department of the treasury internal_revenue_service commerce street dallas tx 501-dollar_figure date date person to contact badge number contact telephone number contact address employer_identification_number tax_exempt_and_government_entities_division release number release date legend org - organization name xx - date address - address org address certified mail dear this is a final notice of adverse determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective january 20xx for the following reason s you are not operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you are not and have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 rather your activities further a substantial nonexempt commercial purpose and serve private rather than public interests because you did not protest the proposed modification of your non-private foundation status and have indicated your agreement by signing the form 6018-a on february 20xx it is further determined that you have not exhausted your available remedies for purposes of declaratory_judgment under sec_7428 of the code contributions to your organization are no longer deductible you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all the tax years thereafter in accordance with instructions of the return it is further determined that your failure_to_file a written appeal constitutes a failure to exhaust your available administrative remedies however if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment to secure a petition form write to the following address united_states tax_court second street nw washington dc please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely nanette m downing director eo examinations enclosures publication internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examinations south west 6th court mail stop plantation fl department of the treasury org address date date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax manager’s name id number manager’s contact number response due_date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren’t an organization described in sec_501 after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code lf 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 revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also letter rev catalog number 34809f may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn't a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing director eo examinations enclosures report of examination form_6018 publication publication letter rev catalog number 34809f form 886a department of the treasury - internal_revenue_service explanation of items name of taxpayer january 20xx org ein ein year period starting schedule no or exhibit legend org - organization name -- president ein - ein secretary - secretary issue xx - date state - state president whether org qualifies for exemption under sec_501 of the internal_revenue_code fact sec_1 org was recognized as a tax exempt_organization under c of the internal_revenue_code in march 20xx org has failed to produce books_and_records for the tax period ending december 20xx in respond to the internal_revenue_service correspondence requesting the exempt organization’s books_and_records see exhibit a the org responded to the request with a letter dated december 20xx see exhibit b that states first after my incarcerated status i no longer have access to those documentations either my wife as well all she doing if she has too spend some money to keep the organization live until i come out impossible to provide as a prisoner different sections of the correspondence the internal_revenue_service sent requesting documents that stated a impossible to provide b impossible to provide c impossible to provide so i am sure that all those documentation that you inquired will be at the end of the letter it specifically makes reference to the org is not conducting required exempt_activities as described in c of the internal_revenue_code org filed reinstatement documents with state department of state division of corporations on january 20xx and is currently active with the state these documents only list two officers directors president as president and director and secretary as secretary correspondence form org president see exhibit b states ‘ the reason you must still keep the organization because when i get out this will be my primary business to give to the world the corporation it’s renewed because we don’t want to loose the name and keep the license active as far as donation activities we are not doing that right now president pleaded guilty to one count of conspiracy to commit mail and wire fraud on july 20xx and was sentenced month or years in federal prison followed by three years of supervised release president will not get out of federal prison until sometime in 20xx and he has put the organization activities on hold until he is released law internal_revenue_code sec_501 exempts from federal_income_tax corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition but only if all or part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities page of form 886a department of the treasury - internal schedule no or exhibit revenue service explanation of items january 20xx name of taxpayer org ein ein year period starting of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distribution of statements and political campaign on behalf of or in opposition to any candidate for public_office internal_revenue_code irc sec_6001 provides that every person liable for any_tax imposed by the irc or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 provides except as provided in sec_6033 every organization exempt from tax under sec_501 a shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6001-1 in conjunction with sec_1_6001-1 provides that every organization exempt from tax under jrc sec_501 and subject_to the tax imposed by sec_5 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by jrc sec_6033 sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_50 and the following chapter of the code and jrc sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of jrc sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status page of form 886a department of the treasury - internal schedule no or exhibit revenue service explanation of items name of taxpayer january 20xx org ein ein year period starting _ in accordance with the above cited provisions of the code and regulations under jrc sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax federal regulations section _1 c -1 c states primary activities an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities as not in furtherance of an exempt_purpose federal regulations sec_1_501_c_3_-1 provides that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals the words ‘private shareholders or individual refer to persons having a personal and private interest in the activities of the organization the term private shareholder or individual’ is defined in regulation sec_1_501_a_-1 _1 c -1 d gii provides an organization is regulation section not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus to meet the requirement of this subdivision it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests taxpayer's position the organization has not responded to preliminary letters or requests for returns government's position based on the above cited law it is the government's position that the org has failed to meet its reporting and operational requirement of an internal_revenue_code sec_501 tax exempt_organization as such the tax exempt status of the same should be withdrawn conclusion it is the irs's position that the org failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under sec_501 it is also the irs’s position that the organization filed the operational_test under federal regulation sec_1_501_c_3_-1 for page of department of the treasury - internal form 886a schedule no or exhibit explanation of items name of taxpayer revenue service org ein ein january 20xx year period starting lack of exempt_activities accordingly the organization's exempt status is revoked effective january 20xx page of


t c memo united_states tax_court thomas h carver petitioner v commissioner of internal revenue respondent docket no filed date r determined deficiencies and additions to tax pursuant to sec_6651 and i r c held p is liable for the deficiencies and the additions to tax thomas h carver pro_se michael k park for respondent memorandum findings_of_fact and opinion wherry judge this case is before the court on a petition for redetermination of alleged income_tax deficiencies and additions to tax that respondent determined for petitioner’ sec_2001 and tax years after concessions by petitioner the issues for decision are whether petitioner is entitled to business_expense deductions for and whether petitioner is entitled to net_operating_loss nol carryforward or carryback deductions for and whether petitioner is liable for additions to tax under sec_6651 for and and whether petitioner is liable for additions to tax under sec_6651 for and findings_of_fact petitioner is an elderly individual who needed a caregiver’s assistance and a wheelchair to pursue this court case he resided in california when he filed his tax_court petition he 1petitioner conceded that he received dollar_figure and dollar_figure of income in and respectively those amounts included income from the sale of stocks and bonds dividend income_interest income and pension retirement distributions 2all section references are to the internal_revenue_code_of_1986 as amended and in effect for the tax years at issue and all rule references are to the tax_court rules_of_practice and procedure did not file federal_income_tax returns for hi sec_2001 and tax years accordingly respondent prepared sec_6020 substitutes for individual federal_income_tax returns for those years on date and issued notices of deficiency on date for both years petitioner filed a timely petition with this court on date and an amended petition on date a trial was held on date in los angeles california respondent filed a brief on date petitioner who was a licensed attorney in california from until he was disbarred in was given the opportunity to file a brief but as of the date of this opinion has not done so opinion i whether petitioner is entitled to business_expense deductions deductions are a matter of legislative grace and the taxpayer must maintain adequate_records to substantiate the amounts of any deductions or credits claimed sec_6001 503_us_79 sec_1_6001-1 income_tax regs generally the court may allow the deduction of a claimed expense even where the taxpayer is unable to fully substantiate it provided the court has an evidentiary basis for doing so 39_f2d_540 3the court will take judicial_notice of the public records of the california supreme court and the state bar of california 2d cir 85_tc_731 but see sec_1_274-5t temporary income_tax regs fed reg date in these instances the court is permitted to approximate the allowable expense bearing heavily against the taxpayer whose inexactitude is of his or her own making cohan v commissioner supra pincite sec_162 authorizes a deduction for all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business a trade_or_business expense is ordinary for purposes of sec_162 if it is normal or customary within a particular trade business or industry and is necessary if it is appropriate and helpful for the development of the business 320_us_467 308_us_488 in contrast personal living or family_expenses are generally nondeductible sec_262 certain business_expenses described in sec_274 are subject_to strict substantiation rules that supersede the cohan doctrine 50_tc_823 affd per curiam 412_f2d_201 2d cir sec_1_274-5t temporary income_tax regs supra sec_274 applies to any traveling expense including meals_and_lodging away from home entertainment amusement or recreational expenses any expense for gifts or the use of listed_property as defined in sec_280f including passenger automobiles to deduct expenses to which sec_274 applies the taxpayer must substantiate by adequate_records or sufficient evidence to corroborate the taxpayer’s own testimony the amount of the expenditure or use which includes mileage in the case of automobiles the time and place of the travel entertainment or use its business_purpose and the business relationship to the taxpayer of the persons entertained or each expenditure or use sec_274 flush language petitioner did not file a return for or and respondent’s sec_6020 returns make no mention of any business income expenses or losses petitioner now claims however that he sustained business_losses during and at trial he introduced a vast unorganized collection of checks front side only statements and receipts to substantiate unspecified amounts of business_expenses for those years a number of these were for tax years not at issue particularly respondent does not dispute that petitioner operated several businesses including a legal practice4 and an investment_company in and and a business called color coordinators in respondent does not even appear to dispute that petitioner has deductible business_expenses instead respondent argue sec_4given petitioner’s disbarment in that legal practice must have been as a scrivener and not as an attorney that petitioner failed to prove the amounts of his business’s gross_receipts thereby making it impossible-- regardless of the fact that petitioner has deductible business_expenses --to establish that petitioner had business_losses that he could use to offset his income from other sources respondent’s argument is flawed sec_162 allows a deduction for ordinary and necessary business_expenses regardless of whether the business in question has income or losses see sec_1_162-1 income_tax regs the full amount of the allowable deduction for ordinary and necessary expenses in carrying on a business is deductible even though such expenses exceed the gross_income derived during the taxable_year from such business simply said petitioner is entitled to deduct any substantiated ordinary and necessary business_expenses paid during the tax years at issue with respect to a going business engaged in for profit and not disallowed by sec_162 or required to be capitalized sec_162 whether his businesses had income or losses is irrelevant 5a taxpayer’s history of income or loss related to an activity is of course not always irrelevant such history for example is an important consideration in determining whether the activity is engaged in for profit and thus whether it constitutes a trade_or_business within the meaning of sec_162 see helmick v commissioner tcmemo_2009_220 sec_1_183-2 income_tax regs respondent however has not argued that petitioner’s businesses were not yet started or were not engaged in for profit in fact respondent cites petitioner’s testimony that color coordinators earned a profit in paradoxically we note that respondent--even after petitioner revealed the continued we turn therefore to whether petitioner has substantiated any business_expenses for and petitioner has submitted evidence pertaining to a wide variety of expenses it is not clear from the evidence or petitioner’s testimony what the expenses are for and or how they relate to petitioner’s businesses what is clear however is that most of the expenses appear to be personal and thus nondeductible under sec_162 for example petitioner is not permitted to deduct his traffic tickets dentist’s fees or mint proof coin purchase in addition he cannot deduct rent payments for the apartment he lived in because among other things petitioner also maintained and worked at an external office see sec_280a c further many of petitioner’s expenses such as vehicle expenses or expenses for meals and club_dues are either nondeductible under sec_274 or are subject_to the strict substantiation requirements of sec_274 which petitioner has not satisfied other receipts or checks relate to airplane travel public storage pacific bell faa cc luncheon buffet and dues american judicature society annual dues postage air force continued existence of his businesses and admitted that he earned a profit with respect to one of them--has not alleged that there was any unreported income or asserted an increased deficiency with respect to any income related to color coordinators in or related to petitioner’s other businesses in or association membership dues utility payments american foreign service association dues etc however the relationship to petitioner’s businesses has not been explained petitioner has therefore not met his burden of substantiation petitioner did introduce evidence in the form of checks and bank statements reflecting that he paid a total of dollar_figure in rent for office space in july august september and date the evidence also shows that he paid a total of dollar_figure for parking space at the office in june july august september and date respondent does not dispute that petitioner operated several businesses in or that he maintained an 6petitioner also introduced--without any explicit testimony or explanation--a statement from his landlord that appears to indicate that petitioner prepaid dollar_figure of rent for the office space on date the payment was applied to petitioner’s rent payment for date prepaid rent applicable to future tax years is generally deducted either ratably over the period of the lease or the rental period to which it applies or if certain requirements are met in the year it was paid howe v commissioner tcmemo_2000_291 petitioner has not made any argument as to why this prepaid rent expense should be deductible in and the evidence introduced at trial does little to clarify the matter we have no information about the period of the lease or the period to which the prepayment applies we are left to speculate whether the prepayment was a security deposit being applied to petitioner’s date rent payment and we must even question whether petitioner already deducted the prepayment in assuming he even filed a return for that year because of these gaps in the record petitioner has ultimately failed to properly substantiate the deductibility in of this prepaid rent expense 7it seems probable that petitioner also rented his office in june and date and may have rented it for the entire tax_year but if so he has not met his burden_of_proof as to the additional rent payments or their amounts office where he conducted business activities consequently petitioner’s expenses for office space and parking are ordinary and necessary business_expenses and petitioner has substantiated those expenses see sec_162 davis v commissioner tcmemo_2006_272 whitaker v commissioner tcmemo_1988_418 we will therefore allow petitioner to deduct dollar_figure in office rent and parking expenses for with respect to petitioner’s remaining expenses we conclude that he has failed to explain how they relate to his businesses and further that petitioner’s own self-serving testimony is insufficient to establish the required relationship under the facts of this case ii nol carryforward and carryback deductions petitioner testified that from approximately to my net operating losses from business operations exceeded my gross_receipts to the extent he is claiming that he can deduct nol carryforwards and carrybacks for and we disagree to carry forward or carry back nols a taxpayer must prove the amount of the nol carryforward or carryback hawks v commissioner tcmemo_2005_155 see 25_tc_1100 revd and remanded on other grounds 8although parking expenses may be personal commuting expenses respondent in footnote of his brief concedes that petitioner made payments for rent and parking that satisfy sec_162 as office rental expenses for petitioner’s investment_company f 2d 5th cir petitioner did not introduce any evidence regarding his nol carryforwards or carrybacks accordingly petitioner is not entitled to nol carryforward or carryback deductions for hi sec_2001 and tax years iii additions to tax respondent determined that petitioner is liable for additions to tax under sec_6651 and pursuant to sec_7491 respondent has the burden of production with respect to these additions to tax and is therefore required to come forward with sufficient evidence indicating that it is appropriate to impose the relevant penalty see 116_tc_438 however once the commissioner meets his burden of production the taxpayer must come forward with evidence sufficient to persuade a court that the commissioner’s determination is incorrect id pincite a sec_6651 addition_to_tax sec_6651 imposes an addition_to_tax for failure_to_file a timely return unless the taxpayer proves that such failure is due to reasonable_cause and not willful neglect see 469_us_241 petitioner concedes that he did not file federal_income_tax returns for hi sec_2001 and tax years he has not argued or introduced any evidence suggesting that his failures to file were due to reasonable_cause and not willful neglect accordingly we sustain respondent’s imposition of the additions to tax under sec_6651 b sec_6651 addition_to_tax sec_6651 imposes an addition_to_tax for failure to timely pay the amount of tax shown on a return the commissioner’s burden of production with respect to the sec_6651 addition_to_tax requires that the commissioner introduce evidence that a return showing the taxpayer’s tax_liability was filed for the year in question in a case such as this where the taxpayer did not file a return the commissioner must introduce evidence that an sfr substitute for return satisfying the requirements of sec_6020 was made see cabirac v commissioner t c 127_tc_200 affd 521_f3d_1289 10th cir the sec_6651 addition_to_tax is not imposed if the taxpayer proves that the failure to pay is due to reasonable_cause and not willful neglect under sec_6651 a return prepared by the secretary pursuant to sec_6020 is treated as a return filed by the taxpayer for the purpose of determining the amount of an addition_to_tax under sec_6651 to constitute a sec_6020 return the return must be subscribed it must contain sufficient information from which to compute the taxpayer’s tax_liability and the return form and any attachments must purport to be a ‘return’ spurlock v commissioner tcmemo_2003_ petitioner concedes that respondent prepared sec_6020 returns for hi sec_2001 and tax years those returns were entered into evidence as joint exhibits because petitioner did not fully pay the tax_liabilities as shown on the sec_6020 returns respondent has met the burden of production with respect to the sec_6651 additions to tax further petitioner has not argued or introduced any evidence suggesting that his failures to pay are due to reasonable_cause and not willful neglect we therefore sustain respondent’s imposition of the addition_to_tax under sec_6651 the court has considered all of petitioner’s contentions arguments requests and statements to the extent not discussed herein we conclude that they are meritless moot or irrelevant to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number ------------------- ----------------------- ------------------------ - --------------------------------------- legend legend a -------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- telephone number --------------------- ------------------------------- --------------------------------------------------- refer reply to cc ita b07 plr-163425-04 date september ----------------------- b -------------------------- c ---------------- date ----------------------- date ---------------------------- date ------------------------------ dear ---------------- this ruling replies to the letter and enclosures requesting an extension of time under sec_301_9100-1 of the procedure and administration regulations for a to file form_3115 application_for change in accounting_method this request was made in accordance with sec_301_9100-3 facts a requests an extension of time to file its form_3115 application_for change in accounting_method a’s form_3115 seeks to make changes in its method_of_accounting to deduct prepaid expenses as provided in sec_1_263_a_-4 and to utilize the recurring_item_exception under sec_1_461-5 a sought to file form_3115 for this purpose under the provisions of revproc_2004_23 2004_1_cb_785 that filing requires three steps to be taken all on or before the 6-month extended due_date for the filing of a’s partnership return making the change on its timely filed partnership return filing one copy of its form_3115 prepared in duplicate with the partnership return and filing the other copy of its form_3115 with the irs national_office at the address provided for changes under revproc_2004_23 a timely filed its partnership return which was prepared and assembled by b on date the last day of the 6-month extension for its tax_year ended date a represents that on its return a implemented the requested changes in its methods_of_accounting to deduct prepaid expenses and to utilize the recurring_item_exception plr-163425-04 previously on date a filed a copy of its form_3115 which was prepared by c with the irs national_office however a did not attach the original of its form_3115 to its partnership return for the year_of_change as required by revproc_2002_9 2002_1_cb_327 and revproc_2004_23 shortly after filing its partnership tax_return a discovered its failure to attach its form_3115 to its partnership tax_return a contacted b and soon thereafter a submitted this request for an extension of time to file law and analysis revproc_2002_9 provides the procedures by which a taxpayer may obtain automatic consent to change certain methods_of_accounting a taxpayer complying with all the applicable provisions of this revenue_procedure has obtained the consent of the commissioner of the irs to change the taxpayer's method_of_accounting under sec_446 and the regulations thereunder section dollar_figure of revproc_2002_9 provides in part that consent is granted only to the extent that the taxpayer complies with all the applicable provisions of the revenue_procedure and implements the change in method_of_accounting for the requested year_of_change section a of revproc_2002_9 provides that a taxpayer changing a method_of_accounting pursuant to revproc_2002_9 must complete and file a form_3115 in duplicate the original must be attached to the taxpayer's timely filed including extensions original federal_income_tax return for the year_of_change and a copy with signature of the form_3115 must be filed with the irs national_office no earlier than the first day of the year_of_change and no later than when the original is filed with the federal_income_tax return for the year_of_change sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make certain regulatory elections sec_301_9100-1 defines a 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_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer plr-163425-04 acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been satisfied accordingly an extension of time is hereby granted for a to file the required form_3115 in accordance with rev procs and this extension shall be for a period of days from the date of this ruling please attach a copy of this ruling to the form_3115 when it is filed except as specifically ruled upon above no opinion is expressed or implied concerning the federal_income_tax consequences arising from a's activities further we express no opinion on whether a is qualified to file the forms under revproc_2004_23 and revproc_2002_9 otherwise meets the requirements of that revenue_procedure and that the requested changes in accounting methods described above meet the requirements of that revenue_procedure pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to the partnership's authorized representatives this ruling is directed only to the partnership that requested it sec_6110 provides that it may not be used or cited as precedent sincerely george baker chief branch office of associate chief_counsel income_tax accounting


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 - plr-121612-06 date date company ----------------------------- -------------------------- -------------------------------- shareholders ------------------------------------------------------- --------------------------------------------------- ------------------------------------------------------- ----------------------------------------------------- ------------------------------------------------------- properties ----------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ ------------------------------------------------- a b c d e f g h ----------------- ---------------------- -- ---- ------------- ------------- ------- ------- ------------- ------------- ----------- ------------- ------------- plr-121612-06 i k m n p dear -------------- this letter responds to a letter from your authorized representatives dated date submitted on behalf of company requesting a ruling that the rental income received by company from the properties is not passive_investment_income within the meaning of ' d c i of the internal_revenue_code facts company incorporated on a elected under ' a to be an s_corporation company through its c employees c shareholders and approximately d effective b company has accumulated_earnings_and_profits it owns leases and manages commercial real_estate including office buildings and warehouses contractors provides various services in leasing and managing the properties these services include maintenance and repair of building structural_components and systems including roofs walls and floors as well as electrical air conditioning and plumbing systems maintenance cleaning and repair of gutters and downspouts parking lot maintenance and repair pressure cleaning of walkways and parking lots landscaping weed control and irrigation system maintenance maintenance and inspection of fire safety equipment elevator services janitorial services window cleaning glass and window repair maintenance and repair of interior and exterior lighting removal and replacement of wallpaper interior and exterior painting graffiti removal pest control mail delivery services emergency lockout services direct response to tenant calls for minor plumbing repairs and first response to hurricane damage company received or accrued approximately e in rents and paid_or_incurred approximately f in relevant expenses for g on the properties the comparable figures for h are i and k respectively and the figures for m are n and p respectively plr-121612-06 law and analysis except as provided in ' g ' a provides that a small_business_corporation may elect in accordance with the provisions of ' to be an s_corporation sec_1362 provides that an election under ' a terminates whenever the corporation i has accumulated_earnings_and_profits at the close of each of three consecutive tax years and ii has gross_receipts for each of such tax years more than percent of which are passive_investment_income the term passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities except as otherwise provided in ' d c ' d c i provides that sec_1_1362-2 of the income_tax regulations provides that rents means amounts received for_the_use_of or the right to use property whether real or personal of the corporation sec_1_1362-2 provides that rents does not include rents derived in the active trade_or_business of renting property rents received by a corporation are derived in an active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation conclusion based solely on the facts and representations submitted we conclude that the rents company receives from the properties are not passive_investment_income under ' d c i except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding company's eligibility to be an s_corporation further the passive_investment_income rules of ' are independent of the passive_activity rules of ' unless an exception under ' applies the rental_activity remains passive for purposes of ' plr-121612-06 under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative this ruling is directed only to the taxpayer who requested it according to ' k this ruling may not be used or cited as precedent sincerely s mary beth collins senior technician reviewer branch office of associate chief_counsel passthroughs and special industries -------------------------------------- enclosures copy for ' purposes cc ---------------------- ----------------------------- --------------------- ------------------------------- ----------------------------- --------------------------------- ----------------------------------------------- ----------------------------------------


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp plr-108015-99 date date parent merger sub target us sub us sub foreign sub foreign sub foreign sub foreign sub country s plr-108015-99 country t country u date date v w dear this letter responds to your date request for rulings on certain federal_income_tax consequences of a proposed transaction the information submitted in that request and later correspondence is summarized below the rulings contained in this letter are based on the facts and representations submitted under penalties of perjury in support of the request for rulings verification of this information may be required as part of the audit process parent is a diversified industrial corporation that joins with its includible affiliates in filing a consolidated federal_income_tax return on date parent merged newly formed wholly owned merger sub into target an unrelated corporation in exchange solely_for_voting_stock of parent the merger making target a wholly owned subsidiary of parent at the time target wholly owned us sub and v percent of foreign sub a country t corporation us sub wholly owned us sub and foreign sub a country s_corporation and foreign sub wholly owned foreign sub a country u corporation on date us sub liquidated into target under state law the dissolution us sub then did the same target now owns all of foreign sub and v percent of foreign sub foreign sub continues to wholly own foreign sub in a separate chain of corporations parent indirectly owns all the stock of foreign sub a country s_corporation for what are represented to be good business reasons parent proposes the following transactions i target will transfer its stock in foreign sub to foreign sub the foreign sub transfer plr-108015-99 ii foreign sub will sell the foreign sub stock to foreign sub for cash the foreign sub sale iii target will transfer all the stock of foreign sub representing w percent of target’s assets to foreign sub in exchange for equal fair_market_value of stock in foreign sub the foreign sub transfer the taxpayer_representative states that to its best knowledge and belief the merger will qualify as a reorganization under sec_368 and sec_368 of the internal_revenue_code if not disqualified by the foreign sub transfer in addition the taxpayer_representative states that the foreign sub sale is described in sec_304 based solely on the information submitted and representations made we rule as follows provided the merger otherwise qualifies as a reorganization under sec_368 and sec_368 its status as such will not be affected by the foreign sub transfer the foreign sub transfer followed by the foreign sub sale will be taxable under sec_367 unless target enters into a gain_recognition_agreement gra and complies with all the provisions of sec_1_367_a_-8 of the income_tax regulations under sec_1_367_a_-8 the gra will be triggered if i foreign sub disposes of the stock of foreign sub or ii foreign sub disposes of the stock of foreign sub see sec_1_367_a_-8 a deemed disposition may occur for example under sec_301 as a result of the sec_304 transaction described above because foreign sub is a controlled_foreign_corporation within the meaning of sec_957 any dividends deemed paid_by foreign sub and or foreign sub to foreign sub under sec_304 will be subpart_f_income to target subject_to any applicable exceptions sec_954 the foreign sub transfer will be taxable under sec_367 unless target enters into a gra and complies with all the provisions of sec_1_367_a_-8 no opinion is expressed about the tax treatment of the transactions described above under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the above rulings in particular no opinion was requested plr-108015-99 and none is expressed regarding i whether the merger qualifies as a reorganization under sec_368 ii whether the foreign sub transfer qualifies under sec_368 or sec_351 iii whether the foreign sub sale is described in sec_304 iv whether the dissolution is a complete_liquidation under sec_332 for federal_income_tax purposes and v whether the foreign sub transfer qualifies under sec_368 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in these transactions must attach a copy of this ruling letter to the taxpayer’s federal_income_tax return for the taxable_year in which the transactions are completed in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to each of your authorized representatives sincerely yours assistant chief_counsel corporate by wayne t murray senior technician reviewer branch


internal_revenue_service number release date index numbers -------------------------- ---------------------------------------------- ------------------------ --------------------------------- ------------------------------------- -------------------------------- 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-122209-09 date date legend x --------------------------------------------------- ---------------------------------------------- d1 d2 country ------------------- -------------------------- ------------ dear ---------------- this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed on d1 under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d2 however x inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes effective d2 plr-122209-09 law and analysis sec_301_7701-3 provides 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 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 guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single owner having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 and iii provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_7701-3 provides that an election under sec_301_7701-3 must be signed by - a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organizational documents to make the election and who represents to having such authorization under penalties of perjury sec_301_7701-3 provides that if a purchasing_corporation makes an election under sec_338 regarding an acquired subsidiary an election under sec_301 c i for the acquired subsidiary can be effective no earlier than the day after the acquisition_date within the meaning of sec_338 under sec_301_9100-1 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 except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 plr-122209-09 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a properly executed form_8832 effective d2 with the appropriate service_center to elect to be classified as a disregarded_entity 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 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely curt g wilson curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court foy d and barbara f smith petitioners v commissioner of internal revenue respondent docket no filed date foy d and barbara f smith pro sese rebecca dance harris for respondent memorandum findings_of_fact and opinion gale judge respondent determined deficiencies of dollar_figure and dollar_figure with respect to petitioners’ and federal_income_tax respectively after concessions the issues for decision 1at the conclusion of the trial petitioners asserted for the first time that they were entitled to certain itemized_deductions that they had not claimed on their return the continued are whether petitioners are entitled to depreciation_deductions for and in amounts greater than those respondent allowed whether petitioners are entitled to a dollar_figure ordinary_loss for whether petitioners are entitled to any additional itemized_deduction for home mortgage interest for beyond that conceded by respondent whether petitioners are entitled to deduct additional_amounts attributable to loan transaction charges for rental real_estate for and whether petitioners are entitled to any additional itemized_deductions for charitable_contributions for beyond those respondent conceded unless otherwise noted all section references are to the internal_revenue_code_of_1986 as in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure all dollar amounts have been rounded to the nearest dollar continued court directed the parties to confer after trial and to file status reports concerning petitioners’ itemized_deduction claims after reviewing petitioners’ substantiation respondent concedes that petitioners are entitled to deductions for state and local_taxes of dollar_figure mortgage interest of dollar_figure and charitable_contributions of dollar_figure respondent was unwilling to concede dollar_figure of petitioners’ claimed mortgage interest_deduction and dollar_figure of petitioners’ claimed charitable_contribution deductions we accordingly address those issues hereinafter 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 the petition was filed petitioners resided in tennessee allocation of value between land and buildings petitioners owned several rental real_estate properties as well as a mobile home during the years at issue these properties were all in rutherford county tennessee and included properties at the following addresses edwards street a and b colonial circle and reynolds drive and reynolds drive and hickory street hickory street properties and pearcy street pearcy street properties and a and b harrell street harrell street property petitioners claimed depreciation_deductions with respect to the properties based on allocations of value between the land and the buildings that were estimated by their return preparer and for the mobile home on the basis of a year life respondent determined in a timely notice_of_deficiency that dollar_figure and dollar_figure of depreciation_deductions for and respectively should be disallowed because the allocations to building values were excessive the notice further disallowed dollar_figure and dollar_figure of depreciation_deductions for and respectively with respect to the mobile home hvac units petitioners installed new hvac units in the harrell street and hickory street properties in and at a cost of dollar_figure and dollar_figure respectively petitioners claimed deductions equal to the full cost of each unit as a repair expense in the year of installation the notice_of_deficiency disallowed these deductions allowing instead depreciation_deductions with respect to the units of dollar_figure and dollar_figure for and respectively for the harrell street property and dollar_figure for for the hickory street properties pearcy street improvements around or petitioners made improvements to the pearcy street properties including replacing roofs installing new carpets and painting walls petitioners claimed depreciation_deductions attributable to these improvements of dollar_figure for both and and respondent disallowed dollar_figure of these amounts for each year trust dealings in petitioners purchased an offshore_trust package from global prosperity group in connection with this purchase petitioners paid dollar_figure in date to innovative financial consultants for specified trust materials and made a wire transfer of dollar_figure in date to an account chosen by global prosperity group innovative financial consultants represented to petitioners that they could lawfully avoid income taxes by placing their income and assets in an offshore_trust in respondent informed petitioners that the promoters of an abusive trust scheme marketed under the name of innovative financial consultants had been indicted for and one of the promoters had already pleaded guilty to conspiracy to defraud the united_states petitioners claimed an ordinary_loss of dollar_figure for that they maintain is attributable to their dealings with innovative financial consultants and global prosperity group the notice_of_deficiency disallowed the loss opinion allocation of value between land and buildings respondent disallowed depreciation_deductions totaling dollar_figure and dollar_figure for and respectively on the grounds that petitioners had apportioned too much of the total value of certain residential rental real_estate propertie sec_2 to depreciable improvements rather than to nondepreciable land see sec_1_167_a_-2 income_tax regs under sec_1_167_a_-5 income_tax regs the depreciation allowance must be based on the proportionate value of the building in relation to that of the land at the time of acquisition respondent’s determination apportioned value 2the parties do not dispute that all of petitioners’ real_estate properties at issue except a mobile home discussed hereinafter were residential rental properties between land and buildings on the basis of local property_tax assessments for which made such an apportionment petitioners bear the burden of proving error in respondent’s determination see rule a 290_us_111 see also 503_us_79 292_us_435 except in the case of the harrell street property which was acquired in the local property_tax assessments on which respondent relied are in evidence petitioner foy d smith petitioner testified that the allocations on the returns were made by petitioners’ return preparer who had extensive experience in the area and made his calculations on the basis of a standard he used for other properties in the area petitioners offered no further particulars regarding the basis for their return preparer’s allocations on this record petitioners have failed to demonstrate error in respondent’s determination we are persuaded that the allocations made on the basis of the local property_tax assessment are the only reliable estimates of the depreciable 3petitioners have neither claimed nor shown entitlement to any shift in the burden_of_proof to respondent under sec_7491 with respect to any factual issues in this case see h conf rept pincite 1998_3_cb_747 explaining that the taxpayer has the burden of proving that the conditions for invoking sec_7491 have been met portions of the real properties at issue we therefore sustain respondent’s determination to disallow petitioners’ claimed depreciation_deductions to the extent of dollar_figure and dollar_figure for and respectively mobile home depreciation respondent disallowed dollar_figure and dollar_figure of petitioners’ claimed depreciation_deductions in and respectively for a mobile home respondent determined that the mobile home is residential_rental_property which has a recovery_period of years see sec_168 petitioners contend that they are entitled to depreciate the mobile home over years residential_rental_property is defined for the purposes of allowance for depreciation as any building or structure if percent or more of the gross rental income from such building or structure for the taxable_year is rental income from dwelling units sec_168 where a mobile home has been permanently affixed to the land the mobile home may be residential_rental_property and thus depreciable using a year recovery_period rupert v commissioner tcmemo_2001_ affd 57_fedappx_212 5th cir petitioners offered no evidence that the mobile home was readily movable in a manner that would distinguish it from the mobile home at issue in rupert we accordingly sustain respondent’s determination that petitioners’ mobile home was residential_rental_property depreciable over years depreciation of the hvac units respondent disallowed the dollar_figure and dollar_figure deductions petitioners claimed in connection with the installation of hvac units in at the harrell street property and in at the hickory street properties respondent determined that the amounts petitioners claimed as repair expenses must be depreciated and recovered over a period of years the depreciation period of the rental properties at which the hvac units were installed petitioners contend that the expenditures may be deducted completely in the year that the hvac units were placed_in_service or alternatively that the units should be depreciated over a period shorter than years generally additions to or improvements of property are depreciated in the same manner as the underlying property see sec_168 the same recovery_period and method must be used with the recovery_period commencing on the later of the date when the addition or improvement is placed_in_service or the date when the underlying property is placed_in_service id the residential rental real properties at which the hvac units were installed are sec_1250 class property because they are real_property depreciable and do not meet the requirements of sec_1245 see sec_1250 neither sec_168 nor the regulations thereunder define additions to or improvements of property the caselaw looks to the regulations promulgated under the former investment_tax_credit ie sec_1_48-1 income_tax regs 109_tc_21 the distinction turns on whether the property being considered is tangible_personal_property sec_1245 property or structural_components of the buildings sec_1250 property see id pincite the regulations promulgated under sec_1245 define tangible_personal_property with regard to sec_1_48-1 income_tax regs sec_1_1245-3 income_tax regs the regulations promulgated under sec_1250 incorporate the meanings for building and structural_components as defined by sec_1_1245-3 income_tax regs which in turn incorporate the meanings for those terms as defined by sec_1_48-1 income_tax regs sec_1_1250-1 income_tax regs the interaction of the statute and the regulations indicates that congress intended to retain the test under the former investment_tax_credit for the purpose of determining whether property is sec_1245 property or sec_1250 property hosp corp of am v commissioner supra pincite the test under the investment_tax_credit is described in sec_1_48-1 income_tax regs the regulations state in part that the term ‘structural components’ includes all components whether in on or adjacent to the building of a central air conditioning or heating system sec_1_48-1 income_tax regs respondent determined that the hvac units petitioners installed at the harrell street and hickory street properties were central heating and air conditioning systems and thus were structural_components of a building petitioners failed to provide any evidence that the hvac units were window units or otherwise movable rather than part of a central system consequently we sustain respondent’s determination depreciation of improvements respondent disallowed depreciation_deductions of dollar_figure for both and with respect to improvements on the pearcy street properties namely roof replacements carpet installation and painting respondent determined that the improvements should be depreciated over a period of years the period applicable to the underlying properties whereas petitioners contend that they are entitled to amounts greater than those resulting from the use of the period determined by respondent as with the hvac units the issue presented is whether these improvements are structural_components that must be depreciated over the same period as the underlying property or are instead tangible_personal_property the roofs’ status is clear see sec_1_48-1 income_tax regs the term ‘building’ generally means any structure or edifice usually covered by a roof consequently the expenditures_for roof replacements must be capitalized and depreciated using the same 5-year period and method as the underlying residential_rental_property commencing when the replacements were placed_in_service even if it were conceded that the repainting was a repair expense and the carpet was tangible_personal_property petitioners have provided no breakdown of the respective costs for roof replacements carpet replacements and repainting accordingly we sustain respondent’s determination loss from offshore_trust petitioners claimed a dollar_figure ordinary_loss on their return which respondent disallowed petitioner testified that the loss was for moneys paid over to global prosperity group and innovative financial consultants as reflected in our findings_of_fact petitioners made two payments to the foregoing entities totaling dollar_figure in in connection with establishing an offshore_trust petitioners claimed a dollar_figure loss for representing the amount they claim had not been returned to them when they learned from respondent that promoters of innovative financial consultants had been indicted petitioners have the burden of establishing their entitlement to a deduction see rule a indopco inc v commissioner u s pincite new colonial ice co v helvering u s pincite the record is devoid of evidence that would support petitioners’ claimed dollar_figure loss while it has been stipulated that petitioners paid out dollar_figure in in connection with their establishment of an offshore_trust petitioner’s testimony concerning how that amount became a dollar_figure loss in was conclusory and uninformative notwithstanding the court’s repeated questioning whether considered as a loss from a transaction entered into for profit see sec_165 or a theft_loss see sec_165 petitioners’ claim suffers the fatal defect of a failure to prove their adjusted_basis as of see sec_165 316_f2d_56 8th cir affg tcmemo_1962_77 there is no evidence of petitioners’ dealings with the trust between and that might affect basis or explain the calculation of the claimed dollar_figure loss moreover insofar as a theft_loss might be concerned the evidentiary vacuum for the years after casts substantial doubt upon whether the purported theft was discovered and any reasonable_prospect_of_recovery ceased to exist in some year before see sec_165 92_tc_958 affd without published opinion 921_f2d_280 9th cir sec_1_165-1 income_tax regs we accordingly sustain respondent’s determination disallowing petitioners’ dollar_figure loss claimed for home mortgage interest after trial petitioners were afforded an opportunity to substantiate certain itemized_deductions claimed at trial petitioners claimed a dollar_figure deduction for home mortgage interest respondent has accepted petitioners’ substantiation and conceded all but dollar_figure of the claimed deduction respondent’s position is that the disputed dollar_figure is attributable to mortgage interest for a rental property that is not properly deductible on schedule a itemized_deductions petitioners submitted a copy of a form_1098 mortgage interest statement issued by bank of the south showing two separate mortgage interest payments of dollar_figure and dollar_figure for a total of dollar_figure for relating to sunward drive la vergne tennessee which has been stipulated as petitioners’ residence when they filed the petition we are satisfied that petitioners have substantiated dollar_figure of home mortgage interest deductible pursuant to sec_163 4see supra note 5respondent based his decision to reject dollar_figure of petitioners’ claimed home mortgage interest_deduction on a bank document petitioners submitted showing dollar_figure as attributable to interest and loan charges for the harrell street property respondent apparently believes this amount constitutes part of petitioners’ claimed dollar_figure in home mortgage interest however the form_1098 petitioners submitted reports both the dollar_figure in home mortgage interest_paid with respect to petitioners’ residence and dollar_figure of interest_paid with respect to the harrell street property that amount added to the dollar_figure of interest continued loan charges petitioners have also claimed entitlement to a deduction for loan charges of dollar_figure paid with respect to the harrell street property however loan charges may not be deducted and must instead be capitalized and amortized over the life of the loan 308_us_488 75_tc_424 affd without published opinion 691_f2d_490 3d cir as petitioners have provided no evidence regarding the life of the underlying loan they have not substantiated any deduction for loan charges in charitable_contributions petitioners’ posttrial claims also include dollar_figure of itemized charitable_contribution deductions respondent rejected dollar_figure of this amount dollar_figure as attributable to payment to an individual and dollar_figure for lack of substantiation the dollar_figure deduction is attributable to a check payable to the order of jon crump with a memo line bearing the notation continued shown as paid on the bank document dollar_figure of the dollar_figure shown on the bank document was attributable to loan charges rather than interest produces total interest_paid of dollar_figure for the harrell street property this latter amount is the amount shown on petitioners’ schedule e supplemental income and loss from rental real_estate royalties partnerships s_corporations estates trusts remics etc as mortgage interest_paid for the harrell street property we conclude that the dollar_figure in interest not conceded by respondent has been accounted for on petitioners’ schedule e children in ukraine in order to be deductible under sec_170 a contribution must be to or for_the_use_of certain governmental entities or a corporation trust or community chest fund or foundation sec_170 petitioners have provided no evidence that jon crump was associated with any charitable_organization as an officer director or employee therefore petitioners have not shown entitlement to their claimed charitable_contribution_deduction for dollar_figure that respondent has not accepted petitioners also claimed and respondent rejected charitable_contribution deductions for cash contributions totaling dollar_figure that petitioners describe in their posttrial submission as made to church in ukraine petitioners are required to maintain appropriate records for all charitable_contributions see sec_1_170a-13 income_tax regs petitioners have not provided any reliable records nor any receipts from a donee organization that would substantiate their claimed cash contributions see sec_1_170a-13 income_tax regs therefore petitioners have not substantiated their 6petitioners contend that they are required to maintain records only for contributions over dollar_figure and thus are not required to maintain records for each of the small cash contributions they contend were made to church in ukraine although sec_170 requires a contemporaneous written acknowledgment for donations over dollar_figure this requirement is in addition to the requirement that all charitable_contributions satisfy recordkeeping requirements established by the secretary continued claimed charitable_contribution_deduction of dollar_figure for purported cash contributions to church in ukraine to reflect the foregoing decision will be entered under rule continued see sec_170 sec_1_170a-13 income_tax regs while in certain limited circumstances we have allowed a deduction for small cash contributions to churches where there was credible testimony corroborating the claimed deduction see eg wasik v commissioner tcmemo_2007_148 fontanilla v commissioner tcmemo_1999_156 petitioners raised this claim only after trial and there is no sworn testimony or other competent evidence to support it


internal_revenue_service number release date index number ----------------- ------------------------ ------------------------------------------ legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- telephone number --------------------- refer reply to cc tege eb ec plr-140690-10 date date x restricted_stock ---------------------------------------------------------------------- employer ---------------- --------- dear ------------- this letter is in response to your request dated date in which you asked for consent to revoke an election you made under sec_83 of the internal_revenue_code code the facts as represented are as follows on date you were granted an award of x shares of restricted_stock by employer on or about date you filed an election under sec_83 of the code with the internal_revenue_service center where you file your individual tax_return the sec_83 election referenced all x shares of the restricted_stock received from employer on date on date you sent a letter to this office requesting consent to revoke your sec_83 election sec_83 of the code sets forth the rules for transfers of property in_connection_with_the_performance_of_services sec_83 provides that the excess of the fair_market_value of the property transferred at the time the property becomes substantially_vested over the amount if any paid for the property shall be included as compensation in the service provider's gross_income for the taxable_year in which the property becomes substantially_vested property is substantially_vested when it is either transferable or no longer subject_to a substantial_risk_of_forfeiture sec_83 of the code and sec_1_83-2 of the income_tax regulations permit the service provider to elect to include in gross_income the excess if any of the fair_market_value of the property at the time of transfer over the amount if any paid for the property as compensation_for services under sec_83 of the code an election plr-140690-10 made under sec_83 must be made in accordance with the regulations thereunder and must be filed with the internal_revenue_service no later than days after the date that the property is transferred to the service provider sec_83 of the code and sec_1_83-2 of the income_tax regulations provide that an election under sec_83 may not be revoked without the consent of the commissioner of the internal_revenue_service sec_1_83-2 provides that consent to revoke an election under sec_83 will be granted only in a case where the transferee is under a mistake of fact as to the underlying transaction and must be requested within days of the date on which the mistake first became known to the person who made the election the service has recognized the principle that an election made under the code or regulations may be revoked on or before the due_date for making the election section dollar_figure of revproc_2006_31 2006_1_irb_32 provides that a request for consent to revoke a sec_83 election will generally be granted if the request is filed on or before the due_date for making that sec_83 election in the instant case you filed your request to revoke your date sec_83 election within the day time period allowed under sec_83 for making the election based solely on the representations provided and the information and documents submitted consent to revoke your sec_83 election is granted except as specifically ruled above no opinion is expressed as to the federal tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning other tax consequences of sec_83 and its applicability to the transaction described above this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to your income_tax return for ------- sincerely thomas d scholz assistant branch chief executive compensation branch office of division counsel associate chief_counsel tax exempt and government entities


internal_revenue_service department of the treasury number release date index number 468a washington dc person to contact telephone number refer reply to cc psi br 6-plr-152900-01 date date re legend taxpayer plant location former parent parent commission dear this letter responds to the taxpayer’s request dated date for a revised schedule of ruling amounts in accordance with sec_1_468a-3 of the income_tax regulations relating to the plant's nuclear decommissioning fund fund taxpayer previously received a schedule of ruling amounts on a revised schedule of ruling amounts was requested on for the period beginning in a letter dated this office granted a revised schedule of ruling amounts beginning with the taxpayer’s fiscal_year that begins but determined that the portion of the request pertaining to the period from through had not been filed within the period prescribed by sec_1_468a-3 of the regulations on taxpayer submitted a new request for a schedule of ruling amounts for the period begiunning and ending along with a request for permission under sec_301_9100-3 of the regulations for the request for revised schedule of ruling amounts to be treated as timely filed the relief requested under sec_301_9100-3 was granted in a letter dated taxpayer as a part of its restructuring and withdrawal from the power generation industry expects to sell all of its interest in plant in the coming months and is requesting an extension of the previous schedule of ruling amounts to cover part of the period through the anticipated sale date information was submitted pursuant to section plr-152900-01 468a-3 h taxpayer directly owns a percent undivided tenancy_in_common in the plant which is situated in location taxpayer filed a consolidated_return with former parent through on that date former parent was acquired by parent and taxpayer as a result of the acquisition became a wholly-owned subsidiary of parent consequently after taxpayer will file a consolidated_return with parent the commission has exclusive regulatory jurisdiction over the rates of taxpayer and taxpayer is under the audit jurisdiction of the industry director natural_resources lm nr it is expected that the sale of taxpayer’s interest in the plant will include the facilities licenses records nuclear fuel and assets comprising both the qualified and nonqualified nuclear decommissioning trust funds relating to plant in addition the entity purchasing plant is expected to assume taxpayer’s liability for decommissioning plant and taxpayer expects to make no further payments to the qualified nuclear decommissioning trust fund following the sale of plant the estimated cost of decommissioning the plant is dollar_figure of which taxpayer's share is dollar_figure the commission in provided for decommissioning costs for the plant of dollar_figure to be included in taxpayer's cost of service for ratemaking purposes commission has not subsequently redetermined this amount and taxpayer will continue to receive the same amount of decommissioning charge as a component of its cost-based rates through the closing date of the sale of plant any additional expenses for decommissioning plant that are borne by taxpayer through the date of sale of the plant will be recouped through a non-bypassable contract termination charge paid with respect to taxpayer’s transmission and distribution activities and collected by taxpayer’s retail distribution company affiliates from their customers the funding_period and level_funding limitation period begins on and ends on the assumed after-tax rate of return to be earned by the assets of the fund is percent the rate of escalation to determine the future decommissioning cost of the plant is percent compounded annually the estimated date on which the plant will no longer be included in taxpayer's rate base for ratemaking purposes is the proposed method for decommissioning the plant is the prompt removal dismantling method taxpayer has determined the estimated period for which the fund is to be in effect is and the estimated_useful_life of the plant is therefore the qualifying percentage is percent plr-152900-01 no proceeding is pending before the commission that may result in an increase or decrease in the amount of decommissioning costs for the plant to be included in taxpayer’s cost of service sec_468a of the code provides that a taxpayer may elect to deduct the amount of payments made to a qualified decommissioning fund however sec_468a limits the amount_paid into such fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to this fund which is included in the taxpayer’s cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the total nuclear power plant as the period for which the nuclear decommissioning fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year and is made within ½ months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in among other things a direct ownership_interest including an interest as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such tax_year if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b the excess is not deductible by the electing taxpayer in addition under sec_1_468a-5 there are rules which provide that the internal_revenue_service may disqualify a nuclear decommissioning fund if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b plr-152900-01 sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes under sec_1_468a-3 the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer’s proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3 of the regulations provides that in general the amount for any_tax year in the level_funding limitation period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day on which the nuclear power plant will no longer be included in the taxpayer’s rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer’s share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer’s share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer’s qualifying interest in the plant under sec_1_468a-3 the qualifying percentage for any nuclear decommissioning fund is equal to a fraction the numerator of which is the number of tax years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of tax years in the estimated_useful_life of the applicable plant plr-152900-01 sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount we have examined the representations and the data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely upon these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations the commission has determined the decommissioning costs to be included in taxpayer’s cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations taxpayer as one of several owners of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by the commission and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts in regard to the commission satisfies the requirements of sec_468a of the code accordingly the schedule of ruling amounts requested by the taxpayer under sec_468a is approved as follows approved schedule of ruling amounts allocable to the taxpayer year approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of plr-152900-01 the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above in particular no opinion is expressed or implied concerning whether the contract termination charge is includible in the gross_income of and deductible by any entity other than taxpayer the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code payments made to such fund can qualify only to the extent they are made while taxpayer is the owner of the plant and only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the powers of attorney we are sending a copy of this ruling to your authorized representative we are also sending a copy of this letter_ruling to the industry director natural_resources lm nr pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer’s federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to psi 2-plr-153786-01 date date legend x a b c date date state p dollar_figureq dollar_figurer dear this responds to a letter dated date together with subsequent correspondence submitted on behalf of x requesting a ruling that x’s revenues from its crop-sharing farming arrangement will not be classified as passive_investment_income within the meaning of sec_1362 of the internal_revenue_code facts plr-153786-01 according to the information submitted x was incorporated in state on date as a c_corporation x is in the business of crop share farming and timber harvesting x owns p acres of farmland the property in state and participates in three separate crop sharing arrangements with a b and c with respect to the property x intends to elect to be treated as an s_corporation effective date x plans to enter into new separate farm lease agreements with each of the three tenants listed above the new leases state that a b and c must provide all labor machinery and equipment necessary to properly farm the land subject_to each lease under the leases x’s expenses relating to the property will include insurance ad_valorem_taxes and other taxes in addition x and the lessees each will furnish one-half of all lime fertilizer needed and provide one-half of the funds for any expenditures incurred regarding land forming and irrigation x will receive from a b and c of all crops rebates subsidies and payments of any kind the right to which arise from the property and the farming thereon the leases provide that x participate in a number of management activities members of x’s board_of directors will attend monthly meetings at which decisions regarding the leased property are made furthermore x in its sole discretion will make all decisions regarding the types of crops to be planted the acreage to be planted the location of the planted crops the marketing of its share of crops and land forming and irrigation needs a full-time_employee of x spends one-third of his time making daily visits to the property and participates in the property’s day to day management decisions including advising on crop production based on income and expenses from recent years x expects to receive or accrue dollar_figureq in rents and to pay or incur dollar_figurer in relevant expenses with respect to the property for its taxable_year beginning date law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect sec_1362 provides than an election under sec_1362 shall be terminated whenever at any time after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that an election under sec_1362 shall be terminated whenever the corporation has accumulated_earnings_and_profits at the close of each of consecutive taxable years and has gross_receipts for each of such taxable plr-153786-01 years more than percent of which are passive_investment_income any termination under this paragraph shall be effective on and after the first day of the first taxable_year beginning after the third consecutive taxable_year referred to above sec_1362 provides that except as otherwise provided the term passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1_1362-2 of the income_tax regulations provides that rents means amounts received for_the_use_of or the right to use property whether real or personal of the corporation sec_1_1362-2 provides that rents does not include rents derived in the active trade_or_business of renting property rents received by a corporation are derived in an active trade_or_business of renting property only if based on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including but not limited to the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation see also revrul_61_112 1961_1_cb_399 holding that amounts received by a corporation under share- farming agreements were not rents within the meaning of former sec_1372 where the corporation participated to a material degree in the production of farm commodities through physical work or management decisions or a combination of both conclusion based solely on the facts and the representations submitted we conclude that the rental income that x derives from the property will not be passive_investment_income as described in sec_1362 except as specifically set forth above we express no opinion as to the federal tax consequences of the transaction described above under any other provision of the code specifically we express no opinion on whether x is a small_business_corporation eligible to make an s election further the passive_investment_income rules of sec_1362 are completely independent of the passive_activity rules of section sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-153786-01 pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours matthew lay senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes