internal_revenue_service number release date index number - -------------------------- ------------- -------------------------------------- -------------------------------------------------- --------------------------------- department of the treasury washington dc person to contact ------------------------------- --------- ------------ --------- telephone number --------------------- refer reply to cc psi - plr-123318-06 date date -------------------------------------- ------------------------------------------------ x --------------------------------------------------- y --------------------------------------------------- date date date dear ------------------- --------------------- ----------------- ------------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to treat y as a qualified_subchapter_s_subsidiary qsub effective date under sec_1361 of the internal_revenue_code according to the information submitted x is a corporation that elected to be treated as an s_corporation effective date x purchased all of the stock of y on date and joined with the seller to make an election with respect to y under sec_338 x intended to and did treat y as a qsub effective the following day on date but inadvertently failed to file the proper election plr-123318-06 sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 generally provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a qsub as any domestic_corporation that is not an ineligible_corporation if percent of the stock of the corporation is owned by an s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations provides the time and manner for making the qsub election a taxpayer makes a qsub election with respect to a subsidiary by filing a form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center sec_1_1361-4 provides that an s_corporation that makes a qualified_stock_purchase of a target may make an election under sec_338 with respect to the acquisition if it meets the requirements for the election and may make a qsub election with respect to the target if an s_corporation makes an election under sec_338 with respect to a subsidiary acquired in a qualified_stock_purchase a qsub election made with respect to that subsidiary is not effective before the day after the acquisition_date within the meaning of sec_338 if the qsub election is effective on the day after the acquisition_date the liquidation under sec_1_1361-3 occurs immediately after the deemed asset purchase by the new target_corporation under sec_338 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by regulations published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic_extension of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-123318-06 based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied x is granted an extension of time of days from the date of this letter to file a form_8869 to elect to treat y as a qsub effective date a copy of this letter should be attached to the election except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed regarding whether x is a valid s_corporation or whether y is otherwise a valid qsub for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to x's authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes -------------------------------------------- ----------------------- --------------------------------------------------------- -------------------------------------------- ---------------------------------------------- -------------------------------- ------------------------------------------------------ ----------------------------------


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc it a 05-plr-119888-00 date date taxpayer buyer state a dear this letter responds to your request for a private_letter_ruling on behalf of taxpayer taxpayer is a regulated_public_utility that owns an undivided fee simple interest as a tenant in common in a nuclear power plant the plant and certain other facilities and assets associated therewith and ancillary thereto taxpayer maintains a decommissioning fund qualified_fund that satisfies the requirements necessary to be treated as a nuclear decommissioning reserve fund within the meaning of sec_468a a and as a nuclear decommissioning fund and a qualified nuclear decommissioning fund within the meaning of sec_1_468a-1 taxpayer also maintains a nonqualified decommissioning fund nonqualified_fund that is a valid trust under state a law and which is considered a grantor_trust under sections taxpayer holds the funds for the purpose of decommissioning the plant taxpayer has contracted to sell its interest in the plant and assets related thereto to buyer specifically taxpayer has contracted to sell assign convey transfer and deliver to buyer its ownership share of the assets held for the use in the operation of the plant which include the following the real_property all spent nuclear fuel machinery and equipment etc leasehold interests and subleases relating to the real_property all permits certain contracts and agreements certain documents correspondence books_and_records personnel records intellectual_property related to a certain name nuclear regulatory commission licenses rights in nuclear fuel and the assets comprising any qualified or nonqualified_fund maintained by taxpayer with unless provided otherwise all section references are to the internal_revenue_code_of_1986 as applicable to the taxable years in question plr-119888-00 regard to the plant including all income_interest and earnings thereon together with all related tax_accounting decommissioning studies and cost estimates and all other books_and_records related thereto in conjunction with the sale buyer will make certain payments of cash and will assume certain taxpayer liabilities including decommissioning liabilities with respect to the plant certain environmental liabilities and encumbrances on acquired assets on the sale closing date taxpayer will transfer the assets in its qualified_fund to a decommissioning fund buyer will establish and which the buyer intends to qualify as a qualified decommissioning fund within the meaning of sec_1_468a-1 and a nuclear decommissioning reserve fund within the meaning of sec_468a on the sale closing date taxpayer will also transfer any funds in its nonqualified_fund to a nonqualified decommissioning fund that buyer will establish buyer will hold both its qualified_fund and nonqualified_fund solely for the purpose of decommissioning the plant and any monies or other properties remaining in such funds following the decommissioning of the plant will be distributed to buyer taxpayer requests a ruling that the portion of any net_operating_loss that it incurs as a result of the assumption by buyer of its obligation to decommission the plant will qualify as a specified_liability_loss within the meaning of sec_172 that will be eligible for a 10-year carryback under sec_172 sec_172 allows a net_operating_loss_deduction equal to the aggregate of the net_operating_loss carryovers and net_operating_loss carrybacks to a taxable_year with certain modifications sec_172 defines a net_operating_loss as the excess of deductions permitted by chapter of the internal_revenue_code the code over gross_income sec_172 provides that generally a net_operating_loss is carried back to each of the taxable years preceding the year of the loss and carried forward to each of the taxable years following the year of the loss sec_172 provides that in the case of a specified_liability_loss the loss is carried back to each of the taxable years preceding the loss_year rather than years sec_172 defines a specified_liability_loss in part as any amount taken into account in computing the net_operating_loss for the taxable_year and that is allowable as a deduction under chapter of the code other than sec_468 or sec_468a which is in satisfaction of a liability under a federal or state law requiring the decommissioning of a nuclear power plant or any unit thereof we have previously ruled that taxpayer will be entitled to a deduction in the year_of_sale for the amount of its decommissioning liability associated with the plant expressly assumed by buyer and included in taxpayer’s amount_realized to the extent taxpayer incurs a net_operating_loss in the taxable_year of the sale that loss may be attributable in whole or in part to taxpayer’s deduction for its decommissioning liability assumed by buyer and included in taxpayer’s amount_realized plr-119888-00 to generate a sec_172 specified_liability_loss the amount of taxpayer’s deduction for the decommissioning liability assumed by buyer must be in satisfaction of a liability under federal or state law requiring the decommissioning of a nuclear power plant prior to the sale taxpayer has the obligation to decommission the plant this obligation arose years ago when taxpayer obtained its license to operate the plant in addition the requirement to decommission the plant is imposed by the nuclear regulatory commission nrc and thus arises under federal_law see c f_r sec_50 as part of the sale of the plant the operating licence for the plant will be transferred to buyer decommissioning funds held by taxpayer will be transferred to buyer and buyer will expressly assume taxpayer’s obligation to decommission the plant the express assumption of the decommissioning liability by buyer as part of the sale of the plant satisfies the economic_performance requirement under sec_1_461-4 thereby entitling taxpayer to a deduction for its decommissioning liability in addition as a result of the sale of the plant and buyer’s assumption of the decommissioning liability taxpayer’s liability under federal_law to decommission the plant will be extinguished taxpayer has represented that after the sale and licence transfers are complete including the transfer of the decommissioning funds the nrc will no longer look to taxpayer to decommission the plant to the extent the decommissioning funds are insufficient to fully decommission the plant buyer will be responsible for funding the shortage thus the transfer of the plant and related assets to buyer and the assumption by buyer of the decommissioning liability results in taxpayer no longer being required under federal_law to decommission the plant further the deduction allowed to taxpayer for buyer’s assumption of the liability to decommission the plant is in satisfaction of taxpayer’s liability under federal_law requiring the decommissioning of a nuclear power plant black’s law dictionary seventh edition defines the term satisfaction as among other things the giving of something with the intention express or implied that it is to extinguish some existing legal or moral obligation in this case taxpayer has as part of the sale of the plant transferred the operating licence and decommissioning funds to buyer taxpayer represents that because of this transfer and buyer‘s assumption of the decommissioning liability the nrc the regulatory agency that imposes the legal_obligation to decommission nuclear power plants will no longer look to taxpayer to decommission the plant thus taxpayer’s liability under federal_law to decommission the plant will be satisfied because it has transferred certain assets to buyer in order to extinguish this legal_obligation the amount of the decommissioning liability assumed by buyer and included in taxpayer’s amount_realized is allowed as a deduction to taxpayer to the extent the deduction generates a net_operating_loss for the taxable_year that portion of the net_operating_loss will be a specified_liability_loss under sec_172 we conclude that the portion of any net_operating_loss that taxpayer incurs in the year the plant is sold and that is attributable to the deduction allowed to taxpayer for buyer’s assumption of taxpayer’s liability to decommission the plant will be a plr-119888-00 specified_liability_loss to taxpayer and may be carried to each of the taxable years preceding the loss_year under sec_172 sec_172 generally provides that the portion of a specified_liability_loss that is attributable to amounts incurred in the decommissioning of a nuclear power plant or any unit thereof may be carried back to each of the taxable years during the period i beginning with the taxable_year in which the plant or unit thereof was placed_in_service and ii ending with the taxable_year preceding the loss_year in this case taxpayer is not requesting a ruling under sec_172 therefore we make no determination as to whether any portion of taxpayer’s specified_liability_loss is attributable to amounts incurred in the decommissioning of a nuclear power plant or any unit thereof and thus eligible for the carryback provision set forth in sec_172 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely yours associate chief_counsel income_tax accounting by william a jackson chief branch


tax_exempt_and_government_entities_division department of the treasury internal_revenue_service te_ge eo examinations commerce st mail stop dal dallas texas date date 501-dollar_figure release number release date legend org - organization name xx - date address - address org address certified mail dear taxpayer_identification_number person to contact employee identification_number contact numbers phone fax this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter to you dated october 19xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reason courtesy of our examination of your activities and financial records for the years ending december 20xx through december 20xx we have determined that your organization has been inactive since 20xx and that there have been no operations or financial activities conducted or planned as such you fail to meet the operational requirements for continued exemption under sec_501 sec_1_501_c_3_-1 contributions to your organization are no longer deductible you are required to file income_tax returns on form_1120 if you have not aiready filed these returns and the examiner has not provided you instructions for converting your previously filed form s to form s you should file these income_tax returns with the appropriate service_center for the tax years ending december 20xx and for all tax years thereafter in accordance with the instructions of the return processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition or complaint in one of these three courts must be filed before the day after the date this determination was mailed to you if you wish to seek review of our determination please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note that the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the courts at the following addresses you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours ae nanette m downing director eo examinations enclosures publication exempt_organization appeal procedures for unagreed issues form_6018 consent to proposed action - sec_7428 aes al tax_exempt_and_government_entities_division org address department of the treasury internal_revenue_service te_ge eo examinations commerce street dallas tx date date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax manager’s name id number manager’s contact number certified mail - return receipt requested dear we propose to revoke our recognition of your exempt status as an organization described in sec_501 of the internal_revenue_code code we enclose our report of examination explaining why we are proposing this action if you accept our proposal please sign and return the enclosed form_6018 consent to proposed action - sec_7428 unless you have already provided us a signed form_6018 we will issue a final revocation letter determining you are not an organization described in sec_501 after the issuance of the final revocation letter we will publish an announcement that you have been deleted from the cumulative list of organizations contributions to which are deductible under sec_170 of the code if you do not respond to this proposal we will similarly issue a final revocation letter proposal ray adversely impact your legal standing to seek a declaratory_judgment because you may be deemed to have failed to exhaust administrative remedies failing to respond to this if you do not agree with our proposed revocation and wish to protest our proposed revocation to the appeals_office of the internal_revenue_service then you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision this written request is called a protest for your protest to be valid it needs to contain certain specific information which generally includes a statement of the facts the applicable law and arguments in support of your position for the specific information needed for a valid protest please refer to page of the enclosed publication the examination process and page of the enclosed publication exempt_organizations appeal procedures for unagreed issues these documents also explain how to appeal an irs proposed action if you do submit a valid protest then an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication and publication explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process please note that fast tract mediation services referred to in publication generally do not apply after issuance of this letter you may also request that we refer this matter for technical_advice as explained in publication and an annual revenue_procedure please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the eo rulings and agreements function then no further administrative appeal will be available to you within the irs on the matter if you agreed with the proposed revocation or if you receive a final revocation letter you will be required to file federal_income_tax returns for the tax period s shown above file these returns with the ogden service_center within days of the date you agreed with the revocation or the date of your final revocation letter whichever is sooner unless a request for extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns we will hotify the appropriate state officials of the revocation in accordance with sec_6104 of the code currently only certain states are eligible to receive notification of proposed revocation actions you can call the person at the heading of this letter to find out if your state is eligible to receive a notice of revocation of your tax-exempt status you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you sincerely thank you for your cooperation nanette m downing director eo examinations enclosures publication publication report of examination form 886a name of taxpayer org department of the treasury - internal_revenue_service explanation of items schedule no or exhibit year period ended 20xx - 20xx legend org - organization name president president issue_date - xx state - state county - county whether org continues to qualify for exemption as an organization described in the internal_revenue_code irc sec_501 because of no operation or activity since 20xx which includes the year of examination facts org was incorporated under the laws of the state of state as a non-profit corporation on april 19xx for the purpose of the following to own acquire build construct alter renovate lease rent establish organize maintain and operate residential housing for the low income families and other persons in need of a place to live in county to provide living accommodations for such low income needy and or other indigent persons requiring same to furnish sleeping quarters dining areas reception rooms recreation areas and other facilities for the purpose of providing for the care and sustenance of the poor and the needy to equip decorate and fit up such residential housing to provide and supply any and all necessary appurtenances that may be useful or convenient for the conduct of the charitable purposes of this corporation to secure and provide volunteers to offer aid assistance advice and comfort to the poor and other needy individuals to encourage interest awareness and activism in local and national political arenas with reference to the plight of low income individuals and families to provide financial aid and other reasonable economic assistance for the ultimate benefit of the poor and the needy to initiate and promote civic and political programs beneficial to low income families and others residing in county to hold conduct and organize meetings discussions and forums to consider community opinions on issues affecting the needs of low income families and individuals in county to aid assist cooperate co-sponsor and otherwise engage in concerted action with private and governmental agencies organizations and institutions on all programs designed calculated and dedicated to the improvement of life for the poor and the needy to solicit collect and otherwise raise money for the charitable and benevolent purposes of this corporation and to expend such monies for such purposes and generally to endeavor to improve and advance the health welfare and well-being of the poor and the needy by providing adequate housing on october 19xx org was recognized to be exempt from federal_income_tax as an organization described in sec_501 during telephone discussion on november 20xx the organization’s form 886-a rev department of the treasury - internal_revenue_service page -1- form_886 a department of the treasury - internal_revenue_service explanation of items name of taxpayet org schedule no or exhibit year period ended 20xx - 20xx representative stated that the organization established in 19xx for the purpose to provide housing to low income families in county state due to a legal lawsuit that is still pending the organization stopped serving all its exempt purposes and activities since 20xx in letter dated november 20xx the organization’s representative wrote due to the lawsuit against the corporation and the fact that the corporation was at the time ending its business because of the suit it was determined that the income received by the corporation and the expenses paid should be run thru an account not in the corporate name as such the monthly mortgage proceeds and any expenses were received and paid out through president business account the only business receipt belonging to org was the monthly mortgage payment which was retained by president and treated as officer's compensation_for that period law sec_501 exempts from federal_income_tax organizations which are organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office tax reg sec_1_501_c_3_-1 states that an organization may be exempt as an organization described in c if it is organized and operated exclusively for one or more of the following purposes religious charitable scientific testing for public safety literary educational or prevention of cruelty to children or animals tax reg sec_1_501_c_3_-1 of the regulations provides that in order to be exempt as an organization described in sec_501 of the code the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section tax reg sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 form 886-a cev department of the treasury - internal_revenue_service page -2- form’ a name of taxpayer org department of the treasury - internal_revenue_service explanation of items schedule no or exhibit yeat period ended 20xx - 20xx revproc_90_27 1990_1_cb_514 date states that a ruling or determination_letter recognizing exemption may be revoked or modified by a notice to the taxpayer to whom the ruling or determination_letter originally was issued enactment of legislation or ratification of a tax_treaty a decision of the united_states supreme court issuance of temporary or final regulations or issuance of a revenue_ruling revenue_procedure or other statement published in the internal_revenue_bulletin the revocation or modification may be retroactive if the organization omitted or misstated a material fact operated in a manner materially different from that originally represented or in the case of organizations to which sec_503 applies engaged in a prohibited_transaction with the purpose of diverting corpus or income of the organization from its exempt_purpose and such transaction involved a substantial part of the corpus or income of such organization where there is a material_change inconsistent with exemption in the character the purpose or the method of operation of an organization revocation or modification will ordinarily take effect as of the date of such material_change in cases where a ruling or determination_letter was issued in error or is no longer in accord with the holding of the service when sec_7805 relief is granted see sec_15 and of rev_proc retroactivity of the revocation or modification ordinarily will be limited to a date not earlier than that on which the original ruling or determination_letter is modified or revoked revrul_58_617 1958_2_cb_260 jan rulings and determinations letters granting exemption from federal_income_tax to an organization described in sec_501 of the internal_revenue_code of to which contributions are deductible by donors in computing their taxable_income in the manner and to the extent provided by sec_170 of the code are effective only so long as there are no material changes in the character of the organization the purposes for which it was organized or its methods of operation the district_director of internal revenue for the district in which the organization is located must be advised immediately of any such changes in order that a determination may be made as to the effect the changes may have upon the exempt status of the organization see generally sec_1_501_a_-1 and sec_1_6033-1 of the income_tax regulations failure to comply with this requirement may result in serious consequences to the organization for the reason that the ruling or determination_letter holding the organization exempt may be revoked retroactively to the date of the changes affecting its exempt status depending upon the circumstances involved and subject_to the limitations on retroactivity of revocation found in sec_503 of the code taxpayer’s position the organization’s representative declared that the organization has no operational or financial activities agent discussed revocation with the organization’s representative on december 20xx and he agreed to the propose revocation as organization is no longer operating for an exempt_purpose form 886-a rev department of the treasury - internal_revenue_service page -3- ‘ form_886 a name of taxpayer org department of the treasury - internal_revenue_service explanation of items schedule no or exhibit year period ended 20xx - 20xx government's position and conclusion the service position is that the organization has been inactive for several years now and that there have been no operations activities conducted the sole financial activity is from a mortgage payable to the organization from a previously sold property as such org fails to meet the operational requirements to continue its exemption status under sec_501 therefore the effective date will be january 20xx if you agree to this conclusion please sign the attached forms if you disagree please submit a statement of your position department of the treasury - internal_revenue_service form 886-a crev page -4-


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 7-plr-149088-02 date date legend taxpayer a b c d e f g h dear we received a letter dated a from taxpayer’s authorized representative requesting permission for taxpayer to revoke its election under sec_41 of the internal_revenue_code this letter responds to that request the facts submitted and the representations made are as follows taxpayer the common parent of its consolidated_group is an accrual basis taxpayer with a g taxable_year which ends on the h for the b taxable_year taxpayer elected to determine its credit_for_increasing_research_activities under the alternative_incremental_research_credit rules of sec_41 for the c d and e taxable years taxpayer continued to determine its research_credit using the alternative_incremental_research_credit rules of sec_41 before the due_date including extensions of taxpayer’s return taxpayer submitted a request to revoke its prl-149088-02 election for qualified_research_expenses paid_or_incurred during the taxable_year that ended on f as well as for all subsequent taxable years for taxable years beginning after date taxpayers may elect to determine their credit_for_increasing_research_activities under the alternative_incremental_research_credit rules of sec_41 as provided in sec_41 any election under sec_41 shall apply for the taxable_year in which made and all succeeding taxable years unless revoked with the consent of the secretary based solely on the facts submitted and representations made by taxpayer we grant permission for taxpayer to revoke its election to determine its credit_for_increasing_research_activities under the alternative_incremental_research_credit rules of sec_41 for qualified_research_expenses paid_or_incurred during the taxable_year ending on f taxpayer should compute its research_credit for the taxable_year ending on f and all succeeding taxable years using the general_rule of sec_41 provided that taxpayer does not make a new election to determine its credit_for_increasing_research_activities under the alternative_incremental_research_credit rules of sec_41 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 copies of this letter are being sent to your authorized representatives a copy of this letter must be attached to any income_tax return to which it is relevant the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely brenda m stewart senior counsel branch associate chief_counsel passthroughs special industries cc


internal_revenue_service number release date index number ------------------------------------------------------------- ------------------------------------------------------------- --------------------------------------------- ------------------------------------ --------------------------- in re -------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ----------------- telephone number --------------------- refer reply to cc psi b05 plr-140976-11 date date taxpayer ----------------------------- ------------------------ building ---------------------- ------------------------------------ ------------------------------ x y ---- ------- dear ----------------- this letter responds to taxpayer’s authorized representative's letter dated date requesting an extension of time to make an election under sec_42 pursuant to sec_301_9100-3 of the procedure and administration regulations taxpayer owns building a x-unit multifamily residential property taxpayer intended to begin the credit_period as defined in sec_42 for building in y the taxable_year that building was placed_in_service according to information submitted taxpayer inadvertently failed on its form_8609 to make an effective election under sec_42 consistent with taxpayer’s intent as evidenced by the taxpayer's contemporaneous documentation and its return filing consistent with this intent sec_42 defines credit_period to mean with respect to any building the period of taxable years beginning with the taxable_year in which the building is placed_in_service or at the election of the taxpayer the succeeding taxable_year but in either case only if the building is a qualified_low-income_building as of the close of the first year of such period the election once made is irrevocable plr-140976-11 sec_301_9100-8 provides that the election under sec_42 generally must be made for the taxable_year in which the building is placed_in_service or the succeeding taxable_year if the sec_42 election is made to defer the start of the credit_period and must be made in the certification required to be filed pursuant to sec_42 and sec_301_9100-8 provides that the election under sec_42 is irrevocable sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government in the instant case based solely on the facts submitted and the representations made we conclude the requirements of sec_301_9100-1 and sec_301_9100-3 have been met accordingly taxpayer is granted an extension of time to make the sec_42 election on form_8609 to treat the credit_period for building as beginning in y the election must be made by filing within days from the date of this letter an amended form_8609 that includes this intended election the amended form_8609 along with a copy of this letter is to be sent to the following address department of the treasury internal_revenue_service center philadelphia pa a copy of this letter is enclosed for this purpose plr-140976-11 no opinion is expressed or implied regarding the application of any other provisions of the code or regulations specifically we express no opinion on whether taxpayer otherwise qualifies for credit under sec_42 this ruling is directed only at the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file a copy of this letter is being sent to taxpayer’s authorized representative sincerely associate chief_counsel passthroughs special industries by _______________________ christopher j wilson senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service te_ge appeals_office capitol street suite fresno ca release number release date date date ode ‘ vil c a b department of the treasury employer_identification_number cc person to contact theron c wing emplovee id number tel fax tax period s ended d certified mail dear this is a final adverse determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code the code sec_501 as an organization described in sec_501 the favorable determination_letter to you dated date is hereby revoked and you are no longer exempt under sec_501 of the code effective january the adverse determination was made for the following reason s the primary activity of a is the rental of a facility as apartment housing to the general_public renting apartments to members of the general_public who are not of a charitable_class is not an exempt activity thus the organization is not operated exclusively for one or more exempt purposes as set forth in sec_501 of the code contributions to your organization are not deductible under sec_170 of the code you are required to file federal_income_tax returns on form_1120 file your return with the appropriate internal_revenue_service center per the instructions of the return for further instructions forms and information please visit www irs gov you have agreed to waive your right to contest this determination under the declaratory_judgment provisions of sec_7428 of the code we will make this letter and the proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information we have provided to you ina separate mailing notice notice of intention to disclose please review the notice and the documents attached that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours appeals team manager enclosure publication internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examinations department of the treasury date october taxpayer_identification_number form_990 return tax_year s ended december december person to contact id number contact numbers telephone fax manager's name id number manager's contact number response due_date date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need fo do if you agree if you agree with our proposal please sign the enclosed form_6018 consent fo proposed action sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren’t an organization described in sec_501 after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code lf we don't hear from you if you don't respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal letter rev catalog number 34808f standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn't a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please cal the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you letter rev catalog number 34809f thank you for your cooperation sincerely of al sey tyigasy sf oy xf- los dara a aed lacs sp ry margaret von lienen director eo examinations enclosures report of examination form_6018 publication publication letter rev catalog number 34809f form 886-a sre srnr ler explanations of items schedule number or exhibit - name of t taxpayer oo tax identification_number year period ended december december issue whether exemption under sec_501 of the internal_revenue_code qualifies for facts was granted exemption from federal_income_tax under internal_revenue_code sec_501 of the internal_revenue_code as an organization described in section s01 c according to its organizational documents its primary purpose is to promote democracy in the united_states of america and the foster and promote education among our young people to assist those who are in need to promote brotherhood among all people only activity observed from the audit years and _ forward has been the renting of its facility as an apartment house to the general_public and paying the related mortgage expense the tenants were not and are not of a charitable_class law sec_501 provides tax exemption for corporations and foundations that are operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 states that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 states that an organization will be regarded as operated exclusively for one or more exempt purposes only if primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 c an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose it engages sec_1_501_c_3_-1 assigns the burden_of_proof to an applicant organization to show that it serves a public rather than a private interest and specifically that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service a schedule number or exhibit form 886-a rev jasmuary explanations of items name of taxpayer so tax identification_number year period ended december december sec_1_501_c_3_-1 provides that the term charitable is used in sec_501 of the code in its generally accepted legal sense and includes the relief of the poor and distressed or of the under privileged as well as the advancement of education revrul_77_366 c b provides that a nonprofit organization that arranges and conducts winter-time ocean cruises during which activities to further religious and education purposes are provided in addition to extensive social and recreational activities is not operated exclusively for exempt purposes and does not qualify for exemption under sec_501 in 326_us_279 the supreme court held that the presence of a single non-exempt purposes if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes taxpayer's position the taxpayer expressed intended near future programs in a letter dated may near future programs include - producing a newspaper and creating an internet website connecting all members contributors and people at large teaching traditional dancing - establishing a tutoring program - establishing philanthropic programs - donating to different not-for-profit agencies and - having lectures government's position as stated in sec_1_501_c_3_-1 an organization will be regarded as operated exclusively for one or more exempt purposes only if if engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 renting apartments to members of the general_public who are not of a charitable_class is not an exempt activity in revrul_77_366 the organization accomplished both charitable and noncharitable purposes but lost its exemption because it was not operating exclusively form 886-a catalog number 20810w page _____ publish no irs gov department of the treasury-internal revenue service form 886-a ifien semmiry explanations of items schedule number or exhibit tax identification_number year periad ended name of taxpayer iss for exempt purposes in this case therefore is found not operating exclusively for exempt purposes does not accomplish any exempt purposes and december december further in better business bureau of washington d c inc v united_states the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes again therefore is not operating exclusively for exempt purposes does not accomplish any exempt purposes and conclusion based on our review of all facts and circumstances and the legislative support referenced above we have concluded that is not an organization described in sec_501 of the code because it is not operated exclusively for one or more exempt purposes set forth in sec_501 of the code accordingly the organization's exempt status is revoked effective january form_1120 returns should be filed for the tax periods ending on or after january publish no irs gov department of the treasury-internal revenue service form 886-a catalog number 20810w page


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 b3 plr-123246-16 date date legend x n m state date date date date year -------------------------------- ------------------------- ----------- ------- ------------- --------------------------- ------------------------- -- -------------------------- -------------------------- -------- dear -------------- this letter responds to a letter dated date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code code facts the information submitted states that x was incorporated under the laws of state on date on date x filed an amendment to its articles of incorporation specifically amending the article iv restated article iv to authorize n shares of class a voting plr-123246-16 common_stock par_value of dollar_figurem per share and n shares of class b non-voting common_stock par_value of dollar_figurem per share article iv immediately reclassified the outstanding capital stock as class a voting common_stock and class b non-voting common_stock the restated article iv also provided that the class b non-voting common_stock shall have preference in the payment of dividends by the corporation and the holders thereof shall be entitled to receive from the corporation annually a non- cumulative dividend equal to five percent of the net after tax profits of the corporation x elected be classified as an s_corporation effective date in year x became aware that the class b non-voting common_stock created by the restated article iv created a second class of stock that caused x’s s_corporation_election to be ineffective on date x amended the articles of incorporation article iv to add n shares of class c non- voting common_stock with no voting rights and no preference in the payment of dividends these class c shares replaced the class b non-voting common_stock x represents that the termination of x’s s_corporation_election was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the commissioner with respect to the period specified by sec_1362 x requests a ruling that the ineffectiveness of x's s_corporation_election due to the existence of the preferred_stock class b non-voting common_stock was inadvertent within the meaning of sec_1362 and that it will be treated as an s_corporation from date and thereafter law sec_1362 provides in part that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary plr-123246-16 conclusion based solely on the facts submitted and representations made we conclude that x's s_corporation_election was ineffective on date as a result of x having more than one class of stock we further conclude that such ineffectiveness was inadvertent within the meaning of sec_1362 x has taken corrective action so that it meets the requirements of a small_business_corporation under sec_1361 therefore we determine that pursuant to the provisions of sec_1362 x will be treated as an s_corporation effective date and thereafter provided that x's s_corporation_election was otherwise valid and has not otherwise terminated under sec_1362 except as specifically ruled above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provisions of the code specifically we express or imply no opinion as to whether x is otherwise eligible to be treated as an s_corporation the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely bradford r poston senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


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 -------------------------------- ------------- telephone number --------------------- refer reply to cc psi b01 plr-109694-15 date date legend x a b_trust trust state date date date date date date ----------------------------------------------------------------------------------------------------------------------- ------ ---------------------- ----------------------------------------------------------------------------------------------------------------------- -------- ----------------------------------------------------------------------------------------------------------------------- ------ ----------------------------------------------------------------------------------------------------------------------- --- ------ --------------------- ---------------------- ----------------------- --------------------------- --------------------------- ----------------------- -------------------------------------------------------------------------------------------------------------------- plr-109694-15 years dollar_figuren ---------------- dear------------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief pursuant to sec_1362 of the internal_revenue_code the code facts the information submitted states that x was incorporated under the laws of state on date x filed a timely election under sec_1362 to be taxed as an s_corporation effective date on date trust owned shares of x stock x represents that trust was qualified to be an electing_small_business_trust esbt within the meaning of sec_1361 however no election was made under sec_1361 to treat trust as an esbt consequently trust was an ineligible shareholder and as a result x’s s_corporation_election was ineffective additionally on date a an individual owned shares of x stock on date a contributed the shares of x stock to trust a revocable_trust a died on date pursuant to the terms of trust after a’s death individual b became the primary beneficiary of trust x represents that trust is eligible to elect to be a qualified_subchapter_s_trust qsst however no qsst election was filed on behalf of trust and therefore x’s s_corporation_election would have terminated on date if it had not already made an ineffective election because trust was an ineligible shareholder x represents that the circumstances resulting in the ineffectiveness of x's s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive tax planning additionally x represents that x and its shareholders have filed their federal_income_tax returns consistent with having a valid s_corporation_election in effect for x x and its shareholders have agreed to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to the period specified by sec_1362 law and analysis sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year plr-109694-15 sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1361 provides that for the purposes of sec_1362 a_trust all of which is treated under title_26 subtitle a chapter subchapter_j part i subpart e of the united_states_code as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder of an s_corporation sec_1361 provides that an esbt within the meaning of sec_1361 may be a shareholder for purposes of sec_1361 the trustee of the trust makes the esbt election pursuant to sec_1361 sec_1_1361-1 provides that the trustee of an esbt must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of sec_1_1361-1 sec_1361 provides that in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 a such trust will be treated as a_trust described in sec_1361 and b for purposes of sec_678 the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1361 provides that a beneficiary of a qsst or his legal_representative may elect to have sec_1361 apply sec_1361 provides that an election under sec_1361 shall be effective up to days and months before the date of the election sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the tax_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under paragraph or of sec_1362 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the event resulting in the ineffectiveness steps were taken a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness the corporation shall be treated as an s_corporation during the period specified by the secretary plr-109694-15 sec_1_1362-4 of the income_tax regulations provides that the commissioner may require any adjustments that are appropriate in general the adjustments required should be consistent with the treatment of the corporation as an s_corporation during the period specified by the commissioner conclusion based solely on the facts submitted and representation made we conclude x’s s election was invalid on date upon the failure to timely file an esbt election for trust we further conclude that the invalid election was inadvertent within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will continue to be treated as an s_corporation on and after date unless x’s s_corporation is otherwise terminated under sec_1362 moreover had x’s s_corporation been effective it would have terminated on date upon the failure of the income_beneficiary to file a qsst election for trust similarly this terminating event would have been an inadvertent termination within the meaning of sec_1362 this ruling is conditioned on the trustee of trust filing an esbt election effective date with the appropriate service_center within days of the date of this letter and b as the income_beneficiary of trust filing a qsst election for trust effective date within days from the date of this letter a copy of this letter should be attached the esbt and qsst elections in addition this ruling is conditioned on trust filing any amended returns and making adjustments that are necessary to properly reflect the treatment of trust as an esbt for years taxable years and trust filing any amended returns and making adjustments that are necessary to properly reflect the treatment of trust as a qsst for years taxable years furthermore as an adjustment under sec_1362 this ruling is conditioned on the payment of dollar_figuren and a copy of this letter ruing must be sent to the address internal_revenue_service cincinnati service_center west rivercenter blvd covington ky stop terri lackey manual deposit the payment and copy of this letter must be sent no later than date if all of the above conditions are not met then this ruling is null and void furthermore if these conditions are not met x must send a notification that its s_corporation_election has terminated to the service_center with which x’s s_corporation was filed 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 plr-109694-15 in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely laura c fields senior technician reviewer branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


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-143950-05 date date ----------------- --------------------------------------------------- legend x -------------------------------------------------- d1 state dear ----------------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code -------------------- facts according to the information submitted x was incorporated on d1 under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d1 but the election was not timely filed 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 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 if the election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-143950-05 sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not file a timely election to be treated as an s_corporation under sec_1362 effective d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely upon 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 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 relevant service_center 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 s requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp br 06-plr-165603-01 date date legend corp corp corp state a area a b c d e f g busine sec_1 busine sec_2 busine sec_3 busine sec_4 busine sec_5 business a b c d e f g h i plr-165603-01 j date date period dear this letter is in reply to your letters dated date date date and date corp a state a corporation is a diversified company with many active businesses serving a variety of industries for over a years corp members own more than b percent of the single class of corp stock tax exempt_organizations own the remaining stock corp directly engages in numerous active businesses corp has directly engaged in busine sec_2 busine sec_3 busine sec_4 and busine sec_5 for more than five years these five-year active businesses directly operated by corp constitute well in excess of five percent of corp 1’s net and gross assets and will comprise more than five percent after the transaction described below recently corp sold busine sec_1 a directly conducted five-year business the distribution of the proceeds of the sale of busine sec_1 is the subject of this ruling_request corp also engages in businesses that it conducted for less than five years within the past five years corp acquired all of the stock of corp a corporation that engages in business before the sale described below corp conducted the business associated with busine sec_1 corp started busine sec_1 in period busine sec_1 owned and actively managed over c acres of a properties in area busine sec_1 was a separate and active business it generated income and incurred expenses and it had its own management separate and distinct from corp 1’s other business operations also busine sec_1 had its own office equipment and employees that performed various direct business functions such as sales management negotiation of a lease agreements land security and surveying management and control of b and investigation of the purchase sale of various a properties for cost efficiency purposes corp 1’s d sector and corporate offices performed certain administrative functions of busine sec_1 busine sec_1 was separately accounted for with its own separate internally prepared financial statements on date closing date corp sold a percent of busine sec_1 to corp an unrelated purchaser this sale constituted a sale of the e and f of the real_estate attributable to busine sec_1 as well as a sale of g h and i the purchaser also hired the employees of busine sec_1 the transaction was an asset sale for d in cash corp immediately invested the proceeds on a temporary basis in a segregated account in order to preserve the funds received plr-165603-01 upon receipt of a favorable ruling from the service corp 1’s board_of directors will approve and adopt a plan of partial_liquidation providing for the distribution of the net_proceeds attributable to the sale of the busine sec_1 in the same or the next succeeding tax_year pursuant to the plan of partial_liquidation corp will distribute all of the net_proceeds after expenses and taxes attributable to busine sec_1 pro_rata to the corp shareholders the proposed distribution corp estimates the amount of the proposed distribution to be e corp has not used any of the cash from the sale of the busine sec_1 in any manner except that corp has placed the cash in an identified and segregated separate investment custodial_account as managed by a financial adviser corp will not distribute any assets representing income earned on this account pursuant to the plan of partial_liquidation no substituted assets will be distributed there is no plan or intention to completely liquidate corp as of date corp has f stock_options outstanding these options have been issued to one employee of corp as of date g of these options can be exercised by the employee none of these options have been exercised by the employee the following representations have been made in connection with the proposed transaction a b c d e throughout the five-year period prior to date corp was engaged in many different active businesses serving a variety of industries busine sec_1 was a separate active business and a division of corp busine sec_1 as well as corp 1’s other businesses which corp will continue after the proposed distribution will each qualify as a five-year trade_or_business the sales proceeds to be distributed are proceeds from the sale of business_assets that corp actively used in the busine sec_1 and are not attributable to an expansion reserve a mere business decline or a mere decrease in working_capital none of the sales proceeds are proceeds from the sale of assets that directly or indirectly are or were idle passive or investment_assets the proposed distribution will be consummated during the taxable_year in which the plan of partial_liquidation is adopted or in the succeeding taxable_year following the proposed distribution corp will not retain any portion of the sales proceeds attributable to busine sec_1 all distributions to corp shareholders in the proposed distribution will be made with cash coming solely from the proceeds of the sale of busine sec_1 corp has not used any of the cash that it will distribute pursuant to the proposed distribution in any manner except that corp placed the cash in identified and segregated liquid short-term investments corp plr-165603-01 f g h i j k will not distribute any assets representing income earned on these accounts pursuant to the proposed distribution corp has not used any of the proceeds from the sale of busine sec_1 in any of its remaining business activities corp will not distribute any substituted assets corp will distribute proceeds pro_rata to the corp shareholders although corp shareholders will not surrender any corp shares in the proposed distribution each shareholder will compute gain_or_loss on a deemed redemption under the principles set forth in revrul_77_245 c b there are no declared but unpaid dividends on the stock to be redeemed by corp there is no plan or intention to completely liquidate corp corp has no plan or intention to reenter busine sec_1 or to expand its continuing business operations other than through normal internal growth except that it is actively negotiating the acquisition of companies involved in business activities unrelated to those of busine sec_1 corp shareholders have no plan or intention to reinvest any of the amount distributed in the proposed distribution transaction in corp the proposed distribution will not be preceded or followed by the reincorporation or transfer of such cash to a recipient corporation where persons holding more than percent in value of the stock of corp also hold more than percent in value of the stock of the recipient corporation for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 of the code as modified by sec_304 l none of the amounts distributed by corp in the proposed distribution will be received by a corp shareholder as a debtor creditor employee or in some capacity other than that of a corp shareholder m corp will adjust the terms of its outstanding options to eliminate the dilutive effect on the value of these options caused by distributing assets in a partial_liquidation without actually redeeming shares of corp stock based solely on the information submitted and on the representations set fourth above we hold as follows a the distribution of the net_proceeds from the sale of busine sec_1 will be treated as a distribution in partial_liquidation under sec_302 of the code provided such distribution is made in the taxable_year in which the plr-165603-01 b c d e plan is adopted or in the next succeeding year sec_1_346-1 of the income_tax regulations the maximum amount considered to be distributed in the partial_liquidation with respect to the sale of busine sec_1 equals the sales proceeds received by corp relating to busine sec_1 reduced by all the liabilities including taxes and expenses of corp incurred in connection with the sale and the proposed distribution this amount will not include any earned or accrued investment earnings on the sales proceeds see revrul_60_232 1960_2_cb_115 revrul_71_250 1971_1_cb_112 revrul_76_279 1976_2_cb_99 revrul_76_289 1976_2_cb_100 if the amount distributed to the corp shareholders in the proposed transaction exceeds the maximum amount considered distributed in the partial_liquidation see ruling b above each shareholder of corp or each person considered to hold corp stock under sec_302 as relevant will be treated as receiving the same ratio of that maximum amount and any excess such excess_distribution will be treated as a distribution_of_property under sec_301 and sec_316 in the case of non-corporate shareholders distributions made pursuant to the plan of partial_liquidation to the extent indicated in ruling b above will be treated as is in full payment for the stock constructively redeemed sec_302 such shareholders will recognize gain_or_loss to the extent of the difference between the amount distributed in partial_liquidation and the adjusted_basis of the shares deemed surrendered as provided in ruling e below in exchange therefore provided that the stock is a capital_asset in the hands of the exchanging shareholder and that sec_341 relating to collapsible_corporations is not applicable gain_or_loss if any will be considered capital_gain or loss subject_to the provisions and limitations of subchapter_p of chapter of the code for purposes of rulings a and d above the number of shares that will be considered to have been redeemed regardless of the number of shares actually surrendered for the purposes of determining gain_or_loss will be determined in accordance with the principles set fourth in revrul_77_245 c b to the extent that the fair_market_value of the distributions in partial_liquidation received by a shareholder exceeds the fair_market_value of the corp stock deemed surrendered in exchange therefor the additional shares considered redeemed pursuant to revrul_77_245 will be determined in accordance with the principles set forth in revrul_68_348 c b and revrul_85_48 85_1_cb_126 f corp will recognize no gain_or_loss on the distribution of cash in partial_liquidation sec_311 plr-165603-01 no opinion is expressed 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 effects resulting from the proposed transaction that are not directly covered by the above rulings this ruling 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 a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated the rulings contained in this letter are predicated upon the facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by the appropriate party this office has not verified any of the material submitted in support of the request for the ruling verification of the factual information representations and other data may be required as part of the audit process sincerely yours steven hankin senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service department of the treasury number release date index number 0302-dollar_figure washington dc person to contact telephone number refer reply to cc corp 2-plr-112568-00 date date legend parent sub sub sub state x business a date y date z dear this responds to your letter dated date on behalf of the above referenced corporation requesting rulings as to certain federal_income_tax consequences of a proposed transaction additional information was received on november and date the information submitted for consideration is summarized below parent a state x corporation is the common parent of a group of corporations that join in the filing of a consolidated_income_tax_return sub which engaged in business a was a wholly-owned subsidiary of parent sub was a wholly-owned subsidiary of sub due to changes in the business climate related to business a management decided to actively market the assets of sub to unrelated industry participants subsequently on date y sub entered into an asset purchase agreement in which it sold substantially_all of its assets the asset sale sub ceased to conduct all business activities parent has invested the asset sale proceeds in a segregated investment account subsequent to the asset sale sub was organized to operate the remaining sub assets all associated with business a in addition sub was formed as a single member llc parent being the sole member that is disregarded for federal tax purposes shortly thereafter sub merged with and into sub followed by the merger of sub with and into sub the taxpayer has represented that the merger of sub with and into sub is a complete_liquidation pursuant to sec_332 the taxpayer has also represented that the merger of sub with and into sub should be treated as a complete_liquidation of sub into parent pursuant to sec_332 parent now proposes to distribute the proceeds from the asset sale in a transaction that it believes qualifies as a partial_liquidation under sec_302 sec_302 and sec_302 of the code in connection with the asset sale and the planned distribution parent makes the following representations a parent on the date of the plan of complete_liquidation of sub was the owner of at least percent of the outstanding_stock of sub b no shares of sub were redeemed during the three years preceding the adoption of the plan_of_liquidation of sub c pursuant to the plan of merger of sub into parent the merger and the state x business corporation act the act sub was completely liquidated into parent on date z the effective date of the merger and therefore all distributions from sub to parent pursuant to the plan of complete_liquidation were made within a single taxable_year of sub d pursuant to the plan of merger and the act as of date z the stock of sub was canceled the legal existence of sub was terminated and sub ceased to be a going concern e pursuant to the plan of merger and the act sub retained no assets following the merger f sub did not acquire assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the date of the adoption of the plan_of_liquidation substantially_all of the assets of sub were disposed of pursuant to the asset sale a genuine corporate_contraction on date y g the liquidation of sub will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation of any of the businesses or assets of sub if persons holding directly or indirectly more than percent in value of sub 1’s stock also hold directly or indirectly more than percent in value of the stock of the recipient corporation h prior to the adoption of the plan of merger no assets of sub were distributed in_kind transferred or sold to parent except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to the adoption of the plan_of_liquidation because sub will file a consolidated_return with parent for the year ended and because parent was the sole shareholder of sub prior to the merger all earned_income will be reported i the fair_market_value of the assets of sub will exceed its liabilities both at the date of the adoption of the plan of merger and immediately prior to the time the first liquidating_distribution is made j there was no intercorporate debt existing between parent and sub on the effective date of the merger and none had been canceled forgiven or discounted except for transactions that occurred more than three years prior to the date of adoption of the plan_of_liquidation k parent is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code l all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the liquidation of sub have been fully disclosed m there is no plan or intention to completely liquidate parent n parent has no plan to expand its continuing business operations other than through normal internal growth o the partial_liquidation of parent will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation of any of the businesses or assets of parent if persons holding directly or indirectly more than percent in value of parent's stock also hold directly or indirectly more than percent in value of the stock of the recipient corporation p parent will adopt a plan of partial_liquidation upon the receipt of a favorable ruling all distributions made pursuant to the plan will be made within the taxable_year in which the plan is adopted or within the succeeding taxable_year q no part of the consideration from parent will be received by a shareholder as a debtor creditor employee or in some capacity other than that of a shareholder of parent r there are no declared but unpaid dividends on any of the stock to be redeemed s the proposed transaction will result in a reduction of more than percent in i the net fair_market_value of parent’s assets ii the gross revenue of parent and iii parent’s employees t the proceeds from the asset sale are not attributable to expansion reserve a mere business decline a decrease in working_capital the sale of a nominal business or a loss business u parent will retain none of the asset sale proceeds v the asset sale proceeds have been held on a temporary basis in a segregated account which invests in short term liquid_assets based solely on the information submitted and the representations set forth above and provided that the proposed distribution is made in the taxable_year in which the plan of partial_liquidation is adopted or in the succeeding taxable_year the merger of sub with and into sub is a complete_liquidation pursuant to sec_332 and for federal_income_tax purposes the merger of sub with into sub is a complete_liquidation of sub into parent pursuant to sec_332 we rule as follows the pro_rata distribution by parent to its noncorporate shareholders of the net_proceeds of the sale of substantially_all of the assets of sub will constitute a partial_liquidation pursuant to sec_302 and sec_302 such distribution shall be treated as a distribution in part or full payment in exchange for stock pursuant to sec_302 regardless of whether there is an actual redemption of the stock the maximum amount considered distributed by parent in partial_liquidation will equal the asset sale proceeds received by sub reduced by all liabilities including all taxes and expenses of sub incurred in connection with the asset sale this amount will not include any earned or accrued investment earnings or any amount allocable to a covenant_not_to_compete rev_rul c b 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination a copy of this letter must be attached to any income_tax return to which it is relevant this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely assistant chief_counsel corporate by lewis k brickates assistant to chief branch