internal_revenue_service number release date index number --------------------------------------------------------- ------------------------ ------------------------------------ ----------------------------- in re -------------------------------- ------------------------------------ ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc corp b06 plr-151815-09 date date legend parent former parent sub sub date a date b year company official --------------------------------------------------------------------------------------- ----------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ----------------------- --------------------------------------------------------------------------------------- ----------------------- --------------------------------------------------------------------------------------- ----------------------- --------------------------------------------------------------------------------------- -------------------------- --------------------------------------------------------------------------------------- ----------------------- --------------------------------------------------------------------------------------- ----------------------------------------------------------- --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- ------------------------ plr-151815-09 tax professional --------------------------------------------------------------------------------------- ---------------------------------------- dear ------------------ this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election the extension is being requested for parent former parent sub and sub to make an election to file a consolidated federal_income_tax return with parent as the common parent under sec_1_1502-75 of the income_tax regulations effective for the taxable_year ended date a the election the material information is summarized below prior to date b former parent was the common parent of an affiliated_group the former parent group consisting of itself sub and sub which filed consolidated federal_income_tax returns on date b parent acquired all of the stock of former parent in a transaction not constituting a reverse_acquisition within the meaning of sec_1_1502-75 and because parent is an includible_corporation terminating the former parent group nevertheless the former parent group filed a consolidated federal_income_tax return for year parent filed a separate_return for its year the election was due no later than the last day prescribed by law including extensions of time for the filing of parent’s return but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for parent's former parent's sub 1's or sub 2's taxable years for which they want to make the election the taxable years in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed sec_1_1502-75 provides that a group which did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation which has been a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents to the regulations under sec_1502 if a group wishes to exercise its privilege of filing a consolidated_return such consolidated_return must be filed not later than the last day prescribed by law including extensions of time for filing the common parent's return under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than plr-151815-09 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 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections 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 sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_1502-75 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent to file the election provided parent shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly provided parent group qualifies substantively to file a consolidated_return for the applicable tax_year an extension of time is granted under sec_301_9100-3 until days from the date on this letter for parent to file the election parent having already filed its return must within days from the date on this letter amend its return to reflect a consolidated_return that includes parent’s activity for year and the activity of the former parent group members for year after date b including forms and parent must attach a copy of this letter to such return or if parent group files its return electronically parent group may attach a statement to the return that provides the date and control number of this ruling letter the above extension of time is conditioned on parent group's tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made by the applicable director's office upon plr-151815-09 audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers' tax_liability is lower sec_301_9100-3 we express no opinion as to whether parent group qualifies substantively to file a consolidated_return in addition we express no opinion as to the tax consequences of filing the return or the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the return and the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives sincerely _______________________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc corp - plr-107782-02 date date legend purchaser target seller seller x y date b date c date d company official company official dear this letter responds to a letter dated date submitted on behalf of purchaser and seller by their authorized representative requesting an extension of plr-107782-02 time under sec_301_9100-1 through of the procedure and administration regulations to file an election purchaser seller and seller are requesting an extension to file a sec_338 election under sec_338 and sec_338 of the internal_revenue_code and sec_1_338_h_10_-1 of the income_tax regulations with respect to purchaser’s acquisition of the stock of target sometimes hereinafter referred to as the election on date b all citations in this letter to regulations under sec_338 are to regulations in effect on date b additional information was received in a letter dated date the material information is summarized below purchaser is a professional services organization target was an s_corporation that was owned x by seller and y by seller on date b purchaser acquired all of the stock of target from seller and seller in exchange for cash it is represented that purchaser’s acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 on date d purchaser liquidated target purchaser seller and seller intended to file the election the election was due on date c but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for purchaser’s target’s seller 1's or seller 2’s taxable years in which the acquisition occurred the taxable years in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase sec_338 permits the purchasing and selling corporations to elect jointly to treat the target_corporation as deemed to sell all of its assets and distribute the proceeds in complete_liquidation a sec_338 election may be made for target only if it is a member of a selling_consolidated_group a member of a selling affiliated_group filing separate returns or an s_corporation sec_1_338_h_10_-1 under sec_301_9100-1 the commissioner has discretion to 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 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer plr-107782-02 acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338_h_10_-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for purchaser seller and seller to file the election provided purchaser seller and seller show they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser company official company official seller and seller explain the circumstances that resulted in the failure to timely file a valid election the information establishes that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the interests of the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that purchaser seller and seller have shown they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for purchaser seller and seller to file the election with respect to the acquisition of the stock of target as described above the above extension of time is conditioned on the filing within days of the date on this letter of all returns and amended returns if any necessary to report the transaction in accordance with the election and the taxpayers' purchaser's seller 1's seller 2's and target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 purchaser seller and seller must file the election in accordance with sec_1_338_h_10_-1 that is a new election on form_8023 must be executed on or after the date on this letter which grants an extension and filed in accordance with the instructions to the form a copy of this letter must be attached to the election form purchaser seller and seller must file or amend as applicable their returns to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year and to attach to the returns a copy of this letter and a copy of the election plr-107782-02 we express no opinion as to whether the acquisition sale of the target stock qualifies as a qualified_stock_purchase under sec_338 whether the acquisition sale of target stock qualifies for sec_338 treatment or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply purchaser must provide seller and seller with a copy of this letter this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter has been sent to the taxpayer cc sincerely yours ken cohen senior technician reviewer branch office of assistant chief_counsel corporate


t c memo united_states tax_court marty m morin and marilee d morin petitioners v commissioner of internal revenue respondent docket no filed date marty m morin and marilee d morin pro sese julie l payne for respondent memorandum findings_of_fact and opinion vasquez judge respondent determined the following deficiencies in and additions to petitioners' federal_income_tax marty m morin additions to tax_year deficiency sec_6651 a sec_6654 dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number marilee d morin additions to tax_year deficiency sec_6651 a sec_6654 dollar_figure -- -- big_number dollar_figure sec_601 big_number unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure after concessions ’ the issues for decision are whether petitioners are liable for the deficiencies determined by respondent whether marty m morin mr morin is liable for an addition_to_tax for failing to file a federal_income_tax return for whether petitioners are liable for additions to tax for failing to file federal_income_tax returns for and whether mr morin is liable for an addition_to_tax for failing to make estimated federal_income_tax payments for whether petitioners are liable for additions to tax for failing to make estimated federal_income_tax payments for and and whether petitioners engaged in behavior warranting the imposition of a penalty pursuant to sec_6673 a ' respondent concedes that petitioners did not receive any gain from the sale of real_estate in findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time they filed their petition mr morin and marilee d morin mrs morin husband and wife resided in yakima washington in and mr morin earned dollar_figure dollar_figure and dollar_figure respectively from les morin subaru as compensation_for his services in and mr morin received prizes from subaru of america inc in the amounts of dollar_figure and dollar_figure respectively in mr morin received a retirement account distribution from common sense shareholder services in the amount of dollar_figure mr morin had not yet attained the age of at the time he received this distribution opinion sec_61 defines gross_income as all income from whatever source derived gross_income includes compensation_for services see sec_61 unless certain exceptions apply prizes awards and any amount received from an annuity including a retirement_plan are gross_income see sec_72 sec_74 in general the commissioner's determinations in a notice_of_deficiency are presumed correct and taxpayers bear the burden of proving them erroneous see rule a petitioners do not challenge the facts on which respondent's determinations are based or respondent's calculation of tax petitioners stipulated that during and mr morin received compensation from les morin subaru a retirement distribution and prizes from subaru of america inc petitioners have not demonstrated that any exception contained in the tax laws excludes the prizes or the retirement distribution from income instead petitioners advanced shopworn arguments characteristic of tax-protester rhetoric that has been universally rejected by this and other courts see 848_f2d_1007 9th cir affg tcmemo_1987_225 784_f2d_1006 9th cir petitioners allege the wages they received are not income the internal_revenue_service did not send a notice_of_deficiency and did not file a return as mandated by sec_6020 petitioners were not employees petitioners did not receive any wages as defined by sec_3121 and taxing their wages violates the sixteenth_amendment we shall not painstakingly address petitioners' assertions with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit 737_f2d_1417 5th cir accordingly we sustain respondent's determination that these amounts are income we must next decide whether this income is community_property income under washington law with certain exceptions all property including compensation earned by a spouse acquired after marriage is presumed community_property and treated as acquired or earned by each spouse see wash rev code ann sec_26 through west zgielasko v commissioner tcmemo_1993_177 community_property income is attributable percent to each spouse see 282_us_101 petitioners presented no evidence demonstrating that mr morin's compensation the prizes or the retirement distribution are not community_property therefore we conclude that under washington law this income is community_property and must be allocated percent to each petitioner see also rule a respondent also determined that the retirement distribution is subject_to an additional tax pursuant to sec_72 respondent in the separate notices of deficiency sent to mr morin and mrs morin determined mr morin is taxable on percent of a the compensation he received from les morin subaru b the retirement distribution he received from common sense shareholder services and c the prizes he received from subaru of america inc mrs morin is taxable on percent of the gain from her sale of real_property mr morin is taxable on percent of the gain received by mrs morin and mrs morin is taxable on percent of the net_income earned by mr morin respondent took these inconsistent positions to protect respondent's rights under washington law because petitioners were uncooperative married nonfilers sec_72 provides for a 10-percent additional tax on the taxable_amount of an early distribution from a qualified_retirement_plan sec_72 provides exceptions to the tax for certain types of distributions petitioners did not offer any evidence at trial related to this issue and failed to address it on brief therefore we hold that petitioners are liable for the additional tax pursuant to sec_72 see rule a respondent determined that mr morin is liable for an addition_to_tax pursuant to sec_6651 for and that petitioners are liable for additions to tax pursuant to sec_6651 for and sec_6651 imposes an addition_to_tax for failure_to_file a return on the date prescribed determined with regard to any extension of time for filing unless the taxpayer can establish that such failure is due to reasonable_cause and not due to willful neglect the taxpayer has the burden of proving the addition is improper see rule a 469_us_241 petitioners presented no evidence showing that mr morin filed a return for that they filed returns for and or that these failures to file were due to reasonable_cause and not due to willful neglect accordingly we hold that mr morin is liable for an addition_to_tax pursuant to sec_6651 for and that petitioners are liable for the additions to tax pursuant to sec_6651 for and respondent also determined that mr morin is liable for an addition_to_tax pursuant to sec_6654 for failing to make estimated_tax payments for and that petitioners are liable for additions to tax pursuant to sec_6654 for failing to make estimated_tax payments for and petitioners did not offer any evidence at trial related to this issue and they failed to address it on brief therefore we hold that mr morin is liable for an addition_to_tax pursuant to sec_6654 for failing to make estimated_tax payments for and that petitioners are liable for additions to tax pursuant to sec_6654 for failing to make estimated_tax payments for and see rule a by motion made at the conclusion of trial respondent requested that the court impose a penalty pursuant to sec_6673 sec_6673 authorizes this court to require a taxpayer to pay to the united_states a penalty not to exceed dollar_figure if the taxpayer took frivolous positions in the proceedings or instituted the proceedings primarily for delay a position maintained by the taxpayer is frivolous where it is contrary to established law and unsupported by a reasoned colorable argument for change in the law 791_f2d_68 7th cir petitioners’ position based on stale and meritless contentions is manifestly frivolous and groundless and they have wasted the time and resources of this court accordingly we shall grant respondent's motion and we shall impose a penalty of dollar_figure pursuant to sec_6673 to reflect the foregoing an appropriate order will be issued and decision will be entered under rule


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uniform issue list number contact person identification_number contact number employer_identification_number form required to be filed form tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in sec_501 of the internal_revenue_code the code recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final because you do not qualify for exemption as an organization described in code sec_501 of the code donors may not deduct contributions to you under sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance with their instructions we will make this letter and our proposed adverse determination_letter available for public inspection under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions instructions in notice action if you agree with our deletions you do not need to take any further if you disagree with our proposed deletions follow the if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your or the irs customer service number for businesses the irs customer service number for people with hearing impairments is sincerely lois g lerner director exempt_organizations enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date contact person uniform issue list number identification_number contact number fax number employer_identification_number legend you r applicant president vice president trustee trustee trustee govern ing body dear we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code as an organization described in sec_501 based on the information submitted we have concluded that you do not qualify for exemption under that section the basis for our conclusion is set forth below facts you were formed as a nonprofit corporation under the laws of state on date you filed form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code on date your articles of incorporation the articles state that you are formed for the following purposes a to operate a faith based corporation b to teach the biblical message to the nations of the earth emphasizing the rulership of the lord jesus christ c to promote the publication of literature bearing the bible message d to promote the teaching of the bible truths and culture and e to provide a strong basis for doctrinal ethical and visionary accountability articles at exclusively for the charitable purposes within the meaning of sec_501 of the internal_revenue_code and that you shall not be empowered and are prohibited from engaging in any activity which is not allowed pursuant to that section articles at your articles further state that you are organized and operated activities you state that you travel worldwide to inform others about yjour lord and savior encourage those in need to strive for a better life form_1023 part iv while traveling you minister to individuals and teach and educate on the word of god letter 4c your members have traveled to ghana china and london and the expenses associated with such travel have been paid for by members or by organizations requesting your presence letter f 4a b and to you state that you offer food bank services and provide scholarships for general education development ged programs form_1023 part iv you state that the scholarships help pay for ged courses and a ged test form_1023 part viii schedule h information on the scholarship program is posted on the bulletin boards of church state you provided us with a copy of your informational flyer which lists a leader of church as the person to whom scholarship applications should be directed letter attachment in state and church in your director of education and your governing body are responsible for selecting scholarship recipients and for setting the terms of the awards letter j form_1023 schedule h section part you state that there is not an application process and that the only criteria for receiving funds is that the recipient must desire to complete the ged program attend class regularly and agree to have grades and progress reports sent to you form_1023 part viii schedule h item sec_3 4a relatives of your organization’s scholarship selection committee are eligible to receive scholarship awards insofar as they meet the attendance and progress requirements that apply to all award recipients form_1023 schedule h section part you state that the amount of each scholarship will vary depending on the time it takes the recipient to complete the ged coursework letter you state that you have not incurred any expenses related to this program but that you will pay the ged programs directly on a monthly basis and will do so in the recipient’s name letter i 7d records will be maintained that include the names of recipients and the amounts and purposes of each award letter governance your governing body consists of five uncompensated individuals who are selected by a vote of your current members form_1023 part il item part v item 1a and schedule a item letter 7b these include president vice president trustee trustee trustee and pastors of individual churches id president is married to and lives with vice president and trustee is married to and lives with trustee your articles expressly prohibit private benefit to your members and contains a dissolution clause you state that you have not formally adopted bylaws or a conflict of interest policy form_1023 part il item letter j you state that your integrity will keep you from having conflict of interest problems form_1023 part v item sec_5b c attachment you state that although you do not currently pay any wages or salaries you anticipate that you will do so in the future letter body you did not describe the method or criteria you will use to determine compensation however other than stating it will be subject_to a vote by the governing church and congregation you claim to be a church within the meaning of sec_170 of the code form_1023 part x item 5a you state that you are a ministry that operates within the church organization letter 7a you state that your headquarters is church and that church is birth ed from that ministry letter schedule a item 5b you do not own nor do you pay rent to use the facilities at either church form you have members all of whom believe in jesus christ letter j 8c e your members generally do not attend weekly services in the same location due to the distance certain members would have to travel letter 8e however all members come together for several days for services at least three times a year letter 8e you state that the majority of your worship services are held in conjunction with the services of church and church -in that they are held in the same place on the same day and at the same time letter j the same is true regarding your bible study and sunday school programs letter you state that anyone can become a member of your organization by informing you that they would like to join form_1023 schedule a item you state that the person must go before your congregation to pledge faithfulness to god and the church and that they then are given the right hand of fellowship for all the current members id members are free to associate with another denomination or church letter j while your members are not required to attend services at any particular church you state that six of your total members attend church and five of the attend church form_1023 schedule a item letter four persons who hold leadership positions in church are members of your organization including president and vice president letter three persons who hold leadership positions in church are members of your organization including trustee and trustee letter big_number you state that your remaining members visit church or church on occasion but have chosen not to be completely active in either church attend other churches or fellowship otherwise as they feel comfortable letter in your application you indicate that you are not part of a group of churches with similar beliefs and structures and that you have a written creed statement of faith or summary of beliefs which includes the belief that t he entire bible is the infallible word of god and is truth and that jesus christ was and is the son of god form_1023 schedule a item sec_1 letter j you also state that you have a form of worship in which you pray sing and read the word of god as well as a formal code of doctrine and discipline which is the belie f in the birth life and death of jesus christ and that discipline comes from jesus christ as described in his word form_1023 schedule a item letter however you state that you do not have a distinct religious history or literature of your own nor do you have bulletins or other such materials that you provide to attendees at your services id your application states that you have schools_for the preparation of your ordained ministers or religious leaders and that you ordain commission or license such individuals though you have provided no proof to support either claim form_1023 schedule a items you also state that you conduct baptisms weddings and funerals and that you have a school for the religious instruction of the young form_1023 schedule a items you do not issue church charters ld item letter j law sec_501 of the code exempts from federal income_taxation organizations described in sec_501 sec_501 of the code describes organizations organized and operated exclusively for charitable religious and other specified exempt purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations the regulations states that in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in that section it is not exempt if an organization fails to meet either the organizational_test or the operational_test sec_1_501_c_3_-1 of the regulations states that an organization is organized exclusively for one or more exempt purposes only if its articles of organization limit the purposes of the organization to one or more exempt purposes and do not expressly empower the organization to engage other than as an insubstantial part of its activities in activities which are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 of the regulations states that an organization is not organized exclusively for one or more exempt purposes if its articles of organization expressly empower it to carry on as more than an insubstantial part of its activities activities which are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 further provides that in no case shall an organization be considered to be organized exclusively for one or more exempt purposes if by the terms of its articles the purposes for which such organization is created are broader than the purposes specified in sec_501 sec_1_501_c_3_-1 of the regulations states that an organization must in order to establish its exemption submit a detailed statement of its proposed activities with and as a part of its application_for exemption sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as it engages primarily in activities operated exclusively for one or more exempt purposes only if that accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be regarded as exempt if more than an insubstantial part of its activities further a non-exempt purpose sec_1_501_c_3_-1 of the regulations 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 who are defined in sec_1_501_a_-1 as persons having a personal and private interest in the activities of the organization sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest thus an organization must establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests revrul_56_304 1956_2_cb_306 held that an organization meeting the requirements for exemption is not precluded from distributing its funds to individuals as long as any such distribution is made on a truly charitable basis and in furtherance of the purposes for which it is organized however such organizations should maintain adequate_records and case histories such that all distributions can be substantiated upon request by the internal_revenue_service the service adequate recordation ordinarily would include the names and addresses of each recipient of aid the amount distributed to each recipient the purpose for which the aid was given the manner in which the recipient was selected and the relationship if any between the recipient and a members officers or trustees of the organization b a grantor or substantia contributor to the organization or a member_of_the_family of either and c a corporation controlled by a grantor or substantial_contributor in 74_tc_531 aff'd 670_f2d_104 9th cir the tax_court denied exemption to a small family church the court found that the close family relationship of the organization’s only three board members who also controlled of the entity’s voting rights put them in a position to without challenge dictate the organization’s program s and operation s prepare its budget and spend its funds and that they could continue to do so indefinitely the court acknowledged that the presence of a small closely-related board alone was not enough to deny tax exemption however when combined with the organization’s vague and uninformative responses to questions about expenditures membership and activities denial was appropriate because the organization failed to meet its burden of showing the absence of private benefit to its individual members in 82_tc_18 the tax_court held that the combination of unfavorable facts and circumstances and the applicant's failure to provide full and complete information from which the service could make a well- informed determination was sufficient to deny exemption the court emphasized the need for open and candid disclosure particularly where a family church is involved in church by mail inc v commissioner t c memo t c aff'd 765_f2d_1387 9th cir an organization sought sec_501 exemption and claimed it was a church where its main activity was mailing literature that focused on the ministry of one its reverends that reverend served as an officer of the church along with another reverend in addition the two reverends were the sole shareholders of an ad agency through which the church mailings were obtained the two reverends received commissions on each order placed through the agency the two reverends also were the sole shareholders of a computer services business which through the ad agency provided services to the church the ad agency marked up the cost of the computer services and then billed the church at the increased rate finally the two reverends operated another ministry that was very similar to but nevertheless distinct from the applicant-church the church the ministry and the ad agency all shared office space and the two reverends carried out effectively all responsibilities associated with the various entities furthermore several family members of the reverends received payments from these entities the church received over dollar_figure deductions for its mailings and other expenses it reported a net_loss the tax_court held that the business relationships between the church and the outside entities facilitated the flow of private financial benefits to the two reverends their outside entities and their families the court gave particular attention to the substance of the relationships between the various entities and individuals and focused on the potential for the enablement of current as well as potential abuse through manipulation of the arrangements between those entities in contributions in one tax_year but after taking sec_170 of the code describes a church_or_convention_or_association_of_churches in 490_fsupp_304 d d c the court held that a religious_organization exempt under sec_501 of the code was not a church described in sec_170 the court discussed the criteria developed by the service to aid in the evaluation of applications for church foundation status those criteria are a distinct legal existence a recognized creed and form of worship a definite and distinct ecclesiastical government a formal code of doctrine and discipline a distinct religious history a membership not associated with any other church or denomination an organization of ordained ministers ordained ministers selected after completing prescribed courses of study literature of its own established places of worship regular congregations regular religious services sunday schools_for the religious instruction of the young and schools_for the preparation of its ministers the court stated that a t a minimum a church includes a body of believers or communicants that assembles regularly in order to worship and reasoned that certain criteria are of central importance in distinguishing a church from other forms of religious organizations -namely the existence of an established congregation served by an organized ministry the provision of regular religious services and religious education for the young and the dissemination of a doctrinal code with respect to the existence of a regular congregation the court held that a congregation consisting of the organization’s organizer and his immediate_family members did not constitute a congregation within the ordinary meaning of the word in 86_tc_916 the tax_court defined a church for purposes of sec_170 as a coherent group of individuals and families that join together to accomplish the religious purposes of mutually held beliefs the court further stated that a church’s principal means of accomplishing its religious purposes must be to assemble regularly a group of individuals related by common worship and faith in 88_tc_1341 hereinafter foundation i the tax_court held that an organization that operated a radio ministry and established local congregations was a church because it met most of the service’s criteria however the court did not adopt the criteria as a definitive test explaining them instead as a part of the service’s broader consideration of all facts and circumstances when determining church status the court also declared that w hen bringing people together for worship is only an incidental part of the activities of a religious_organization those limited activities are insufficient to label the entire organization a church in 927_f2d_335 8th cir the eighth circuit upheld a tax_court decision denying church status to an organization because it failed to meet the factual requirements of being a church under sec_501 of the code the court cited the criteria and gave particular emphasis to the facts that the organization did not regularly provide religious services or religious education for the young and did not disseminate a doctrinal code moreover the court found that the organization lacked an established congregation because nothing indicates that the participants considered the organization to be their church in 614_f3d_1383 fed cir hereinafter 131_sct_1676 mar the court_of_appeals_for_the_federal_circuit affirmed a decision by the court of federal claims denying an organization church status under sec_170 the court rejected the organization’s argument that a religious_organization should be treated as a church under sec_170 as long as ‘there is a body of followers beyond the scope of a family church who seek the teachings of the organization and express or acknowledge an affiliation with its religious tenets the court held that more than mere affiliation by a number of people with an organization espousing a particular belief system is necessary to qualify as a church within the meaning of sec_170 of the code instead a religious_organization must create as part of its religious activities the opportunity for members to develop a fellowship by worshipping together in bubbling well supra the court stated that the applicant-organization carries the burden of showing that it qualifies for exemption under sec_501 of the code and that even for an organization claiming exemption as a religious_organization exemption is a privilege a matter of grace rather than right meeting the burden requires an open and candid disclosure of all facts bearing upon the applicant's organization operations and finances disclosure is not made the logical inference is that the facts if disclosed would show that the applicant fails to meet the requirements for exemption and if such analysis qualification as an organization described in sec_501 of the code to qualify for exemption as an organization described in sec_501 of the code you must be both organized and operated exclusively for one or more of the purposes specified in that section see sec_1_501_c_3_-1 of the regulations an organization is operated exclusively for one or more exempt purposes only if primarily in activities that accomplish one or more of the exempt purposes specified in sec_501 of the code and if not more than an insubstantial part of its activities furthers a non- it engages exempt_purpose see sec_1_501_c_3_-1 of the regulations see also 326_us_279 construing a similar provision of the social_security act such that t he presence of a single non-exempt purpose that is substantial in nature will destroy the exemption an organization will not be regarded as operated exclusively for exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals see sec_1_501_c_3_-1 of the regulations although you state that you offer food bank services you did not provide any information about nor have you established your present involvement in providing such services you provided information about your ged scholarship program in your application and in your subsequent submissions in letter and letter however your explanation of the award process raises significant concerns you have no application process and the only criteria for receiving funds is that the recipient must desire to complete the ged program attend class regularly and agree to have grades and progress reports sent to you there is no procedure in place to determine the amount of scholarship awards and your responses indicate that recipients will be funded indefinitely until they complete the program finally relatives of your scholarship selection committee are eligible to receive funds but without formally adopted bylaws or a written conflict of interest policy there is nothing to prevent the inurement of your net_earnings to persons having a personal and private interest in your activities within the meaning of sec_1_501_c_3_-1 of the regulations with all of this said the information you provided suggests that you have not to this point awarded any scholarship funds even if you have you did not submit the type of information contemplated in revrul_56_304 supra and based on the above facts you could not provide such information in any event you state that you travel around the world to inform others about your beliefs and to encourage those in need to strive for a better life however you did not provide any details about your members’ travels beyond listing the names of countries they have visited thus you have not established how worldwide travel is related to or furthers your exempt_purpose and even if you did the absence of bylaws and a conflict of interest policy is once more problematic because you lack the basic procedural safeguards necessary to prevent impermissible private benefits from flowing to your members you further represent that you plan to compensate your governing body once you have sufficient resources to do so however you have not established criteria to determine how compensation will be determined and to ensure that compensation is no more than the fair_market_value based on the qualification of the individuals being compensated the duties assigned them and the hours they devote to those duties the information you provided suggests that compensation will be determined by the individuals being compensated and or other persons that compose your closely-related governing body this arrangement results in a conflict of interest and like other aspects of your operations discussed to this point leaves open the possibility of private_inurement proscribed by sec_1_501_c_3_-1 of the regulations given its closely-related nature your governing body like the one in bubbling well supra could be positioned to without challenge dictate your organization's program s and operation s prepare its budget and spend its funds and they could continue to do so indefinitely moreover your claims that your integrity will prevent conflict of interest problems and that you will take it under advisement to adopt bylaws along with the incomplete information you provided about your worldwide travel the operation of your scholarship program and your relationship with church and church do not amount to the level of open and candid disclosure the court discussed in american churches supra thus you have not met the burden of establishing that your net_earnings will not inure in whole or in part to the benefit of private shareholders or individuals as set forth in sec_1_501_c_3_-1 of the regulations and that your activities will not serve to benefit private interests as set forth in sec_1 c -1 d ii the potential for private benefit clouds every aspect of your organization’s operations this issue was identified early in the process of developing your case and you had ample time and opportunity to address it your failure to concretely address these concerns is especially troubling given that you expressly leave open the possibility of future remuneration of the governing body and even if no benefit has flowed to individual members up to this point the pervasive but ambiguous relationship between your organization and church and church coupled with the lack of procedural safeguards detailed above and the fact that president and vice president are leaders of church and trustee and trustee are leaders of church could readily facilitate the types of future abuses that the court identified in church by mail supra you do not meet the operational_test of sec_1_501_c_3_-1 of the regulations because you have not established that your organization is operated exclusively for one or more exempt purposes you have not established either that your net_earnings will not inure in whole or in part to the benefit of private shareholders or individuals as set forth in sec_1_501_c_3_-1 or that your activities will not serve to benefit private interests as set forth in sec_1_501_c_3_-1 therefore you are not exempt as an organization described in sec_501 of the code qualification as a church under sec_170 of the code even when it is determined that an organization is organized and operated for religious purposes within the meaning of sec_501 of the code it is not necessarily a church within the meaning of sec_170 the associational test and the criteria guide this determination associational test in american guidance supra the court stated that a t a minimum a church includes a body of believers or communicants that assembles regularly in order to worship this associational role the court reasoned is what separates a ‘church’ from other forms of religious enterprise see also church of eternal life foundation il supra thus if an organization does not serve this associational role it fails to achieve the minimum characteristics of a church and instead must be viewed simply as a religious_organization subject_to the filing_requirements of sec_6033 of the code you do not regularly bring members of your organization together in one place to worship a common faith instead your case resembles the organization in foundation il supra there the court held that sporadic meetings conducted in a variety of locations did not constitute a regular assembly of a cohesive group of people for worship congregants to establish a community of worship likewise you hold several meetings and did not enable annually in a location mutually convenient for all of your members but the more regularly occurring worship takes place at church church or wherever else your members decide to practice their faith also like foundation il you did not provide any information about the members in attendance at your semi-annual meetings nor did you otherwise establish the existence of a regular congregation your organization does not create for your members an opportunity to develop a fellowship by worshipping together like the organization described in foundation il as well as those described in universal life church american guidance and spiritual outreach supra you lack regularly held worship services and a regular place of worship at best bringing people together for worship is only an incidental part of your activities see foundation supra accordingly you do not satisfy the associational test and you thus are not a church as described under sec_170 of the code criteria if an organization satisfies the associational test the analysis then moves to the total facts and circumstances embodied within the criteria see american guidance foundation and spiritual outreach supra although an organization need not satisfy each of the criteria the absence of factors such as a formal code of doctrine and discipline or a membership that is not associated with any other church or denomination reduces the likelihood that an organization will be classified as a church within the meaning of sec_170 see spiritual outreach supra distinct legal existence you have a distinct and independent legal existence under the laws of state recognized creed and form of worship in your application you indicate that you have a written creed statement of faith or summary of beliefs which includes the belief that t he entire bible is the infallible word of god and is truth and that jesus christ was and is the son of god you also state that you have a form of worship in which you pray sing and read the word of god definite and distinct ecclesiastical government your governing body is a definite and distinct ecclesiastical government however it is composed almost entirely of persons who also are involved with and hold leadership positions on the governing bodies of church and church formal code of doctrine and discipline you state that you have a formal code of doctrine and discipline which is the belie f in the birth life and death of jesus christ described in his word and that discipline comes from jesus christ as distinct religious history you state in your application that you do not have a distinct religious history membership not associated with any other church or denomination in your application you indicate that you are not part of a group of churches with similar beliefs and structures however you state that you are a ministry that operates within the church organization that your headquarters is church and that church is birth ed from that ministry in addition the majority of your services are held in conjunction with church and church and you state that six of your twenty-five total members attend church and five of the twenty-five attend church moreover four persons who hold leadership positions in church are members of your organization including president and vice president and three persons who hold leadership positions in church are members of your organization including trustee and trustee you also state that members attend other churches and fellowship otherwise as they feel comfortable in church of eternal life supra the court emphasized the importance of common worship and faith in addition to the associational aspect of a church on the contrary your members are free to attend any church that they choose to attend and still be a member of your organization just as important four of the five persons on your governing body are active in church or church and overall there appears to be a significant overlap in the activities operations and governance of your organization church and church the information you provided clearly indicates that you are associated with other churches moreover you expressly state that members are free to associate with other denominations or churches accordingly you do not have a membership that is not associated with any other church or denomination organization of ordained ministers ordained ministers selected after completing prescribed courses of study your application states that president is a minister_of_the_gospel although you state that president was ordained and is licensed in state you did not provide any information on the proscribed course of study that president completed prior to ordination and licensure you also state that you have schools_for the preparation of your ordained ministers or religious leaders and that you ordain commission or license such individuals however the information you provided regarding your requirements for ordination commission or licensure were vague and did not include any type of detail regarding the actual steps applicants would need to take or the benchmark criteria they would need to satisfy to be ordained commissioned or licensed nor could the information you provided be viewed as a summary of a proscribed course of study finally there is nothing to indicate a wider network or organization of ministers similar to president therefore you did not provide information sufficient to establish an organization of ordained ministers or to establish that ordained ministers are selected after completing prescribed courses of study literature of its own you state in your application that you do not have literature of your own you also state that you do not have bulletins or other such materials that you provide to members or attendees at your services established place of worship you state that the majority of your worship services are held in conjunction with the services of church and church in other words your services take place at the same location on the same day and at the same time as the services of church and church furthermore your members are not required to attend services at either church or church and instead are free to worship as they see fit church and church are most accurately viewed as the established places of worship for those respective churches therefore you do not have an established place of worship regular congregations in spiritual outreach supra the court held that the organization did not have an established congregation because nothing indicates that the participants consider it to be their church there is nothing to indicate that your members consider you to be their church you do not require members to renounce other religious beliefs or membership in other churches and your application and subsequent correspondences indicate that members can bring their own religion to your organization furthermore your members do not come together to meet in a common place on a regular basis accordingly and in addition to the analysis presented above regarding the associational test you do not have a congregation regular religious services you state that you hold services in conjunction with church and church and that members also can attend services wherever they choose based on the information you provided it appears that the only time your services are held independent of church or church are during your semi-annual gatherings the presence of your members during church 1's or church 2's regular religious services does not likewise make them your organization’s religious services thus under the circumstances you do not have regular religious services sunday schools_for the religious instruction of the young based on the information you provided it appears that your bible study and sunday school programs are held in conjunction with church and church at best it appears that you provide those services to supplement the religious activities of church and church there is nothing to establish that any religious curriculum taught by way of these services reflects your practices or beliefs see 88_fedclaims_203 explaining that the applicant bears the burden of establishing the existence of religious instruction of the young and establishing that such instruction reflects the applicant’s religious practices or beliefs accordingly you have not established that you have sunday schools_for the religious instruction of the young schools_for the preparation of its ministers you state that you have schools_for the preparation of your ministers however you failed to provide any information describing or establishing the existence of such schools thus even if you satisfied the associational test you still would not qualify as a church described in sec_170 because you do not meet a majority of the criteria used by the service to determine church status conclusion in light of the foregoing we have concluded that you do not qualify for exemption from federal_income_tax under sec_501 of the code as an organization described in sec_501 moreover even if you qualified for tax exemption under sec_501 you would nevertheless fail to qualify for status as a church under sec_170 because the balance of determinative facts and circumstances weigh heavily against such a classification you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications for more information about representation see publication practice_before_the_irs if you if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service will consider the failure to protest as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the internal_revenue_service if if you do not intend to protest this determination you do not need to take any further action we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service te_ge constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois g lerner director exempt_organizations


internal_revenue_service number release date index number -------------------------------------- ----------------------------------------------- ------------------------------------- --------------------------- -------------------------------------- --------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------ telephone number -------------------- refer reply to cc psi b01 plr-151992-05 date date --------------------- -------------------------- ----------------------------------------- legend legend x -------------------------------------------------- country d dear ------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-151992-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed 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 code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register 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 that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-151992-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter 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 p si br 1-plr-120040 -98 date date legend x y z m pr sec_1 pr sec_2 pr sec_3 pr sec_4 pr sec_5 m n o x y cc dom p si br 1-plr-120040 -98 buyer parent this responds to your letter dated date in which you requested a supplemental ruling to take into account a change in facts with respect to our letter_ruling issued to x dated date as revised on date the ruling letter except as otherwise noted in the legend above all terms used in this letter have the same meaning as in the in the ruling letter we issued five rulings based on a series of transactions the ruling letter was based on the facts before us at the time the private_letter_ruling was issued included was the fact that family y and pr sec_2 would enter into the underwriting agreement with underwriter as the lead managing underwriter of spo pursuant to which family y and pr sec_2 would sell a substantial portion of the newco shares they received in sale1 exchange1 and exchange2 in an spo of the shares under the facts submitted you requested rulings concerning the tax treatment of a power purchase agreement held by pr sec_3 your recent submission indicates that the conditions surrounding the proposed transaction necessitate a change in the facts described above you have represented that instead of the above-described transaction the following steps will occur in connection with the sale of the cogeneration business y and pr sec_2 will enter into a separate agreement with buyer to sell slightly less than m of their respective x and y interests in pr sec_1 to buyer a wholly owned subsidiary of parent for cash and shares of parent sale1 x and pr sec_2 will enter into an agreement with buyer to sell n of their respective x and y partnership interests in pr sec_4 to buyer in exchange for cash sale2 y’s and pr sec_2's interests remaining in pr sec_1 following sale1 will be redeemed by pr sec_1 redemption1 in consideration of a distribution to y and pr sec_2 of cash and pr sec_1's note receivable from pr sec_5 the shareholders of z will cause m to be merged with and into z z will then redeem o of each shareholder’s z shares in exchange for a promissory note seller notes cc dom p si br 1-plr-120040 -98 each z shareholder will then sell its remaining z shares to buyer or its designee for cash the seller notes will then be repaid in full on the first business_day after the closing of these transactions as a result of sale2 y will recognize significant gain from the disposition of its partnership_interest in pr sec_4 based solely on the information submitted by the taxpayer with respect to this supplemental ruling_request and the information submitted with respect to the ruling letter we conclude that the change in facts as discussed above will not adversely affect ruling sec_1 and contained in the ruling letter accordingly under the additional facts submitted in your request for a supplemental ruling we rule as follows ppa is not an unrealized_receivable for purposes of sec_751 and ppa is not an inventory_item for purposes of sec_751 except as held immediately above no opinion is rendered regarding the federal_income_tax effects of any of the transactions described above under other provisions of the code or 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 specifically no opinion is rendered regarding the effect of the change_of facts on the other rulings issued in the ruling letter this ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours signed dianna k miosi dianna k miosi chief branch office of the assistant chief_counsel passthroughs and special industries enclosure


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b03 plr-121627-02 date date distributing controlled trust trust sub shareholder trustee trustee business m plr-121627-02 business n date date state x aa bb cc dd ee ff xxx dear we respond to your representative’s letter dated date for rulings concerning the federal_income_tax consequences of a proposed transaction additional information was submitted in a letter dated date the material information submitted for consideration is summarized below distributing a state x corporation is currently engaged directly in business m and business n the shares of distributing are all held by shareholder or for the benefit of his descendants through trust and trust distributing has aa shares of common_stock outstanding which are held in the following manner bb shares by trust cc shares by trust and dd shares by shareholder shareholder is not in a position of control as to trustee trustee of trust and does not have the power to remove trustee trustee of trust controlled is a newly created state x corporation and is wholly owned by distributing distributing and controlled use an accrual_method of accounting for each of their federal_income_tax returns with a taxable_year ending on date on date plr-121627-02 distributing sold its ownership interests in sub to a third party in a transaction unrelated to the proposed transaction discussed herein we have received financial information indicating that business m and business n each have had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years a difference of opinion has arisen between shareholder and trustee and trustee as trustees to trust and trust respectively regarding the future operations of the businesses of distributing business n tends to produce more stable and consistent annual returns which better matches the investment goals of the two trusts business m tends to be more sporadic and long-term in nature and possesses opportunities to expand into development activities in which additional capital contributions by the shareholders or debt could be required which shareholder favors accordingly to resolve the conflicting goals of the shareholders the following transaction is proposed i distributing will contribute cash having an approximate value of dollar_figurexxx and ee of business n to controlled the contribution ii distributing will distribute bb shares of controlled stock to trust in exchange for all of trust 1's stock in distributing distributing will distribute cc shares of controlled stock to trust in exchange for all of trust 2's stock in distributing together the distribution after the proposed transaction controlled will be wholly owned by trust and trust and distributing will be wholly owned by shareholder distributing will remain engaged directly in business n and business m controlled will be directly engaged in business n independent of distributing the taxpayers have made the following representations in connection with the proposed transaction a b the fair_market_value of the controlled stock to be received by each shareholder of distributing will be approximately equal to the fair_market_value of distributing stock surrendered by the shareholder in the exchange no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing plr-121627-02 c d e f g h i j k l the five years of financial information submitted on behalf of business m and business n is representative of each business’ respective present operations and with regard to each business there has been no substantial operational changes since the date of the last financial statements submitted except for the sale of distributing’s interest in sub in a transaction otherwise unrelated to the transaction proposed herein following the distribution distributing and controlled each will continue the active_conduct of its business independently and with its separate employees and controlled may employ distributing as a consultant for its business n assets for a period not greater than ff months the distribution of controlled stock is carried out for the following corporate business purposes fit and focus the distribution of controlled stock is motivated in whole or substantial part by this corporate business_purpose distributing is not an s_corporation within the meaning of sec_1361 and there is no plan or intention by distributing or controlled to make an s_corporation_election pursuant to sec_1362 there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in either distributing or controlled after the transaction there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length neither distributing nor controlled is an investment_company as defined in sec_368 and iv plr-121627-02 m the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of distributing or controlled based solely on the information submitted and the representations as set forth above we hold as follows the contribution followed by the distribution will constitute a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing will recognize no gain_or_loss on the contribution sec_361 sec_357 and sec_357 controlled will recognize no gain_or_loss on the contribution sec_1032 controlled’s basis in each asset received in the contribution will equal the basis of that asset in the hands of distributing immediately prior to the transfer sec_362 controlled’s holding_period for each asset received from distributing will include the period during which distributing held such asset sec_1223 distributing will recognize no gain_or_loss on the distribution sec_361 trust and trust will recognize no gain_or_loss and no amount will be included in their income upon receipt of controlled stock in exchange for their distributing stock sec_355 the basis of the controlled stock received by trust and trust in the transaction will equal the basis of the distributing stock surrendered by each of the shareholders respectively in exchange therefor sec_358 the holding_period of the controlled stock received by trust and trust in the transaction will include the holding_period of the distributing stock surrendered in exchange therefor provided the respective shareholder held the distributing stock as a capital_asset on the date of the distribution sec_1223 plr-121627-02 as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the proposed transaction under any other provision of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction the rulings contained in this letter are predicated upon the facts and representations submitted by the taxpayers and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for a ruling verification of the information representations and other data may be required as part of the audit process see section dollar_figure of revproc_2002_1 2002_1_irb_1 which discusses in greater detail the revocation or modification of ruling letters however when the criteria in section dollar_figure of revproc_2002_1 i r b pincite are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances this ruling is directed only to the taxpayer s requesting 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 the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated pursuant to a power_of_attorney on file in this office a copy of this letter has been sent to each of your authorized representatives sincerely yours richard e coss senior counsel office of associate chief_counsel corporate cc


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 b1 plr-140589-08 date date internal_revenue_service number release date index number ---------------------------- ----------------- -------------------- -------------------------- legend x -------------------------------------------------- ------------------- date date date a -------------------------- ------------------------- -------------------------- -------------------------- trust --------------------------------------------------- -------------------------------------------- dear -------------------- this responds to a letter dated date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts x elected to be treated as an s_corporation for federal tax purposes effective date on date a a shareholder in x died under the terms of a’s will at the time of a’s death the shares of x transferred to trust because no election was made to treat trust as an qualified_subchapter_s_trust qsst x's s_corporation_election terminated plr-140589-08 x represents that there was no intent to terminate x’s s_corporation_election and that the failure_to_file timely the qsst elections for trust was not motivated by tax_avoidance or retroactive tax planning x also represents that since date and thereafter trust has complied with the requirements under sec_1361 which defines a qsst x and its shareholders agree to make any adjustments required by the secretary consistent with the treatment of x as an s_corporation law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that a qsst whose beneficiary makes an election under sec_1362 will be treated as a_trust described in sec_1361 and the qsst's beneficiary will be treated as the owner for purposes of sec_678 of that portion of the qsst's s_corporation stock to which the election under sec_1361 applies under sec_1361 a beneficiary of a qsst may elect to have sec_1361 apply under sec_1361 this election will be effective up to days and two months before the date of the election sec_1361 defines a qsst as a_trust a the terms of which require that i during the life of the current income_beneficiary there shall be only one income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current beneficiary in the trust shall terminate on the earlier of the beneficiary's death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to that beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to one individual who is a citizen or resident_of_the_united_states plr-140589-08 sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 b or to obtain shareholder consents the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in ineffectiveness steps were taken so that the corporation is once more a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the circumstances resulting in the ineffectiveness the corporation shall be treated as continuing to be an s_corporation during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that the termination of x's subchapter_s_election was inadvertent within the meaning of sec_1362 therefore x will be treated as continuing to be an s_corporation from date and thereafter provided that the beneficiaries of trust file a qsst election with the appropriate service_center effective date within days of the date of this letter a copy of this letter should be attached to the qsst election except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is otherwise eligible to be treated as an s_corporation or whether trust is eligible to be treated as a qsst this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative plr-140589-08 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely david r haglund david r haglund senior technician reviewer branch office of associate chief_counsel passthroughs special industries cc


department of the treasury metrotech center fulton street brooklyn ny internal_revenue_service number release date te_ge eo uil date date legend x organization d date of revocation person to contact ------------------- identification_number ----------- contact telephone number ------------------- ----------------------------------------------------------------------------------------------- in reply refer to te_ge review staff p audit period ein dear ----------------- this is a final adverse determination as to your exempt status under sec_501 of the internal_revenue_code our adverse determination was made for the following reasons x fails to meet the requirement for exemption under c sec_501 as changed by the tax reform act of provides for the exemption of clubs organized and operated for pleasure recreation and other nonprofitable purposes substantially_all of the activities of which are for such purposes and no part of the net_earnings of which inures to the benefit of any private shareholder as a result of a recent examination of your organization’s activities and form_990 for the period ended p it was determined that the organization administers and enforces homeowner’s restrictions for preserving the architecture and appearance of the housing development your organization has the authority of a homeowner’s association with the right to design the streets as well as limit the height size and exterior appearance of the residences revrul_75_494 1975_2_cb_214 holds that a club that administers and enforces covenants for the preservation of the architecture and appearance of the housing development is not operated exclusively for pleasure recreation and other nonprofitable purposes as required by sec_501 of the code based on the above we are revoking your organization's exemption from federal_income_tax under sec_501 of the internal_revenue_code effective d you are required to file federal_income_tax returns on form 1120-h these returns should be filed with the appropriate service_center for all years beginning after p you have executed the form_6018 agreeing to this revocation - - you are required to file form 1120-h u s income_tax return for homeowner_associations if the association does not elect to use form 1120-h it must file the applicable income_tax return form_1120 etc form 1120-h must be filed by the 15th day of the third month after the end of your annual_accounting_period a penalty of dollar_figure a day is charged when a return is filed late unless there is reasonable_cause for the delay however the maximum penalty charged cannot exceed dollar_figure or percent of your gross_receipts for the year whichever is less this penalty may also be charged if a return is not complete so please be sure your return is complete before you file it you 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 taxpayer_advocate assistance or you can contact the taxpayer_advocate from the site where the tax_deficiency was determined by calling or writing to internal_revenue_service office_of_the_taxpayer_advocate taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to file a petition in the united_states tax_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 if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter r c johnson director eo examinations sincerely yours