internal_revenue_service number release date index number ------------------------ --------------------------------------- ------------------------------------------------- --------------------------------------- ---------------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------------ telephone number ---------------------- refer reply to cc fip b03 plr-124328-17 date date company a --------------------------------------------------------------------- ------------------------------------------------- company b --------------------------------------------------------------------- ----------------------------------------------------------------------- company c --------------------------------------------------------------------- ----------------------------------------------------------------------- company d --------------------------------------------------------------------- ------------------------------------------------- company e --------------------------------------------------------------------- ----------------------------------- company f --------------------------------------------------------------------- --------------------------------------------- company g --------------------------------------------------------------------- ----------------------------------------------------------------------- entity entity firm date ------------------------------------------------------------------------ ----------------------------- ------------------------------ ---------------------------- ------------------------ plr-124328-17 date date date date year state a b ------------------------ ------------------------ ------------------ ---------------------- ------- -------------- ---- ---- dear ----------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of company a company b company c company d company e company f and company g collectively taxpayers taxpayers request an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations the regulations to jointly make elections under sec_856 of the internal_revenue_code code to treat company b company c company d company e company f and company g as taxable reit subsidiaries trss of company a effective as of date facts taxpayers represent that historically entity a real_estate_investment_trust within the meaning of sec_856 through reit owned a health care portfolio that included qualified health care properties as defined in sec_856 of the code and company b company c company d company e company f and company g health care portfolio taxpayers represent that before the acquisition transaction defined below each of company b company c company d company e company f and company g had elected on form_8832 entity classification election to be taxed as an association_taxable_as_a_corporation and together with entity on form_8875 taxable_reit_subsidiary election to be treated as a trs of entity taxpayers represent that qualified health care properties in the healthcare portfolio were leased to company b company c company d company e company f and company g or disregarded entities of these companies and that these companies engaged eligible independent contractors within the meaning of sec_856 to operate and manage the qualified healthcare properties plr-124328-17 taxpayers represent that on date entity formed company a a state limited_liability_company on date entity merged with and into entity entity continues to exist as a subsidiary of entity and entity is the common parent of both company a and entity on date company a acquired from entity an interest of approximately a of the health care portfolio which includes company b company c company d company e company f and company g acquisition transaction entity through an operating partnership owns the remaining b of the health care portfolio company a intends to elect to be treated as a reit for federal_income_tax purposes commencing in year taxpayers are calendar_year taxpayers on the accrual_method of accounting as a result of the acquisition transaction on date taxpayers were required to make elections pursuant to sec_856 on forms to treat each of company b company c company d company e company f and company g as a trs of company a the tax director of each of taxpayers tax director was responsible for ensuring that these elections were timely made by timely filing the forms however due to an extended illness suffered by the tax director the elections were not filed within the two-month fifteen-day period after date on date the tax director realized that the elections had not been filed and filed them that day with an effective date of date the then earliest effective date possible subsequent to filing these forms the tax director realized that filing the elections with an effective date of date would result in company a recognizing over two months of income that did not qualify for purposes of sec_856 and and would therefore prevent company a from qualifying as a reit for year after consultation with firm the decision was made to request an extension of time under sec_301_9100-1 and sec_301_9100-3 of the regulations to elect pursuant to sec_856 to treat each of company b company c company d company e company f and company g as a trs of company a effective as of date taxpayers make the following additional representations in connection with their request for an extension of time the request for relief was filed before the failure to make the regulatory election was discovered by the internal_revenue_service service granting the relief requested will not result in any of taxpayers having a lower tax_liability in the aggregate for all years to which the election applies than they would have had if the election had been timely made taking into account the time_value_of_money taxpayers do not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of the code at the time they requested relief and the new position requires or permits a regulatory election for which relief is requested plr-124328-17 being fully informed of the required regulatory election and related tax consequences taxpayers did not choose to not file the election taxpayers are not using hindsight in making the decision to seek the relief requested no specific facts have changed since the due_date for making the election that make the election advantageous to taxpayers the period of limitations on assessment under sec_6501 has not expired for taxpayers for the taxable_year in which the election should have been filed nor for any taxable_year s that would have been affected by the election had it been timely filed in addition affidavits on behalf of taxpayers have been provided as required by sec_301_9100-3 of the regulations law and analysis sec_856 of the code provides that a reit and a corporation other than a reit may jointly elect to treat such corporation as a trs to be eligible for treatment as a trs sec_856 provides that the reit must directly or indirectly own stock in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition sec_856 specifically provides that the election and any revocation thereof may be made without the consent of the secretary in announcement 2001_1_cb_716 the service announced the availability of new form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for taxable years beginning after for eligible entities to elect treatment as a trs the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the taxable_year however the effective date of the election depends on when the form_8875 is filed the instructions further provide that the effective date cannot be more than months and days prior to the date of filing the election or more than months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service sec_301_9100-1 of the regulations provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin sec_301_9100-3 through c sets forth rules that the service generally will use to determine whether under the particular facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that plr-124328-17 do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election a taxpayer will be deemed to have not acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section conclusion based upon the facts and representations submitted we conclude that taxpayers have satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to treat company b company c company d company e company f and company g as trss of company a effective as of date accordingly taxpayers have days from the date of this letter to file their intended elections plr-124328-17 this ruling is limited to taxpayers’ timeliness of the filing of form_8875 this ruling’s application is limited to the facts representations and code and regulation sections cited herein except as provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular no opinion is expressed as to whether company a qualifies as a reit whether any of company b company c company d company e company f or company g otherwise qualifies as a trs under part ii of subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of taxpayers is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect the ruling contained in this letter is based upon information and representations submitted by taxpayers and accompanied by a penalty of perjury statements executed by appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayers that requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the terms of a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely __________________________ julanne allen assistant branch chief branch office of the associate chief_counsel financial institutions and products enclosure copy for sec_6110 purposes cc


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 b02 plr-144085-13 date date x --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- ---------------------------- country ------- date --------------------- dear -------------- this letter responds to a letter dated date submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be classified as a partnership for federal tax purposes the information submitted provides that x was organized under the laws of country on date x represents that it is a foreign_entity eligible to elect to be classified as a partnership for federal tax purposes however x failed to timely file form_8832 entity classification election to be treated as a partnership effective date sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with plr-144085-13 a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes unless the entity elects otherwise a foreign eligible_entity is treated as an association if all members have limited_liability a foreign eligible_entity with a single owner may elect to be treated as a disregarded_entity pursuant to the rules under sec_301_7701-3 a foreign eligible_entity with two or more members is treated as a partnership if at least one member does not have limited_liability a foreign eligible_entity with two or more members may elect to be treated as a partnership pursuant to the rules under sec_301_7701-3 sec_301_7701-3 provides that an eligible_entity may make an entity classification election by filing form_8832 with the appropriate service_center under sec_301_7701-3 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 effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed sec_301_9100-1 provides that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but not more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards by which the commissioner will determine whether to grant an extension of time to make an election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 describes the conditions under which the commissioner will grant requests for relief 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 granting relief will not prejudice the interests of the government based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 as a result we grant x an extension of time of one hundred twenty days from the date of this letter to file form_8832 with the appropriate service_center to elect to be classified as a partnership effective date a copy of this letter should be attached to the form_8832 this ruling is contingent on x and the owners of x filing within days from the date of this letter all required returns including amended returns consistent with the requested plr-144085-13 relief granted in this letter to the extent appropriate these returns must include but are not limited to form_8865 information_return of u s persons with respect to certain foreign_partnerships a copy of this letter should be attached to any such returns except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item either discussed or referenced in this letter the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination we are directing the ruling only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely associate chief_counsel passthroughs special industries by ____________________________ bradford r poston senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division u i l aug tep ome attn legend organization a plan x plan y authority b authority v authority c religion c state n conference c conference b directory r dear this is in response to your letters dated date date date date date date date and date submitted on your behalf by your authorized representative in which you request a ruling that plans x and y are church plans described in sec_414 of the internal_revenue_code_of_1986 as amended the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested and is a member of conference c a organization a was established in april religion c conference and is recognized as a religion c district by conference b a religion c conference of bishops organization a was formed as a non-profit corporation pursuant to a special act of state n the primary purposes of organization a are to engage in religious charitable benevolent recreational welfare or educational work to support maintain conduct and advise and cooperate with any charitable religious benevolent recreational welfare or educational corporation association institution committee agency or activity in keeping with its concern for persons in need organization a maintains as one of its primary purposes a commitment to provide improve promote create and preserve affordable housing for persons of low income the by-laws of organization a provide that authority b authority v and authority c are members and trustees of the corporation the general management of the affairs of the corporation is vested in the board_of trustees the officers of the corporation are authority b as president and treasurer authority v as the vice president and authority c as the secretary parishes and several religious elementary and high organization a operates schools servicing over big_number students an integral part of the mission of organization a is to witness to god's unconditional love and to bring christ's healing presence to the world through this mission statement several social service agencies ie the religion c charities have been organized and supported by organization a as well as the operation of senior citizen housing and hospitals organization a parishes schools charities housing and hospitals are all tax exempt_organizations under sec_501 of the code and are directly controlled by organization a organization a and all of the organizations it controls are listed in directory r organization a sponsors two retirement plans which are intended to meet the requirements of sec_401 and sec_501 of the code organization a is the original and sole plan_sponsor of plan x and plan y the plans have not been adopted or sponsored by any other organization both plans have always operated as non-electing church plans and an election under sec_410 of the code has never been made plan x is a defined_benefit_plan that has been in effect since and also includes post-retirement medical benefits under sec_105 of the code plan y is a defined_benefit_plan that has been in effect since plan x covers the priests of organization a who are ordained for organization a or incardinated in organization a plan y covers all employees of the religion c charities of organization a and all lay employees employed by a school parish or other organization which is supported by organization a none of the eligible participants are or can be considered employed in connection with one or more unrelated trades_or_businesses within the meaning of sec_513 of the code in addition all of the participants are or will be employed by organization a or deemed employed by organization a and will not include employees of for-profit entities in accordance with revproc_2011_44 2011_39_irb_446 notice to employees with reference to plan x was provided on date and the notice to employees with reference to plan y was provided on date these notices explained to participants of plan x and plan y the consequences of church_plan status based on the above facts and representations you request a ruling that plan x and plan y qualify as church plans within the meaning of sec_414 of the code and have had such status since date and date respectively sec_414 was added to the code by sec_1015 of the employee_retirement_income_security_act_of_1974 as amended erisa pub law 1974_3_cb_1 enacted date sec_1017 of erisa provided that sec_414 of the code applied as of the date of erisa’s enactment however sec_414 of the code was subsequently amended by sec_407 of the multiemployer pension_plan amendment act of pub law to provide that sec_414 of the code was effective as of date sec_414 of the code generally defines a church_plan as a plan established and maintained for its employees or their beneficiaries by a church or a convention or association of churches which is exempt from taxation under sec_501 of the code sec_414 of the code provides in part that the term church_plan does not include a plan that is established and maintained primarily for the benefit of employees or their beneficiaries of such church_or_convention_or_association_of_churches who are employed in connection with one or more unrelated trades_or_businesses within the meaning of sec_513 of the code or if less than substantially_all of the individuals included in the plan are individuals described in sec_414 of the code or sec_414 of the code or their beneficiaries sec_414 of the code provides that a plan established and maintained for its employees or their beneficiaries by a church or a convention or association of churches includes a plan maintained by an organization whether a civil law corporation or otherwise the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits or both for the employees of a church or a convention or association churches if such organization is controlled by or associated with a church or a convention or association of churches sec_414 of the code generally defines employee of a church ora convention or association of churches to include a duly ordained commissioned or licensed minister of a church in the exercise of his or her ministry regardless of the source of his or her compensation and an employee of an organization whether a civil law corporation or otherwise which is exempt from tax under sec_501 of the code and which is controlled by or associated with a church or a convention or association of churches sec_414 of the code provides that a church or a convention or association of churches which is exempt from tax under sec_501 of the code shall be deemed the employer of any individual included as an employee under subparagraph b sec_414 of the code provides that an organization whether a corporation or otherwise is associated with a church or a convention or association of churches if the organization shares common religious bonds and convictions with that church_or_convention_or_association_of_churches civil law revproc_2011_44 2011_39_irb_446 supplements the procedures for requesting a letter_ruling under sec_414 of the code relating to church plans the revenue_procedure requires that plan participants and other interested persons receive a notice in connection with a letter_ruling request under sec_414 of the code for a qualified_plan requires that a copy of the notice be submitted to the internal_revenue_service irs as part of the ruling_request and provides procedures for the irs to receive and consider comments relating to the ruling_request from interested persons in this case organization a is a non-profit corporation which is exempt from federal_income_tax under sec_501 of the code as an organization described in sec_501 of the code organization a is a member of the state n conference c a religion c conference organization a is recognized as a religion c district by conference b a religion c conference of bishops and organization a is listed in directory r in addition organization a is controlled by authority b authority v and authority c who all serve on organization a’s board_of trustees and as officers of the corporation accordingly we find that organization a and it’s parishes are a convention or association of churches for purposes of sec_414 of the code since plan x and plan y are maintained by an organization that is a church_or_convention_or_association_of_churches we conclude in regard to your ruling_request that plan x and plan y are church plans as defined in sec_414 of the code and have been church plans since date the effective date of sec_414 of the code 2u1345 u4 this letter expresses no opinion as to the qualified status of plan x or plan y this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you have any questions please contact se t ep ra t3 please address all correspondence to sincerely yours laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi br - plr-125365-01 date date legend x state d1 this responds to your letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated under state law on d1 the shareholders of x intended that x elect to be treated as an s_corporation effective d1 however the election to be treated as an s_corporation was not timely filed law and analysis sec_1362 provides that a small_business_corporation can elect to be treated as an s_corporation sec_1362 provides when an s election becomes effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election was made if an election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year sec_1362 provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and the secretary determines reasonable_cause existed for the failure to timely make plr-125365-01 the election then the secretary can treat such an election as timely made for that taxable_year and effective as of the first day of that taxable_year x did not file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d1 an original form_2553 along with a copy of this letter must be forwarded to the relevant service_center within days from the date of this letter except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely matthew lay assistant to the branch chief branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


t c no united_states tax_court dennis l and margaret j knudsen petitioners v commissioner of internal revenue respondent docket no filed date ps filed a motion for reconsideration of our memorandum opinion in knudsen v commissioner tcmemo_2007_340 knudsen i in knudsen i we held that petitioners were not engaged in their animal breeding activity for profit within the meaning of sec_183 i r c we concluded that we did not need to decide whether ps met the requirements under sec_7491 i r c to shift the burden_of_proof to r because the outcome was based on a preponderance_of_the_evidence in their motion ps argue that this court erred in so concluding ps also argue for the first time that each factor under sec_1_183-2 income_tax regs is a separate factual issue to which sec_7491 i r c applies held ps’ motion for reconsideration will be denied this court did not err by concluding that the court did this opinion supplements our previously filed opinion in knudsen v commissioner tcmemo_2007_340 not need to decide whether the burden_of_proof shifted to respondent under sec_7491 i r c jack d flesher and brian a turney for petitioners ann l darnold for respondent supplemental opinion marvel judge on date pursuant to rule petitioners filed a timely motion for reconsideration of this court’s memorandum opinion in knudsen v commissioner tcmemo_2007_340 knudsen i in knudsen i we held that petitioners’ exotic animal breeding activity was not an activity engaged in for profit within the meaning of sec_183 petitioners request that we reconsider whether they satisfied the requirements under sec_7491 to shift the burden_of_proof to respondent reconsideration under rule is intended to correct substantial errors of fact or law and allow the introduction of newly discovered evidence that the moving party could not have introduced by the exercise of due diligence in the prior proceeding 110_tc_440 this court has discretion to grant a motion for 1all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect at all relevant times reconsideration but will not do so unless the moving party shows unusual circumstances or substantial error id see also 87_tc_164 reconsideration is not the appropriate forum for rehashing previously rejected legal arguments or tendering new legal theories to reach the end result desired by the moving party estate of quick v commissioner supra pincite sec_7491 provides that subject_to certain limitations where a taxpayer introduces credible_evidence with respect to a factual issue relevant to ascertaining the taxpayer’s tax_liability the burden_of_proof shifts to the commissioner with respect to such issue sec_7491 applies with respect to a factual issue only if the requirements of sec_7491 are satisfied under sec_7491 a taxpayer must have maintained all records required by the internal_revenue_code and cooperated with reasonable requests by the secretary for witnesses information documents meetings and interviews in their motion for reconsideration petitioners assert that this court erred in concluding that we did not need to decide whether petitioners met the requirements under sec_7491 to shift the burden_of_proof to respondent and each factor under sec_1_183-2 income_tax regs is a separate factual issue within the meaning of sec_7491 i sec_7491 burden_of_proof shift in knudsen i we stated we do not need to decide whether petitioners have met all of the requirements under sec_7491 to shift the burden_of_proof to respondent the outcome of this case is based on a preponderance_of_the_evidence and thus is unaffected by sec_7491 petitioners contend that congress did not intend income_tax cases to be ‘unaffected’ by sec_7491 and that we must determine whether petitioners met the requirements under sec_7491 to shift the burden_of_proof to respondent although this case is appealable absent a stipulation to the contrary to the court_of_appeals for the tenth circuit see sec_7482 petitioners rely on 315_f3d_1017 8th cir griffin ii vacating and remanding tcmemo_2002_6 griffin i in support of their argument petitioners argue that the court_of_appeals for the eighth circuit in griffin ii correctly concluded that sec_7491 should be applied in all cases petitioners’ argument applies griffin ii too broadly and fails to acknowledge that griffin ii is distinguishable from this case in griffin v commissioner supra pincite the taxpayers appealed an unfavorable tax_court decision and argued that the tax_court erred in holding that the taxpayers failed to present sufficient evidence to shift the burden_of_proof to the commissioner under sec_7491 the tax_court in griffin i had concluded that the taxpayers did not introduce credible_evidence and thus the burden_of_proof remained with the taxpayers griffin v commissioner tcmemo_2002_6 the court_of_appeals disagreed it concluded that the taxpayers did produce sufficient credible_evidence and stated it is not sufficient to summarily conclude that the outcome is the same regardless of who bears the burden_of_proof if that were the case sec_7491 would have no meaning griffin v commissioner f 3d pincite2 on remand this court shifted the burden_of_proof to the commissioner in accordance with the decision of the court_of_appeals and revisited the trial record this court concluded that the taxpayers were entitled to certain deductions because the commissioner had not offered sufficient contrary evidence to overcome the taxpayers’ evidence which the court_of_appeals had concluded was credible see griffin v commissioner tcmemo_2004_64 the court_of_appeals in griffin ii disagreed with this court’s finding regarding the credibility of the taxpayers’ evidence and its opinion is properly read in that context it 2in a footnote in its opinion the tax_court also stated that even if the burden_of_proof were placed on the commissioner we would decide the issue in his favor based on the preponderance_of_the_evidence griffin v commissioner tcmemo_2002_6 vacated and remanded 315_f3d_1017 8th cir is also apparent that once the issue of the credibility of the taxpayers’ evidence was resolved the burden shift did affect the result as this court on remand allowed the deductions that it had not allowed in its earlier opinion on the basis of the commissioner’s failure to carry his burden_of_proof petitioners’ argument in their motion for reconsideration reads griffin ii too broadly griffin ii does not stand for the proposition that a trial_court must decide whether the burden_of_proof shifts to the government in all cases where the issue of a burden shift is raised nor does it stand for the proposition that a trial court’s failure to decide a burden shift issue is always reversible error the court_of_appeals said as much in 366_f3d_608 8th cir affg tcmemo_2002_145 in polack v commissioner supra pincite the taxpayer appealed a tax_court decision arguing among other things that the tax_court erred in not shifting the burden_of_proof to the commissioner after the commissioner abandoned his initial valuation theory in favor of an expert’s valuation the tax_court had concluded that it did not need to decide whether the burden_of_proof shifted to the commissioner because the outcome 3the taxpayer in 366_f3d_608 8th cir affg tcmemo_2002_145 did not argue for a shift of the burden_of_proof under sec_7491 rather the taxpayer relied on general principles governing shifting the burden_of_proof was based on a preponderance_of_the_evidence id the court_of_appeals agreed with the tax_court and explained that ‘the shifting of an evidentiary burden of preponderance is of practical consequence only in the rare event of an evidentiary tie’ id quoting 159_f3d_355 8th cir the court_of_appeals did not mention its earlier decision in griffin ii in approximately months after it issued its decision in polack the court_of_appeals for the eighth circuit further clarified its position in 394_f3d_1030 8th cir affg tcmemo_2003_212 the court_of_appeals revisited whether the tax court’s failure to shift the burden_of_proof to the commissioner under sec_7491 was reversible error and held that on the record before it the tax_court did not commit reversible error by declining to decide the issue the court_of_appeals explained its holding in a situation in which both parties have satisfied their burden of production by offering some evidence then the party supported by the weight of the evidence will prevail regardless of which party bore the burden of persuasion proof or preponderance therefore a shift in the burden of preponderance has real significance only in the rare event of an evidentiary tie here the record is clear if the tax_court did err in failing to shift the burden_of_proof any error was harmless because the weight of the evidence supported a decision for the commissioner id at least two other courts of appeals have also held that the burden_of_proof shift under sec_7491 is relevant only when there is an evidentiary tie see 279_fedappx_834 11th cir any error committed by the tax_court by failing to shift the burden was harmless because the burden_of_proof is of practical consequence only in the rare event of an evidentiary tie affg tcmemo_2006_271 89_fedappx_656 9th cir the court was not required to determine who had the burden_of_proof under sec_7491 when the preponderance_of_the_evidence favored the commissioner affg tcmemo_2002_276 petitioners argue that griffin ii is correct and polack and blodgett are wrong however the court_of_appeals for the eighth circuit in blodgett upon revisiting griffin ii held that an allocation of the burden_of_proof is relevant only when there is equal evidence on both sides we agree with the analysis of the court_of_appeals in blodgett in a case where the standard of proof is preponderance_of_the_evidence and the preponderance_of_the_evidence favors one party we may decide the case on the weight of the evidence and not on an allocation of the burden_of_proof 4the court has often cited 394_f3d_1030 8th cir affg tcmemo_2003_212 for this position see eg 130_tc_1 n grossman v commissioner tcmemo_2005_164 levine v commissioner tcmemo_2005_86 5petitioners also argue that the reliance of the court_of_appeals for the eighth circuit on polack is questionable because continued in knudsen i the weight of the evidence favored respondent and consequently we did not need to decide the allocation of the burden_of_proof under sec_7491 with respect to the sec_183 issue we hold therefore that in knudsen i we did not err in declining to allocate the burden_of_proof under sec_7491 ii sec_1_183-2 income_tax regs petitioners argue that the court should have applied sec_7491 to each factor under sec_1_183-2 income_tax regs to determine whether petitioners were engaged in an activity for profit under sec_183 in other words petitioners contend that each factor is a separate factual continued polack did not involve any argument for a shift of the burden_of_proof under sec_7491 however the court_of_appeals in blodgett recognized that its reasoning in polack regarding the shifting of the burden_of_proof in a case decided on the basis of the preponderance_of_the_evidence was equally applicable to the analysis required by sec_7491 blodgett v commissioner supra pincite sec_1_183-2 income_tax regs provides a list of nine factors used to determine whether a taxpayer is engaged in an activity for profit under sec_183 the factors are the manner in which the taxpayer carries on the activity the expertise of the taxpayer or his advisers the time and effort expended by the taxpayer in carrying on the activity the expectation that assets used in the activity may appreciate in value the success of the taxpayer in carrying on other similar or dissimilar activities the taxpayer’s history of income or loss with respect to the activity the amount of occasional profits if any which are earned the financial status of the taxpayer and elements of personal pleasure or recreation issue to which sec_7491 applies and that we must analyze each factor to determine whether petitioners satisfied the requirements of sec_7491 to shift the burden_of_proof to respondent with respect to that factor petitioners raise this argument for the first time in their motion for reconsideration petitioners never argued at trial or on brief that each factor under sec_1_183-2 income_tax regs is a separate factual issue to which we must apply sec_7491 rather petitioners argued on brief that they satisfied the requirements under sec_7491 to shift the burden_of_proof to respondent with respect to the issue of whether their animal breeding operation was an activity engaged in for profit in their brief petitioners stated in this case petitioners have introduced a considerable amount of credible_evidence concerning the profit_motive of petitioners with respect to their exotic animal breeding operation since petitioners have met the requirements of sec_7491 the burden_of_proof with respect to issue i is on the commissioner respondent emphasis added issue i of petitioners’ brief is titled whether petitioners’ exotic animal operations constituted an ‘activity not engaged in for profit’ within the meaning of code sec_183 because petitioners never raised at trial or on brief the issue of whether each factor under sec_1_183-2 income_tax regs is a separate factual issue to which sec_7491 applies we decline to address petitioners’ argument asserted for the first time in petitioners’ motion for reconsideration see 67_tc_643 as stated above reconsideration is not the appropriate forum for petitioners to advance new legal theories to reach their desired result accordingly we shall deny petitioners’ motion for reconsideration an appropriate order and decision will be entered 7even if we were to address the application of sec_7491 on a factor-by-factor basis in this case we would still conclude that the allocation of the burden_of_proof would not change the result petitioners did not introduce evidence on a factor-by- factor basis to show that the requirements of sec_7491 were satisfied with respect to each factor in fact if we analyzed each of the factors to decide whether the sec_7491 requirements were met we would conclude that petitioners did not satisfy the requirements of sec_7491 for the reasons that we identified in knudsen i of the six negative factors five factors manner in which petitioners conducted their activity the expertise of petitioners and or their advisers expectation that assets would appreciate the amount of occasional profits and petitioner’s history of income or loss were negative at least in part because petitioners did not introduce credible_evidence to establish that the factor weighed in their favor see sec_7491


internal_revenue_service p o box cincinnati oh number release date date date legend x city dear department of the treasury employer_identification_number contact person - id number contact telephone number uil you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 and sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under the sec_4945 procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 description of your request your letter indicates you will award scholarships to high school students with documented learning disabilities for the expenses related to enrollment and attendance at private high schools in the x metropolitan area the scholarship will fund expenses that are described in both internal_revenue_code sec_4945 and sec_4945 expenses under code sec_4945 will include tuition books and school fees to attend a qualified educational_institution under sec_170 expenses under code sec_4945 will generally cover travel_expenses such as mass transportation_expenses to attend the qualified educational_institution to be eligible to receive a scholarship the applicant must be e e diagnosed with a learning disability by a physician learning specialist counselor or other expert currently enrolled or seeking enrollment in a private high school in the x area furthermore you will give preference to applicants demonstrating financial need who could not otherwise attend a private high school applicants must submit a completed application as part of the application applicants must include relevant financial information at least one personal reference and a personal statement describing how receiving the scholarship will further their academic objectives the applications will be reviewed by your selection committee which consists of your directors the committee will base their selection on the severity of the applicant’s learning disability and the applicant's demonstrated efforts to achieve their academic potential as illustrated through the applicant’s personal statement and references the committee will also consider financial need as the scholarship is intended to aid the recipients in gaining access to the resources and assistance available to students through private_schools which the student may be otherwise unable to obtain you will offer at least one but no more than three scholarships each school year in an amount equal to the current tuition at the private high school that the recipient will attend in the following academic year plus travel_expenses associated with the recipient's attendance at the school if necessary generally scholarships will be awarded on a one-time basis however if adequate funds are available you may renew a previously awarded scholarship in place of or in addition to your scholarships to ensure the scholarship funds are used for the purposes intended each recipient will provide the name of the private high school they will be attending prior to the disbursement of funds you may distribute the scholarship funds directly to the school if funds are not distributed directly to the school the scholarship recipient will provide a statement from the school verifying payment was received for tuition fees and or books if the scholarship funds are used for travel_expenses to or from the school the recipient must provide evidence of the cost of such travel furthermore the recipient will be required to submit two reports showing proper school attendance during the academic year if after a proper investigation you determine the scholarship funds were not used for the intended purposes you will seek repayment of such funds from the recipient basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements


department of the treasury internal_revenue_service washington d c ic tax exempt and government entities dec uniform issue list terra t2 division kh kkk legend decedent a individual b individual c trust t ira x company y date date date date date state s ee ek ala wie eee tik wee eee eae tek ee fk dear this is in response to your letter dated date in which you through your authorized representative request several letter rulings under sec_401 sec_408 and sec_691 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested decedent a was a resident of state s and established trust t on date on date decedent adied atage and c retirement account within the meaning of code sec_408 with company y at the time of his death decedent a owned ira x an individual and was survived by his sons individuals b decedent a’s beneficiary designation form dated date designated the trustee of trust t as the primary beneficiary of ira x you represent that trust t is valid under the laws of state s and that a copy of trust t was delivered to company y by october of the calendar_year following the year decedent a died trust t became irrevocable upon decedent a’s death sec_3 paragraph d of trust t provides that upon the death of decedent a the trustee may sell any property of the trust if deemed in the best interests of the remainder beneficiaries shall pay all legal claims against the estate and any estate or inheritance taxes and shall assign transfer and convey all remaining assets other than certain tangible_property equally to individual b and individual if either individual b or individual c is not living upon decedent a's death and c not survived by issue his share shall be distributed to decedent a's other living child per stirpes individual b was born on date and individual c was born on date both were living on decedent a’s date of death based on the above you request the following letter rulings that trust t constitutes a see-through trust within the meaning of sec_1_401_a_9_-4 q a-5 of the income_tax regulations regulations that division of ira x by means of trustee-to-trustee transfers into two inherited iras in the name of decedent a a will not result in taxable_distributions or payments under code sec_408 and b will not constitute a transfer causing inclusion in the gross_income of trust t or either beneficiary under code sec_691 that individuals b and c may each receive the required minimum distributions under code sec_401 from his respective inherited ira using the life expectancy of individual b with respect to your ruling requests code sec_408 provides the rules governing iras code sec_408 provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shail apply to the page distribution of the entire_interest of an individual for whose benefit the trust is maintained sec_401 of the code provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee ira holder - i will be distributed to such employee not later than the required_beginning_date or ii will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary code sec_401 provides that a_trust shall not constitute a qualified_trust under this section unless the plan provides that if an employee dies before the distribution of the employee’s interest has begun in accordance with subparagraph a ii the entire_interest of the employee will be distributed within years after the death of such employee code sec_401 provides an exception to the 5-year rule if any portion of the employee’s interest is payable to or for the benefit of a designated_beneficiary such portion will be distributed in accordance with regulations over the life of such designated_beneficiary or over a period not extending beyond the life expectancy of such beneficiary and such distributions begin not later than year after the date of the employee’s death or such later date as the secretary may by regulations prescribe for purposes of a b ii the portion referred to in subclause i shall be treated as distributed on the date on which such distributions begin code sec_401 provides in relevant part that for purposes of sec_401 the term required_beginning_date means april of the calendar_year following the calendar_year in which the employee attains age code sec_401 provides that for purposes of sec_401 the term designated_beneficiary means any individual designated as a beneficiary by the employee on date final regulations were published in the federal_register with respect to code sec_401 and sec_408 see also r b date sec_1_401_a_9_-4 of the regulations q a-1 provides in relevant part that a designated_beneficiary is an individual who is designated as a beneficiary under the plan an individual may be designated as a beneficiary under the plan either by the terms of the plan or if the plan so provides by an affirmative election by the employee or the employee's surviving_spouse specifying the beneficiary page under these regulations a designated_beneficiary need not be specified by name in the plan in order to be a designated_beneficiary so long as the individual who is to be the beneficiary is identifiable under the plan the member of a class of beneficiaries capable of contraction or expansion will be treated as being it is possible to identify the class member with the shortest life identifiable if expectancy further the passing of an employee’s interest to an individual under will or otherwise under applicable state law will not make that individual a designated_beneficiary under sec_401 e unless that individual is designated as a beneficiary under the plan sec_1_401_a_9_-4 of the regulations q a-3 provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate or a charitable_organization may not be a designated_beneficiary if a person other than an individual is designated as a beneficiary of an employee's benefit the employee will be treated as having no beneficiary for purposes of sec_401 even if there are also individuals designated as beneficiaries sec_1_401_a_9_-4 of the regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee’s death generally an employee’s designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of the date of death sec_1_401_a_9_-4 of the regulations q a-5 provides that where a_trust is named as a beneficiary of an employee beneficiaries of the trust with respect to the trust’s interest in the employee’s benefit may be treated as designated beneficiaries if the following requirements are met the trust is valid under state law or would be but for the fact there is no corpus the trust is irrevocable or will by its terms become irrevocable upon the death of the employee the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee’s benefit are identifiable within the meaning of a-1 of this section from the trust instrument relevant documentation has been timely provided to the plan_administrator sec_1_401_a_9_-4 q a-6 b of the regulations provides in relevant summary that at a minimum documentation sufficient to enable an ira custodian to identify beneficiaries of an ira must be provided by a trustee to the custodian by october of the calendar_year immediately following the calendar_year in which the ira owner died is with respect to your first ruling_request you have represented that trust t valid under the laws of state s that it became irrevocable upon the death of page decedent a and that a copy of trust t was timely given to the ira custodian furthermore the service notes that the identity of each person entitled to receive any portion of ira x upon decedent a’s death is determinable under the provisions of trust t the beneficiaries of trust t are individuals b and c therefore with respect to your first ruling_request we conclude that trust t constitutes a see-through trust within the meaning of sec_1_401_a_9_-4 q a-5 of the regulations with respect to your second ruling_request code sec_408 provides generally that in accordance with the rules of code sec_72 amounts paid or distributed from an ira are included in gross_income by the payee or distributee code sec_408 provides that paragraph d of this section does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code - code sec_408 provides generally that amounts from an inherited in general an inherited ira is an ira cannot be rolled over into another ira ira maintained by an individual who acquired said ira by reason of the death of another if the acquiring individual is not the surviving_spouse of said other individual revrul_78_406 1978_2_cb_157 rev_rul provides that the direct transfer of funds from one ira trustee to another ira trustee even if at the behest of the ira holder does not constitute a payment or distribution to a participant payee or distributee as those terms are used in code sec_408 furthermore such a transfer does not constitute a rollover_distribution revrul_78_406 is applicable if the trustee-to-trustee transfer is directed by the beneficiary of an ira after the death of the ira owner as long as the transferee ira is set up and maintained in the name of the deceased ira owner for the benefit of the beneficiary code sec_691 provides that the amount of all items of gross_income in respect of a decedent ird which are not properly includible in respect of the taxable_period in which falls the date of the decedent's death or a prior period page including the amount of all items of gross_income in respect of a prior decedent if the right to receive such amount was acquired by reason of the death of the prior decedent or by bequest devise or inheritance from the prior decedent shall be included in the gross_income for the table year when received of a the estate of the decedent if the right to receive the amount is acquired by the decedent's_estate b the person who by reason of the death of the decedent acquires the right to receive the amount if the right to receive the amount is not acquired by the decedent's_estate from the decedent or c the person who acquires from the decedent the right to receive the amount by bequest devise or inheritance if the amount is received after a distribution by the decedent's_estate of such right code sec_691 provides that if a right described in code sec_691 to receive an amount is transferred by the estate of the decedent or a person who received such right by reason of the death of the decedent or by bequest devise or inheritance from the decedent there shall be included in the gross_income of the estate or such person as the case may be for the taxable_period in which the transfer occurs the fair_market_value of such right at the time of such transfer plus the amount by which any consideration for the transfer exceeds such fair_market_value for purposes of code sec_691 the term transfer includes sale exchange or other_disposition or the satisfaction of an installment_obligation at other than face value but does not include transmission at death to the estate of the decedent or a transfer to a person pursuant to the right of such person to receive such amount by reason of the death of the decedent or by bequest devise or inheritance from the decedent sec_1_691_a_-4 of the regulations provides that if the estate of a decedent or any person transmits the right to ird to another who would be required by code sec_691 to include such income when received in his gross_income only the transferee will include such income when received in his gross_income in this situation a transfer within the meaning of code sec_691 has not occurred sec_1_691_a_-4 of the regulations provides that if a right to ird is transferred by an estate to a specific or residuary legatee only the specific or residuary legatee must include such income in gross_income when received sec_1_691_a_-4 of the regulations provides that if a_trust to which is bequeathed a right of a decedent to certain payments of income terminates and transfers the right to a beneficiary only the beneficiary must include such income in gross_income when received if the transferee described in reg sec_1 a - b or transfers his right to receive the amounts in the manner described in reg sec_1_691_a_-4 the principles contained in reg sec_1_691_a_-4 are applied to such transfer on the other hand if the transferee transmits his right in’ the manner described in reg sec_1_691_a_-4 the principles of reg sec_1 a - b are again applied to such transfer page kkk revrul_92_47 1992_1_cb_198 rev_rul holds that a distribution to the beneficiary of a decedent's ira that equals the amount of the balance in the ira at the decedent's death less any nondeductible_contributions is ird under code sec_691 that is includible in the gross_income of the beneficiary for the tax_year the distribution is received further with respect to your second ruling_request code sec_408 provides that in general amounts distributed or paid out of an ira are taxable to the payee or distributee code sec_408 exempts rollovers but pursuant to paragraph d c of that section amounts from inherited iras may not be rolled over to another ira however as noted above a trustee-to- trustee transfer described in revrul_78_406 does not constitute a payment or distribution such a transfer may be accomplished after the death of the ira holder on behaif of the beneficiaries of a decedent's ira in addition as noted above code sec_691 provides that the term transfer’ does not include a transfer to a person pursuant to the right of such person to receive such amount by reason of the death of the decedent further revrul_92_47 provides that a distribution to the beneficiary of a decedent's ira that equals the ira’s balance upon the decedent’s death less any nondeductible_contributions is ird under code sec_691 that is includible in the gross_income of the beneficiary for the tax_year in which the distribution is received therefore with respect to your second ruling_request we conclude that division of ira x by means of trustee-to-trustee transfers into two inherited iras in the name of decedent a a will not result in taxable_distributions or payments under code sec_408 and b will not constitute a transfer causing inclusion in the gross_income of trust t or either beneficiary under code sec_691 at the time of the transfer with respect to your third ruling_request sec_1_401_a_9_-3 of the regulations q a-3 a provides with respect to an employee ira holder who dies prior to his required_beginning_date that distributions to a non-spouse beneficiary must commence on or before the end of the calendar_year immediately following the year in which the employee ira holder died further sec_1_401_a_9_-5 of the regulations q a-5 c provides that the distribution period is determined using the non-spouse designated beneficiary's age as of the beneficiary's birthday in the calendar_year immediately following the calendar_year of the decedent's death in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after the calendar_year immediately following the calendar_year of the employee's death sec_1_401_a_9_-4 of the regulations q a-5 c provides that if the trust has more than one beneficiary the rules under sec_1_401_a_9_-5 q a-7 v page determine which beneficiary's life expectancy shall be used to determine the distribution period sec_1_401_a_9_-5 of the regulations q a-7 a states that if more than one individual is a designated_beneficiary the beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the applicable distribution period sec_1_401_a_9_-8 of the regulations q a-2 a provides the separate_account rules with respect to defined contribution plans a separate_account is an account under which the beneficiary or beneficiaries differ from the beneficiary or beneficiaries of the other accounts in general if separate_accounts are set up for years subsequent to the calendar_year containing the date on which the separate_accounts were established or the date of death if later a separate_account under a plan is not aggregated with the other separate_accounts under the plan in order to determine whether the distributions from such separate_account satisfy the requirements of code sec_401 instead the rules in code sec_401 apply separately to each separate_account under the plan sec_1_401_a_9_-8 of the regulations q a-3 provides that a separate_account is a separate portion of an employee's benefit which reflects the separate interest of an employee's beneficiary under the plan as of the employee's death for which separate_accounting is maintained the separate_accounting must allocate all post-death investment gains and losses contributions and forfeitures for the period prior to the establishment of the separate_accounts on a pro-rata basis in a consistent and reasonable manner among the separate_accounts sec_1_401_a_9_-4 of the regulations q a-5 c provides in relevant part that the separate_account rules under a-2 of reg sec_1_401_a_9_-8 are not available to beneficiaries of a_trust with respect to the trust's interest in the employee's benefit sec_1_401_a_9_-9 of the regulations q a-1 sets forth the single life table to be used to determine the life expectancy of an individual under the terms of trust t individuals b and c are the potential designated beneficiaries of ira x because individual b is older than individual c and thus has the shortest life expectancy individual b will be the designated_beneficiary for purposes of determining the applicable distribution period under code sec_401 therefore with respect to your third ruling_request we conclude kek page that individuals b and c may each receive the required minimum distributions under code sec_401 from his respective inherited ira using the life expectancy of individual b this ruling letter is based on the assumption that ira x and the iras to be established met or will meet the requirements of code sec_408 at all relevant times furthermore this ruling letter rests on the assumption that trust t is valid under the laws of state s as represented this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact please address all correspondence to se t ep ra t2 sincerely ygurs jaren leaune nzelt mployee plans technical group littlejohn manager actny ky derrall lakhishe enclosures deleted copy of ruling letter notice of intention to disclose cc eek


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 3-plr-109784-99 date date legend corporation state d1 d2 shareholders plr-109784-99 dear this responds to your letter dated date as supplemented submitted on behalf of corporation requesting rulings under sec_1361 and sec_2701 of the internal_revenue_code facts the following facts have been represented corporation was incorporated under the laws of state on d1 corporation elected to be taxed as an s_corporation on d2 corporation currently has a single class of common voting_stock all of the shares of which are held by shareholders for business reasons corporation proposes to undergo a recapitalization intended to qualify as a tax-free reorganization under sec_368 pursuant to the recapitalization the shareholders will receive one share of voting and shares of nonvoting common_stock for every share of voting common_stock currently held it is represented that the voting and nonvoting shares received by each shareholder will have shareholder rights similar to those voting shares given up additionally the only distinction between the two types of common_stock received in the proposed recapitalization will be as to voting rights all shares of stock will have identical rights to distributions and liquidation proceeds rulings requested plr-109784-99 the voting and non-voting stock which will be identical in all other respects will not be treated as different classes of stock within the meaning of sec_1361 and the existing s status will not terminate and sec_2701 does not apply to the proposed recapitalization law and analysis sec_1361 provides that for purposes of the code the term s_corporation means with respect to any_tax year a small_business_corporation for which an election under sec_1362 is in effect for the year sec_1361 provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not among other things have more than one class of stock sec_1361 indicates that a corporation shall not be treated as having more than one class of stock solely because there are differences in voting rights among the shares of common_stock sec_1_1361-1 of the income_tax regulations provides that subject_to certain exceptions a corporation is treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds it has been represented that the sole difference between the voting and nonvoting common_stock that corporation will issue pursuant to the recapitalization will be voting rights therefore the voting and nonvoting_stock will not be considered two classes of stock for purposes of sec_1361 sec_2701 contains special valuation rules to determine the amount_of_the_gift when an individual transfers an equity_interest in a corporation or a partnership to a member of the individual’s family sec_2701 provides that solely for purpose of determining if a transfer of an interest in a corporation or partnership to or for the benefit of a member of the transferor’s family is a gift and the value of such transfer the value of any right - - a that is described in sec_2701 or sec_2701 and b that is with respect to any applicable_retained_interest that is held by the transferor or an applicable_family_member immediately_after_the_transfer shall be determined under sec_2701 sec_2701 provides that sec_2701 does not apply to any right with respect to an applicable_retained_interest if - - a market quotations are readily available as of the date of the transfer for plr-109784-99 such interest on an established_securities_market b such interest is of the same class as the transferred interest or c such interest is proportionally the same as the transferred interest without regard to nonlapsing differences in voting power or for a partnership nonlapsing differences with respect to management and limitations in liability sec_2701 defines an applicable_retained_interest as any interest in an entity for which there is - - a a distribution_right but only if immediately before the transfer the transferor and applicable family members hold after application of sec_2701 control of the entity or b a liquidation_put_call_or_conversion_right sec_2701 provides that for purposes of sec_2701 in the case of a corporation the term control means the holding of at least percent by vote or value of the stock of the corporation sec_2701 provides that for purposes of sec_2701 the term applicable_family_member includes any lineal descendant of any parent of the transferor or the transferor’s spouse sec_25_2701-2 of the gift_tax regulations provides that an applicable_retained_interest is any equity_interest in a corporation or partnership with respect to which there is either an extraordinary_payment_right as defined in sec_25_2701-2 or in the case of a controlled_entity as defined in sec_25_2701-2 a distribution_right as defined in sec_25_2701-2 an extraordinary_payment_right is any put call or conversion_right any right to compel liquidation or any similar right the exercise or nonexercise of which affects the value of the transferred interest a distribution_right is the right to receive distributions with respect to an equity_interest but does not include - - any right to receive distributions with respect to an interest that is of the same class as or a class that is subordinate to the transferred interest any extraordinary_payment_right or certain other rights as described in sec_25_2701-2 sec_2701 provides that except as provided in regulations a contribution_to_capital or a redemption recapitalization or other change in the capital structure of a plr-109784-99 corporation or a partnership is treated as a transfer of an interest in such entity to which sec_2701 applies if the taxpayer or an applicable_family_member a receives an applicable_retained_interest in such entity pursuant to such transaction or b under regulations otherwise holds immediately after such transaction an applicable_retained_interest in such entity sec_2701 does not apply to any transaction other than a contribution_to_capital if the interests in the entity held by the transferor applicable family members and members of the transferor’s family before and after the transaction are substantially identical sec_25_2701-1 provides that except as provided in sec_25_2701-1 a transfer subject_to the rules of sec_2701 includes a redemption recapitalization or other change in the capital structure of an entity a capital structure transaction if - - the transferor or an applicable_family_member receives an applicable_retained_interest in the capital structure transaction the transferor or an applicable_family_member holding an applicable_retained_interest before the capital structure transaction surrenders an equity_interest that is junior to the applicable_retained_interest a subordinate interest and receives property other than an applicable_retained_interest or the transferor or an applicable_family_member holding an applicable_retained_interest before the capital structure transaction surrenders an equity_interest in the entity other than a subordinate interest and the fair_market_value of the applicable_retained_interest is increased sec_25_2701-1 provides that for purposes of sec_2701 a transfer does not include the following transactions i a capital structure transaction if the transferor each applicable_family_member and each member of the transferor’s family holds substantially the same interest after the transaction as that individual held before the transaction for this purpose common_stock with nonlapsing voting rights and nonvoting common_stock are interests that are substantially the same ii a shift of rights occurring upon the execution of a qualified_disclaimer described in sec_2518 plr-109784-99 iii a shift of rights occurring upon the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment described in sec_2514 except to the extent the release exercise or lapse would otherwise be a transfer under chapter sec_25_2701-1 provides that sec_2701 does not apply if the retained_interest is of the same class of equity as the transferred interest or if the retained_interest is of a class that is proportional to the class of the transferred interest a class is the same class as is or is proportional to the class of the transferred interest if the rights are identical or proportional to the rights of the transferred interest except for nonlapsing differences in voting rights or for a partnership nonlapsing differences with respect to management and limitations on liability in this case the shareholders of corporation propose to exchange all of their stock in corporation for new stock in corporation pursuant to a plan of recapitalization intended to qualify as a tax-free reorganization under sec_368 as discussed above pursuant to the plan of recapitalization for each voting share that a shareholder currently owns the shareholders will receive one new share of voting common_stock and new shares of nonvoting common_stock in all cases the rights with respect to the stock transferred by each shareholder will be identical to the rights with respect to the stock received by each shareholder therefore in accordance with sec_25_2701-1 and sec_25_2701-1 sec_2701 will not apply to the proposed recapitalization conclusion based solely on the facts submitted and the representations made we hold that the voting and nonvoting common_stock that will be issued in the recapitalization will not be considered different classes of stock within the meaning of sec_1361 therefore assuming corporation’s s election is otherwise valid the issuance of the voting and nonvoting common_stock will not terminate corporation’s s election sec_2701 will not apply to the proposed recapitalization this ruling expresses no opinion about the tax treatment of the proposed transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or any effects resulting from the transaction that are not specifically covered by the above rulings in particular this ruling expresses no opinion as to whether the proposed exchange of voting plr-109784-99 common_stock for a combination of voting common_stock and non-voting common_stock constitutes a corporate recapitalization within the meaning of sec_368 of the code revproc_2000_3 2000_1_irb_107 sec_3 and whether corporation is in fact an eligible s_corporation this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent sincerely william p o’shea branch chief branch office of assistant chief_counsel passthroughs and special industries enclosures copy of letter copy for sec_6110 purposes