internal_revenue_service number release date index number 468a ------------------ ------------------------------------------------------------ ----------- --------------------------------------- ------------------------ ------------------------------------- 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 psi b06 plr-106823-16 date date legend taxpayer parent state director electric company plant location commission order independent study independent study method date date a b c d e f g h year year year year ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- -------- ---------------------------------------------- -------------------------------------------------- ----------------------------------------------------------------------------- ------------------------------------------------- --------------------------------------------------------- ------------------------------------------ ----------------------------------------------------------------------------- ---------------- ----------------------------------------------------------------------------- --------------- ----------- --------------------------- ------------------------ ------- ------- ---------------- ------ ------------------- ------------- ------------- ------------- ------ ------ ------ ------ plr-106823-16 year year fund dear ---------------- ------ ------ ------------------------------------------ this letter responds to your request dated date for a mandatory revised schedule of ruling amounts under sec_468a of the internal_revenue_code code and sec_1_468a-3 of the income_tax regulations taxpayer was previously granted revised schedules of ruling amounts most recently on date taxpayer represents the facts and information relating to its request for a revised schedule of ruling amounts as follows taxpayer is a limited_liability_company that is indirectly and wholly-owned by parent taxpayer is incorporated in and engaged in the generation and sale of electric energy in state taxpayer files a consolidated federal_income_tax return with its parent on a calendar-year basis using the accrual_method of accounting taxpayer is under the audit jurisdiction of director although taxpayer is not a regulated utility electric company an affiliate of taxpayer is subject_to the rate-of-return ratemaking jurisdiction of commission and the cost of decommissioning plant is included in electric company’s cost of service by commission electric company collects an amount intended to fund the cost of decommissioning the plant through its commission-approved tariff which is a non- bypassable charge upon electric company’s retail customers that must be paid over to taxpayer taxpayer deposits these amounts into the qualified nuclear decommissioning fund maintained by taxpayer with respect to the plant taxpayer is the sole owner of the plant which is situated at location the plant’s operating license expires in year with respect to the decommissioning costs related to the plant which are included in the taxpayer’s cost of service for ratemaking purposes the taxpayer is subject_to regulation by commission commission in order effective date modified the amount of decommissioning costs to be included in taxpayer’s cost of service for ratemaking purposes the order relies upon assumptions provided in independent study and independent study the proposed method of decommissioning the plant is method based on the assumptions adopted by commission in order it is estimated that fund assets will earn an after-tax rate of return between a percent and b percent for year through year commission approved rates for taxpayer containing a decommissioning cost component based upon an estimated cost of dollar_figurec in year dollars as a base cost for decommissioning the plant this base cost for plr-106823-16 decommissioning the plant was escalated at the rate of d percent annually to the year that costs are incurred resulting in total estimated future decommissioning costs for the plant of approximately dollar_figuree in year to year dollars it is estimated that substantial decommissioning costs will first be incurred in year and that decommissioning will be substantially complete at the end of year sec_468a as amended by the energy tax incentives act of the act publaw_109_58 119_stat_594 allows an electing taxpayer to deduct payments made to a nuclear decommissioning reserve fund sec_468a limits the amount that may be paid into the nuclear decommissioning fund in any year to the ruling_amount applicable to that year prior to the changes made by the act the deduction was limited to the lesser_of the amount included in the utility’s cost of service for ratemaking purposes or the ruling_amount generally as a result only regulated utilities could take advantage of sec_468a the act amendment of sec_468a eliminated the cost-of-service limitation accordingly decommissioning costs of an unregulated nuclear power plant may now be funded by deductible contributions to a qualified nuclear decommissioning fund sec_468a provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund the total nuclear decommissioning cost of that nuclear power plant over the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within 2½ months after the close of the tax_year this section applies to payments made pursuant to either a schedule of ruling amounts or a schedule of deduction amounts sec_1_468a-1 provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a an eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in any portion of a nuclear power plant a qualifying interest is among other things a direct ownership_interest sec_1_468a-2 provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year plr-106823-16 the limitation on the amount of cash payments for purposes of sec_1_468a-2 does not apply to any special transfer permitted under sec_1_468a-8 sec_1_468a-3 provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on reasonable assumptions concerning the after-tax rate of return to be earned by the amounts collected for decommissioning the total estimated cost of decommissioning the nuclear plant and the frequency of contributions to a nuclear decommissioning fund for a taxable_year under sec_1_468a-3 the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer’s proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3 provides that the taxpayer bears the burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the regulations and that it is based on reasonable assumptions that section also provides additional guidance regarding how the service will determine whether a proposed schedule of ruling amounts is based on reasonable assumptions for example if a public_utility commission established or approved the currently applicable rates for the furnishing or sale by the taxpayer of electricity from the plant the taxpayer can generally satisfy this burden_of_proof by demonstrating that the schedule of ruling amounts is calculated using the assumptions used by the public_utility commission in its most recent order in addition a taxpayer that owns an interest in a deregulated nuclear plant may submit assumptions used by a public_utility commission that formerly had regulatory jurisdiction over the plant as support for the assumptions used in calculating the taxpayer’s proposed schedule of ruling amounts with the understanding that the assumptions used by the public_utility commission may be given less weight if they are out of date or were developed in a proceeding for a different taxpayer the use of other industry standards such as the assumptions underlying the taxpayer’s most recent financial assurance filing with the nrc are described by the regulations as an alternative means of demonstrating that the taxpayer has calculated its proposed schedule of ruling amounts on a reasonable basis sec_1_468a-3 further provides that consistency with financial_accounting statements is not sufficient in the absence of other supporting evidence to meet the taxpayer’s burden_of_proof sec_1_468a-3 provides that in general the ruling_amount for any_tax year in the funding_period shall not be less than the ruling_amount for any earlier tax_year plr-106823-16 under sec_1_468a-3 the funding_period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the last day of the estimated_useful_life of the nuclear power plant to which the fund relates sec_1_468a-3 provides rules for determining the estimated_useful_life of a nuclear plant for purposes of sec_468a in general under sec_1_468a-3 if the plant was included in rate base for ratemaking purposes for a period prior to date the date used in the first such ratemaking proceeding as the estimated date on which the nuclear plant will no longer be included in the taxpayer’s rate base is the end of the estimated_useful_life of the nuclear plant sec_1_468a-3 provides that if the nuclear plant is not described in sec_1_468a-3 the last day of the estimated_useful_life of the nuclear plant is determined as of the date the plant is placed_in_service under sec_1_468a-3 any reasonable method may be used in determining the estimated_useful_life of a nuclear power plant that is not described in sec_1_468a-3 sec_1_468a-3 provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer’s share of the total estimated cost of decommissioning the nuclear power plant sec_1_468a-3 provides that a taxpayer’s share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer’s qualifying interest in the plant sec_1_468a-3 provides the rules regarding the manner of requesting a schedule of ruling amounts sec_1_468a-3 provides that the service will not provide or revise a ruling_amount applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment_date as defined in sec_1_468a-2 for such taxable_year sec_1_468a-3 enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3 provides that the service may prescribe administrative procedures that supplement the provisions of sec_1_468a-3 and in addition that section provides that the service may in its discretion waive the requirements of sec_1_468a-3 and under appropriate circumstances sec_1_468a-3 describes the circumstances in which a taxpayer must request a revised schedule of ruling amounts sec_1_468a-3 requires that a taxpayer request a revised schedule of ruling amounts for the fund if the operating license of the nuclear plant to which the fund relates is extended the request for the revised schedule of ruling amounts must be submitted on or before the deemed payment plr-106823-16 deadline for the taxable_year that includes the date on which the license extension is granted sec_1_468a-3 provides that any taxpayer that has previously obtained a schedule of ruling amounts may request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we reach the following conclusions pursuant to sec_1_468a-3 taxpayer has met its burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the code and regulations and is based on reasonable assumptions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations taxpayer as owner of an interest in the plant has calculated its decommissioning costs under sec_1_468a-3 of the regulations the proposed schedule of ruling amounts was derived by following the assumptions contained in independent study and independent study that taxpayer has represented is a standard type study used in the industry in addition the same underlying assumptions were used by commission in order to calculate the amount of decommissioning costs to be included in taxpayer’s cost of service for ratemaking purposes thus taxpayer has demonstrated pursuant to sec_1_468a-3 that the proposed schedule of ruling amounts is based on reasonable assumptions and is consistent with the principles of sec_468a and the regulations thereunder the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the ruling_amount applicable to the fund as set forth under sec_1_468a-2 of the regulations based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code we have approved the following revised schedule of ruling amounts approved schedule of ruling amounts years commission plr-106823-16 year year sec_3 - year dollar_figuref dollar_figureg dollar_figureh if any of the events described in sec_1_468a-3 occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which this schedule of ruling amounts is received except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above in particular while we have approved the proposed schedule of ruling amounts based on cost estimates contained in independent study we make no ruling express or implied whether any particular item contained in that study constitutes a nuclear decommissioning cost within the meaning of sec_1_468a-1 this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7 a copy of this letter must be attached with the required election statement to the taxpayer’s federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours peter c friedman senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries 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 b01 plr-163311-05 date date -------------------------------------------- legend legend x ---------------------------------- d1 --------------------------- dear -------------- this responds to the letter dated date submitted on behalf of x requesting relief under ' b of the internal_revenue_code facts x was incorporated on d1 the shareholders of x intended that x be treated as an s_corporation effective d1 but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective d1 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under ' b however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed plr-163311-05 sec_1362 provides that if no ' a election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and ' b shall not apply x did not timely file an election to be treated as an s_corporation under ' a x has however established reasonable_cause for not making a timely s election and is entitled to relief under ' b conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as specifically set forth above no opinion is expressed or implied as to 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 in fact an s_corporation for federal tax purposes provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 pursuant to the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representative sincerely dianna k miosi dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes


internal_revenue_service number release date index numbers 263a --------------- ----------------------------------- -------------------------------- ------------------------------ ----------------------------------- - 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 ita b06 plr-106041-05 date date ------- ------- ------- ----------------- do lmsb ---------taxable years --------------- do lmsb ---------taxable years --------------- -------------------------------- ---------------------- legend a b year year year year year date date date dear --------------- this ruling is in reply to a request submitted by a the taxpayer requesting an extension of time under sec_301_9100-1 of the procedure and administration regulations and revproc_2005_1 2005_1_irb_1 date to elect the simplified_production_method with historic absorption ratio election pursuant to -------------------------- -------------------------- ----------------------- ------- ------- plr-106041-05 sec_1_263a-2 of the income_tax regulations effective for the taxable_year ended date facts a designs creates builds and sells b for at least three years prior to its taxable_year a had used the simplified_production_method without the historic absorption ratio spm election provided by sec_1 b to determine its additional costs under sec_263a of the internal_revenue_code properly allocable to ending inventories of property produced and other eligible_property on hand at the end of the taxable_year beginning with its taxable_year ended date a began to determine these additional costs using the simplified_production_method with historic absorption ratio election har to reflect this change in its simplified_production_method during year a’s corporate tax department reviewed both the requirements for electing the simplified_production_method with historic absorption ratio and accounting_method change procedures consequently the corporate tax department understood that in order to elect this simplified_production_method a was required to attach its election of this method to its timely filed federal_income_tax return for year the corporate tax department prepared the required statement with the intention of including it with a’s year tax_return however the election statement was inadvertently placed in the work papers supporting the year tax_return rather than with the tax_return itself and thus was not included in a’s year tax_return filed with the internal_revenue_service however a prepared and filed its year tax_return and all subsequent returns consistent with its having duly elected the simplified_production_method with historic absorption ratio as provided by sec_1_263a-2 on or about date while reviewing documents in preparation for filing applications for change in accounting_method forms for unrelated matters a’s tax manager discovered that the required election statement had not been included with a’s tax_return for year shortly thereafter a filed this request for an extension of time a is a taxpayer under continuous examination by the service at the time of this request for an extension of time under sec_301_9100-1 the service was concluding its examination of a’s taxable_year through year at the time of a’s ruling_request the issue of a’s timely election of the simplified_production_method with historic absorption ratio was not under consideration by the examining agent the next examination cycle covering taxable_year through year was due to begin on date a stated in its ruling_request that it would provide a copy of this extension request to the examining agent at the opening conference for this cycle plr-106041-05 the law sec_263a provides uniform rules for capitalizing certain expenses including the direct and an allocable portion of the indirect_costs of producing real or tangible_personal_property in the case of property that is inventory in the taxpayer’s hands such costs must be included in the taxpayer’s inventory costs sec_1_263a-1 defines sec_263a costs as the costs that a taxpayer must capitalize under sec_263a consisting of the sum of the taxpayer’s sec_471 costs additional sec_263a costs and interest capitalizable under sec_263a sec_1_263a-1 defines additional sec_263a costs as the costs other than interest that were not capitalized under the taxpayer’s method_of_accounting immediately prior to the effective date of sec_263a but that are required to be capitalized under sec_263a sec_1_263a-1 generally defines sec_471 costs for purposes of the sec_263a regulations as the costs other than interest capitalized under the taxpayer’s method_of_accounting immediately prior to the effective date of sec_263a sec_1_263a-2 provides simplified methods for determining the additional sec_263a costs allocable to ending inventories of property produced and other eligible_property on hand at the end of the taxable_year these are the spm and the har sec_1_263a-2 provides generally that under the spm additional sec_263a costs allocable to eligible_property remaining on hand at the close of the taxable_year equal the absorption ratio times the sec_471 costs remaining on hand at year end the absorption ratio equals the additional sec_263a costs incurred during the taxable_year divided by the sec_471 costs incurred during the taxable_year under the spm the taxpayer calculates an absorption ratio for each taxable_year sec_1_263a-2 permits qualifying taxpayers to elect the simplified_production_method with historic absorption ratio a method of calculating additional sec_263a costs that does not require calculating an absorption ratio for each taxable_year under sec_1_263a-2 a taxpayer that properly elects the simplified_production_method with historic absorption ratio may calculate a historic absorption ratio and use that ratio as its absorption ratio during the qualifying period as defined in sec_1_263a-2 in order to determine the additional sec_263a costs allocable to eligible_property on hand at the end of each taxable_year the qualifying period defined in sec_1_263a-2 includes each of the first five taxable years beginning with the first taxable_year after a test period or an updated test period plr-106041-05 sec_1_263a-2 provides that the historic absorption ratio equals the additional sec_263a costs incurred during the test period divided by the sec_471 costs incurred during the test period the test period generally is the three-year period immediately preceding the taxable_year that the simplified_production_method with historic absorption ratio is adopted see sec_1_263a-2 sec_1_263a-2 provides that a taxpayer may elect the simplified_production_method with historic absorption ratio if the taxpayer has used the spm for three or more consecutive years immediately prior to the taxable_year of election the taxpayer has capitalized additional sec_263a costs using an actual absorption ratio for its three most recent consecutive taxable years and the taxpayer was not deemed to have zero additional sec_263a costs under the de_minimis_rule of sec_1_263a-2 sec_1_263a-2 provides that a taxpayer using the spm may elect the simplified_production_method with historic absorption ratio in any taxable_year if permitted under sec_1_263a-2 provided the taxpayer has not obtained the commissioner’s consent to revoke this method within its prior six taxable years sec_1_263a-2 provides that a taxpayer electing to use the simplified_production_method with historic absorption ratio must attach a statement to its income_tax return for the taxable_year in which the election is made the statement must show the actual absorption ratios determined under the spm during the taxpayer’s first test period additionally the statement must disclose the historic absorption ratio that the taxpayer will use during its qualifying period under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election under all subtitles of the code except subtitles e g h and i provided that the taxpayer acted reasonably and in good_faith and provided that granting relief will not prejudice the interests of the government sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin an election is defined to include a request to adopt change or retain an accounting_method sec_301_9100-2 sets forth rules governing automatic extensions for regulatory elections if the provisions of sec_301_9100-2 do not apply to a taxpayer’s situation the provisions of sec_301_9100-3 may apply instead sec_301_9100-3 sets forth the standards that the commissioner will use in determining whether to grant an extension of time to make a regulatory election it also sets forth information and representations that must be furnished by the taxpayer to enable the service to determine whether the taxpayer has satisfied these standards plr-106041-05 the standards to be applied in this case are whether the taxpayer acted reasonably and in good_faith and whether granting relief would prejudice the interests of the government under sec_301_9100-3 a taxpayer applying for relief for failure to make an election before the failure is discovered by the service ordinarily will be deemed to have acted reasonably and in good_faith however pursuant to sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer 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 or if the taxpayer was informed in all material respects of the required election and related tax consequences but chose not to file the election furthermore a taxpayer ordinarily will not be considered to have acted reasonably and in good_faith if the taxpayer uses hindsight in requesting relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all tax years affected by the regulatory election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money likewise if the tax consequences of more than one taxpayer are affected by the election the government’s interests are prejudiced if extending the time for making the election may result in the affected taxpayers in the aggregate having a lower tax_liability than if the election had been timely made further sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the tax_year in which the regulatory election should have been made or any_tax 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 sec_301_9100-3 conclusion based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly we grant an extension of time for a to file the necessary documents to satisfy the requirements for electing the simplified_production_method with the historic absorption ratio effective with a’s taxable_year ended date this extension shall be for a period of days from the date of this ruling a copy of this letter must be attached to any income_tax return to which it is relevant the ruling contained in this letter is based upon information and representations submitted by a and its representatives and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of plr-106041-05 the material submitted in support of the request for this ruling they are subject_to verification on examination 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 further no opinion is expressed as to the application of any other provisions of the code or regulations that may be applicable to this election specifically this ruling addresses only the request to extend the period for electing the simplified_production_method with historic absorption ratio and does not directly or indirectly approve any inventory_accounting method used by a to capitalize costs particularly a’s qualification to use the har and the validity of its data supporting its simplified sec_263a method will be determined upon examination this ruling is directed only to a the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to a’s authorized representative sincerely jeffery g mitchell branch chief branch income_tax accounting


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-130631-05 date date ----------- ------------------- ------------------------------------------------------ legend x ----------------------------------------- country date dear ------------------ requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity under sec_301_7701-3 x represents that x is a foreign_entity eligible to elect to be treated as a disregarded_entity however x inadvertently failed to timely file a form_8832 entity classification election electing to treat x as a disregarded_entity effective date entity for federal_income_tax purposes generally a foreign eligible_entity is treated as the information submitted states that x was formed under the laws of country sec_301_7701-3 provides guidance on the classification of a foreign this responds to a letter dated date submitted on behalf of x sec_301_9100-1 through provide the standards the sec_301_9100-1 provides that the commissioner may grant a reasonable sec_301_7701-3 provides that an entity classification election must be filed plr-130631-05 an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if the foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed 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 internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose federal tax consequences of the facts described above under any other provision of the code provides that it may not be used or cited as precedent except as specifically set forth above no opinion is expressed concerning the based solely on the information submitted and the representations made we this ruling is directed only to the taxpayer requesting it sec_6110 plr-130631-05 being sent to x’s authorized representative pursuant to a power_of_attorney on file with this office a copy of this letter is sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures cc copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court jack a lettie g wheeler petitioners v commissioner of internal revenue respondent docket no 25087-08s filed date alan c housholder for petitioners lynette mayfield for respondent cohen judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax for the issue for decision is whether jack a wheeler petitioner has substantiated deductible vehicle expenses as required under sec_274 and sec_280f background petitioners resided in tennessee at the time that they filed their petition during petitioner represented a laboratory that provided testing for clinics performing renal services including dialysis to patients petitioner’s employment required him to make sales and service calls on customers petitioner used his personal vehicle in calling on customers petitioner did not maintain any logs reflecting his business use of a vehicle or any other contemporaneous_records of his vehicle expenses on schedule c profit or loss from business attached to petitioners’ form_1040 u s individual_income_tax_return for petitioners reported no income but deducted dollar_figure as car and truck expenses petitioner prepared the return for respondent disallowed the claimed deduction and made corresponding adjustments increasing the taxable_portion of petitioners’ social_security_benefits and reducing deductible medical_expenses in their petition and at trial petitioners reduced the amount claimed for car and truck expenses to dollar_figure based on a proposed amended form_1040 and an amended schedule c prepared by petitioners’ counsel attached to the proposed amended form_1040 were a schedule a itemized_deductions which included a deduction for employee business_expenses and a form 2106-ez unreimbursed employee business_expenses but neither form separately identified any vehicle expenses the reduced claim was based on reconstructed mileage for weekly visits to two labs and monthly and less frequent but regular visits to other customers or potential customers of petitioner’s employer discussion petitioner and a representative of one of his customers testified at trial their testimony was to the effect that petitioner made business calls on certain customers at various intervals and they estimated the mileage to the customer’s places of business from some unspecified locale petitioner offered a reconstructed schedule of examples of business calls he made on behalf of his employer during including estimates that he visited certain customers times per week petitioners’ counsel acknowledged that the reconstructed mileage was employee_business_expense rather than schedule c expense and relied on the proposed amended_return as stating petitioners’ position respondent objected to the testimony to any discussion of the amended_return and to the reconstruction that did not relate to the amounts claimed on the original schedule c respondent asserts that the proposed amended_return was not filed and was simply a settlement negotiation offer and inadmissible from the time the petition was filed it was apparent that petitioners were not relying on the schedule c filed with their original return for if they adequately substantiated deductible vehicle expenses that should have been claimed as employee business_expenses the expenses might be allowable as itemized_deductions subject_to the limitations on that category of expenses see sec_67 and sec_68 petitioners elected the small_tax_case procedure under rule when they filed their petition and evidence having probative value is admissible under rule b the testimony of petitioner and his witness had probative value in explaining petitioner’s business use of his vehicle respondent’s objections based on the difference between the original schedule c and the reduced claim are not well founded and they are overruled on the other hand we cannot accept petitioners’ counsel’s argument that rule b relaxes the standards of evidence of deductible business_expenses subject_to the sec_274 requirement of substantiation by adequate_records a passenger_vehicle is listed_property under sec_280f thus deductions are disallowed unless the taxpayer adequately substantiates the amount of the expense the time and place of business use of the vehicle and the business_purpose of the travel these rules were adopted to preclude estimates based solely on a finding that some deductible business_expenses were incurred as allowed in other contexts see 50_tc_823 affd per curiam 412_f2d_201 2d cir the statutory standard of adequacy of evidence is not modifiable by a rule regarding admissibility of evidence such as rule b petitioner admitted during trial that he did not keep a log of the mileage for business or other use of his vehicle and he did not have any contemporaneous_records that would corroborate his reconstruction he testified only that some motel or gas receipts had been misplaced we are not persuaded that petitioner ever had adequate_records to substantiate either the dollar_figure claimed on his filed return or the lesser amount of dollar_figure claimed at trial the disparity in these claims casts doubt on the reliability of petitioner’s recollections in reconstructing the events of petitioner has adequately explained and corroborated the business_purpose of his calls on customers during he has not however adequately substantiated the time or date and number of trips taken his reconstruction is based on estimates and averages obviously he did not make trips in a week his reconstruction based on weekly trips in each of weeks or monthly trips in each of months in without any indication of the day of the week or month on which he made those trips is unreliable we give no weight to the proposed amended_return prepared by petitioners’ counsel beyond the concession of reduced business mileage the proposed amended_return contains inconsistencies and obvious errors it also sets forth other unexplained deductions that are not in issue here thus we need not resolve the dispute between the parties about whether the amended_return was filed the other adjustments made in the statutory notice are automatic and petitioners have given us no reason to believe that they are erroneous for the foregoing reasons decision will be entered for respondent


department of the treasury washington dc person to contact telephone number refer reply to plr-103101-01 cc intl b1 date date internal_revenue_service number release date index no a date b date c country d dear this is in response to a letter dated b by a’s authorized representative requesting a ruling under sec_877 of the internal_revenue_code_of_1986 code that a’s loss of long-term_resident status did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by penalty of perjury statements 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 the information submitted for consideration is substantially as set forth below a a long-term_resident of the united_states within the meaning of sec_877 relinquished his u s lawful permanent resident status expatriated on date c a is a citizen of country d the country in which he was born on the date of a’s expatriation his net_worth exceeded the threshold_amount stated in sec_877 sec_877 generally provides that a citizen who loses u s citizenship or a u s long-term_resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable_year will be taxed under sec_877 and the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes plr-103101-01 page a former citizen or former long term-resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual’s average income_tax_liability or the individual’s net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 a former u s citizen or former long term-resident whose net_worth or average tax_liability exceeds these thresholds however will not be presumed to have a principal purpose of tax_avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 under notice_98_34 1998_2_cb_29 modifying notice_97_19 1997_1_cb_394 a former long-term_resident whose net_worth or average tax_liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax_avoidance if that former resident is described within certain categories and submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes notice_98_34 requires that certain information be submitted with a request for a ruling that an individual’s expatriation did not have for one of its principal purposes the avoidance of u s taxes a submitted all the information required by notice_98_34 including any additional information requested by the service after review of the submission a is eligible to request a ruling pursuant to notice_98_34 because he has become a resident fully liable to income_tax in the country in which he was born a submitted his request within one year of expatriation based solely on the information submitted and the representations made we conclude that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 therefore a will not be presumed under sec_877 to have as one of his principal purposes for expatriating the avoidance of u s taxes it is further concluded that a will not be treated under sec_877 as having as one of his principal purposes of expatriating the avoidance of u s taxes 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 in addition no opinion is expressed as to a’s u s tax_liability for taxable periods prior to his loss of permanent residence status or for taxable periods after his loss of permanent residence status under sections of the code other than sec_877 sec_2107 and sec_2501 a copy of this letter must be attached to a’s u s income_tax return for the year in plr-103101-01 page which a obtained the ruling 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 will be sent to a’s representative sincerely yours w edward williams senior technical reviewer branch office of the associate chief_counsel international cc