form_990 return of organization exempt from income_tax or other annual information_return required to be filed under sec_6033 although the supporting_organization may redact from the return the name and address of any contributor to the organization that was most recently filed as of the date the notification is provided and any such return for any other taxable_year of the supporting_organization ending after december 20xx that has not previously been provided to the supported_organization and c a copy of the supporting organization’s governing documents as in effect on the www irs gov form 886-a rev catalog number 20810w page schedule number ct explanations of items form 886-a date - internal_revenue_service the spariment of ine department easury exhibi tr of name of taxpayer tax identification_number last digits year period ended 20xx date the notification is provided including its articles of organization and bylaws if any and any amendments to such documents unless such documents have been previously provided and not subsequently amended ii electronic media the notification documents required by this paragraph i may be provided by electronic media due_date the notification documents required by this paragraph i for any taxable iii year shall be postmarked or electronically transmitted by the last day of the fifth calendar month following the close of that taxable_year principal officer iv officer includes but is responsibility for- for purposes of paragraph i i a of this section a principal title has ultimate a person who regardless of not limited to a implementing the decisions of the governing body of a supported_organization b supervising the management administration or operation of the supported_organization or c managing the finances of the supported_organization managing the finances of the supported_organization responsiveness test- i the a supported responsiveness test organization except as provided in paragraph i v of this section in order to meet this test a supporting_organization must satisfy the requirements of paragraphs i ii and i iii of this section organization the needs or demands of is responsive to supporting general meets rule a if it ii relationship of officers directors or trustees a supporting_organization satisfies the requirements of this paragraph i ii with respect to a supported_organization only if- a one or more officers directors or trustees of the supporting_organization are elected or appointed by the officers directors trustees or membership of the supported_organization b one or more members of the governing body of the supported_organization are also officers directors or trustees of or hold other important offices in the supporting_organization or c the officers directors or trustees of the supporting_organization maintain a close www irs gov form 886-a rev catalog number 20810w page schedule number at explanations of items form 886-a date internal_revenue_service epariment orine department asury of the tre tax identification_number last digits exnidl year period ended name of taxpayer 20xx and continuous working relationship with the officers directors or trustees of the supported_organization significant voice a supporting_organization satisfies the requirements of this iii paragraph i iii only if by reason of paragraphs i ii a i ii b or i ii c of this section the officers directors or trustees of the supported_organization have a significant voice in the investment policies of the supporting_organization the timing of grants the manner of making grants and the selection of grant recipients by such supporting_organization and in otherwise directing the use of the income or assets of the supporting_organization integral part test-functionally integrated type iii supporting organization- i general_rule a supporting_organization meets the integral part test and will be considered functionally integrated within the meaning of sec_4943 if it- a engages in activities substantially_all of which directly further the exempt purposes of one or more supported organizations and otherwise meets the requirements described in paragraph i ii of this section b is the parent of each of its supported organizations as described in paragraph i iii of this section or supports a governmental supported_organization and otherwise meets the c requirements of paragraph i iv of this section ii substantially_all activities directly further exempt purposes- a in general a supporting_organization meets the requirements of this paragraph i ii if it engages in activities substantially_all of which- directly further the exempt purposes of one or more supported organizations to which the supporting_organization is responsive by performing the functions of or carrying out the purposes of such supported_organization s and but for the involvement of the supporting_organization would normally be engaged in by such supported_organization s b meaning of substantially_all for purposes of paragraph i ii a of this section in determining whether substantially_all of a supporting organization’s activities directly further the exempt purposes of one or more supported_organization s to which the supporting_organization is responsive all pertinent facts and circumstances will be taken into consideration catalog number 20810w page www irs gov form 886-a rev schedule number at explanations of items form 886-a date sparimentorme easury - internal_revenue_service department exhibi the tr of name of taxpayer tax identification_number last digits year period ended 20xx c meaning of directly further activities directly further the exempt purposes of one or more supported organizations for purposes of this paragraph i only if they are conducted by the supporting_organization itself rather than by a supported_organization holding title to and managing exempt-use assets described in paragraph i ii of this section are activities that directly further the exempt purposes of the supported_organization within the meaning of this paragraph i conversely except as provided in paragraph i ii d of this section fundraising making grants whether to the supported_organization or to third parties and investing and managing non-exempt-use assets are not activities that directly further the exempt purposes of the supported_organization within the meaning of this paragraph i iii parent of supported_organization s for purposes of paragraph i i b of this section a supporting_organization is the parent of a supported_organization if the supporting_organization exercises a substantial degree of direction over the policies programs and activities of the supported_organization and a majority of the officers directors or trustees of the supported_organization is appointed or elected directly or indirectly by the governing body members of the governing body or officers acting in their official capacity of the supporting_organization sec_514 acquisition_indebtedness general_rule for purposes of this section the term acquisition_indebtedness means with respect to any debt-financed_property the unpaid amount of- 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 been incurred but for such acquisition or improvement and the incurrence of such indebtedness was reasonably foreseeable at the time of such acquisition or improvement sec_514 real_property acquired by a qualified_organization a in general except as provided in subparagraph b the term acquisition_indebtedness does not for purposes of this section include indebtedness incurred by a qualified_organization in acquiring or improving any real_property b exceptions page www irs gov form 886-a rev catalog number 20810w form 886-a date schedule number a exhibi year period ended explanations of items tax identification_number last internal_revenue_service of the epariment of ine name of taxpayer breasury - t d rtment digits 20xx c qualified_organization for purposes of this paragraph the term qualified_organization means- i an organization described in sec_170 and its affiliated support organizations described in sec_509 taxpayer’s position is of the position that it meets the requirements of a and is a type_iii_functionally_integrated_supporting_organization operated in connection with and functionally integrated with its supported_organization government's position of the dollar_figure in total support dollar_figure or approximately constitutes support from gross_receipts from rental income an unrelated business activity rental income is not a charitable religious or educational activity and therefore is an unrelated business activity however if an organization qualifies as a a supporting_organization then is a qualified_organization and thereby real_property acquired by or improved by a qualified_organization is not acquisition_indebtedness with respect to any debt-financed_property and is excluded from the unrelated_business_income_tax sec_514 real_property acquired by a qualified_organization also not more than one-third of the support is received from investment_income and unrelated_business_income since sec_1_170a-9 precludes organizations receiving almost all of its support from gross_receipts from related activities being treated as satisfying the support_test under a the organization does not meet the public support_test under sec_509 and sec_170 of the code computation of the public support percentage for tax_year ending december 20xx is zero percent or more and fails as an organization described in sec_170 does not meet the required support percentage of computation is shown in exhibit a form_990 20xx schedule a public charity status and public support part il support schedule for organizations described in sec_170 and sec_170 catalog number 20810w page www irs gov form 886-a rev form 886-a date name of taxpayer department of the epariment treasury reasury explanations of items - internal_revenue_service tax identification_number ast digits schedule number ct exhibi year period ended 20xx sec_509 of the code excludes from the term private_foundation an organization that 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 that is related to the exempt_function and does not receive more than one-third of its support in each taxable_year from the sum of gross_investment_income and unrelated_business_income computation of the public support percentage for tax_year ending december 20xx is zero percent or more and fails as an organization described in sec_509 does not meet the required support percentage of computation is shown in exhibit b form_990 20xx schedule a public charity status and public support part iil support schedule for organizations described in sec_509 in general sec_509 excludes from the definition of private_foundation those organizations which meet the requirements of subparagraphs a b and c of treas regs sec_1_509_a_-4 supporting organizations sec_509 provides that a sec_509 organization must be organized and at all times thereafter operated exclusively for the benefit of to perform the functions of or to carry out the purposes of one or more specified organizations described in sec_509 or does list name in its by-laws see exhibit e requirements set forth in sec_1_509_a_-4 specified by name in the by-laws of sec_1 a d specified organizations provides of its support to catalog number 20810w page organization described in sec_170 organization described in sec_170 not an organization described in sec_509 or a c is a c sec_509 provides that a sec_509 organization must be operated supervised or controlled by or in connection with one or more organizations described in sec_509 or as a supported_organization by meets the organizational ts www irs gov form 886-a rev form 886-a date name of taxpayer depart epariment of t of the ine ti reasury explanations of items - internal_revenue_service tax identification_number last digits schedule number an exnidl year period ended 20xx for purposes of sec_509 paragraph g of this section defines operated supervised or controlled by paragraph h of this section defines supervised or controlled in connection with and paragraph i of this section defines operated in connection with i meaning of operated in connection with- general_rule for each taxable_year a supporting_organization is operated in connection with one or more supported organizations that is paragraph f relating to acceptance of contributions from controlling donors or paragraph i relating to foreign supported organizations of this section and it satisfies- is a type iii supporting organization’ only if it is not disqualified by reason of by-laws of board_of directors the board_of directors of investment policies and directs the use of gives the authority to elect its determine assets operates in connection with is a 501_c_3_organization described in sec_170 also organization described in sec_509 must satisfy additional requirements in order to qualify as an additional requirements are i the notification requirement which is set forth in paragraph i of this section notification requirement- i annual notification for each taxable_year a type ill supporting_organization must provide the following documents to each of its supported organizations a a written notice addressed to a principal officer of the supported_organization describing the type and amount of all of the support the supporting_organization provided to the supported_organization during the supporting organization’s taxable_year immediately preceding the taxable_year in which the written notice is provided and during any other taxable_year of the supporting_organization ending after december 20xx for which such support information has not previously been provided b a copy of the supporting organization’s form_990 return of organization exempt from income_tax or other annual information_return required to be filed under sec_6033 although the supporting_organization may redact from the return the name and address of any contributor to the organization that was most recently filed as of the date the form 886-a rev catalog number 20810w www irs gov page schedule number at explanations of items department of the treasury epa - internal_revenue_service form 886-a date sury tax identification_number last name of taxpayer digits exhibi year period ended 20xx notification is provided and any such return for any other taxable_year of the supporting_organization ending after december 20xx that has not previously been provided to the supported_organization and c a copy of the supporting organization’s governing documents as in effect on the date the notification is provided including its articles of organization and bylaws if any and any amendments to such documents unless such documents have been previously provided and not subsequently amended ii electronic media the notification documents required by this paragraph i may be provided by electronic media iii due_date the notification documents required by this paragraph i for any taxable_year shall be postmarked or electronically transmitted by the last day of the fifth calendar month following the close of that taxable_year iv principal officer for purposes of paragraph i i a of this section a principal officer includes but is not limited to a person who regardless of title has ultimate responsibility for- a implementing the decisions of the governing body of a supported_organization b supervising the management administration or operation of the supported_organization or c managing the finances of the supported_organization based on the close relationship between this information was constructively available and provided will timely document these notification requirements in future years and states it ii the responsiveness test which is set forth in paragraph i of this section and responsiveness test- i general_rule a supporting_organization meets the responsiveness test if it is responsive to the needs or demands of a supported_organization except as provided in paragraph i v of this section in order to meet this test a supporting_organization must satisfy the requirements of paragraphs i ii and i iii of this section ii relationship of officers directors or trustees a supporting_organization satisfies the requirements of this paragraph i ii with respect to a supported_organization only if- catalog number 20810w page www irs gov form 886-a rev form 886-a date department of the trea internal_revenue_service eparimen ore ie sury explanations of items tax identification_number last name of taxpayer digits schedule number at exhibi year period ended 20xx a one or more officers directors or trustees of the supporting_organization are elected or appointed by the officers directors trustees or membership of the supported_organization b one or more members of the governing body of the supported_organization are also officers directors or trustees of or hold other important offices in the supporting_organization or c the officers directors or trustees of the supporting_organization maintain a close and continuous working relationship with the officers directors or trustees of the supported_organization by-laws of board_of directors give the authority to elect its is responsive to the needs or demands of iii significant voice a supporting_organization satisfies the requirements of this paragraph i iii only if by reason of paragraphs i ii a i ii b or i ii c of this section the officers directors or trustees of the supported_organization have a significant voice in the investment policies of the supporting_organization the timing of grants the manner of making grants and the selection of grant recipients by such supporting_organization and in otherwise directing the use of the income or assets of the supporting_organization the integral part test which is satisfied by maintaining significant involvement in the iii operations of one or more supported organizations and providing support on which the supported_organization s are dependent in order to satisfy this test the supporting_organization must meet the requirements either for- the board_of directors of investment policies and directs the use of determine assets sole supported_organization is to conduct its operations as a state-sponsored charter school provides buildings and other facilities classrooms necessary for works directly with to identify buildings and other facilities necessary for its operations as a state-sponsored charter school then acquires and maintains the buildings and other facilities specifically for use by assets are used to provide the necessary buildings and all of catalog number 20810w form 886-a rev www irs gov page schedule number wt explanations of items department of the treasury - internal_revenue_service form 886-a date name of taxpayer tax identification_number last digits exnidi year period ended 20xx all of facilities for use by classrooms are used by maintained for necessary_working_capital day-to-day operations building and facilities classrooms are necessary for to provide a state-sponsored education program to children in elementary_school middle school and high school without and maintain its own buildings and facilities classrooms and a relatively small bank account is real_property involvement would have to acquire conclusion _ foundation status should be reclassified from a publicly_supported_organization described in sec_509 and sec_170 to an organization described in sec_509 of the code the effective date of this reclassification is january 20xx catalog number 20810w page www irs gov form 886-a rev


internal_revenue_service number release date index number ---------------------------------------------- --------------------------------- --------------------------------------------- ----------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ----------------- telephone number ------------------- refer reply to cc psi b03 plr-124251-09 date date company ------------------------------------------------------------------------------------------------- ------------------------ legend country ------------ date ------------------ dear ------------------ this letter responds to a letter dated date and subsequent correspondence submitted on behalf of company by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity under sec_301_7701-3 facts company was formed under the laws of country on date company represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes however company inadvertently failed to timely file form_8832 entity classification election electing to treat company as a disregarded_entity effective date law sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in plr-124251-09 sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 plr-124251-09 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied therefore company is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely s curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------------------------- ---------------- ------------------------------------------------------ ----------------------------- ------------------------- department of the treasury washington dc person to contact ---------------- id no ------------- telephone number --------------------- refer reply to cc psi b09 - plr-150563-03 date date - legend trust ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ ----------------------- ------------------------ ------------------ -------------------------- ----------------------- ------------------------------- ------------------------ ------------------------ ------------------- ---------------------- decedent date date date spouse child grandchild grandchild grandchild great-grandchild ------------------------ great-grandchild -------------------------- great-grandchild -------------------- great-grandchild ------------------------- great-grandchild -------------------- great-grandchild ------------------------- date date state date state statute state statute date ----------------- ----------------- -------- -------------------------- ----------------------------------------------------------- --------------------------------------------------------- ---------------------- this is in response to your letter dated date and prior article third paragraph e of the will provides that in case the net_income the facts and representations submitted are summarized as follows decedent article third paragraphs d and d of the will provide generally that the plr-150563-03 dear ------------------------------------- correspondence requesting rulings on the income and generation-skipping_transfer gst tax consequences of a division and modification of the trust died on date leaving a last will and testament dated date as amended by a codicil dated date collectively referred to as the will article third of the will established the trust for the benefit of decedent’s grandchildren and their lawful issue trustees shall pay the net_income of the trust in their discretion to decedent’s grandchildren and their lawful issue share and share alike per stirpes payable to any beneficiary is at any time in the opinion of the trustees insufficient for the maintenance and education of such beneficiary the trustees may in their discretion expend from time to time such sum or sums from the principal of the trust estate as may be necessary for that purpose twenty years after the death of the survivor of spouse child and decedent’s grandchildren grandchild grandchild and grandchild upon termination the trustees shall transfer pay over deliver and convey the trust estate together with all accumulations and undistributed_income to the lawful issue of decedent’s grandchildren share and share alike per stirpes was survived by two children great-grandchild and great-grandchild grandchild was survived by four children great-grandchild great-grandchild great-grandchild and great-grandchild grandchild was not survived by lawful issue great-grandchildren through are collectively referred to as the primary beneficiaries and grandchild accordingly the trust will terminate on date twenty years after the date of grandchild 2’s death and the trust estate will be distributed to the primary beneficiaries share and share alike per stirpes if they are then living constructive additions have been made to the trust after date grandchild grandchild and grandchild are all deceased grandchild grandchild died on date and survived each of spouse child grandchild article third paragraph f of the will provides that the trust shall terminate the trust is governed by state law it is represented that no additions or the trustees represent that the investment goals and needs of the as a result of the severance of the trust each and every asset of the trust was plr-150563-03 primary beneficiaries of the trust have become divergent accordingly on date the trustees and the primary beneficiaries of the trust entered into an agreement as authorized by state law the agreement divided the trust into three separate and equivalent sub-trusts pursuant to the trust severance provisions of state statute and converted each of the sub-trusts from an income trust to a total_return_trust as authorized under the total_return_trust provisions of state statute severed on a fractional basis and allocated proportionately among three sub-trusts the first sub-trust is for the primary benefit of great-grandchild the second sub-trust is for the primary benefit of great-grandchild the third sub-trust is for the primary benefit of great-grandchildren through state law authorizes trustees without court approval to sever a single trust into two or more separate trusts provided that the aggregate interest of each beneficiary of the separate sub-trusts after severance is substantially equivalent to the beneficiary’s interest before the severance the trustees allocated a fractional share of the assets of the trust to the sub-trusts after the severance each primary beneficiary has an interest identical to their interest in the income and principal of the sub-trust that he or she had in the trust prior to the severance in addition each sub-trust has terms identical to those of the trust each sub-trust will terminate on date and upon termination distributions will be made to the current primary beneficiaries as if there had been no severance the trustees of each sub-trust retain the discretionary standard contained in the trust to distribute principal to the primary beneficiary or beneficiaries of that sub-trust in the event the trustees of a sub-trust determine that a discretionary distribution of principal to a primary beneficiary of the sub-trust should be made the trustees of the other two sub-trusts created from the same trust as a result of the severance are required to distribute to such primary beneficiary a pro_rata portion of such discretionary principal distribution so that the source of funds for any discretionary principal distribution will remain identical and unchanged both before and after the severance if the trustee or a court determines that the conversion will enable the trustee to better carry out the purposes of the trust and is in the best interest of the trust beneficiaries state statute provides that the trust distribution amount may not be less than the net_income of the trust the conversion of the income trust to a total_return_trust changed the definition of income distributable annually by the trust and sub-trusts to the greater of net trust accounting_income or a five percent unitrust_amount determined on a three- year average basis in accordance with state law the trustees and the state statute authorizes the conversion of an income trust to a total_return_trust plr-150563-03 primary beneficiaries determined and agreed that the conversion to a total_return_trust would enable the trustees to better carry out the purposes of the trust and would be in the interest of the beneficiaries requirement that trust distributions may not be less than the net_income of the trust on date state statute was amended by prospectively deleting the the following rulings have been requested the exercise of the trustees’ power to sever the trust on a fractional basis into three separate sub-trusts in accordance with state law will not adversely affect the trust’s status as exempt from the gst tax and the three sub-trusts created as a result of the severance will remain exempt from the gst tax the exercise of the trustees’ power to convert the trust and sub-trusts to total return trusts in accordance with the total_return_trust provisions of state law distributing after conversion an annual amount equal to the greater of net trust accounting_income or five percent of trust asset value will not adversely affect the trust’s status as exempt from the gst tax and the sub-trusts created as a result of the severance will remain exempt from the gst tax a subsequent modification of the trust and sub-trusts in accordance with state statute as amended to provide that the trusts distribute an annual amount equal to a five percent unitrust_amount and remove prospectively the requirement that distributions not be less than net_income if made in accordance with state law will not adversely affect the trusts’ status as exempt from the gst tax however since such modification is not required by state law such modification is not necessary to maintain the trusts’ status as exempt from the gst tax the exercise of the trustees’ power to sever the trust on a fractional basis into three separate sub-trusts in accordance with state law will not cause the trust the sub-trusts or their beneficiaries to realize gain_or_loss from the sale_or_other_disposition of property under sec_1001 of the code the exercise of the trustees’ power to convert the trust and sub-trusts to unitrusts in accordance with the total_return_trust provisions of state law distributing after conversion an annual amount equal to the greater of net trust accounting_income or five percent of trust asset value will not cause the trust the sub-trusts or their beneficiaries to realize gain_or_loss from the sale_or_other_disposition of property under sec_1001 plr-150563-03 after the severance of the trust each asset of each sub-trust has the same basis and holding_period that it had in the trust and after the severance of the trust into three separate sub-trusts each sub-trust is treated as a separate taxpayer under sec_643 sec_2601 imposes a tax on every generation-skipping_transfer sec_26_2601-1 of the generation-skipping_transfer_tax sec_2611 defines the term generation-skipping_transfer as a taxable ruling_request sec_1 and distribution a taxable_termination and a direct_skip under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date however this exemption does not apply if additions actual or constructive are made to the trust after date regulations provides that any trust in existence on date will be considered an irrevocable_trust except as provided in sec_26_2601-1 or c which relates to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 in the present case the trust is considered to have been irrevocable on date because neither sec_2038 nor sec_2042 applies judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes unless specifically noted 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 instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy 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 provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower sec_26_2601-1 provides that a modification of the governing sec_26_2601-1 provides rules for determining when a modification sec_26_2601-1 provides that for purposes of this section a plr-150563-03 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 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 gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a 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 modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust in addition administration of a_trust in conformance with applicable local law that defines the term income as a unitrust_amount or permits a right to income to be satisfied by such an amount or that permits the trustee to adjust between principal and income to fulfill the trustee’s duty_of impartiality between income and principal beneficiaries will not be considered to shift a beneficial_interest in the trust if applicable local law provides for a reasonable apportionment between the income and remainder beneficiaries of the total return of the trust and meets the requirements of sec_1_643_b_-1 before date the trustee has the discretion to distribute income and principal to a b and their issue in such amounts as the trustee deems appropriate on the death of the last to die of a and b the trust principal is to be distributed to the living issue of a and b per stirpes in the appropriate local court approved the division of the trust into two equal trusts one for the benefit of a and a’s issue and one for the benefit of b and b’s issue the trust terms are identical except for the identity of the beneficiaries the division of the trust into 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 division in addition the division 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 two partitioned trusts resulting from the division will not be subject_to the provisions of chapter of the internal_revenue_code sec_26_2601-1 example illustrates a situation where a_trust that is otherwise exempt from the gst tax provides that trust income is payable to a for life and upon a’s death the remainder is to pass to a’s issue per stirpes in the sec_26_2601-1 example involves a_trust that is irrevocable on or plr-150563-03 appropriate local court approves a modification to the trust that converts a’s income_interest into the right to receive the greater of the entire income of the trust or a fixed percentage of the trust assets valued annually unitrust_interest to be paid each year to a for life the example concludes that the modification does not result in a shift in beneficial_interest 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 modification rather the modification can only operate to increase the amount distributable to a and decrease the amount distributable to a’s issue in addition 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 therefore the trust will not be subject_to the provisions of chapter of the internal_revenue_code sec_26_2601-1 example considers a situation where a_trust that is otherwise exempt from the gst tax provides that trust income is payable to a for life and upon a’s death the remainder is to pass to a’s issue per stirpes state x the situs of the trust then amends its income and principal statute to define income as a unitrust_amount of percent of the fair_market_value of the trust assets valued annually the example concludes that the administration of the trust in accordance with the state statute defining the income to be a percent unitrust_amount will not be considered to shift a beneficial_interest in the trust therefore the trust will not be subject_to the provisions of chapter of the internal_revenue_code further under the facts of the example no trust_beneficiary will be treated as having made a gift_for federal gift_tax purposes and neither the trust nor any trust_beneficiary will be treated as having made a taxable_exchange for federal_income_tax purposes date and there have been no additions made to the trust after date accordingly the trust is exempt from the gst tax under sec_26_2601-1 the trust into three sub-trusts as described above does not result in a shift of any beneficial_interest in the trust to any beneficiary who occupies a generation lower than the persons holding the beneficial interests prior to the division further the severance does not extend the time for vesting of any beneficial_interest beyond the period originally provided for under the terms of the trust the conversion of the trust and sub-trusts to total return trusts does not result in a shift of any beneficial_interest to any beneficiary who occupies a lower generation than the beneficiaries holding the beneficial interests prior to the modification further the conversion to total return trusts does not extend the time for vesting of any beneficial_interest beyond the period originally provided for under the terms of the trust accordingly the severance and conversion to total return trusts does not cause the trust or the sub-trusts to lose their gst exempt status based on the facts submitted and the representations made the severance of in the present case the trust was established and became irrevocable on furthermore a subsequent modification of the trust and sub-trusts in sec_1001 provides that the gain from the sale_or_other_disposition of sec_61 provides that gross_income includes all income from whatever plr-150563-03 accordance with state statute as amended to provide that the trusts distribute an annual amount equal to a five percent unitrust_amount and remove prospectively the requirement that distributions not be less than net_income if made in accordance with state law will not adversely affect the trusts’ status as exempt from the gst tax however since state law does not require such modification such modification is not necessary to maintain the trusts’ status as exempt from the gst tax ruling_request sec_4 and source derived including gains derived from dealings in property and under sec_61 from an interest in a_trust property is the excess of the amount_realized 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 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss must be recognized except as otherwise provided sec_1_1001-1 of the income_tax regulations provides that except as otherwise provided in subtitle a of the code 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 where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result of the transaction thus neither gain nor loss is realized on a partition see revrul_56_437 1956_2_cb_507 the properties exchanged are materially different 499_us_554 properties exchanged are materially different if the properties embody legal entitlements different in_kind or extent or if the properties confer different rights and powers id pincite in cottage savings the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans id pincite in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent id pincite based on the information submitted and the representations made in the ruling_request the severance of the trust does not result in a material difference in the legal entitlements enjoyed by any of the trust beneficiaries likewise a conversion from an an exchange of property results in the realization of gain_or_loss under sec_1001 if a partition of jointly owned property is not a sale_or_other_disposition of property sec_1_1015-2 provides that in the case of property acquired after plr-150563-03 income_interest to a unitrust_interest as described above will not cause the beneficiaries to have materially different or additional rights to the trust accordingly no gain_or_loss is recognized on the severance and modification of the trust for purposes of sec_1001 ruling_request sec_1015 provides that if property is acquired by a transfer in trust other than a transfer in trust by a gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer date by transfer in trust other than by 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 on the transfer under the law applicable to the year in which the transfer was made if the taxpayer acquired the property by transfer in trust this basis applies whether the property be in the hands of the trustee or the beneficiary and whether acquired prior to termination of the trust and distribution of the property or thereafter 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 subtitle a of the internal_revenue_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 his hands as it would have in the hands of such other person see also sec_1_1223-1 of the income_tax regulations that because sec_1001 does not apply to the severance and conversion of the trust assets under sec_1015 the basis of the sub-trusts’ assets and unitrusts’ assets will be the same after the severance and conversion as the basis of those assets before the severance and conversion furthermore pursuant to sec_1223 the holding periods of the assets in the hands of the sub-trusts will include the holding periods of the assets in the hands of the trust ruling_request or more trusts shall be treated as one trust if such trusts have substantially the same grantor or grantors and substantially the same primary beneficiary or beneficiaries and a principal purpose of such trusts is the avoidance of federal_income_tax based upon the information submitted and representations made we conclude sec_643 provides that under regulations prescribed by the secretary two the rulings contained in this letter are based upon information and plr-150563-03 based on the facts submitted and representations made we conclude that while the sub-trusts will have the same grantor they have different primary beneficiaries and will be managed and administered separately therefore we conclude that the sub-trusts will be treated as separate trusts for federal_income_tax purposes representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party if there is a change in material fact or law local or federal before the transactions considered in this ruling take effect the ruling will have no force or effect 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 concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition no opinion is expressed or implied with respect to the income_tax consequences of any transaction of the code provides that it may not be used or cited as precedent being sent to your authorized representative these rulings are directed only to the taxpayer requesting it sec_6110 pursuant to the power_of_attorney on file with this office a copy of this letter is except as expressly provided herein no opinion is expressed or implied sincerely melissa c liquerman branch chief branch office of associate chief_counsel passthroughs special industries enclosure copy for sec_6110 purposes


internal_revenue_service number info release date march cc psi 1-genin-108073-03 uilc dollar_figure dear we are responding to your correspondence requesting to retroactively revoke your s_corporation_election the information provided by the service_center indicates that your election became effective on date and that you have had a change in shareholders since incorporation sec_1_1362-6 of the income_tax regulations discusses the manner for revoking an s elections while sec_1_1362-6 explains how to rescind a revocation essentially there are currently no provisions allowing taxpayers to retroactively revoke an s_corporation_election once the revocation has become effective because your request was dated date the earliest revocation effective date for which you could be considered would be date if you choose to affirmatively revoke your election as of date please follow the guidance provided in sec_1_1362-6 along with a copy of this letter via certified mail within days from the date of this letter please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours dianna k miosi chief branch associate chief_counsel passthroughs and special industries


significant index number tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c jan ri 204i ti ep la ar re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning date this extension applies to the eligible amortization charge bases as identified in your application submission established as of date the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan’s actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the to the and to your authorized representative pursuant to a power_of_attorney on file in this office this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent lf you require further assistance in this matter please contact sincerely yours david m ziegler manager ep actuarial group cc manager ep classification manager ep compliance unit