department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uil code contact person identification_number contact number employer_identification_number form required to be filed tax years all years dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions the instructions in notice if you agree with our deletions you do not need to take any further action if you disagree with our proposed deletions you should follow if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your letter cg catalog number or the irs customer service number for businesses the irs customer service number for people with hearing impairments is sincerely lois lerner director exempt_organizations enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter letter cg catalog number department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date identification_number contact person contact number fax number employer_identification_number vil legend b restaurant chain c state d date dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below issue do you qualify for exemption under sec_501 of the code no for the reasons stated below facts you were incorporated under the non-profit laws of the state of c on d your purpose is to provide for the common interests and mutual benefit of b franchisees you provide a forum for the members to communicate with each other and with the franchisor you also conduct meetings and provide a website for members to share information_letter cg catalog number 47628k you provided a breakdown of your activities as follows of activities are organizing and presenting a yearly convention put on by members for members focsuing on educational presentations of activities are publishing periodic newsletters and emails to members focusing on business updates and educational information of activities are maintaining a website complete with a forum as a vehicle for members to communicate and share information you indicated that the remainder of the time is focused on responding to issues as they arise your annual convention is a three day event with general sessions and workshops vendor exhibits and guest speakers the conventions are open to b franchisees and product suppliers of b stores as vendors the product suppliers pay a vendor fee for a booth and depending on the amount of the fee paid some get to speak at the convention and get monthly exposure on your webpage and in your newsletters topics covered at the convention include marketing techniques marketing juggling tv and print discounts what other markets are doing what's new and what’s working and current franchisee issues ie remodel initiative all topics covered pertain to operating pizza store you submitted representative copies of your newsletters which address a b similar topics in a prior year you contracted with an attorney to negotiate changes to the franchise agreement terms with the franchisor you have one class of membership membership is limited to majority owners of one or more b stores with each member having one vote member dues are paid yearly based on the number of stores owned and subject_to change each year based on needs which may facilitate a special assessment you currently have approximately members your financial data shows that your revenue comes from member dues convention income and vendor exhibit fees from convention income and vendor exhibit fees than you have from member dues the convention activity comprises the majority of your annual expenditures in the last two years you have received more revenue letter cg catalog number 47628k law sec_501 provides for exemption of business_leagues chambers_of_commerce real_estate boards boards_of_trade and professional_football_leagues whether or not administering a pension fund for football players which are not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_6_-1 of the income_tax regulations states that a business league is an association of persons having some common business_interest the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit activities should be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons revrul_67_295 states that an organization composed of businessmen may qualify for exemption where its activities are limited to holding luncheon meetings devoted to a discussion review and consideration of the various problems in a particular industry directed to the improvement of business conditions for the industry as a whole revrul_68_182 indicates the internal_revenue_service will not in similar cases follow the decision entered by the united_states court_of_appeals seventh circuit in 369_f2d_250 in that case the court held that the association whose members are engaged in the bottling and sale of a single franchised soft drink product and whose purposes and activites were directed to the more efficient production and sale of that product qualified under sec_501 of the code it is the position of the service that organizations promoting a single brand or product within a line_of_business do not qualify for exemption under sec_501 of the code in 440_us_472 the supreme court held that an association of a particular brand name of muffler dealers did not qualify for sec_501 status because it was not engaged in the improvement of business conditions of a line_of_business letter cg catalog number 47628k application of law you are not described in sec_501 of the code because you are not organized to improve business conditions of one or more lines of business as defined under this subsection you are not descried in sec_1_501_c_6_-1 of the income_tax regulations because your activities are not directed to the improvement of business conditions of one or more lines of business instead you are formed to promote the business interests of your individual members who are all franchise owners of b pizza stores you are not like the organization described in revrul_67_295 unlike the organization described in this ruling your primary purpose is not the improvement of business conditions for an industry as a whole instead your activities are directed at the promotion of your members’ businesses b pizza stores which are a specific brand not the industry as a whole this is evident by the fact that your membership is open only to individuals that own one or more b franchises and all of your activities are directed to improving the operation of b stores you are identical to the organization discussed in revrul_68_182 and the court case pepsi-cola bottlers’ association inc v united_states although pepsi-cola bottlers’ association was granted exemption in two years later revrul_68_182 made it clear that organizations promoting a single brand or product within a line_of_business do not qualify for exemption under sec_501 of the code like this organization your activities promote a single brand within a line_of_business namely b pizza stores your primary purpose is to promote the products and services of your members and increase their business performance likewise you are similar to the organization in 440_us_472 since your primary purpose is to promote a particular brand applicant’s position you believe you meet the definition of a business league under code sec_501 as a trade_association of franchisees having a common business_interest the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit you have named several franchisee organizations whom you claim operate similarly to you and have been granted exemption under sec_501 of the code you maintain their exemption should justify a similar ruling in your favor letter cg catalog number 47628k service response to applicant’s position as explained above your organization is not promoting an industry as a whole the information you have provided shows that your organization is formed to promote the business interests of your members who are all franchise owners of b pizza stores therefore you do not meet the definition of operating for the improvement of business conditions of one or more lines of business regarding your argument that other similar organizations are exempt under sec_501 of the code the service does not accept the exempt status of another organization as legal precedent the exempt status of an organization can not be applied broadly to other organizations as each applicant's facts and circumstances are unique conclusion your primary purpose is the promotion and improvement of a particular chain of pizza stores instead of improving the business conditions of one or more lines of business as a whole your activities are directed to improving the business conditions of your members who are all franchise owners of b pizza stores accordingly we conclude that you are not exempt under sec_501 you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if that information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues types of information that should be included in your appeal can be found on page of publication under the heading regional_office appeal’ these items include n o r the organization’s name address and employer_identification_number a statement that the organization wants to appeal the determination the date and symbols on the determination_letter a statement of facts supporting the organization's position in any contested factual issue a statement outlining the law or other authority the organization is relying on and letter cg catalog number 47628k astatement as to whether a hearing is desired the statement of facts item must be declared true under penalties of perjury this may be done by adding to the appeal the following signed declaration under penalties of perjury declare that have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete your appeal will be considered incomplete without this statement if an organization’s representative submits the appeal a substitute declaration must be included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process to be represented during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not intend to protest this determination you do not need to take any further action determination_letter to you that letter will provide information about filing tax returns and other matters if we do not hear from you within days we will issue a final adverse please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to internal_revenue_service eo determinations quality assurance p o box room cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you may also fax your statement using the fax number shown in the heading of this letter letter to confirm that he or she received your fax if you fax your statement please call the person identified in the heading of this letter cg catalog number 47628k if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois g lerner director exempt_organizations enclosure publication letter cg catalog number 47628k


t c memo united_states tax_court george r ward petitioner and victoria j ward intervenor v commissioner of internal revenue respondent docket no filed date george r ward pro_se victoria j ward pro_se kimberly l clark for respondent memorandum findings_of_fact and opinion morrison judge the petitioner george r ward seeks our review under sec_6015 e of the irs’s denial of relief from joint_and_several_liability for the tax 1all references to sections are to the internal_revenue_code year for that year he filed a joint_return with his then wife victoria j ward who is the intervenor in this proceeding we sustain the irs’s determination for the reasons explained below findings_of_fact the stipulation of facts which was filed on date and the supplemental stipulation of facts which was filed on date are incorporated in this opinion by this reference george r ward and victoria j ward were married in in date george r ward received an early distribution of dollar_figure from his retirement account in date george r ward and victoria j ward separated george r ward and victoria j ward filed a valid joint federal income-tax return for the return reported the dollar_figure distribution as income but it did not report the percent additional tax imposed under sec_72 on early distributions from retirement plans the 10-percent additional tax was not paid with the return in date the irs determined that the wards had overpaid their tax_liability by dollar_figure the irs applied dollar_figure to 2the record reflects that the return was filed by its due_date however it is unclear whether the due_date was date or was extended the wards’ joint tax_liability for and refunded the remaining dollar_figure to victoria j ward in date divorce proceedings were initiated on date george r ward and victoria j ward were divorced in george r ward and victoria j ward received a deficiency_notice from the irs determining a dollar_figure deficiency for the deficiency was based on the couple’s liability for the 10-percent additional tax on early distributions from retirement plans neither george r ward nor victoria j ward filed a tax_court petition in response to the deficiency_notice in date george r ward submitted a request for innocent-spouse relief to the irs he argued that he should not be liable for the understatement on the return he said he had not reviewed the return and could not have known that it was prepared incorrectly on date the irs office that handles innocent-spouse matters sent george r ward a letter informing him that it had made a preliminary determination that he was not entitled to relief from joint_and_several_liability the letter stated that the dollar_figure distribution was from george r ward’s retirement account that the joint_return failed to report the 10-percent additional tax and that relief was not available to him under sec_6015 c or f because 3the record does not explain why the deficiency was not dollar_figure which is percent of dollar_figure relief is not allowed on tax you owe on your own income or deductions on date george r ward submitted to the irs a form statement of disagreement stating that the irs’s preliminary determination was wrong because he had not reviewed the return or received the refund on date irs appeals officer janie duncan sent george r ward a letter informing him that because the additional tax charged on the joint_return is solely attributable to your income she determined that he was not entitled to relief from joint_and_several_liability on date the irs appeals_office mailed a final_determination letter to george r ward denying him relief from joint_and_several_liability the letter stated that relief is not allowed on tax you owe on your own income or deductions and you knew or had reason to know of the income or deductions that caused the additional tax george r ward filed a tax_court petition to challenge the final_determination at the time he resided in idaho victoria j ward entered the case as an intervenor by filing a notice of intervention she resided in maryland when she filed the notice trial of this case was held in boise idaho on date the court issued an order setting this case for further trial in washington d c for date on date the parties filed a supplemental stipulation of facts and moved to close the record the court granted the motion to close the record on date at trial george r ward argued that he should not be held liable for the 10-percent additional tax because he asserted he had not reviewed the return he also argued that a portion of the distribution from his retirement account had been withheld for payment of the 10-percent additional tax that his wife benefited from the withholding because she received the tax_refund and that for him to be liable for the tax would require him to pay the tax twice the irs took the position that he was not entitled to section-6015 b relief because the understatement on the return was not attributable to an erroneous item of his former wife he knew or had reason to know there was an understatement and it is not inequitable to hold him liable for the deficiency the irs argued that he was ineligible for section-6015 c relief because the deficiency was solely allocable to him and the irs contended that he was ineligible for section-6015 f relief because the 10-percent additional tax was attributable to him not his former wife and he is not entitled to relief after consideration of the seven factors listed in revproc_2003_61 sec_4 2003_2_cb_296 opinion sec_6013 provides that the income_tax for a married couple who files a joint_return is computed by aggregating the two incomes and that their income-tax liability is joint_and_several sec_6015 provides that notwithstanding sec_6013 a person who files a joint_return is relieved of joint liability under three specific exceptions set forth in sec_6015 c and f except as otherwise provided by sec_6015 the person seeking section- relief has the burden of proving entitlement to relief tax_court rule_of practice and procedure a 119_tc_306 affd 101_fedappx_34 6th cir in this case george r ward has the burden_of_proof in reviewing the irs’s denial of section-6015 relief we accord no deference to the irs’s determination see 132_tc_203 stating that the tax_court applies a de novo standard of review in reviewing sec_6015 c and f determinations sec_6015 sec_6015 relieves a person of joint income-tax liability only if a a joint_return was made for the person b on the return there is an understatement_of_tax attributable to erroneous items of the other filer c the person establishes that he or she did not know of the understatement and had no reason to know of the understatement and d it is inequitable to hold the person liable for the tax_deficiency attributable to the understatement these four conditions are imposed by sec_6015 b c and d respectively george r ward has failed to demonstrate that the condition imposed by sec_6015 is met ie that there is an understatement_of_tax attributable to erroneous items of the other filer sec_1_6015-1 income_tax regs provides an erroneous item is any item resulting in an understatement or deficiency in tax to the extent that such item is omitted from or improperly reported including improperly characterized on an individual_income_tax_return the joint tax_return for reflected an erroneous item the unreported 10-percent additional tax but the 10-percent additional tax was an erroneous item of george r ward not victoria j ward sec_72 provides that if any taxpayer receives any amount from a qualified_retirement_plan the taxpayer’s tax shall be increased by an amount equal to percent of the portion of such amount which is includable in gross_income the dollar_figure distribution was received by george r ward not victoria j ward he does not dispute that the distribution was from a qualified retirement 4the additional tax does not apply to distributions made to taxpayers who are more than years old sec_72 george r ward does not contend that he was more than years old at the time of the distribution plan and that it was includable in gross_income the 10-percent additional tax is therefore george r ward’s erroneous item because george r ward failed to satisfy sec_6015 we need not reach whether he satisfied the other conditions of sec_6015 he is not entitled to relief under sec_6015 sec_6015 sec_6015 allows a person who is divorced or separated from the person with whom a joint_return was filed to elect to limit his or her liability for any deficiency to the portion of such deficiency properly allocable to the electing person a deficiency resulting from a tax other than the income_tax on individuals imposed by sec_1 and the alternative_minimum_tax imposed by sec_55 is allocated to the joint filer to whom the tax would be allocated if separate returns were filed sec_6015 a sec_1_6015-3 income_tax regs the 10-percent additional tax would have been allocated to george r ward not victoria j ward if they had filed separate returns george r ward received the distribution as the recipient he was the taxpayer who would have been liable for the tax if separate returns had been filed because the entire deficiency is properly allocable to george r ward the limit on george r ward’s liability is dollar_figure this is the amount of the deficiency for therefore sec_6015 affords no relief to george r ward sec_6015 if relief is not available under sec_6015 and c the irs is allowed by sec_6015 to relieve a person of joint liability if it would be inequitable for that person to be liable sec_6015 provides that relief is to be granted under procedures prescribed by the secretary this court has jurisdiction to decide whether a taxpayer qualifies for relief under sec_6015 sec_6015 132_tc_203 the irs has issued revenue procedures to guide its employees in determining whether a taxpayer is entitled to relief from joint_and_several_liability see revproc_2003_61 supra modifying and superseding revproc_2000_15 2000_1_cb_447 the court consults those same guidelines when reviewing the irs’s denial of relief see 120_tc_137 following revproc_2000_15 supra the prior version of the guidelines revproc_2003_61 sec_4 c b pincite imposes seven threshold conditions for relief under sec_6015 the seventh condition is the income_tax_liability from which the requesting spouse seeks relief is attributable to an item of the individual with whom the requesting spouse filed the joint_return the ‘nonrequesting spouse’ revproc_2003_61 sec_4 the seventh condition has not been met by george r ward the income-tax liability from which he seeks relief is the 10-percent additional tax on early distributions from retirement plans as explained in our discussion of section-6015 b relief the 10-percent additional tax is george r ward’s item of tax_liability not victoria j ward’s furthermore none of the four exceptions to the imposition of the seventh condition is applicable see revproc_2003_61 sec_4 a - d therefore george r ward is not entitled to relief under sec_6015 conclusion the determination of the irs is sustained to reflect the foregoing decision will be entered for respondent


id office uilc cca_2010031113083337 ---------- number release date from ------------------- sent thursday date pm to -------------------------------------------------------------- cc ---------------------------------- subject re agreements a pass-thru_partner can sign an agreement binding the indirect partners sentence since your settling partner is a tier only its general_partner tmp need to sign i r c c last for a source partnership that wants to pay the tax for is partners the tmp and notice partners should agree since the tmp only has power to bind non-notice partners


number release date id office uilc cca_2011103109154247 -------------- from ---------------------- sent monday date am to ----------------- cc ------------------- subject fw levy question for assignment hi--my reviewer concurs in my response to your question involving levies made without giving required cdp levy notices first these levies are illegal the question is whether any of the proceeds they determine to have been illegally collected need to be returned to the taxpayer we have to return any illegally levied proceeds provided we are within the limitations_period the authority to return the proceeds is under sec_6343 specifically sec_6343 authorizes return of levied property where with the consent of the taxapyer or the national_taxpayer_advocate the return of such property would be in the best interests of the taxpayer as determined by the national_taxpayer_advocate and the united_states sec_6343 further makes applicable the limitations_period under b which is months from the date of levy in the case of levied money or sale proceeds d is generally discretionary however sec_301_6343-3 provides that where the service makes a levy in violation of the law it is in the best interest of the united_states and taxpayer to release the levy and the service will return to the taxpayer any property obtained pursuant to the levy failure to give cdp_notice required under sec_6330 is listed as a specific example of when levied property will be returned sec_301_6343-3 further provides that the determination to return levied proceeds must be made within months from the levy although the money may actually be returned within a reasonable amount of time after that period if additional time is necessary for investigation or processing accordingly proceeds should be returned to the taxpayers for any illegal levies which occurred in the month period dating back from the discovery of the existence of the illegal levies the proceeds should be returned as soon as is reasonably possible note that it is possible that some of the levies could be discovered to fall within one of the pre-levy cdp exceptions in sec_6330 in which case the levies without issuance of the pre-levy cdp_notice would not have been illegal and we would not have to return the levied proceeds let me know if you have any further questions


t c memo united_states tax_court salvador f neri and guadalupe neri petitioners v commissioner of internal revenue respondent docket no filed date held ps have failed to prove that ph's receipt of an arbitrator's award from his former employer on account of its wrongfully failing to accommodate ph's disability was excludible from gross_income under sec_104 because of its being paid on account of personal physical injuries or physical sickness held further ps are not liable for sec_6662 accuracy- related penalty joyce anne rebhun for petitioners michael w tan for respondent memorandum findings_of_fact and opinion halpern judge respondent determined a deficiency in petitioners' federal_income_tax of dollar_figure and an accuracy-related_penalty of dollar_figure taking into account a stipulation of settled issues which we accept the issues that remain are whether petitioners may exclude from gross_income dollar_figure awarded to petitioner husband mr neri by an arbitrator in a proceeding resolving claims brought by mr neri against his former employer for wrongfully failing to accommodate his disability and are liable for the accuracy-related_penalty unless otherwise stated section references are to the internal_revenue_code in effect for and rule references are to the tax_court rules_of_practice and procedure petitioners bear the burden_of_proof see rule a 1petitioners have not raised the issue of sec_7491 which shifts the burden_of_proof to the commissioner in certain situations we conclude that sec_7491 does not apply here because petitioners have not produced any evidence that they have satisfied the preconditions for its application findings_of_fact some facts are stipulated and are so found the stipulation of facts with accompanying exhibits is incorporated herein by this reference at the time they filed the petition petitioners lived in california until sometime in mr neri was employed as a maintenance worker by e s ring management corp e s e s terminated his employment in and in date mr neri commenced an action against e s in the superior court of california county of los angeles in the complaint mr neri stated the following causes of action family_and_medical_leave discrimination in violation of the california fair employment and housing act feha cal govt code sec et seq family_and_medical_leave discrimination in violation of public policy retaliation for requests for family_and_medical_leave complaints of family_and_medical_leave discrimination and or harassment in violation of feha retaliation for requests for family_and_medical_leave complaints of family_and_medical_leave discrimination and or harassment in violation of public policy family_and_medical_leave harassment in violation of feha disability discrimination in violation of feha disability discrimination in violation of public policy retaliation for requests for accommodation complaints of disability discrimination and or harassment in violation of feha retaliation for requests for accommodation complaints of disability discrimination and or harassment in violation of public policy and disability harassment in violation of feha by the complaint mr neri prayed for the following relief reinstatement of employment lost wages and related employment benefits special damages according to proof at trial attorney's_fees according to proof at trial punitive_damages according to proof at trial general damages and damages for emotional distress according to proof at trial a jury trial on all issues costs of litigation and such other relief as the court might deem just and proper mr neri and e s submitted the case to arbitration with respect to liability the arbitrator found e s wrongfully failed to accommodate neri's disability dimson apparently an agent of e s lacked knowledge of the law and its requirements respecting the accommodation of disability neri was disabled at the time he was terminated the necessary accommodation was minimal and there was no reason it could not have been made dimson accepted the fact of disability yet failed to accommodate it as the law required because she was ignorant as to the need for accommodation with respect to damages the arbitrator found in part neri's condition after the wrongful termination was basically similar to his condition that previously was treated successfully by dr hernandez over a relatively brief period for a very reasonable amount neri's complaints were subjective in nature accordingly credibility is very important in evaluating their seriousness the arbitrator finds that neri 's credibility is lacking in this regard neri very shortly after the termination moved his care to dr milgrim a forensic physician whose testimony was not persuasive neri's previous condition was exacerbated by termination but the arbitrator is not persuaded that the exacerbation was nearly as extensive nor requiring the quantum of treatment testified to by dr milgrim neri truly was an eggshell at the time of his unlawful termination in that he had been suffering from similar complaints almost immediately before his wrongful termination these are conditions that would be adversely affected by subsequent improper unlawful termination there is no basis for an award of punitive_damages the arbitrator awarded to mr neri dollar_figure subsequently the arbitrator made an additional award of dollar_figure for attorney's_fees and dollar_figure for costs the three amounts together dollar_figure award on account of the award e s paid dollar_figure to mark weidmann mr neri's attorney in the case who deducted dollar_figure as attorney's_fees and dollar_figure for costs totaling dollar_figure in date mr weidmann paid the balance dollar_figure to mr neri on date petitioners filed their form_1040 u s individual_income_tax_return they reported nothing on account of the award or on account of their payment of attorney's_fees and costs petitioner wife ms neri testified that mr weidmann told her and her husband that any recovery against e s was nontaxable opinion i the award sec_61 provides that in general gross_income means all income from whatever source derived in pertinent part sec_104 provides that gross_income does not include the amount of any damages received on account of personal physical injuries or physical sickness the flush language at the end of sec_104 qualifies that exclusion by adding for purposes of paragraph emotional distress shall not be treated as a physical injury or physical sickness the parties disagree on the applicability of sec_104 to the award 2the parties have stipulated that if the court finds that the award is includible in petitioners' gross_income they are entitled to a deduction of dollar_figure under sec_62 respondent argues that the award is not excludible from gross_income under sec_104 because notwithstanding that it constitutes damages within the meaning of the provision those damages were not received on account of personal physical injuries or physical sickness respondent draws that conclusion from an examination of the complaint and the arbitrator's decision respondent argues when read together the complaint and the arbitration award make clear that the damages were not for physical injury in its factual allegations the complaint failed to allege that e s caused any physical injury to the petitioner-husband in line with the factual allegations the complaint's prayer for relief failed to request damages for physical injury at best the complaint's prayer for relief only requested damages for emotional distress according to proof specifically with respect to the arbitrator's decision respondent argues nowhere in the arbitrator's decision does the arbitrator award damages as compensation_for physical injury respondent concludes in light of the fact that the complaint did not allege or request damages for physical injury the court should find that the award was not for physical injuries petitioners describe the award as in full settlement of a suit for personal injuries as a result of the wrongful conduct of the employer in violation of both federal and state laws in response to respondent's claim that the complaint does not allege facts relating to any physical injury petitioners answer t he complaint contained a cause of action alleging family medical leave discrimination in violation of public policy which requires wrongful retaliation by an employer against a physically injured worker while on disability leave we must determine whether any portion of the award paid_by e s to mr neri was paid on account of personal physical injuries or physical sickness the complaint lists numerous causes of action and prays for damages on account of emotional distress it does not specifically ask for damages on account of personal physical injuries or physical sickness the arbitrator did not particularize the award with respect to any of the causes alleged while the arbitrator did find that mr neri's previous condition was exacerbated by e s' unlawful termination of his employment he also found that his posttermination condition was basically similar to his condition that was treated successfully by dr hernandez apparently before mr neri's termination the arbitrator does not tell us what mr neri's condition was ie a personal physical injury or physical sickness or emotional distress although his description of mr neri's eggshell status at the time of his termination would indicate the latter petitioners have failed to convince us that the arbitrator intended any of the award to recompense mr neri for e s' causing or exacerbating any personal physical injury or physical sickness suffered by him nor have petitioners otherwise shown us that e s' intent or dominant reason for paying the award was to recompense mr neri for personal physical injury or physical sickness see eg 430_f3d_1253 9th cir vincent v commissioner tcmemo_2005_95 petitioners have failed to show error in respondent's determination_of_a_deficiency on account of petitioners omitting the award from gross_income ii penalty sec_6662 and b and provides for an accuracy-related_penalty penalty in the amount of of the portion of any underpayment attributable to among other things negligence or intentional disregard of rules or regulations or any substantial_understatement_of_income_tax sec_6664 provides that the penalty shall not be imposed with respect to any portion of an underpayment if a taxpayer shows that there was reasonable_cause for and that the taxpayer acted in good_faith with respect to that portion sec_1_6664-4 income_tax regs provides the determination of whether a taxpayer acted with reasonable_cause and in good_faith is made on a case-by-case basis taking into account all pertinent facts and circumstances circumstances that may indicate reasonable_cause and good_faith include an honest misunderstanding of law that is reasonable in light of all of the facts and circumstances including the experience knowledge and education of the taxpayer reliance on the advice of a professional tax advisor does not necessarily demonstrate reasonable_cause and good_faith taking into account all pertinent facts and circumstances we find that petitioners acted with reasonable_cause and in good_faith in omitting the award from gross_income we therefore do not sustain respondent's determination of an accuracy-related_penalty decision will be entered under rule


uniform issue list no internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to t ep ra t4 date attention legend corporation a corporation b corporation c program m public administrator division n plan x e dear this is in response to a request for rulings submitted may in which your authorized representative request sec_25 rulings concerning the ability of plan x to make distributions to former participants of the plan supplemented by letters dated date december the request was and date the following facts and representations have been submitted to support your ruling requests corporation a maintains plan x which received a favorable plan x includes a cash or determination_letter from the service on september concluding that the plan is qualified under sec_401 the internal_revenue_code code deferred arrangement described in sec_401 of the code and the participants' accounts are not distributable prior to the employee's separation_from_service death or disability plan x also provides that the accounts of the participants are distributable upon the sale or disposition by corporation a to an unrelated corporation of substantially_all of the assets used in a trade_or_business of corporation a if corporation a continues to maintain the plan after the disposition but only with respect to participants who continue employment with the corporation acquiring such assets of since and until its exit from program m corporation a has maintained an operating division the program m unit that was dedicated solely to serving as intermediary and a program m carrier pursuant to separate contracts with the public administrator the government_entity responsible for administering program m and a carrier corporation a's program m unit processed program m claims on behalf of the public administrator as an intermediary a program m the program m unit was the sole division of corporation a responsible for performing the program m contracts and the program m unit provided no other services for corporation a the the program m unit operated in separate facilities that were physically and in most cases geographically separated from corporation a's private sector business operations program m unit had separate management employees who were substantially_all responsible for the operations of the unit accounting and financial activities of the program m unit were performed within the unit and were required by the contract with the public administrator to be segregated from corporation a's private sector business also the budget for the program m unit which was funded exclusively by the public administrator was approved by the public administrator and was completely segregated from corporation a's other business costs associated with funding benefits for the program m unit were accounted for separately on corporation a's books_and_records and the public administrator reimbursed corporation a for all allowable costs associated with the funded benefits for program m unit employees similarly the in date corporation a notified the public in response the public administrator sought out and as part of the program m carrier transition administrator that it was terminating its program m carrier contract designated corporation b as a replacement contractor hereinafter carrier replacement contractor replacement contractor is not related to corporation a corporation a transferred all of the equipment used in the performance of the program m carrier contract that was not needed to perform services under the program m intermediary contract to the carrier replacement contractor transferred consisted primarily of desk chairs and desk top computers the carrier replacement contractor paid corporation a an amount equal to the book_value of the equipment transferred the carrier or affiliated with the equipment in connection with the termination of the program m carrier contract corporation a terminated its program m unit employees dedicated to performance of services under the program m carrier contract employees were terminated on october date transferred to the carrier replacement contractor was approximately dollar_figure and that virtually all of the by letter dated it was stated that the book_value of assets corporation a's program m carrier 3ar approximately terminated employees were hired by the carrier replacement contractor corporation a's former program m unit employees who now work for the carrier replacement contractor are no longer active participants in plan x corporation a retained no interest in the program m carrier contract the program m carrier operations equipment or employees and was directed by the public administrator to transfer its program operations to the carrier replacement contractor corporation a's former program m unit employees hired by the carrier replacement contractor do not provide services associated with the ongoing activities -of corporation a on date corporation a notified the public an operating division of in response the public administrator as a replacement contractor hereinafter or affiliated with also the intermediary replacement contractor administrator that it was terminating its program m intermediary contract sought out and designated division n corporation c intermediary replacement contractor replacement contractor is not related to corporation a for the program m intermediary contract is not the same as affiliated with or related to the carrier replacement contractor for the program m carrier contract program m intermediary employees were terminated on date as is typical in this type of situation the public administrator directed that the intermediary replacement contractor hire corporation a's qualified and interested managers and staff dedicated to the performance of services under the program m intermediary contract the intermediary corporation a's by letter dated date it was stated that the book_value of assets transferred to the proaram m tntermediary replacement contractor was approximately of the approximately employees of the program m unit dedicated to performance of services under the program m intermediary contract who were terminated from employment with corporation a most of them were hired by the intermediary replacement contractor and that br corporation a's former program m unit employees who now work for the intermediary replacement contractor are no longer active participants in plan x employees hired by the intermediary replacement contractor do not provide services associated with the ongoing activities of corporation a the former program m unit following the transfer of assets to the carrier and intermediary replacement contractors and the termination of all program m unit employees by corporation a the program m unit will be dissolved and corporation a will no longer be engaged in the business of processing program m claims corporation a continues to maintain plan x there will be no direct transfer of assets from plan x to another qualified_retirement_plan maintained by the carrier or intermediary replacement contractors in a transaction subject_to sec_414 of the code carrier replacement contractor nor the intermediary replacement contractor are required to be aggregated with corporation a or its affiliates under sec_414 c m or of the code it has been represented that neither the by letter dated date ruling_request sec_2 and were withdrawn and ruling_request sec_1 and renumbered a sec_1 and respectively were revised to read as follows that a distribution can be made from plan x to each participant who terminated employment with corporation a as a result of corporation a terminating its program m carrier contract and who became an employee of the carrier replacement contractor on grounds that a separation_from_service has occurred within the meaning of sec_401 k b i i of the code that a distribution can be made from plan x to each participant who terminated employment with corporation a as a result of corporation a terminating its program m intermediary contract and who became an employee of the intermediary replacement contractor on grounds that there was a disposition of substantially_all of the assets used e in a trade_or_business within the meaning of sec_401 k a ii of the code with respect to the first ruling_request section of the code provides in relevant part k b i distributions from a qualified_cash_or_deferred_arrangement may not be made earlier than the occurrence of certain stated events provides that one of these distributable events is the employee's separation_from_service b i i of the code further sec_401 that revrul_2000_27 2000_21_irb_1016 date or less ie of the code under the facts of the revenue_ruling an most of the employees of the former of the assets of a trade_or_business between two discusses the sale of less than substantially_all than unrelated employers employer former employer sells less than of the assets used in a trade_or_business of the former employer to another employer new employer an entity not required to be aggregated with the former employer under sec_414 m employer associated with the transferred assets the transferred employees are hired by the new employer and continue to perform without interruption and in the same capacity the same functions for the new employer that they performed for the former employer and they no longer perform services for the former employer employer does not assume the assets and liabilities of the applicable_portion of the 401_k_plan of the former employer the revenue_ruling holds that the transferred employees are not employed in a continuation of the same trade_or_business and that the change in their employment status is sufficient to constitute a separation_from_service within the meaning of sec_401 k b i i distributions from the 401_k_plan of the former employer to the transferred employees of the code that permits in addition the new c we believe that the program m unit is a single trade_or_business of corporation a for purposes of sec_401 the code we also view the facts in this case as presenting a situation in which corporation a has disposed of its program m unit in two stages the program m unit occurred upon the termination of the program the first stage of the termination of of 3b this transaction did not m carrier contract by corporation a resulting in the sale of less than of the assets used in the program m unit to the carrier replacement contractor constitute a sale of substantially_all the assets used ina trade_or_business within the meaning of sec_401 plan x may distribute the accounts of the employees terminated by corporation a and hired by the carrier replacement contractor if the change in their employment status as a result of the sale to the carrier replacement contractor constitutes a separation_from_service within the meaning of sec_401 however under rev_rul b i i of the code a ii of the code under the facts in this case we find that the underlying requirements of revrul_2000_27 have been met namely that there was a sale of less than of the assets of a trade_or_business of corporation a to an unrelated employer that the terminated employees who continue to perform the same services for the carrier replacement contractor that they used to perform for corporation a no longer perform services for corporation a and that no plan maintained by the carrier replacement contractor has assumed any portion of the assets and liabilities of plan x applicable to the employees terminated by corporation a a sufficient change in the employment status of these terminated employees to constitute a separation_from_service within the meaning of sec_401 their employment with corporation a terminated thus we find that there has been b i i as of the date accordingly with respect to ruling_request we conclude that a distribution can be made from plan x to each participant who terminated employment with corporation a as a result of corporation a terminating its program m carrier contract and who became an employee of the carrier replacement contractor on grounds that a separation_from_service has occurred within the meaning of sec_401 b i i of the code with respect to the second ruling_request sec_401 k b i distributions from a qualified_cash_or_deferred_arrangement may not be made earlier than the occurrence of certain stated events of the code provides in relevant part that b i ii further provides that one sec_401 bh -e- a disposition of trade or a ii provides for sec_401 of these distributable events is business_assets within the meaning of sec_401 a ii of the code distributions from a qualified_cash_or_deferred_arrangement upon the disposition by a corporation of substantially_all of the assets within the meaning of sec_409 used by such corporation in a trade_or_business of such corporation to an unrelated corporation but only with respect to employees who continue employment with the corporation acquiring such assets of the income_tax regulations concerning a disposition by a corporation of substantially_all the assets within the meaning of sec_409 used by the corporation in a trade_or_business of the corporation to an unrelated corporation see sec_1 k -1 d iv sec_1_401_k_-1 of the regulations provides rules i this the seller must maintain the plan the employee receiving the distribution must applicable to distributions upon the sale of assets regulation requires that and the purchaser may not maintain the plan after the disposition ii continue employment with the purchaser of the assets distribution must be in connection with the disposition of the assets and iv the sale of substantially_all the assets used in a trade_or_business means the sale of at least percent of the assets and an unrelated entity is one that is not required to be aggregated with the seller under code sec_414 c k -1 d part that a distribution may be made upon a sale or disposition of assets only if within the meaning of sec_402 of the regulations provides in pertinent o after the sale_or_other_disposition a lump sum distribution of the code section iii m the or is it sec_1 k -1 d iii of the regulations provides in part that except in unusual circumstances a distribution will not be treated as having been made in connection with a disposition of assets unless it is made by the end of the second calendar_year after the calendar_year in which the disposition occurred we believe that the second stage of the termination of the program m unit occurred upon the termination of the program m intermediary contract by corporation a resulting in the sale ie those of all the remaining assets of the program m unit assets which had been used exclusively by employees dedicated to the performance of services under the program m intermediary contract and those assets which had been used by both the employees dedicated to performance of services under the program m intermediary contract and the employees dedicated to performance of services under the program m carrier contract this second stage transaction falls within the meaning of a ii of the code because it constitutes sec_401 the disposition of substantially_all of the assets used ina trade_or_business of corporation a to an unrelated corporation the intermediary replacement contractor accordingly with respect to ruling_request we conclude that a distribution can be made from plan x to each participant who terminated employment with corporation a as corporation a terminating its program m intermediary contract and who became an employee of the intermediary replacement contractor on grounds that there was a disposition of substantially_all of the assets used in a trade_or_business within the meaning of sec_401 a ii of the code a result of this ruling is applicable only if distributions from plan x to the employees who continued employment with the intermediary replacement contractor are made by the end of the second calendar_year after the calendar_year in which the disposition was completed and sum distributions within the meaning of sec_402 the code or sec_402 d beginning after date the distributions are lump of the code for tax years of these rulings are based on the assumption that plan x has complied at all times relevant to these rulings with the requirements of sec_401 and sec_401 of the code this letter_ruling is directed only to the taxpayer that requested it may not be used or cited by others as precedent sec_6110 of the code provides that it bh the original of this letter_ruling has been sent to your authorized representative in accordance with a power_of_attorney on file with this office sincerely yours plan ipkin alan pipkin manager employee_plans technical group tax exempt government entities division enclosures deleted copy of letter_ruling form_437 3a


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number tax exempt ano government entities dwvibion number release date date date uil former spouse corporation foundation dear we have considered your ruling_request dated date concerning the excise_tax consequences under section of the internal_revenue_code code related to a proposed transfer of assets in the manner and for the purposes described below foundation has been recognized as an organization exempt under sec_501 of the ‘code and is classified as a private_foundation within the meaning of sec_509 b's former ‘spouse was the founder of both foundation and corporation b also made substantial contributions to foundation b had the right so long as she lived either to be a director of foundation or to appoint another to serve in her place as a director subject however to her right to rescind that appointment and either to resume her service as a director or to appoint during her lifetime b appointed her daughter d to serve in her anothar to serve in her place place as a director of foundation b's daughter d and her son f are personal_representatives of the estate of b corporation is a holding_company which conducts business through a number of wholly-owned subsidiaries common_stock and is also a director of foundation contributions to the foundation e has two classes of stock voting and nonvoting f owns all shares of voting corporation has made substantial upon b's death b devised the residue of her estate to foundation ‘ownership of certain timber properties the land was acquired as investment_property and was this residue included the originally held as an undivided percent tenancy-in-common interest with former spouse the land holdings of both b and farmer spouse were subject_to substantially identical option agreements singularly referred to herein as option agreement which granted corporation the right to acquire these holdings at any time up until the estate of the optionor terminated at the then-current fair_market_value as determined by an independent_appraiser after former spouse died leaving the residue of former spouse's estate to foundation corporation exercised its rights under the option agreement with former spouse and acquired the land holdings from former spouse's estate these holdings were then still held as a tenancy-in-common interest with b following acquisition of former spouse's property corporation entered into a series of exchange transactions with b so that corporation and b would each own the entire_interest in approximately half the property instead of undivided interests in the whole we ruled in separate rulings that the traneaction between corporation and the estate of former spouse was not an act of self-dealing pursuant to sec_53 d - b of the foundation and similar excise_tax regulations ‘regulations’ corporation exercised the option granted to it by the option agreement with b through a third party intermediary an assignee of the corporation pursuant to the option agreement the price paid_by the assignee of the corporation to the estate of b was above the fair_market_value of the land determined as of the date of the exercise of the option this fair_market_value was determined by an agreed upon independent_appraiser during this process the estate of b was guided by a committee of members of the board_of the foundation each of whom is independent of corporation in exchange for the land being transferred to an assignee of the corporation pursuant to the option agreement the estate of b received all cash in an amount represented to be above fair_market_value you state that the appropriate state attorney_general acknowledged that it had received a copy of the petition filed by you seeking approval of the sale and that the attorney_general did not file any objections to that petition probate_court with jurisdiction over b's estate you also represent that the transaction was approved by the requested rulings the personal_representatives of the estate of b for themselves and the estate corporation and the foundation for itself and its managers request a ruling that pursuant to section sec_3 d - b of the regulations the estate's sale of the land holdings of b to an assignee of the corporation pursuant to the terms and provisions of the option agreement for the price determined as specified in the option agreement followed by the assignee's transfer of the property to corporation will not be an act of self-dealing under sec_4941 of the code by any of the parties the estate of b the personal_representatives of the estate corporation the foundation or the foundation’s managers law sec_501 of the code exempts from federal_income_tax organization organized and operated exclusively for charitable or educational_purposes sec_507 of the code defines a substantial_contributor as any person who contributed or bequeathed an aggregated amount of more than dollar_figure to a private_foundation if such amount is more than percent of the total contributions and bequests received by the foundation before the close of the taxable_year of the foundation in which the contribution or bequest is received by the foundation from such person sec_4941 a of the code imposes an excise_tax on each act of self-dealing between a disqualified_person and a private_foundation section of the code defines self-dealing as including a sale_or_exchange of property or the extension of credit between a foundation and a disqualified_person whether done directly or indirectly sec_4946 of the code defines the term disqualified persons’ with respect to a private_foundation as including a substantial_contributor to the foundation a foundation_manager and an owner of more than percent of the total combined voting power of a corporation which is a ‘substantial contributor to the foundation it also includes a member_of_the_family of any individual described above in addition it includes a_trust or estate in which persons described in above hold more than percent of the beneficial_interest sec_4946 of the code defines the term foundation_manager as including an officer director of trustee of a foundation or an individual having powers or responsibilities similar to those of officers directors or trustees of the foundation sec_4946 of the code states that the term ‘a member’ of the family of a disqualified_person includes the spouse children of and grandchildren of a disqualified_person sec_53_4941_d_-1 of the regulations provides in general that for the purposes of sec_4941 the term self-dealing means any direct or indirect transaction described in sec_53 d -2 of the regulations sec_53 d -1 b of the regulations provides that certain transactions described in sec_53 d -2 as indirect self-dealing are excepted from the definition of indirect self- dealing sec_53 d -1 b of the regulations provides that the term indirect setf-dealing shall not include a transaction with respect to a private foundation's interest or expectancy in property whether or not encumbered held by an estate or revocable_trust including a_trust which has become irrevocable on a grantor’s death regardless of when title to the property vests under local law i the administrator or executor of an estate or trustee of a revocable_trust either - a possess a power of sale with respect to the property b has the power to reallocate the property to another beneficiary of s required to sell the property under the terms of any option subject_to which the property was acquired by the estate or revocable_trust gi such transaction is approved by the probate_court having jurisdiction over the estate or by another court having jurisdiction over the estate_or_trust or over the private_foundation iii such transaction occurs before the estate is considered terminated for federal_income_tax purposes pursuant to paragraph a of sec_1_641_b_-3 of this chapter or in the case of a revocable_trust before it is considered subject_to sec_4947 v the estate_or_trust receives an amount which equals or exceeds the fair_market_value of the foundation's interest or expectancy in such property at the time of the transaction taking into account the terms of any option subject_to which the property was acquired by the estate of trust and a results in the foundation receiving an interest or expectancy at least as liquid as the one it v with respect to transaction occurring after date the transaction either - gave up purposes of b results in the foundation receiving an asset related to the active carrying out of its exempt is required under the terms of any option which is binding on the estate_or_trust sec_53 d -1 b of the regulations example describes a situation where a substantial_contributor to a private_foundation bequeaths one-half of his estate to his spouse and one-half to the private_foundation the estate includes a one-third interast in a partnership the remaining two-thirds of the partnership are owned by a disqualified_person to the private_foundation the one-third interest was subject_to an option agreement when it was acquired by the estate the sale of the one-third interest in the partnership to the disqualified_person did not constitute an act of self-deating because the transaction satisfied the requirements set forth in sec_53 d -1 b section dollar_figure41 d -2 a of the regulations provides that in general the sale_or_exchange of property between a private_foundation and a disqualified_person shall constitute an act of self- dealing analysis generally transactions between a disqualified_person and a foundation are subject_to the self- dealing rules set forth in sec_4941 of the code sec_4941 defines self-dealing to include any direct or indirect sale_or_exchange of leasing of property between a private_foundation and a disqualified_person under sec_53 d -1 of the regulations the sale by an estate of property in which a private_foundation has an expectancy under a will can be an act of indirect self-dealing ifthe transaction described above were determined to be an act of self-dealing it would subject the self-dealing persons to an excise_tax on each act of self- dealing between a disqualified_person and a private_foundation pursuant to sec_4941 however in order to apply section we must first determine if there are disqualified persons corporation has contributed substantially more than dollar_figure in the transaction with the private_foundation here corporation is a disqualified_person with respect to the foundation under sec_4946 of the code because it was a substantial_contributor fo the foundation sec_807 a of the code provides that a substantial_contributor is any person who contributed an aggregate amount of more than dollar_figure to a private_foundation if such amount is more than percent of total contributions which you state was more than of total contributions additionally d and f are disquaiified persons with respect to the foundation pursuant ta sec_4948 of the code that section states that the term a member’ of the family of a disqualified_person includes the spouse children of and grandchildren of a disqualified_person d and f are children of b a disqualified_person as well as being the executors of b's estate and directors of foundation f is also the owner of all the voting_stock of corporation thus and f are disqualified persons with respect to the foundation however transactions during the administration of an estate regarding the foundation's interest or expectancy in property held by such estate are not self-dealing if all five conditions set forth in sec_53 d -1 b of the regulations are met such exception to the self-dealing rules is commonly referred to as the estate administration exception the first requirement of the estate administration exception is sec_53_4941_d_-1 of the regulations which provides in part that the administrator of an estate is required to sell the property under the terms of any option subject_to which the property was acquired by the estate here b during her lifetime entered into an option agreement with corporation to sell the property to corporation in exchange for which b or her estate would receive fair_market_value of the assets transferred as determined by an independent_appraiser since the personal_representatives of b's estate are required to sell the property under the terms of the option agreement subject_to which the property was acquired by the estate the transaction meets this first requirement the second requirement as set forth in sec_53 d -1 b i of the regulations provides that the transaction must be approved by the probate_court having jurisdiction over the estate here you have represented that the sale transaction has been approved by the probate_court having jurisdiction over the estate thus the second condition has been met the third requirement pursuant to sec_53 d -1 b il of the regulations provides that such transaction occurs before the estate is considered terminated for federal_income_tax purposes here according to the facts you have represented that the transaction occurred prior to the estate being terminated for federal_income_tax purposes additionally the option agreement specifically provided that the corporation could exercise its option at any time up until the estate of the opticnor terminated thus this third condition has been met fourth sec_53_4941_d_-1 of the regulations provides that the estate receives an amount which equals or exceeds the fair_market_value of the foundation's interest or expectancy in such property at the time of the transaction taking into account the terms of any option subject_to which the property was acquired by the estate here the option agreement specifies that the purchase_price will be the fair_market_value as determined by an independent appraisal the estate of b in exchange for selling the property interest pursuant to the option agreement received an amount greater than the appraised amount and received all cash in the transaction thus the requirement of subsection iv of sec_53 d -1 b of the regulations that the estate receives an amount which equals the fair_market_value of the foundation's interest or expectancy in the property holdings at the time of the transaction was met the last requirement of the estate administration exception is that the transaction results in the foundation receiving an interest or expectancy at least as liquid as the one it gave up here the estate and thereby the foundation gave up real_property in exchange for all cash estate received an interest at least as liquid as the one it gave up thus the since the transaction outlined above meets the requirements for the estate administration exception the transaction will not be subject_to the self-dealing rules set forth in sec_4941 of the code ruling the sale by the estate of b and purchase of the interest by an assignee of corporation pursuant to the terms and provisions of the option agreement will not be an act of self-dealing under sec_4941 of the cade by the estate of b in this ruling we have not determined whether the methodology used to determine fair_market_value of the assets is proper we merely have accepted the given representation that the appraisal reflects fair_market_value in this ruling we also have not determined whether the mechanism of the deferred_like-kind_exchange pursuant to saction of the code is proper this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the cade provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolved questions conceming your federal_income_tax status this ruling should be kept in your permanent records tf you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter n accordance with the power of attomey currently on file with the intemal revenue service we are sending a copy of this letter to your authorized representative sincerely ronald j shoemaker manager exempt_organizations technical group enclosure notice


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 plr-143388-13 date date x ----------------------------------------------------------------------------------------------- ----------------------------- state -------------- supplier ---------------------------- operator ------------------------------ plant ----------------------------------------------------------------------------------------------- ------------------------------------------------- agreement ----------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- dear ------------------ this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_7704 of the internal_revenue_code code that income and gains from x’s activities relating to processing natural_gas will constitute qualifying_income x is a limited_partnership organized under the laws of state x is a publicly_traded_partnership within the meaning of sec_7704 of the code facts plr-143388-13 x through affiliated limited_partnerships limited_liability companies or disregarded entities is principally engaged in the business of gathering compressing treating processing transporting storing and selling natural_gas producing fractionating transporting storing and selling natural_gas liquids ngls and condensate and transporting storing and selling propane in wholesale markets this ruling_request involves income x derives from its ownership of a natural_gas processing plant that receives fees for its natural_gas processing services x indirectly wholly owns the plant a natural_gas processing plant the plant uses cryogenic expansion to extract ngls from natural_gas under an arm’s length agreement the plant is operated and maintained by operator a minority partner in x and the indirect owner of supplier on behalf of x under a second arm’s length agreement agreement the plant receives raw natural_gas from supplier and processes it to remove the ngls to meet interstate pipeline gas quality specifications supplier retains legal_title to the natural_gas delivered to the plant at all times and to the volumes of extracted residue gas and ngls at the outlet of the facilities pursuant to agreement supplier subscribes of the available natural_gas processing capacity of the plant supplier pays x a processing fee that is composed of both a fixed monthly demand charge calculated based on the plant’s capacity to process the natural_gas and a variable service fee calculated based on the volume of natural_gas that the plant processes law and analysis sec_7704 provides that except as provided in sec_7704 a publicly_traded_partnership shall be treated as a corporation sec_7704 provides that the term publicly_traded_partnership means any partnership if interests in that partnership are traded on an established_securities_market or interests in that partnership are readily_tradable on a secondary market or substantial equivalent thereof sec_7704 provides that sec_7704 shall not apply to any publicly_traded_partnership for any taxable_year if such partnership met the gross_income requirements of sec_7704 for such taxable_year and each preceding_taxable_year beginning after date during which the partnership or any predecessor was in existence sec_7704 provides that a partnership meets the gross_income requirements of sec_7704 for any taxable_year if percent or more of the gross_income of such partnership for that taxable_year is qualifying_income sec_7704 provides that the term qualifying_income means income or gains derived from the exploration development mining or production processing refining transportation including pipelines transporting gas oil or products thereof or plr-143388-13 the marketing of any mineral_or_natural_resource including fertilizer geothermal_energy or timber sec_1_7704-4 of the income_tax regulations provides that qualifying_income is income and gains from qualifying activities with respect to minerals or natural_resources as defined in sec_1_7704-4 qualifying activities are sec_7704 activities as described in sec_1_7704-4 and intrinsic activities as described in sec_1_7704-4 sec_1_7704-4 provides that sec_7704 activities include the exploration development mining or production processing refining transportation or marketing of any mineral_or_natural_resource sec_1_7704-4 provides that an activity constitutes processing if it is performed to convert raw mined or harvested products or raw well effluent to substances that can be readily transported or stored as described in sec_1_7704-4 sec_1_7704-4 provides that an activity constitutes processing of natural_gas if it is performed to a purify natural_gas including by removal of oil or condensate water or non-hydrocarbon gases such as carbon dioxide hydrogen sulfide nitrogen and helium and b separate natural_gas into its constituents which are normally recovered in a gaseous phase methane and ethane and those which are normally recovered in a liquid phase propane butane pentane and heavier streams conclusion based solely on the facts submitted and representations made we conclude that the income derived by x from the processing of natural_gas under agreement is qualifying_income within the meaning of sec_7704 except as expressly provided herein no opinion is expressed or implied concerning the federal tax consequences of any transaction or item discussed or referenced in this letter in particular no opinion is expressed as to whether x meets the percent gross_income requirement of sec_7704 in any taxable_year for which this ruling may apply 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 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent however in the event of a plr-143388-13 technical_termination of x under sec_708 the resulting_partnership may continue to rely on this ruling in determining its qualifying_income under sec_7704 pursuant to the power_of_attorney on file with the office a copy of this ruling will be sent to x’s authorized representative sincerely holly porter branch chief branch office of the chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes