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 b04 plr-128613-06 date june legend trust decedent daughter date date a statute statute statute statute child child child subtrust subtrust subtrust x shares dear ------------- ---------------------------------------------------------------------------- ------------------- --------------------------------------------- --------------------- ------------------ -------- ------------------------------------------------------------------------------ -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- ------------------- ----------------------- --------------- ------------------------------ ------------------------------ ------------------------------ ----------------------------------------------------------------- this is in response to your date letter and other correspondence requesting rulings concerning the gift and generation-skipping_transfer gst tax consequences of the proposed renunciation of interests in a_trust and the release of a testamentary limited_power_of_appointment in the trust facts plr-128613-06 trust was created under the will of decedent for the benefit of his daughter trust provides that notwithstanding any other provisions in the will any trust trust grants daughter a testamentary nongeneral power to appoint outright or in daughter when decedent died on date trust provides for the trustees to pay daughter so much if any of the net_income as the trustees in their discretion deem necessary for daughter’s support maintenance and medical_expenses the trustees also have discretion to distribute the remaining income to daughter the trustees shall pay annually to daughter as she requests dollar_figurea from principal the trustees also have discretion to distribute principal in excess of dollar_figurea to daughter further trust trust principal to decedent’s lineal_descendants to the extent that daughter does not exercise her power_of_appointment the assets of the trust are to be divided equally among daughter’s children the assets are to be distributed outright to the child of daughter if that child has attained the age of if the child of daughter has not attained the age of then the assets are to remain in trust with of the asset value being distributed at age and the remaining value distributed when the child reaches age currently daughter has three children child child and child if a child of daughter dies before attaining the age of the trustees are to continue the trust for the benefit of that child’s issue established under the terms of the will shall terminate if it is not previously terminated twenty-one years after the death of the last survivor of the group consisting of decedent’s wife decedent’s three children child child and child and any other issue of decedent’s mother in being at the time of decedent’s death upon termination the trustees shall pay the remaining principal and undistributed_net_income of trust to such person or persons to whose income payments could be made under the terms of trust immediately prior to its termination and if there be no such persons distributions will be made per stirpes x shares will be divided into three equal parts and each part will be transferred into three new subtrusts subtrust subtrust and subtrust each subtrust to benefit one of daughter’s children daughter will also release her testamentary nongeneral_power_of_appointment over x shares in the three subtrusts each child will be the trustee and primary beneficiary of his or her own subtrust each child has an annual right to withdraw percent of the value of the principal and undistributed_income of that child’s trust no other distributions will be made to the child prior to the termination of that child’s trust daughter proposes to renounce her entire beneficial_interest in x shares in trust the subtrusts will continue for the lifetime of daughter and upon daughter’s death the remaining assets of each subtrust will be distributed to the child of that subtrust and if the child does not survive daughter the remaining assets will be held in trust for the benefit of child’s descendants and distributed in accordance with the same plr-128613-06 provisions in decedent’s will which pertain to trust each subtrust contains the same termination provisions in article tenth of decedent’s will that governs trust written instrument of renunciation statute provides that a beneficiary may renounce in whole or in part by filing a statute provides in relevant part that unless the transferor of the interest has otherwise indicated in the instrument creating the interest the interest renounced and any future_interest which is to take effect in possession or enjoyment at or after the termination of the interest renounced passes as if the person renouncing had died on the date the interest was renounced if the renunciation is not within the nine month period set forth in statute the person renouncing shall have no power to direct how the interest being renounced shall pass statute provides that any interest in property which exists on date may be renounced after date as provided herein an interest which has arisen prior to date in any person other than the person renouncing is not destroyed or diminished by any_action of the person renouncing you represent that statute requires x shares to continue to be held in a_trust until daughter’s death so that if a child of daughter dies before daughter the interest of the deceased child is not destroyed or diminished accordingly instead of distributing x shares outright in equal shares to each of daughter’s children x shares will be transferred to the three subtrusts in equal shares and remain in each subtrust until the earlier of daughter’s death or the termination of the subtrust under the perpetuities provision in trust you have requested the following rulings daughter’s renunciation of her entire beneficial_interest in x shares will constitute a gift_for purposes of sec_2501 daughter’s release of a testamentary nongeneral_power_of_appointment over x shares will not constitute a gift of such property for purposes of sec_2514 daughter’s renunciation of her entire beneficial_interest in x shares will not cause trust to become subject_to chapter daughter’s release of a testamentary nongeneral_power_of_appointment over x shares will not cause trust to become subject_to chapter daughter is the transferor of x shares transferred to the three subtrusts for purposes of chapter and accordingly distributions and terminating distributions from the three subtrusts to skip persons are subject_to gst tax sec_25_2511-1 of the gift_tax regulations provides that the gift_tax sec_2501 of the internal_revenue_code imposes a tax for each calendar sec_25_2511-1 provides that in the case of taxable transfers creating an plr-128613-06 law and analysis ruling year on the transfer of property by gift by an individual sec_2511 provides that the tax imposed by sec_2501 shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible applies to gifts indirectly made thus any transaction in which an interest in property is gratuitously passed or conferred upon another regardless of the means or device employed constitutes a gift subject_to tax interest in the person disclaiming made before date where the law governing the administration of the decedent’s estate gives a beneficiary heir or next- of-kin a right completely and unqualifiedly to refuse to accept ownership of property transferred from a decedent whether the transfer is effected by the decedent’s will or by the law of descent and distribution a refusal to accept ownership does not constitute the making of a gift if the refusal is made within a reasonable_time after knowledge of the existence of the transfer the refusal must be unequivocal and effective under local law there can be no refusal of ownership of property after its acceptance in the absence of the facts to the contrary if a person fails to refuse to accept the transfer to him of ownership of a decedent’s property within a reasonable_time after learning of the existence of the transfer he will be presumed to have accepted the property property at the date of the gift is considered the amount_of_the_gift renunciation of her entire beneficial_interest in x shares will not be made within a reasonable_time therefore based upon the facts provided and the representations made we conclude that daughter’s renunciation of her entire beneficial_interest in x shares will constitute a gift from daughter to the beneficiaries of the three subtrusts in this case trust was created on date prior to date daughter’s sec_2512 provides that if the gift is made in property the value of the the value_of_the_gift is a question of fact and the service does not rule on such factual determinations see revproc_2007_1 2007_1_irb_1 however since the gift is not an absolute right to distributions of income or principal it cannot be valued by use of the tables contained in sec_2512 see 29_tc_730 rather the value_of_the_gift should be determined in accordance with the plr-128613-06 general valuation principles contained in sec_25_2512-1 further such an interest has more than a nominal value see revrul_67_370 1967_1_cb_324 ruling sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power his estate his creditor or the creditors of his estate daughter’s testamentary nongeneral_power_of_appointment is exercisable only in favor of decedent’s lineal descendents accordingly daughter does not possess a general_power_of_appointment based upon the facts provided and the representations made we conclude that daughter’s release of a testamentary nongeneral_power_of_appointment over x shares will not constitute a gift of such property for purposes of sec_2514 sec_2601 imposes a tax on every generation-skipping_transfer made after rulings date sec_2611 provides that the term ageneration-skipping transfer means a sec_2612 provides that the term taxable_termination means the taxable_distribution a taxable_termination or a direct_skip termination by death lapse of time release of power or otherwise of an interest in property held in a_trust sec_2612 provides that the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip under sec_2612 a direct_skip is a transfer subject_to federal estate or gift_tax of an interest in property to a skip_person that for gst purposes an interest in trust exists if a person has a present right to receive trust principal or income or is a permissible current recipient of trust principal or income sec_26_2612-1 of the generation-skipping tax regulations provides sec_2613 provides that the term skip_person means a natural_person assigned to a generation which i sec_2 or more generations below the generation assignment of the transferor or a_trust in which all the interests are held by skip persons or a_trust where if there is no person holding an interest in such trust and at no plr-128613-06 time after such transfer may a distribution including distributions on termination be made to a non-skip_person sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption amount which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2632 provides that if any individual makes an indirect_skip during such individual’s lifetime any unused portion of such individual’s gst_exemption shall be allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero sec_2632 provides that the term indirect_skip means any transfer of property other than a direct_skip subject_to the tax imposed by chapter made to a gst_trust as defined under sec_2632 sec_2632 provides that an individual may elect to have this subsection not apply to any or all transfers made by such individual to a particular trust sec_2652 provides that the term transferor means in the case of any property subject_to the tax imposed by chapter the donor sec_26_2652-1 provides in part that the individual with respect to whom property was most recently subject_to federal estate or gift_tax is the transferor of the property for purposes of chapter an individual is treated as transferring any property with respect to which the individual is the transferor thus an individual may be a transferor even though there is no transfer of property under local law at the time the federal estate or gift_tax applies under section a of the tax_reform_act_of_1986 act and sec_26_2601-1 the gst tax is generally applicable to generation-skipping transfers made after date however under section b a of the act and sec_26_2601-1 the gst tax provisions do not apply to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added however this exemption does not apply to a pro_rata portion of any generation-skipping_transfer under an irrevocable_trust if additions are made to the trust after date to an irrevocable_trust which is excluded from chapter the trust is thereafter deemed to consist of two portions a portion not subject_to chapter the non-chapter portion and a portion subject_to chapter the chapter portion each with a separate inclusion_ratio as defined in sec_2642 see sec_26_2654-1 rules for treating additions to a_trust by an individual other than the initial transferor as a separate trust for purposes of chapter sec_26_2601-1 provides that if an addition is made after september sec_26_2601-1 provides that the release exercise or lapse of a sec_26_2654-1 provides that if there is more than one transferor with sec_26_2601-1 provides that where any portion of a_trust remains plr-128613-06 respect to a_trust the portions of the trust attributable to the different transferors are treated as separate trusts for purposes of chapter under sec_26_2654-1 with respect to a separate trust under sec_26_2654-1 an individual’s gst_exemption is allocated to the separate trust in trust after the post-date release exercise or lapse of a power_of_appointment over that portion of the trust and the release exercise or lapse is treated to any extent as a taxable transfer for federal estate or gift_tax purposes the value of the entire portion of the trust subject_to the power that was released exercised or lapsed is treated as if that portion had been withdrawn and immediately retransferred to the trust at the time of the release exercise or lapse the creator of the power will be considered the transferor of the addition except to the extent that the release exercise or lapse of the power is treated as a taxable transfer for federal estate and gift_tax purposes power_of_appointment other than a general_power_of_appointment as defined in sec_2041 is not treated as an addition to a_trust if such power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26 b have been no additions actual or constructive to trust since that date accordingly trust is not subject_to chapter daughter’s renunciation of her entire beneficial_interest in x shares is a taxable transfer for gift_tax purposes x shares will be transferred into three subtrusts in which daughter will have no interest the property remaining in trust continues to be subject_to the original trust provisions with no modifications to those provisions based upon the facts provided and the representations made we conclude that daughter’s renunciation of her entire beneficial_interest in x shares will not cause trust to become subject_to chapter as discussed above daughter holds a testamentary nongeneral_power_of_appointment over trust daughter will release this power over x shares that are transferred to the three subtrusts the power_of_appointment was created in trust an irrevocable_trust that is not subject_to chapter therefore the release of the power_of_appointment over x shares will not be treated as a constructive_addition to trust accordingly based upon the facts provided and the representations made we conclude that the release of daughter’s testamentary nongeneral_power_of_appointment over x shares will not cause trust to become subject_to chapter trust was executed prior to date and it is represented that there as stated above under sec_2652 for purposes of chapter daughter is the plr-128613-06 transferor of x shares that will be transferred to the three subtrusts accordingly the three subtrusts are not exempt from chapter by virtue of trust’s exemption daughter may allocate her gst_exemption to the three subtrusts at the time of the transfer or gst_exemption may be automatically allocated under sec_2632 depending on whether the subtrusts are gst trusts as defined in that code section based upon the facts provided and the representations made we conclude that daughter is the transferor of the x shares that will be transferred to the three subtrusts for purposes of chapter and accordingly distributions and terminating distributions from the subtrusts to skip persons are subject_to gst tax in accordance with the power_of_attorney on file with this office copies of this the rulings contained in this letter are based upon information and except as expressly provided herein no opinion is expressed or implied letter are being sent to your authorized representatives concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular we express or imply no opinion on the value of daughter’s gift to the three subtrusts 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 provides that it may not be used or cited as precedent to the taxpayer’s representative pursuant to the power_of_attorney on file with this office this letter is being sent this ruling is directed only to the taxpayer requesting it sec_6110 sincerely lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter cc


t c memo united_states tax_court larry wade human petitioner v commissioner of internal revenue respondent docket no filed date in p deducted payments in the amount of dollar_figure made to or on behalf of his former spouse pursuant to a final judgment and decree of divorce as alimony under sec_215 i r c r disallowed the alimony deduction completely determining that the payments failed to satisfy all the requirements for treatment as alimony r further determined that p was liable for the accuracy-related_penalty for negligence or disregard of rules or regulations pursuant to sec_6662 sec_1 held the obligation to make the lump-sum payments at issue would survive the death of p's former spouse under state law and therefore such payments are not deductible to p as alimony sec_71 sec_215 sec_2 held further p is not liable for the accuracy- related penalty for negligence pursuant to sec_6662 sec_6664 i r c sec_1 b income_tax regs larry wade human pro_se clinton m fried for respondent memorandum findings_of_fact and opinion nims judge respondent determined a deficiency in petitioner larry wade human's federal_income_tax for his taxable_year in the amount of dollar_figure respondent further determined that petitioner is liable for an accuracy-related_penalty for negligence or disregard of rules or regulations pursuant to sec_6662 in the amount of dollar_figure for that year unless otherwise indicated all section references are to sections of the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure the issues for decision are as follows whether the payments of dollar_figure made to or on behalf of petitioner's former spouse anita c human anita constitute alimony within the meaning of sec_71 so as to be deductible by petitioner pursuant to sec_215 and whether petitioner is liable for the sec_6662 accuracy-related_penalty petitioner resided in dunwoody georgia at the time he filed his petition findings_of_fact petitioner married anita on date they had two children together a jury verdict in an action for divorce brought by anita was rendered on date paragraph of the form verdict provides alimony is awarded as follows two lump sum payments dollar_figure immediately dollar_figure on or before may 17th a final judgement and decree of divorce judgment was entered by the superior court of dekalb county georgia superior court on date the judgment incorporated the jury verdict and in paragraph ordered as follows the defendant husband shall pay to the plaintiff wife lump sum alimony payments in the amounts of a twenty-four thousand dollars dollar_figure instanter and b seven hundred fifty thousand dollars dollar_figure on or before date on date the superior court heard anita's contempt action against petitioner for his failure to pay the amount required under the judgment in late pursuant to the judgment and a date order of the superior court the clerk disbursed funds to anita out of the registry of the court in the amount of dollar_figure plus interest thereon in the amount of dollar_figure less attorney's_fees payable to butler and seigal p c of dollar_figure such funds stemmed from an earlier condemnation action brought by dekalb county involving the marital residence of petitioner and anita petitioner timely filed a form_1040 u s individual_income_tax_return for taxable_year on line alimony paid of his return petitioner claimed a deduction of dollar_figure which amount represents the sum of dollar_figure paid to anita as well as attorney's_fees of dollar_figure paid on her behalf the amount of dollar_figure deducted by petitioner on his return appears to have been rounded to the nearest dollar petitioner's accountant for years clark tomlin tomlin prepared and signed petitioner's return petitioner discussed the deductibility of the payments to anita with tomlin several times before the return was prepared petitioner stated that after years if tomlin didn't think he was correct tomlin wouldn't have signed the return petitioner also spoke with an attorney and former employee of the irs bill indictor indictor a bunch of times about this issue in tomlin talked with indictor as well petitioner presented to tomlin everything related to the alimony issue including the judgment in order for tomlin to accurately prepare petitioner's return on date respondent issued a notice_of_deficiency to petitioner for taxable_year respondent disallowed petitioner's alimony deduction in its entirety in workpaper comments attached to the notice respondent stated that the payments failed to satisfy all of the requirements for treatment as alimony other adjustments to income were computational in nature respondent further determined that petitioner was liable for the accuracy-related_penalty for negligence or disregard of rules or regulations pursuant to sec_6662 i whether petitioner is entitled to an alimony deduction pursuant to sec_215 opinion sec_215 allows as a deduction to the payor an amount equal to the alimony or separate_maintenance payments made during the payor's taxable_year whether a payment constitutes alimony or separate_maintenance within the meaning of sec_215 is determined by reference to sec_71 sec_71 provides in pertinent part as follows sec_71 alimony or separate_maintenance payments defined --for purposes of this section-- in general --the term alimony_or_separate_maintenance_payment means any payment in cash if-- d there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment in cash or property as a substitute for such payments after the death of the payee spouse respondent argues that the contested payments in the amount of dollar_figure are not alimony and are therefore not deductible by petitioner as they do not meet the requirements of sec_71 petitioner on the other hand asserts that the requirements set forth in sec_71 have been satisfied in that connection petitioner maintains that even though there is no stipulation that the payments terminate upon the death of mrs human this is implied for reasons which follow we agree with respondent pursuant to the tax_reform_act_of_1986 publaw_99_514 sec b 100_stat_2853 a divorce_or_separation_instrument executed after date need not expressly provide for the termination of payments upon the death of the payee spouse in order for such payments to be treated as alimony provided that such termination is implied under state law notice_87_9 1987_1_cb_421 thus we must turn to georgia law for guidance as to whether an obligation to make the contested payments remained on the part of petitioner in the event of anita's death see 81_tc_614 affd without published opinion 829_f2d_39 6th cir georgia law recognizes alimony as either periodic or lump sum winokur v winokur s e 2d ga lump sum alimony may be payable in specified installments or at once stone v stone s e 2d ga in winokur v winokur supra pincite the georgia supreme court defined lump-sum alimony as follows if the words of the documents creating the obligation state the exact amount of each payment and the exact number of payments to be made without other limitations conditions or statements of intent the obligation is one for lump sum alimony payable in installments see also stone v stone supra pincite that court noted that the distinction between lump sum and periodic alimony is important inasmuch as the obligation to pay periodic alimony terminates at the death of either party while the obligation to pay lump sum alimony in installments over a period of time does not winokur v winokur supra pincite emphasis added in the present case the judgment incorporating the jury verdict required petitioner to pay two installments of dollar_figure and dollar_figure thus the number of payments and the amount of each payment were specified moreover no other limitations conditions or statements of intent are present in the words of the documents creating the obligation cf dillard v dillard s e 2d ga since the payments in meet the definition for lump-sum alimony set forth in winokur v winokur supra it follows that they would have remained payable to anita's estate in the event of her death id pincite in view of the above discussion we hold that the lump-sum payments in the amount of dollar_figure made to anita and on her behalf are not alimony within the meaning of sec_71 see stokes v commissioner tcmemo_1994_456 consequently they are not deductible to petitioner pursuant to sec_215 ii whether petitioner is liable for the sec_6662 accuracy-related_penalty sec_6662 and b impose a penalty equal to percent of any portion of an underpayment attributable to negligence or disregard of rules or regulations petitioner bears the burden of proving that he is not liable for this penalty rule a 79_tc_846 negligence is defined as the lack of due care or failure to do what a reasonable and prudent person would do under the circumstances 85_tc_934 the term disregard includes any careless reckless or intentional disregard sec_6662 sec_6664 provides that no penalty shall be imposed under sec_6662 with respect to any portion of an underpayment if it is shown that there was a reasonable_cause for such portion and the taxpayer acted in good_faith with respect thereto whether the taxpayer acted with reasonable_cause and in good_faith is determined on a case-by-case basis taking into account all of the pertinent facts and circumstances holowinski v commissioner tcmemo_1997_168 remy v commissioner tcmemo_1997_72 sec_1_6664-4 income_tax regs if a taxpayer reasonably relies in good_faith upon the advice of a competent and experienced accountant in the preparation of the taxpayer's return the penalty for negligence or disregard of rules or regulations is not applicable 94_tc_473 51_tc_467 sec_1_6664-4 and example income_tax regs to show good_faith reliance the taxpayer must show that the return preparer was supplied with all the necessary information and the incorrect return was the result of the preparer's mistakes 59_tc_473 57_tc_781 petitioner retained a certified_public_accountant to prepare his return and advise him as to the deductibility of the payments made to or on behalf of his former spouse pursuant to the judgment tomlin had been petitioner's accountant for years and petitioner relied on him to complete the return accurately petitioner supplied tomlin with all of the records in his possession pertaining to the payments to his former spouse including the judgment in addition petitioner spoke with indictor an attorney and former employee of the irs about the deductibility of the payments several times before completing his return based on this record even though we have found that petitioner's reliance on tomlin and indictor was misplaced we find that petitioner acted with reasonable_cause and good_faith in attempting to comply with the provisions of the internal_revenue_code we hold therefore that petitioner is not liable for the sec_6662 accuracy-related_penalty determined by respondent see rosenthal v commissioner tcmemo_1995_603 conway v commissioner tcmemo_1994_405 we have considered the remaining arguments of the parties and to the extent they are not discussed herein find them to be either irrelevant or without merit to reflect the foregoing decision will be entered under rule


signiticant index no department of the treasury internal_revenue_service washington d c apr sf hh pul tax exempt and government entities in re dear this letter constitutes notice that our ruling letter dated date which granted a conditional waiver of the minimum_funding_standard for the above-named pension_plan for the plan_year beginning date is hereby modified to replace conditions and of that letter with the new conditions stated below pursuant to our ruling letter of date the waiver for the plan_year beginning date was granted subject_to the following conditions the company will make contributions necessary to satisfy the minimum_funding requirement including the waiver amortization payments for the plan years beginning date and of the plan for the plan_year beginning date by date in addition to the waiver amortization payment for the plan_year beginning date the company will make a dollar_figure contribution to the plan by date to be credited to the plan_year beginning date in your letter dated date you requested that the date deadline in condition above be extended you indicated that the ‘waiver amortization payment for the plan_year beginning date along with the contribution was processed and sent days late in an effort to meet condition above because these amounts were not paid to the plan until date they must be credited to the plan_year beginning date rather than the plan_year beginning date thus there is an accumulated_funding_deficiency for the plan_year beginning date since the waiver amortization payment for the plan_year beginning date was not made in a timely manner pursuant to your request the above conditions are hereby replaced by the following conditions condition is unchanged which you have agreed to the company will make contributions necessary to satisfy the minimum_funding requirement including the waiver amortization payments for the plan years beginning date and of the plan for the plan_year beginning date by date in addition to the waiver amortization payment for the plan_year beginning date the company will make a dollar_figure contribution to the plan by date to be credited to the plan_year beginning date by date the company will pay the excise_tax due approximately dollar_figure under sec_4971 a resulting from the accumulated_funding_deficiency in the funding_standard_account for the plan_year beginning date copies of form_5330 return of excise_taxes related to employee benefit plans have been enclosed for your convenience we have sent a copy of this letter to the lf you have any questions concerning this matter please contact sincerely waton d bppend martin l pippins manager employee_plans actuarial group


internal_revenue_service significant index no department of the washington dc contact person telephone number in reference to t ep ra t a2 date may inre private_letter_ruling on sec_72 a iv this letter is in response to your request dated date for a ruling that distributions from your individual_retirement_accounts iras would qualify as part of a series of substantially_equal_periodic_payments provided for under sec_72 of the internal_revenue_code the code according to the facts stated in your ruling_request you have a total of seven iras and one roth_ira distributions commenced from five of your ira’s beginning date and have been determined using the methodology described below at the time of the first distribution you were years old the method utilized to calculate the distributions is similar to the third method described in q a-12 of notice_89_25 1989_1_cb_662 the aggregate account balance of the five ira’s referred to in your submission as was determined as of date this aggregate account balance was divided by an annuity factor which is the cost of an annuity of one dollar per year beginning at age and paid for life using commutation functions derived from the up-1984 mortality_table using an interest rate of percent the foregoing calculation determines the annual distribution to be drawn from the five ira’s by the end of the 12-month_period beginning date in subsequent years beginning date and so on the annual distribution amount will be increased by three percent over the prior year’s annual distribution amount annual distribution amounts computed for each respective 12-month_period will be distributed during the respective 12-month_period by dividing the distribution amount by and distributing the resulting amount from one or more of the five ira’s each month in the 12-month_period in addition you have stated that you may from time to time transfer funds from one ira account to another within the pool of the five subject ira’s listed above with the provision that no funds outside the pool are added to the pool and no funds within the pool are transferred outside the pool sec_408 of the code provides that amounts paid or distributed out of an individual_retirement_plan must be included in gross_income by the payee or distributee in the manner provided under sec_72 of the code sec_72 of the code provides rules for determining how amounts received as annuities endowments or life_insurance contracts and distributions from qualified_plans are to be taxed sec_72 was added to the code by the tax_reform_act_of_1986 tra ‘886 effective generally for taxable years beginning after date sec_72 provides for the imposition of an additional tax on early distributions from qualified_plans including ira’s the additional tax is imposed on that portion of the distribution that is includible in gross_income sec_72 of the code provides that sec_72 shall not apply to distributions which are made on or after the date on which the employee attains age sec_72 of the code provides that sec_72 shall not apply to distributions which are part of a series of substantially_equal_periodic_payments not less frequently than annually made for the life or life expectancy of the employee or the joint lives or joint life expectancies of such employee and his or her beneficiary sec_72 of the code imposes the additional limitation on distributions excepted from the tax by sec_72 that if the series of payments is subsequently modified other than by reason of death or disability before the later of the close of the 5-year period beginning with the date of the first payment and the employee’s attainment of age then the taxpayer’s tax for the first taxable_year in which such modification occurs shail be increased by an amount determined under regulations equal to the tax which would have been imposed except for the sec_72 exception plus interest for the deferral_period in the absence of regulations on sec_72 of the code notice_89_25 published on date provided guidance with respect to the exception to the tax on premature distributions provided under sec_72iv q a-12 of notice_89_25 provides three methods which could be used for determining substantially_equal_periodic_payments for purposes of sec_72 tk2 a iv of the code two of these methods involve the use of an interest rate assumption which must be an interest rate that does not exceed a reasonable interest rate on the date payments commence one method of determining substantially equal annual periodic_payments described in q a-12 would be to use a method acceptable for purposes of calculating the minimum distributions required under sec_401 of the code for distributions to be made from an individual_account this could be accomplished by dividing the account balance as of a given date by the life expectancy or joint life and last survivor expectancy of the account owner and beneficiary if applicable and this would be the amount to be distributed for the first year the life expectancies to be used are found in table v one life or table vi two lives of section of the income_tax regulations the regulations where a one-time calculation is done the same amount would be distributed in subsequent years a second method described in q a-12 determines an annual distribution amount by amortizing the taxpayer's account balance over a number of years equal to the life expectancy of the account owner or the joint life and last survivor expectancy of the account owner and beneficiary at an interest rate that does not exceed a reasonable interest rate on the date payments commence the resulting payment is the amount to be distributed each year again the life expectancies to be used are found in table v one life or table vi two lives of sec_1_72-9 of the regulations the third method described in q a-12 of notice_89_25 determines substantially equal annual payments by dividing the account balance by an annuity factor the present_value of an annuity of dollar_figure per year beginning at the taxpayer's age attained in the first distribution year and continuing for the life of the taxpayer with such annuity factor derived using a reasonable mortality_table and using an interest rate that does not exceed a reasonable interest rate on the date payments commence if substantially equal monthly payments are being determined the taxpayer's account balance would be divided by an annuity factor equal to the present_value of an annuity of dollar_figure per month beginning at the taxpayer's age attained in the first distribution year and continuing for the life of the taxpayer the annuity factor is calculated using commutation functions derived from a particular mortality_table where a particular interest rate is assumed because an infinite number of interest rates could be assumed the number of possible tables of commutation functions is infinite in the example in q a-12 of notice_89_25 the annuity factor is derived using commutation functions based on the up-1984 mortality_table where an interest rate of is assumed the methodology you have proposed to use to determine your distributions is consistent with the third method described in q a-12 of notice_89_25 the life expectancy and the interest rate used are such that they do not result in the circumvention of the requirements of sec_72 and sec_72 of the code through the use of an unreasonable high interest rate or an unreasonable life expectancy accordingly we conclude that the method you described determining periodic_payments satisfies one of the methods described in notice_89_25 and results in substantially_equal_periodic_payments within the meaning of sec_72 of the code and such payments will not be subject_to the additional tax of sec_72 unless the requirements of sec_72 are not met 3bb this ruling is directed only to the individual that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent sincerely yours martin l pippins manager employee_plans actuarial group tax_exempt_and_government_entities_division


sm iy 7y op internal_revenue_service department of the treasury washington re contact person telephone numbe in reference to date jun or ev eo ty b c d y dear sir or madam this is in reference to your letter of date requesting advance approval of your grant procedures under sec_4945 of the internal_revenue_code the information submitted shows that the grants will be administered by f program the c and or the d option a publicly_supported_organization under its b organizations operating under the b program may elect for purposes of the c scholarship awards option f selects the competition is the x test after the test the initial phase of individual scholarship recipients in the b program through a competition which 1s given annually in participating high schools by high school officials students scoring in of graduating high school seniors nationwide and designates a number that represents less than one percent of the graduating high school seniors in each state as semifinalists semifinalists then take a second test earlier performance those who repeat their prior performance who demonstrate high academic standing in high school and who meet other standard requirements are designated as finalists a group that represents the top two percent f identifies and honors to confirm their the y p's selection procedures in its d scholarship awards option generally parallel those applied in the c option however eligibility in the d option is limited to the top scoring black sindants i option are designated in semifinalists in the at fsa qeoaraphic reaions pach consistina of several states a vast - according to the distribution of the black population throughout the united_states you have entered into an agreement with f whereby you have e the actual number of to under the b program f b scholarships to be supported agreed to sponsor a specific number of scholarships each year be awarded to children of employees of may award scholarships only to students who are designated as finalists by you will not exceed the number of employees' children who qualify as finalists in their respective competitions list of finalists is obtained f reviews the finalist group to determine which students are eligible for grants under an employer related scholarship program from the students to enter the b program therefore neither you nor f can determine the number of eligible applicants there is qualify as finalists the total number of scholarships to be awarded in a particular year is automatically reduced or some foundations may permit scholarships to be offered to finalists who are not children of employees employers to ensure a sufficiently large base of employees' children from which at least one or more b finalists would ordinarily be expected to emerge than one out of one hundred seventy-five students in class achieves the b finalist level an insufficient number of employees' children who this is necessary since fewer f monitors participating no application is required after the a senior if the selection of individual grant recipients is made by f confirms the individual scholarship recipient's selection committees designated by f selection committee are totally independent and separate from you enrollment at the educational_institution makes payment of the award through the appropriate financial aid office of the educational_institution and supervises and investigates the use of the grant funds by the recipients in their educational program the members of the the scholarships will not be used as a means of inducement scholarships will only be to recruit employees nor will a grant be terminated if employee parent leaves the company awarded to students who plan to enroll in meets the requirements of sec_170 and which may further be limited by f awarded the recipient will not be restricted in his her course of study selection to individuals who propose to study in certain broad fields ’ enable you to maintain the records required by rev c b f will supply statistical information to you which will a ii of the code after the scholarship is in rare cases sponsors may ask f an institution that to give preference in proc an did sec_4945 of the code provides for the imposition of taxes on each taxable_expenditure of a private_foundation sec_4945 d of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 a grant to an individual for travel study sec_4945 of the code provides that section shall not apply to an individual grant awarded on an d objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 to be used for study at an educational_organization described in sec_170 b a ii and is it revproc_76_47 1976_2_cb_670 sets forth guidelines to a scholarship grant subject_to the provisions of section be used in determining whether a grant made by a private_foundation under an employer-related program to a child of employee of the particular employer to which the program relates i sec_117 conditions set forth in sections dollar_figure through dollar_figure of rev and meets the percentage_test described in sec_4 the service will assume the grant will be subject_to the provisions of sec_117 a private foundation's program satisfies the seven proc an if section dollar_figure of revproc_76_47 provides a percentage_test a program that awards it states that in the case of guideline grants to children of employees of program meets the percentage_test if the number of grants awarded under that program in any year to such children does not exceed percent of the number of employees' children who eligible ii were applicants for such grants and considered by the selection committee in selecting the recipients of grants in that year percent of the number of employees' children who can be shown to be eligible for grants whether or not they submitted an application in that year a particular employer the i iii were were or as stated in sec_4 of revproc_76_47 if a sponsor's program satisfies the seven conditions set forth in sections dollar_figure through but does not meet the percentage_test of section dollar_figure applicable to grants to employees' children the question whether the grants are scholarship or fellowship grants subject_to the provisions of sec_117 on the basis of determination the service will consider as pereentadre the facts and circumstances be resolved in making this a substitute for of the code will of section dollar_figure all the relevant facets and est the all ofa to provide extra compensation or other employment circumstances to determine whether the primary purpose of the program is incentive or whether the primary purpose is recipients in their individual capacities circumstances will be considered in the context of the probability that a grant will be available to any eligible applicant these facts and to educate such relevant facts and circumstances could include the history of the program such as the source of the program's funding the course of study for which the grants are available any eligibility requirements imposed by the program other than employment of the applicants or their parents and the age and grade level prerequisites for the studies for which the grants are available the publicity given the grant program the degree of independence of the selection committee the particular standards used for selection the specific means used to determine whether those standards have been met nature of the employee limitation or preference the numbér of grants available the number of employees or their children who would be eligible for them or their children applying for grants who normally eg average basis receive grants under the program and whether and how many grants are awarded to individuals who do not qualify as employees or children of employees the percentage of eligible employees the precise on an in this instance the following facts and circumstances are no application is required aside from the employment preference f considered relevant public charity operates its private_foundation sponsored b program in a substantially_similar manner to its nationwide college scholarship program for academically talented high school students individuals must achieve finalist status in their respective competitions recipients are chosen by selection committees totally independent of the private_foundation or the employer involved no limitations are placed on the recipients' choice of course of study after the grant is awarded number of employees' children who qualify as finalists f provided an average of one scholarship for every big_number employees' children in its programs the number of actual grants made may not exceed the in a under the facts and circumstances as stated above there is only an insignificant probability that any particular employee's child will be selected and the grant's primary purpose is not one of providing extra compensation or other employment incentive and the facts_and_circumstances_test of rev sec_4 is met thus proc assuming your scholarship program wiil accordingly based upon the information presented and be senducted as prop with a view to providing objectivity and non-discrimination in the awarding of scholarship grants we rule that your grants to for the awarding of scholarship grants to children of employees of code procedures will not constitute taxable_expenditures within the meaning of sec_4945 such expenditures made in accordance with those e comply with the requirements of sec_4945 the code of the thus of f the recipient of the scholarship is responsible for determining whether all or part of the scholarship is includible in gross_income under sec_117 of the code that f will advise the recipient that amounts granted are taxable_income if the aggregate scholarship amounts received by the recipient exceed tuition and fees required for enrollment or attendance at the educational_institution and fees books supplies and equipment required for courses of instruction not including room and board we understand this ruling will remain in effect as long as the procedures in awarding grants under your program remain in compliance with sections dollar_figure through dollar_figure of revproc_76_47 please note that this ruling is only applicable to grants before you enter into any other awarded under the b program scholarship or educational loan program you should submit a request for advance approval of that program for awarding grants under the b program are considered to satisfy the facts_and_circumstances_test of rev and therefore will not be counted in determining whether the percentage_test of rev ether such program for which prior approval has been granted proc is met with respect to any your procedures proc we are informing the ep eo key district_office of this ruling organization's permanent records please keep a copy ot this ruling with your requested it may not this ruling is directed only to the organization that sec_6110 of the code provides that it be used or cited as precedent sincerely bevath vw bxck gerald v chief sack exempt_organizations technical branch


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-100332-10 date date legend x ----------------------------------------- -------------------------- d1 d2 ----------------------- ---------------------- state ---------------- dear ---------------- this responds to a letter dated -------------------------- and subsequent information submitted on behalf of x by x’s authorized representative 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 d2 but the proper 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 sec_1362 provides 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 plr-100332-10 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 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 d2 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d2 if within days from the date of this letter x submits a properly completed form_2553 with a copy of this letter attached to the appropriate 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 specifically no opinion is expressed or implied concerning whether x otherwise qualifies as an s_corporation 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 plr-100332-10 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer’s authorized representative sincerely s faith p colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi 4-plr-118323-02 date december re legend - - - - - - - - - - husband wife trust company accountant attorney date date date x dear this is in response to the your letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an allocation of generation-skipping_transfer gst tax exemption this letter responds to your request the facts and representations submitted are summarized as follows husband and wife are married on date husband created trust for the benefit of his descendants husband contributed shares of company’s non-voting common_stock to trust the stock was valued at dollar_figurex article iii sec_3_1 of the trust agreement provides that the trustee has the discretion to accumulate income or distribute it to a class of beneficiaries consisting of husband’s issue sec_3_2 provides for the discretionary invasion of principal when in the trustee’s sole discretion the trustee deems it necessary for the reasonable plr-118323-02 health support maintenance and education of husband’s issue after taking into consideration the beneficiary’s income and other resources known to the trustee article iii sec_3_3 provides that years after creation or at such earlier time as the trustee may in the trustee’s absolute discretion determine the trustee is to divide the then remaining balance into equal shares allotting one share for each of husband’s daughters then living and one share for each deceased daughter who has issue then living sections dollar_figure and dollar_figure contain provisions regarding the discretionary payment of income and invasion of principal of the separate trust shares section dollar_figure provides for the possible further distribution in trust upon the exercise of testamentary powers of appointment given to certain beneficiaries or in default of such exercise further division of the trust into additional shares attorney drafted the trust agreement and accountant prepared the gift_tax returns husband and wife elected to treat the gift of stock as made one-half by each under sec_2513 the gifts were reported on timely filed gift_tax returns date in the course of preparing the returns however the accountant inadvertently failed to allocate any of husband’s and wife’s gst_exemption to the transfer of company’s non-voting stock to trust in reviewing the returns attorney noticed the omission and on date filed supplemental form sec_709 to make late allocations of husband’s and wife’s gst_exemption to the trust husband and wife have requested an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-1 and sec_301_9100-3 to allocate their respective gst_exemption and that such allocations are to be made based on the value of the transferred assets on the date transferred to trust sec_2513 provides that a gift made by one spouse to any person other than such person’s spouse shall be considered as made one-half by that person and one-half by such person’s spouse but only if at the time of the gift each spouse is a citizen or resident_of_the_united_states sec_2601 imposes a tax on every generation-skipping_transfer a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 the inclusion_ratio with any property transferred in a generation-skipping_transfer is generally defined as the excess of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of the gst_exemption allocated to the trust or to plr-118323-02 property transferred in a direct_skip and the denominator is the value of the property transferred to the trust or involved in the direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute sec_2652 provides that if under sec_2513 one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of such individual such gift shall be so treated for purposes of chapter notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_transfer_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government plr-118323-02 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore wife is granted an extension of time of days from the date of this letter to make an allocation of her available gst tax exemption with respect to the date transfer of company’s stock to trust the allocation will be effective as of the date of the transfer to the trust and the gift_tax value of the transfer to trust will be used in determining the amount of gst_exemption to be allocated to trust 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 except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent this election should be made on a supplemental form_706 united_states estate and generation-skipping_transfer plr-118323-02 tax_return and filed with the internal_revenue_service center cincinnati ohio a copy of this letter should be attached to the supplemental form_706 a copy is enclosed for this purpose sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


internal_revenue_service number release date index no cc tege qp2 - plr-104667-01 state_agency a state s date program p dear this responds to your letter of date and subsequent correspondence on behalf of state_agency a requesting a ruling concerning the proposed deferred_compensation plan the plan which agency a intends to be an eligible_deferred_compensation_plan under sec_457 of the internal_revenue_code_of_1986 a is represented to be a state rehabilitation agency which is a governmental entity described in sec_457 of the code agency a has established the plan for the benefit of a number of blind vendors who are participating in a’s rehabilitation program p pursuant to the terms of the federal randolph-sheppard act u s c 107b-e and a comparable state s statute for rehabilitating blind individuals certain individuals with vision impairments commonly known as the blind vendors who participate in program p are trained by a so they have the ability to operate certain vending facilities on either federally-owned state owned or local_government owned property a and p are obligated to place these vendors in these government facilities a is the state licensing agency for these facilities which provides opportunities for blind persons to operate its vending facilities pursuant to this mission a facilitates the establishment and operation of a vending facility by one of the blind vendors through negotiations with the federal state_or_local_government agency that maintains the space where the facility is to be located a enters into a standard agreement with the building manager at the government facility authorizing such vending location in this agreement among other things a agrees to place a vendor in charge of the facility to provide the facility’s equipment and to jointly oversee the vending facility along with the building manager plr-104667-01 a’s standard agreement with the blind vendors grants them the right to operate the facility and requires them to be responsible for managing and operating the facility however a generally provides and owns the equipment used at these facilities once the vendor’s facility has been established the vendor pays a percentage of his her proceeds into a fund maintained by a and used for various purposes such as the purchase maintenance and replacement of the vending facilities’ equipments a also assists the vendors by administering workers’ compensation and liability insurance and by providing management consultation regarding the facility’s operation many government buildings in state s have vending machines provided by a although no vendor actually operates a vending facility in the building according to sec_107d-3 a of the randolph-sheppard act income from such vending machines will be used by the state for the following among other purposes all vending machine income which accrues to a state licensing agency pursuant to subsection a of this section shall be used to establish retirement or pension plans for health insurance contributions and for provision of paid sick leave and vacation time for blind licensees in such state subject_to a vote of blind licensees state s has a similar statutory provision applicable to agency a after following the legally required procedures a is establishing the plan under sec_457 to provide deferred_compensation to the blind vendors pursuant to the above-mentioned federal and state statutes each vendor in program p automatically participates in the plan for each plan_year which is a calendar_year deferred_compensation contributions will be made to each vendor’s account from the vending machine trust fund in accordance with the federal randolph-sheppard act and comparable state s law the amounts to be allocated to each vendor’s account will be determined pursuant to the plan’s provisions amounts deferred for a calendar_year will be deposited to the annuity_contract within a reasonable_time after the determination of such amount has been made the vendors do not have a choice of receiving these amounts in cash instead of having them contributed to the plan however if the deferred_compensation for a vendor for a year exceeds the deferral limitations of sec_457 the excess_amount is paid directly to the vendor from this trust fund as soon as administratively feasible after the determination of such excess_amount a’s plan defers certain compensation described relating to services under program p in any taxable_year until death separation_from_service as defined under the plan attainment of age 70½ or until the occurrence of an unforeseeable_emergency the plan provides for a maximum amount that may be deferred to a participant’s account in any taxable_year and also provides for a catch-up computation for amounts deferred for one or more of the participant's last three taxable years ending before he attains normal_retirement_age under the plan the amounts that may be deferred under plr-104667-01 the annual maximum limitation and the catch-up provision are within the limitations of sec_457 including the sec_457 coordinated deferral provision the plan also provides that its participants may choose among various investment options offered under the plan for investing the amounts in their plan accounts with certain limitations a participant may elect the manner in which his deferred amounts will be distributed the election generally must be made prior to the date any such payment commences to the participant if the participant fails to make a timely election distribution will commence at the time and in the manner set forth in the plan the plan also includes a provision permitting a one-time election by a participant to change the time and manner of his distributions under the plan after the first permissible payout date if distribution from his account had not already commenced the plan provides that the manner and time of benefit payout must meet the distribution_requirements of sec_401 and sec_457 of the code the plan provides that amounts of compensation deferred thereunder are to be transferred to and invested in a_trust described in sec_457 or in one or more annuity_contracts for the exclusive benefit of the participants and their beneficiaries the annuity_contract is represented to be an annuity_contract described in sec_401 and thus eligible for treatment as a_trust pursuant to sec_457 the rights of any participant or beneficiary to payments under the plan are nonassignable and not subject_to pledge encumbrance transfer or alienation the plan generally provides that distribution to an alternate_payee pursuant to a domestic_relations_order may occur or commence only when authorized under sec_457 governing when distributions under the plan may begin if an alternate_payee receives rights to amounts in a participant’s account under a domestic_relations_order the plan may establish and maintain a separate_account for that alternate_payee pursuant to its provisions governing such accounts sec_457 of the code provides rules for the deferral of compensation by an individual participating in an eligible_deferred_compensation_plan as defined in sec_457 sec_457 of the code provides that in the case of a participant in an eligible_deferred_compensation_plan any amount of compensation deferred under the plan and any income attributable to the amounts so deferred shall be includible in gross_income only for the taxable_year in which such compensation or other income is paid or otherwise made available to the participant or beneficiary sec_457 provides that only individuals who perform service for the eligible_employer may be participants in an eligible_plan sec_457 defines an eligible_employer as including a state a political_subdivision of a state and any agency_or_instrumentality of a state or political_subdivision of a state sec_457 defines the performance of service as including performance of service as an plr-104667-01 independent_contractor and it treats the governmental_unit for whom such services are performed as the employer sec_1_457-1 of the income_tax regulations provides that amounts deferred including amounts previously deferred under an eligible_plan will not be considered made available to the participant solely because the participant is permitted to choose among various investment modes under the plan for the investment of such amounts whether before or after payments have commenced under the plan sec_457 provides that a plan maintained by an eligible governmental employer shall not be treated as an eligible_deferred_compensation_plan unless all assets and rights purchased with such deferred_compensation amounts and all income attributable to such amounts property or rights of the plan are held in trust for the exclusive benefit of participants and their beneficiaries sec_457 states that custodial accounts and annuity_contracts described in sec_401 shall be treated as trusts under rules similar to the rules under sec_401 based upon the provisions of the plan summarized above and the documents presented we conclude as follows the plan established by agency a for the blind vendors in program p is an eligible_deferred_compensation_plan as defined in sec_457 of the internal_revenue_code_of_1986 amounts of compensation deferred in accordance with the plan including any income attributable to the deferred_compensation will be includible in the recipient’s gross_income for the taxable_year or years in which amounts are paid or otherwise made available to a participant or beneficiary in accordance with the terms of the plan excess deferred_compensation from the vending machine trust fund exceeding the sec_457 deferral limitations that is paid to the vendors pursuant to the plan will be includible in the recipient’s gross_income in the year when it is paid or made available the annuity_contract associated with a’s sec_457 plan is treated under sec_457 as a_trust which is treated as an organization_exempt_from_taxation under sec_501 the right of the plan’s participants to choose among various investment options under the plan for the investment of the amounts in their accounts does not adversely affect the plan’s status as an eligible_deferred_compensation_plan described in sec_457 sec_1_457-1 of the income_tax regulations plr-104667-01 no opinion is expressed concerning the timing of the inclusion in income of amounts deferred under any deferred_compensation plan other than a’s plan described above in addition this ruling applies only to deferrals made after the date this ruling is issued this ruling is directed only to agency a and applies only to the plan submitted on date as revised by the amendments submitted on date and to the annuity_contract submitted on date in addition no opinion is expressed regarding the recently submitted plan amendments which are intended to reflect the statutory revisions to sec_457 enacted by the economic_growth_and_tax_relief_reconciliation_act_of_2001 if the plan is significantly modified this ruling will not necessarily remain applicable sec_6110 of the internal_revenue_code provides that this ruling may not be used or cited as precedent temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling may be modified or revoked if the adopted temporary or final regulations are inconsistent with any conclusion in the ruling see section dollar_figure of revproc_2001_1 2001_1_irb_1 however when the criteria in section dollar_figure of revproc_2001_1 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances sincerely yours robert d patchell acting chief qualified_plans branch office of the associate chief_counsel tax exempt and government entities enclosure copy for sec_6110 purposes


t c memo united_states tax_court sulphur manor inc petitioner v commissioner of internal revenue respondent docket no 24581-14l filed date david j looby for petitioner ann louise darnold for respondent memorandum opinion paris judge in this collection_due_process cdp case petitioner seeks review pursuant to sec_6330 of the determination by the internal 1unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended and in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure revenue service irs or respondent to uphold a notice_of_intent_to_levy petitioner timely petitioned this court with respect to the notice_of_determination and petitioner and respondent have each filed motions for summary_judgment under rule the remaining questions for decision are whether irs settlement officer alcorte so alcorte abused her discretion in rejecting petitioner’s proposed installment_agreement and sustaining the collection action and whether she had prior involvement with respect to the unpaid tax for the reasons explained below the court will grant respondent’s motion for summary_judgment and deny petitioner’s background the following facts are based on the parties’ pleadings and motion papers including the attached exhibits and affidavits see rule b petitioner oper- ates a nursing home facility in a rural community of fewer than big_number residents its principal_place_of_business was in oklahoma at the time the petition was filed 2each party requests that certain of the other’s affidavits and exhibits be stricken from the record because they were not part of the original administrative record although there exists conflicting authority as to whether the court’s review in cdp cases is limited to the administrative record neither the u s court_of_appeals for the tenth circuit nor the u s court_of_appeals for the d c circuit has specifically ruled on the issue the court denies both requests the case at issue relates to petitioner’s outstanding tax_liability from form_941 employer’s quarterly federal tax_return for the period ending date for that period petitioner timely filed its form_941 but failed to pay the reported tax_liability of dollar_figure for that quarter on date respondent assessed the tax reported on the return and began collection efforts on date respondent issued to petitioner a letter final notice--notice of intent to levy and notice of your right to a hearing in response petitioner timely submitted a form request for a collection_due_process or equivalent_hearing seeking to enter into a dollar_figure-per-month installment_agreement for its unpaid employment_tax liability the cdp hearing request stated that if respondent were permitted to levy petitioner’s difficulty with medicare and medicaid collections would render it unable to pay either its employment_tax balance or its current taxes petitioner’s cdp hearing request however did not dispute the underlying employment_tax liability petitioner checked the collection alternative boxes for installment_agreement and i cannot pay balance respondent mailed petitioner a letter dated date acknowledging receipt of petitioner’s cdp hearing request and so alcorte subsequently mailed to petitioner a letter scheduling a cdp hearing for date so alcorte’s letter advised petitioner that it did not qualify for consideration of an installment_agreement because it was not in compliance with its employment_tax deposit requirements for the taxable_period ending date the letter further advised petitioner that to qualify for a collection alternative it had to provide to so alcorte the following items no later than date a completed form 433-b collection information statement for businesses and evidence that it had made the required federal employment_tax deposits for the current taxable_period so alcorte informed petitioner that respondent could not consider collection alternatives without the information requested petitioner did not submit the requested form 433-b until date two days before the scheduled hearing asserting that the proposed levy would result in economic hardship and therefore this situation mandate s the release of the proposed levy the form 433-b was signed by petitioner’s president sam jewell and listed among petitioner’s assets accounts_receivable from private pay medicaid oklahoma medicare and insurance copay--with a combined balance of dollar_figure--for the period april through date 3the record reflects that dollar_figure of petitioner’s total accounts receiv- able was owed by the federal and state government agencies referenced above the form 433-b also listed petitioner’s monthly income of dollar_figure and monthly expenses of dollar_figure for a net monthly income of dollar_figure in preparation for the cdp hearing so alcorte reviewed the administrative record and noted in her case activity report that petitioner did not appear to qualify for an installment_agreement because its assets in accounts_receivable were sufficient to pay the outstanding liability in full she noted on petitioner’s form 433-b that its net monthly income was dollar_figure on date the parties held the scheduled cdp hearing petitioner’s representative did not contest petitioner’s underlying tax_liability but instead reiterated that it would suffer economic hardship if the proposed collection action were sustained so alcorte explained to petitioner’s representative that she would not consider petitioner’s economic hardship argument because the economic hardship exception under sec_6343 is not available to corporations she noted that because petitioner’s accounts_receivable were sufficient to pay its outstanding liability in full petitioner was not in compliance with its federal employment_tax deposit obligations and the economic hardship exception was unavailable to corporations she would be sustaining the proposed collection action and closing the case so alcorte verified that the assessment was properly made and that all other requirements of applicable law and administrative procedure had been met she thereupon closed the case and on date issued to petitioner a notice_of_determination sustaining the notice_of_intent_to_levy for its employment_tax liability for the tax period ending date i summary_judgment and standard of review discussion the purpose of summary_judgment is to expedite litigation and avoid unnecessary and time-consuming trials fla peach corp v commissioner 90_tc_678 the court may grant summary_judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir if a moving party properly makes and supports a motion for summary_judgment an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but must set forth specific facts by affidavit or otherwise showing that there is a genuine dispute for trial rule d upon due consideration of the parties’ motions supporting declarations and responses thereto the court concludes that no material facts are in dispute and that judgment may be rendered for respondent as a matter of law where the validity of the underlying tax_liability is properly at issue in a collection case the court will review the matter on a de novo basis 114_tc_604 where as here there is no dispute concerning the underlying tax_liability the court reviews the commissioner’s administrative determination to proceed with collection for abuse_of_discretion id abuse_of_discretion exists when a determination is arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir ii collection_due_process in deciding whether the so abused her discretion in sustaining the proposed collection action the court considers whether she properly verified that the requirements of any applicable law or administrative procedure have been met 4regardless of whether petitioner could have contested its underlying liability at the cdp hearing this court may consider a challenge to such a liability only if the taxpayer properly raised it before the so 129_tc_107 and again in its petition to this court see rule b any issue not raised in the assignments of error shall be deemed to be conceded petitioner did not raise this issue with so alcorte or in its petition the court accordingly deems it conceded considered any relevant issues petitioner raised and determined whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary see sec_6330 review of the record reveals that so alcorte conducted a thorough review of petitioner’s account determined that the taxes had been properly assessed and verified that other requirements of applicable law and administrative procedure were followed petitioner’s primary contention is that sec_301_6343-1 proced admin regs defining economic hardship only with respect to individual taxpayers is invalid and that so alcorte abused her discretion in failing to consider its request for relief under the economic hardship provision of sec_6343 this contention is incorrect this court recently released its opinion in lindsay manor nursing home inc v commissioner lindsay manor i t c __ date finding that sec_301_6343-1 proced admin regs is valid and that the economic hardship relief provided by sec_6343 is available only to individual taxpayers and in a companion memorandum opinion lindsay manor nursing home inc v commissioner tcmemo_2017_50 the court concluded that the so did not abuse her discretion in failing to consider a request for economic hardship relief made by a corporate taxpayer so alcorte did not abuse her discretion in declining this request either petitioner argues alternatively that so alcorte abused her discretion in rejecting its installment_agreement request and in failing to adequately consider its economic hardship in the balancing analysis required by sec_6330 finally petitioner suggests that so alcorte was not impartial as required by sec_6330 a petitioner’s installment_agreement request in its discretion the irs may enter into an installment_agreement if it determines that doing so will facilitate full or partial collection of a tax_liability see sec_6159 the irs also has discretion to reject a proposed installment_agreement subject_to certain restrictions not applicable here see 140_tc_173 sec_301_6159-1 c i proced admin regs consequently in reviewing this determination the court does not 5in lindsay manor i this court found that sec_301_6343-1 proced admin regs is valid accordingly the economic hardship exception is available only to individuals to the extent that petitioner’s other arguments attempt to rehash this issue they are summarily disregarded the court will however address petitioner’s economic position with respect to so alcorte’s sec_6330 balancing analysis substitute its judgment for that of appeals and decide whether in its opinion petitioner’s installment_agreement should have been accepted see 112_tc_19 keller v commissioner tcmemo_2006_166 aff’d in part 568_f3d_710 9th cir instead the court reviews this determination for abuse_of_discretion petitioner argues that it was an abuse_of_discretion for so alcorte to reject its proposed installment_agreement the record however demonstrates that so alcorte’s rejection of petitioner’s installment_agreement was proper for either of her reasons the value of petitioner’s assets exceeded the underlying liability and petitioner was not in compliance with its federal employment_tax deposit obligations petitioner’s assets so alcorte rejected petitioner’s proposed installment_agreement after determining that it could fully or partially satisfy its tax liability--dollar_figure--by liquidating or borrowing against its assets--dollar_figure in accounts_receivable 6the court finds disingenuous petitioner’s argument that so alcorte’s notes in her case activity report constituted a predetermination the notes indicate so alcorte’s preparation for petitioner’s cdp hearing and reflect a thorough review of the late-submitted form 433-b and its attachments this is not an abuse_of_discretion alone see internal_revenue_manual irm pt and date taxpayers do not qualify for installment agreements if balance due accounts can be fully or partially satisfied by liquidating assets see also boulware v commissioner tcmemo_2014_80 finding that settlement officer’s reliance on this irm provision was not an abuse_of_discretion aff’d 816_f3d_133 d c cir and other than its argument for economic hardship relief petitioner does not suggest that any exception to the general_rule applies the record does not show any abuse_of_discretion by so alcorte in rejecting this offer compliance with federal tax obligations in rejecting petitioner’s proposed installment_agreement so alcorte also noted that petitioner was not in compliance with its current federal employment_tax deposit obligations established irs policy requires taxpayers to be in 7so alcorte noted in her case activity report that there are enough equity in assets as well as the excess monthly income shows negative figure than proposed and petitioner points to this as an example of so alcorte’s abuse_of_discretion however even assuming that the quoted sentence means that she thought petitioner’s net_income was negative--instead of positive dollar_figure per month-- this mistake was of no consequence to her ultimate decision in the notice_of_determination which does not mention petitioner’s income any actual error was harmless since an accurate reflection of petitioner’s positive net_income would have been another reason to reject its proposed dollar_figure-per-month installment_agreement see boulware v commissioner tcmemo_2014_80 finding no abuse_of_discretion in rejecting proposed installment_agreement when taxpayer was able to pay twice the amount of the proposed payments aff’d 816_f3d_133 d c cir compliance with current filing and estimated_tax payment requirements to be eligible for collection alternatives see 141_tc_248 generally current compliance with tax laws is a prerequisite to being eligible for collection alternatives see 126_tc_237 rev’d on other grounds 514_f3d_1119 10th cir and despite petitioner’s contention so alcorte was well within her discretion to require compliance with current tax obligations see 129_tc_107 cf 461_f3d_610 5th cir finding no abuse_of_discretion when settlement officer rejected collection alternative because taxpayer was not in compliance with its tax payment obligations reed v commissioner t c pincite same petitioner argues that so alcorte abused her discretion because--even though it was not in compliance--she failed to consider that its inability to remain current with its federal tax deposits was a result of its nonreceipt of medicare and medicaid funding from the federal and state governments for support petitioner cites 136_tc_178 in alessio azzari inc a lender stopped lending money to the taxpayer after the commissioner’s settlement officer erroneously determined that the commis- sioner did not need to subordinate his lien on the taxpayer’s accounts to the lender’s lien on the same accounts id pincite as a result the taxpayer was unable to stay current with its employment_tax deposits after being in compliance for six consecutive quarters id pincite the commissioner denied the taxpayer’s installment_agreement request because the taxpayer was no longer in compliance id pincite the court held that it was an abuse_of_discretion for the commissioner to deny the taxpayer’s request for an installment_agreement on the basis of the taxpayer’s failure to stay current on its tax deposits because the settlement officer’s erroneous interpretation of law led to the lender’s decision to stop lending money to the taxpayer which led to the taxpayer’s not being in compliance id pincite unlike the taxpayer in alessio azzari inc petitioner was indisputably not in compliance when it requested an installment_agreement and because sec_301_6343-1 proced admin regs is valid so alcorte’s interpretation was not erroneous see lindsay manor i accordingly so alcorte did not abuse her discretion in rejecting petitioner’s installment_agreement request on the grounds that petitioner was not in compliance b so alcorte’s balancing analysis petitioner next argues that so alcorte either did not conduct the required statutory balancing test or did not explain her reason for concluding that its requirements were met petitioner suggests that it proposed a viable collection alternative that it could afford to pay on a monthly basis while staying current on its federal_tax_deposit payments that was less intrusive than enforced levy action this court also found in lindsay manor i that the sec_6330 balancing test properly takes into account a taxpayer’s specific economic realities and the consequences of a proposed collection action on the basis of the court’s thorough analysis of the record in this case the court concludes that there is no material issue of fact regarding whether so alcorte properly balanced the need for the efficient collection_of_taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary see sec_6330 at the time petitioner requested this installment_agreement the submitted form 433-b showed that its monthly income exceeded its monthly expenses with a net monthly income of dollar_figure so alcorte noted petitioner’s accounts_receivable which were together sufficient to pay the outstanding liabilities in full these accounts included delayed payments from medicare and medicaid but petitioner did not suggest that they would be unpaid although petitioner complains of the possibility of being forced to close its doors to its patients and employees this court finds that so alcorte gave due weight to petitioner’s specific circumstances the government’s interest in efficiently collecting petitioner’s liability simply tipped the scale the other way furthermore it is well established that rejecting a collection alternative be- cause of noncompliance with estimated_tax payment requirements does not violate the proper balancing requirement see eg 123_tc_1 aff’d 412_f3d_819 7th cir friedman v commissioner tcmemo_2015_196 schwartz v commissioner tcmemo_2007_155 in prepara- tion for the cdp hearing so alcorte discovered that petitioner was not in compli- ance with its current employment_tax deposit obligations for the taxable_period ending date and that it did not provide proof of making its required date deposit upon consideration of petitioner’s financial position and its failure to remain in compliance with its employment_tax requirements so alcorte determined that there was no alternative to sustaining the notice_of_intent_to_levy she explained the reasoning behind her decision in the notice of determi- nation accordingly the undisputed material facts establish that so alcorte did not abuse her discretion in conducting the sec_6330 balancing test c so alcorte’s impartiality next petitioner argues that so alcorte’s review of the documents it provided before the cdp hearing violates its sec_6330 right to a cdp hearing by an appeals officer who had no prior involvement with respect to the unpaid tax sec_6330 requires a cdp hearing to be conducted by an officer_or_employee who has had no prior involvement with respect to the unpaid tax before the first hearing prior involvement exists only when the taxpayer the tax and the tax period at issue in the cdp hearing also were at issue in the prior non-cdp matter and the appeals officer_or_employee actually participated in the prior matter sec_301_6330-1 q a-d4 proced admin regs petitioner does not argue that so alcorte had prior involvement in an earlier non-cdp matter rather it argues that because she had reviewed petitioner’s documents before the cdp hearing so alcorte was not impartial petitioner is incorrect the regulations clearly state that prior involvement means that an appeals officer actually participated in an earlier non-cdp matter id because petitioner does not assert that so alcorte participated in a prior non-cdp matter its argument must fail so alcorte verified that she had not had any prior involvement with respect to the specific tax period at issue because so alcorte did not participate in a prior non-cdp matter concerning the same tax taxpayer and tax period at issue she was an eligible appeals officer to preside over the cdp hearing accordingly the undisputed material facts establish that so alcorte did not abuse her discretion by reviewing the information petitioner had provided before its cdp hearing iii conclusion finally petitioner argues that the court should remand this case for additional consideration the court is not convinced that a remand is necessary or would be productive see 117_tc_183 kakeh v commissioner tcmemo_2015_103 at the purpose of a remand is not to afford a do over for a taxpayer whose missteps during the cdp process resulted in its collection alternative’s being rejected see kakeh v commissioner at it appears to the court that petitioner is seeking a do over here finding no abuse_of_discretion the court will grant respondent’s motion for summary_judgment and deny petitioner’s the court has considered all of the arguments made by the parties and to the extent they are not addressed herein they are considered unnecessary moot irrelevant or without merit to reflect the foregoing an appropriate order and decision will be entered