internal_revenue_service number release date index number --------------------------------------- --------------------------- ------------------------------ ------------- ------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-137628-10 date date x y d1 d2 ------------------------------------------------------------------------------------------------------ ----------------------- ------------------------------------------------------------------------------------------------------ ----------------------- ------------------- --------------------------- state ------------- dear ----------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state and elected to be an s_corporation effective d1 x’s election was inadvertently terminated effective d2 when y an ineligible shareholder became the owner of x stock upon the issuance of a favorable ruling x will take corrective action so that y will no longer be a shareholder of x plr-137628-10 x represents that the termination was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the event resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness the corporation shall be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x’s s_corporation_election on d2 was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from d2 and thereafter provided x’s s_corporation_election was valid and provided that the election was not otherwise terminated under sec_1361 this ruling is conditioned upon the shareholders of x including in income their pro_rata share of the separately_stated and nonseparately computed items of x as provided in sec_1366 making any adjustments to basis as provided in sec_1367 taking into account any distributions made by x as provided in sec_1368 and taking corrective action so that y is no longer a shareholder of x within days from the date of this letter if x or its shareholders fail to treat themselves as described above this letter_ruling shall be null and void except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent plr-137628-10 pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x’s authorized representative sincerely melissa c liquerman chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ----------------------------- --------------------- ----------------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ---------------------- id no ----------- telephone number -------------------- refer reply to cc psi b06 plr-111557-14 date date legend taxpayer ------------------------ ----------------------- --------------- ----------------------------------- ---------------------- ----------------------------------------- ------------------------- ------------------------ ------------------ ---------------- ----------------------------------- ----------------------------------------------- ------------ ------------ ---------------- ------------ ----------- --------------- ---------------------- partnership investor investor investor investor investor company a company b company c company d state a state b state c state d state e state f original site original generating station -------------------------------------- site generator generating station --------------------------------------- year a date a date b date c chemical a1 chemical a2 ------ ---------------- --------------------- --------------------- ------ ----------------------------- ----------------------------- ------------------------------------------------ plr-111557-14 chemical b center dear --------------- ------------------------ ------------------------------------------------------------------------------------------ --------------------------------------------------------- this is in response to your request for rulings submitted by your authorized representative concerning the federal_income_tax consequences of the transaction described below background partnership is a state a limited_liability_company classified as a partnership for federal_income_tax purposes partnership is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes partnership is engaged in purchasing raw coal converting it to refined_coal and selling the refined_coal investor is a state b limited_liability_company that is classified as a corporation for u s federal_income_tax purposes investor is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes investor is a state a limited_liability_company that is classified as a corporation for u s federal_income_tax purposes investor is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes investor is a state a corporation investor is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes each of investor investor and taxpayer is an individual resident in state a company a is a state a limited_liability_company that is classified as a corporation for u s federal_income_tax purposes company a is a calendar_year taxpayer and uses the accrual_method of accounting for book and tax purposes company a serves as manager of taxpayer company a is a wholly-owned subsidiary of company b a state a limited_liability_company company b is a wholly-owned subsidiary of company c a state a limited_liability_company and is disregarded as an entity separate from company c for u s federal_income_tax purposes company c is classified as a partnership for u s federal_income_tax purposes company c produces refined_coal that allows coal burning power plants to reduce nox and mercury emissions the members of partnership are investor investor investor investor investor taxpayer and company a plr-111557-14 the facility partnership owns a refined_coal facility the facility located at the generating station near the site the generating station consists of two coal-fired steam-powered electric-generating units the facility was originally placed_in_service in year a by company b at the original generating station located near the original site subsequent to the installation and operation of the facility at the original generating station company b removed the facility from operation and stored it in a secure location on the grounds of the original generating station at the request of generator the facility was installed at the generating station on date a in order for the facility to operate at the generating station company b made certain modifications to the facility the cost of these improvements together with the cost of all other capital expenditures incurred with respect to the facility since it was placed_in_service was less than four times the value of the original facility assuming the original facility remains worth at least the original cost to construct partnership acquired the facility from company b on date b as a contribution to the capital of taxpayer company d a state a limited_liability_company serves as contract operator of the facility technology the facility utilizes proprietary technology sublicensed from company c to produce refined_coal the technology using the technology partnership treats the feedstock coal using a manufacturing process the process in which two chemical additives are metered on to the feedstock coal as it is transported through the facility on coal belts the application rate of the chemical additives is proportional to the weight of coal as measured by coal belt scales on each coal belt the resulting refined_coal is then deposited in the bunkers that feed the boilers the composition of the first chemical additive varies depending on the type of boiler and rank of coal for which the facility is being operated to produce refined_coal for circulating fluidized-bed boilers such as the one at original generating station where the facility was placed_in_service refined_coal is produced using chemical a1 for pulverized-coal boilers such as those at the generating station refined_coal is produced using a combination of chemical a1 and chemical a2 the second chemical additive is chemical b which will increase the fraction of mercury associated with particulates that can be removed in particulate collectors and the fraction of soluble mercury that can be removed in wet scrubbers paartnership anticipates that from time to time generator may request that the application rate of the chemical additives be temporarily or permanently increased to plr-111557-14 assist generator in regulatory emissions compliance or to improve plant operations thus over time the application rate for the additives may increase or decrease but at no time will it be decreased below the application rate certified as achieving a qualified emissions reduction in the most recent certification or most recent applicable redetermination all of the coal that the generating facility burns in its boilers is low-sulfur sub- bituminous coal including sub-bituminous coal fines from state c state d state e and state f the source region generator does not currently depend on a single mine for feedstock coal and therefore expects to purchase feedstock coal from a number of mines in the source region that provide low-sulfur sub-bituminous coal testing as part of placing the facility in service company b conducted a full-scale continuous emissions monitoring system cems field test to measure the reduction in nitric oxide and nitrogen dioxide collectively nox and mercury emissions nox and mercury emissions were measured as required by the cems field testing procedures described in section of notice_2010_54 the notice emissions for both the feedstock coal and refined_coal were measured under the same operating conditions over a period of at least three hours during which the boiler operated at a steady state and at least percent of full load the original generating station had no separate nox air pollution equipment so nox was measured at the stack and mercury was measured downstream of the particulate control device the cems field test demonstrated the required reductions in both nox and total mercury emissions both determined on a lb btu basis to satisfy the requirements of at least nox reduction and at least mercury reduction at the generating station partnership intends to rely on pilot-scale combustion testing under section a of the notice and coal sampling laboratory analysis for redetermination testing pursuant to section b of the notice company c has engaged the center of a prominent university the center to conduct such testing using its pilot-scale combustion furnace the pilot furnace the pilot furnace has been extensively used to research and investigate sulfur oxide and nox emissions and the transformation of toxic trace metals mercury arsenic and lead during the combustion of coal and other fuels or waste materials partnership conducted emissions testing at the pilot furnace on date c in conformance to section a of the notice the tests were conducted using coal from the source region that is the same rank as the feedstock coal used at the generating station the tested coal the center tested emissions from both the feedstock coal and the refined_coal product according to the center the boiler and combustion conditions of the pilot furnace were designed to replicate the combustion conditions of a boiler that is coal-fired and steam-producing and of a size and type plr-111557-14 commonly used in commercial operations including full-scale boilers of the same type as those at the generating station each test at the pilot furnace lasted between and minutes three different add-rates of the chemical additives were tested all three add rates tested showed emissions reductions of at least for nox and for mercury compared to emissions measured from the feedstock coal the center’s report the report indicates that it is expected that the emissions reductions reported here would be achieved at full scale by using these treatment rates during the production of refined_coal the report signed by a qualified_individual with the center concluded that the pilot furnace testing accurately measured the emission reductions that would be achieved in a full-scale boiler if the process is changed unless it is solely to increase the add rate for one or both of the chemical additives partnership expects to repeat emissions qualification test at the pilot furnace or other pilot-scale combustion furnace in accordance with section a of the notice if there has not been a change in the process partnership expects to rely on coal sampling and analysis pursuant to section b of the notice for ongoing redeterminations within six months of the most recent determination or redetermination although the precise intervals may vary eg it may be only four or five months between tests for each a test at the pilot furnace as described below the feedstock coal and refined_coal are sampled the feedstock coal and refined_coal samples are submitted separately for laboratory analysis to determine the sulfur and mercury content of each fuel during each period of up to six months constituting the redetermination period samples of both feedstock coal and refined_coal will be collected at the generating facility on a regular basis currently expected to be daily partnership intends to collect all samples for redetermination from the moving coal belts before and after the coal has passed through the facility company d personnel will collect coal samples from both edges and the center of the belt using a manual sample collection device the daily samples will be blended manually or otherwise into a multi-day gross sample two samples of approximately two pounds each will be collected using a scoop from each gross sample sealed and labeled these samples will then be sent to an independent laboratory for preparation and analysis standard laboratory techniques will be used to measure the sulfur and mercury content of these samples the testing results for sulfur and mercury content of the gross samples of feedstock and refined_coal collected during the redetermination period respectively will then be averaged using a simple arithmetic mean for comparison to the sulfur and mercury content of the coal samples collected during the test period at the pilot furnace or any more recent determination that meets the requirements of section dollar_figure of the notice partnership expects to rely primarily on redetermination tests using coal sampling and laboratory analysis under section b of the notice and to conduct pilot plr-111557-14 furnace testing under section a of the notice only when required ie because of a change in the process rulings requested based on the foregoing you have requested that we rule as follows the refined_coal produced and sold using the process and technology constitutes refined_coal within the meaning of sec_45 of the internal_revenue_code_of_1986 as amended the code provided that such refined_coal is produced from feedstock coal that is from the same source region or rank as the tested coal described herein and provided further that the refined_coal satisfies the qualified_emission_reduction test in sec_45 of the code provided that the feedstock coals used to produce refined_coal during any determination_period is from the same source region and of the same rank as the coal subject_to the most recent determination or redetermination all feedstock coal that satisfies that criteria shall be treated as feedstock coal of the same source and rank for purposes of section dollar_figure of the notice regardless of the mines from which such feedstock coal is purchased and will not require a redetermination to establish qualified emission reductions testing by the center for qualified emissions reductions as described in the report satisfies the requirements of the notice partnership may treat the required emission reductions in sec_45 of the code as having been met based on the results from the pilot furnace testing at the center or other similar pilot-scale combustion testing facilities and subsequent permitted laboratory testing as required for a redetermination described in section a or b of the notice regardless of subsequent normal fluctuations in operating conditions and emissions at the generating station increasing the amounts of chemical additives to the feedstock coal to a higher level per ton of feedstock coal than the rate shown to have produced a qualified emissions reduction in a determination or redetermination will not be construed as a change in the process of producing refined_coal from the feedstock coal requiring a redetermination under section dollar_figure of the notice nor will later resuming application at the rate used in such original determination or redetermination constitute such a change the results of a test set forth in a redetermination test report may be relied upon after the date of testing even if the report is not received until after the six-month period specified in section i of the notice or if the test was done before partnership acquired the facility plr-111557-14 pursuant to section b of the notice the redetermination requirement of section dollar_figure of the notice may be satisfied by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and refined_coal on average do not vary by more than percent below the bottom of nor more than percent above the top of the range of sulfur and mercury content of both the feedstock coal and refined_coal used in the most recent determination pursuant to section dollar_figure of the notice if the facility was placed_in_service prior to date within the meaning of sec_45 of the code a subsequent modification or relocation of the facility or replacement of part of the facility after that date will not result in a new placed-in-service date for the facility for purposes of sec_45 provided the fair_market_value of the original property of the modified or relocated facility is more than percent of the facility’s total fair_market_value at that time law and rationale sec_45 of the code generally provides a credit against federal_income_tax for_the_use_of renewable or alternative resources to produce electricity or fuel for the generation of steam sec_45 of the code provides that in the case of a producer of refined_coal the credit available under sec_45 of the code for any taxable_year shall be increased by an amount equal to dollar_figure5 per ton of qualified refined_coal i produced_by_the_taxpayer at a refined_coal_production_facility during the 10-year period beginning on the date that the facility was originally placed_in_service and which is ii sold by the taxpayer to an unrelated_person during such 10-year period and such taxable_year for purposes of sec_45 of the code section dollar_figure of notice_2010_54 provides that the term refined_coal means a fuel which is i a liquid gaseous or solid fuel including feedstock coal mixed with an additive or additives produced from coal including lignite or high carbon fly ash including such fuel used as a feedstock ii sold by the taxpayer with the reasonable expectation that it will be used for the purpose of producing steam and iii certified by the taxpayer as resulting when used in the production of steam in a qualified_emission_reduction section dollar_figure of the notice provides that the term qualified_emission_reduction means in the case of refined_coal produced at a facility placed_in_service after date a reduction of at least twenty percent of the emissions of nitrogen oxide and at least forty percent of the emissions of either sulfur dioxide or mercury released when burning the refined_coal excluding any dilution caused by materials combined or added during the production process as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of date plr-111557-14 sec_45 of the code generally provides that the term refined_coal_production_facility means a facility which is placed_in_service after date and before date section dollar_figure of notice_2010_54 provides that a refined_coal_production_facility will not be considered to have been placed_in_service after date if more than percent of the total fair_market_value of the facility the cost of the new property plus the value of the used_property is attributable to property that was placed_in_service on or before date section dollar_figure of notice_2010_54 generally provides that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining as defined in sec_613 a c or i of the code if performed by the mine owner or operator accordingly in determining whether a qualified_emission_reduction has been achieved the emissions released when burning the refined_coal must be compared to the emissions that would be released when burning the feedstock coal feedstock coal is the product resulting from processes that are treated as mining including any such processes that are actually applied by a taxpayer in any part of the taxpayer’s process of producing refined_coal from coal sec_613 of the code describes treatment processes that are not considered as mining unless they are provided for in sec_613 or are necessary or incidental to a process provided for in sec_613 any cleaning process such as a process that uses ash separation dewatering scrubbing through a centrifugal pump spiral concentration gravity concentration flotation application of liquid hydrocarbons or alcohol to the surface of the fuel particles or to the feed slurry provided such cleaning does not change the physical or chemical structure of the coal and drying to remove free water provided such drying does not change the physical or chemical identity of the coal will be considered as mining section of the notice provides in part that emissions reduction may be determined using continuous emission monitoring system cems field testing section a provides in part that cems field testing is testing that meets all the following requirements i the boiler used to conduct the test is coal-fired and steam-producing and is of a size and type commonly used in commercial operations ii emissions are measured using a cems iii if epa has promulgated a performance standard that applies at the time of the test to the pollutant emission being measured the cems must conform to that standard iv emissions for both the feedstock coal and the refined_coal are measured at the same operating conditions and over a period of at least hours during which the boiler is operating at a steady state at least percent of full load and v a qualified_individual verifies the test results in a manner that satisfies the requirement of section b plr-111557-14 section of the notice provides that methods other than cems field testing may be used to determine the emission reduction the permissible methods include a testing using a demonstration pilot-scale combustion furnace if it establishes that the method accurately measures the emission reduction that would be achieved in a boiler described in section a i of the notice and a qualified_individual verifies the test results in a manner that satisfies the requirements of section c i ii v and vi of the notice and b a laboratory analysis of the feedstock coal and the refined_coal that complies with a currently applicable epa or astm standard and is permitted under section b i or ii of the notice section of the notice provides that a taxpayer may establish that a qualified_emission_reduction determined under section dollar_figure applies to production from a facility by a determination or redetermination that is valid at the time the production occurs a determination or redetermination is valid for the period beginning on the date of the determination or redetermination and ending with the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of the feedstock coal that occurs after the date of such determination or redetermination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination section of the notice provides that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure must use a method that meets the requirements of section in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that a the sulfur or mercury content of the amount of refined_coal necessary to produce an amount of useful energy has been reduced by at least percent percent in the case of facilities placed_in_service after date in comparison to the sulfur or mercury content of the amount of feedstock coal necessary to produce the same amount of useful energy excluding any dilution caused by materials combined or added during the production process or b the sulfur or mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the sulfur and mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the notice section dollar_figure of the notice provides that the certification requirement of sec_3 c of the notice is satisfied with respect to fuel for which the refined_coal credit is claimed only if the taxpayer attaches to its tax_return on which the credit is claimed a certification that contains the following a statement that the fuel will result in a qualified emissions reduction when used in the production of steam a statement indicating whether cems field testing was used to determine the emissions reduction if cems field testing was not used to determine the emissions reduction a description of the method used a statement that the emissions reduction was determined or redetermined within the six months preceding the production of the fuel plr-111557-14 and that there have been no changes in the source or rank of the feedstock coal used in the process of producing refined_coal from feedstock coal since the emissions reduction was most recently determined or redetermined and a declaration signed by the taxpayer in the following form under penalties of perjury i declare that i have examined this certification and to the best of my knowledge and belief it is true correct and complete finally sec_45 of the code provides that a refined_coal_production_facility must be placed_in_service within certain timeframes for purposes of the refined_coal credit allowable with respect to refined_coal other than steel_industry_fuel the facility must be placed_in_service after date and before date section dollar_figure of the notice provides that the year in which property is placed_in_service is determined under the principles of sec_1_46-3 of the regulations ie when the property is placed in a condition or state of readiness and availability for a specifically assigned function section dollar_figure of the notice provides that a refined_coal_production_facility will not be treated a placed_in_service after date if more than percent of the facility’s total value the cost of the new property plus the value of the used_property is attributable to property placed_in_service on or before date the notice also states that the irs will not issue private letter rulings relating to when a refined_coal_production_facility has been placed_in_service with respect to the first issue the process starts with several chemical additives being added to the feedstock coal prior to its combustion in a furnace the additives provide the chemical structure that result in the reduction of emissions of nitrogen oxide and mercury during combustion section dollar_figure of the notice provides generally that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining if performed by the mine owner or operator in the instant case the process is not a mining process further section dollar_figure of the notice clarifies sec_45 of the code and specifically provides that refined_coal includes feedstock coal mixed with additives thus additive processes that mix certain chemicals or other additives with the coal in order to achieve emissions reductions may qualify for the refined_coal production_tax_credit additionally section dollar_figure of the notice defines comparable coal as coal that is of the same rank as the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal accordingly we conclude that the coal produced by using the process and technology constitutes a refined_coal within the meaning of sec_45 of the code provided that the refined_coal i is produced from feedstock coal that is the same source region or rank as the tested coal and ii satisfies the qualified_emission_reduction test stated in sec_45 of the code with respect to the second issue the emissions profile of the refined_coal product is compared to the emissions profile of either the feedstock coal or a comparable coal predominantly available in the marketplace as of date section dollar_figure of the notice provides that a comparable coal is defined as coal that is of the same rank as plr-111557-14 the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal section dollar_figure of the notice provides that a determination or redetermination of a qualified emissions reduction is valid until the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of the feedstock coal that occurs after the date of such determination or redetermination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination accordingly we conclude that provided that the feedstock coals during any determination_period are from the same coal source regions and of the same rank as the tested coal all feedstock coal that satisfies that criteria shall be treated as feedstock coal of the same source and rank for purposes of section dollar_figure of the notice regardless of the mines from which such feedstock coal is purchased with respect to the third issue section of the notice provides that any permissible testing method provided for in the notice can be used in emission testing for any pollutant that is a taxpayer can use different testing methods for each of nitrogen oxide sulfur dioxide or mercury provided the method used for any pollutant is a permissible method section of the notice provides that an emission test establishing a qualified_emission_reduction qualifies the refined_coal for a six-month period provided there is no change in the process for producing the refined_coal or in the source or rank of the feedstock coal therefore a taxpayer must redetermine the emission reductions to qualify for the succeeding six-month period using one or more approved methods in the instant case pilot-scale combustion testing will be arranged for and there will be no reliance on any continuous emissions monitoring system or other field testing which is permitted under section dollar_figure of the notice specifically the center will conduct testing including redetermination testing at the pilot furnace to determine the emissions reductions associated with burning the refined_coal product compared to the feedstock for purposes of qualifying the refined_coal produced at the facilities the center has conducted pilot-scale combustion tests at the pilot furnace as documented in the report in conducting such tests the center conducted tests on the feedstock and then mixed a separate sample of the feedstock with the additives so that it could conduct tests on the refined_coal product in each of its reports the center reported that the test results indicated that the blend of coal and additives achieved the required emissions reductions based on the foregoing we conclude that testing by the center for qualified emissions reductions as set forth in its test reports including interim reports satisfies the requirements of the notice qualified emissions reduction through testing by the center at its combustion research facility or similar pilot-scale combustion testing facilities under the notice may be relied upon with respect to the fourth issue section iii of the notice provides that a redetermination is required after a change in the process of producing refined_coal section of the notice further provides that in the case of a redetermination required by reason of a change in process any redetermination must be made using a plr-111557-14 method permitted under section dollar_figure of the notice rather than the simplified methods of section b we conclude that increasing the amounts of chemical additives to the feedstock coal will not be construed as a change in process requiring additional testing for qualified emissions reductions under section dollar_figure of the notice nor will it be construed as a change in process to later resume application at the rate used in the original test with respect to the fifth issue it is intended that redetermination testing will occur every six months or more frequently if required pursuant to the notice however the center is not always able to issue the written report required by section a of the notice within the six month period thus although redetermination testing is completed within the six month period the report may be received after the six month period nonetheless the center informed the interested parties of the results of the test on the day of the tests so that it was able to take into account the results of the redetermination within the six month period nevertheless the delay by the center in issuing its report cannot be indefinite accordingly we conclude that the results set forth by the center in a redetermination test report for production may be relied upon after the date of testing even if the report is not received until after the six-month period specified in section i of the notice so long as the written report is received within days from the date of testing however the redetermination of qualified emissions reduction must occur during the earliest of the events described in section dollar_figure of notice_2010_54 regardless of the time of the actual receipt of the center’s report with respect to the sixth issue section of the notice provides in part that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure of the notice must use a method that meets the requirements of section dollar_figure of the notice in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the sulfur and mercury content of the feedstock coal and refined_coal used in the most recent redetermination that meets the requirements of the notice accordingly we conclude the redetermination requirement of section dollar_figure of the notice may be satisfied by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and the refined_coal on average do not vary by more than percent below the bottom of nor more than ten percent above the top of the range of the sulfur and mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of section dollar_figure of the notice with respect to the seventh issue we understand that the facility has been relocated all of the essential components of the facility were relocated and retained similarly during the life of the facility it may be necessary to again relocate the facility or replace certain major components in the event of relocation or replacement of a component there should be no change in the placed_in_service_date of the facility as plr-111557-14 long as the test described in section dollar_figure of the notice has been met based on the foregoing we conclude that provided the facility was placed_in_service prior to date within the meaning of sec_45 of the code relocation of the facility to a different location after date or replacement of part of the facility after that date will not result in a new placed_in_service_date for the facility for purposes of sec_45 of the code provided the fair_market_value of the used_property is more than percent of the facility’s total fair_market_value at the time of relocation or replacement this ruling expresses no opinion regarding any issue not specifically addressed in this ruling letter including whether any person has sold refined_coal to an unrelated_person or when the facility was placed_in_service in particular we express or imply no opinion that taxpayer has sufficient risk or rewards of the production activity to qualify as the producer of the refined_coal the service may challenge an attempt to transfer the credit to a taxpayer who does not qualify as a producer including transfers structured as partnerships sales or leases that do not also transfer sufficient risks and rewards of the production activity no opinion is expressed whether the transaction complies with sec_49 or sec_465 of the code in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives a copy of this ruling must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs special industries


internal_revenue_service number release date index number 6050p -------------------------------- ------------------------- ------------------------------------------------------------ -- ------------------------------------- -------------- ------------------------------------------- ----------------------- 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 pa plr-128490-07 date october ----------- --------------------------------------------------- ------------------ ----------------------- ----------------------- legend company ----------------------------------------- state x act statute date date asset --------------- collection remedy ------------------- dear ------------- this letter responds to the letter dated date submitted on behalf of the company requesting the following ruling the company is not required to file forms 1099-c with respect to the write-off of balances and charges pursuant to its settlement agreement because the discharge was not the result of an identifiable_event listed in sec_1_6050p-1 of the income_tax regulations but rather was required by operation of state law facts the company is a publicly traded corporation engaged in the asset finance business whose financing products are offered through a nationwide network of asset dealers on date a class action lawsuit was filed by consumers in state x against the company alleging violations of state x state law with respect to asset financing plr-128490-07 contracts entered into with the company the lawsuit alleged several violations of state x law including that the company charged post-maturity interest and fees in excess of amounts due and that notices related to collection remedy did not meet statutory notice requirements on date the company and class plaintiffs signed a memorandum of understanding mou settling the entire class action lawsuit the mou provides inter alia that the lawsuit be dismissed with prejudice and that the company with respect to all class members who had been subject_to collection remedy collection remedy class members write off any deficiency balances remaining after the collection remedy additionally with respect to all other class members other class members the company has agreed under the mou to write off all charges interest fees etc other than the net cash price of the asset law analysis sec_6050p of the internal_revenue_code requires that an applicable_entity report any discharges in whole or in part of indebtedness of any person in excess of dollar_figure in addition sec_1_6050p-1 of the income_tax regulations provides that a discharge_of_indebtedness occurs if one of the following identifiable events takes place a a discharge_of_indebtedness under title of the united_states_code bankruptcy b a cancellation or extinguishment of an indebtedness that renders a debt unenforceable in a receivership foreclosure or similar proceeding in a federal or state court as described in sec_368 other than a discharge described in paragraph b i a of this section c a cancellation or extinguishment of an indebtedness upon the expiration of the statute_of_limitations for collection of an indebtedness subject_to the limitations described in paragraph b ii of this section or upon the expiration of a statutory period for filing a claim or commencing a deficiency judgment proceeding d a cancellation or extinguishment of an indebtedness pursuant to an election of foreclosure remedies by a creditor that statutorily extinguishes or bars the creditor's right to pursue collection of the indebtedness e a cancellation or extinguishment of an indebtedness that renders a debt unenforceable pursuant to a probate or similar proceeding f a discharge_of_indebtedness pursuant to an agreement between an applicable_financial_entity and a debtor to discharge indebtedness at less than full consideration g a discharge_of_indebtedness pursuant to a decision by the creditor or the application of a defined policy of the creditor to discontinue collection activity and discharge debt or h the expiration of the non-payment testing_period as described in paragraph b iv of this section out of the above events only two have a potential bearing on the requested ruling the first possible event sec_1_6050p-1 states that an identifiable_event plr-128490-07 exists where the applicable_financial_entity and debtor agree to discharge the indebtedness for less than full consideration to establish consideration there must be a performance or a return promised which has been bargained for by the parties restatement second contracts sec_71 in this case the company an applicable_financial_entity and the debtors are agreeing to the entry of a court approved and supervised judgment which incorporates the mou at first blush it appears that there is an agreement between company and its debtors to discharge indebtedness the agreement however merely reflects the operation of state law with respect to the collection remedy class members the write-off of all collection remedy deficiency balances is based upon applicable state x case law which bars recovery_of any deficiency balance remaining after collection remedy for failure to strictly comply with notice requirements with respect to all other class members the write-off of all charges other than the net cash price of the asset is required under state x statute which bars recovery_of these amounts when there has been a violation of the act in this case the charging of interest and fees in excess of amounts due therefore the decision to discharge these balances and charges is not triggered by an agreement between the company and the debtors the discharge is triggered by the applicable state x case law and statutes the agreement simply reflects the law the fact that the company and plaintiffs chose to settle the lawsuit as opposed to going to trial is immaterial thus sec_1_6050p-1 of the income_tax regulations does not apply the second possible event sec_1_6050p-1 holds that a discharge_of_indebtedness exists where a creditor discontinues collection activity pursuant to a decision by the creditor or a defined policy of the creditor according to sec_1 6050p- b iii a creditor's defined policy includes both a written policy and the creditor's established business practice neither a decision nor a policy triggers the cancellation of indebtedness in this case as stated above the applicable state x case law and statutory provisions trigger the discontinuance of the company's collection activity thus sec_1_6050p-1 does not apply based on the above analysis the discharges by the company are not subject_to the reporting requirements of sec_6050p or the regulations thereunder conclusion based solely on the information provided and the representations made we conclude that the company is not required to file forms 1099-c with respect to the write-off of balances and charges pursuant to its settlement agreement because the discharge was not the result of an identifiable_event listed in sec_1_6050p-1 but rather was required by operation of state law plr-128490-07 this ruling is based on the facts presented and the applicable law in effect on the date of this letter if there is a change in material fact or law local or federal before the transactions considered in this ruling take effect the ruling will have no force or effect except as specifically ruled herein no opinion is expressed as to the federal tax treatment of any issue addressed in this ruling under other provisions of the internal_revenue_code and regulations that may be applicable this ruling is directed only to the taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely charles a hall senior technician reviewer branch procedure administration enclosures copy of letter copy for sec_6110 purposes


t c memo united_states tax_court mohammed a rehman petitioner v commissioner of internal revenue respondent docket no filed date mohammed a rehman pro_se marissa j savit for respondent memorandum findings_of_fact and opinion morrison judge the respondent in this case the irs issued a notice_of_deficiency to the petitioner mr mohammed rehman for tax_year the dollar_figure deficiency arose because the irs denied some of the income-tax deductions that rehman had claimed on his tax_return rehman claimed several deductions on schedule a itemized_deductions and schedule c profit or loss from business of his return the irs disallowed three schedule a deductions all of which were disallowed in full and eight schedule c deductions some of which were disallowed in full some of which were disallowed in part listed in the table below are all the deductions that the irs disallowed fully or partially in the notice of deficiency--with the exception of a dollar_figure interest_deduction rehman claimed on his schedule c that is no longer at issue also listed are the amount that rehman claimed for each deduction the amount of the deduction the irs allowed and the amount at issue schedule a deductions medical and dental expenses charitable_contribution unreimbursed employee business_expenses claimed dollar_figure big_number big_number allowed -0- amount at issue dollar_figure big_number big_number 1this deduction was disallowed in full in the notice_of_deficiency the irs later conceded by stipulation that rehman was entitled to dollar_figure of the deduction as to the remaining claim of dollar_figure rehman conceded at trial that he was not entitled to the deduction schedule c business deductions except interest_expense_deduction claimed allowed amount at issue utilities meals and entertainment travel supplies legal and professional services advertising other expenses books magazines for business subscription for trading tips educational expenses business_gifts dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number -0- -0- dollar_figure -0- big_number -0- big_number dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number rehman timely filed a petition under sec_6213 for redetermination of the deficiency we have jurisdiction under sec_6214 the issue in this case after concessions is whether rehman is entitled to any or all of the above deductions in amounts beyond those the irs allowed in the notice_of_deficiency or subsequently conceded we hold that he is not entitled to 2all section references are to the internal_revenue_code as in effect for the tax_year all rule references are to the tax_court rules_of_practice and procedure any deductions in amounts greater than the amounts the irs has already allowed in the notice_of_deficiency or has conceded findings_of_fact some of the facts have been stipulated those facts are so found at the time of filing of the petition rehman resided in long island city new york from january to may of the tax_year at issue rehman was employed as a marketing outreach representative for a company called fidelis where he had been working since about rehman’s job was to help clients especially low- income clients sign up for assistance with new york state health insurance benefits in that role rehman would visit clients or potential clients in their homes to explain how fidelis could help them get insurance and he would help new clients fill out the necessary paperwork on his workdays rehman traveled to visit clients by public transit or by taxi and he traveled by taxi to restaurants to eat lunch starting sometime before date and continuing into rehman suffered from back pain and he sought medical treatment for his back 3the parties stipulated that rehman’s employer was fidelis rehman also testified that his employer was fidelis however for some reason rehman’s form_w-2 wage and tax statement named new york state catholic health plan inc as his employer from january to rehman traveled to and stayed somewhere in las vegas nevada a trade fair for the wood-products industry took place somewhere in the same city from january to on this trip and on two subsequent trips to las vegas september to and december to rehman gambled or attended shows at night he saved some receipts from shows he attended and meals he purchased during the las vegas trips rehman left his job with fidelis in date he then began working as a self-employed securities trader4 and later created a limited_liability_company chemical technology professional llc for his securities-trading business he operated the business out of his apartment after leaving fidelis rehman continued to take taxis to restaurants to eat lunch rehman purchased office supplies for the business including a computer in august from september to rehman again visited las vegas somewhere in las vegas a trade fair for the online financial-services industry began or took place the day before he arrived on or around date rehman used the website legalzoom com to generate the forms necessary to file for limited-liability-company status for 4he had begun working as a self-employed securities trader no later than date chemical technology professional llc the dollar_figure the irs allowed as a deduction for legal and professional services is for the expense he incurred using this website from december to rehman again visited las vegas during rehman paid an organization called the online trading academy for training related to his securities-trading business the dollar_figure the irs allowed as a deduction for educational expenses is for the cost of this training at some point between date and date rehman paid a company called hubco to advertise the creation of chemical technology professional llc in local publications and hubco placed the advertisements in date on or around date rehman filed a form_1040 u s individual_income_tax_return on it he reported income and claimed deductions including the deductions summarized in the tables supra pp he also reported gains and losses from the sale of securities on or around date rehman filed a form 1040x amended u s individual_income_tax_return on which he reported gains and losses from securities sales that had not been finalized at the time he filed his form_1040 the amended_return did not report different amounts for any of the deductions in question the irs sent rehman a notice_of_deficiency determining a deficiency of dollar_figure the notice_of_deficiency did not challenge rehman’s reporting of gains and losses from the sale of securities the notice_of_deficiency indicated that rehman had earned dollar_figure in unreported interest_income but he conceded this issue at trial the notice also contained the redetermined_deductions summarized in the tables supra pp rehman timely petitioned this court for redetermination of the deficiency opinion we address some general issues before examining the deductions disallowed in the notice the taxpayer generally bears the burden of proving that the determinations in the notice_of_deficiency are incorrect rule a 290_us_111 73_tc_394 sec_7491 shifts the burden_of_proof to the irs with respect to a given factual issue where a taxpayer introduces credible_evidence with respect to that issue meets all applicable substantiation requirements complies with all recordkeeping requirements and cooperates with any reasonable requests for information 116_tc_438 rehman has not demonstrated that the requirements of sec_7491 have been met therefore the burden_of_proof remains with rehman under the cohan_rule if a taxpayer establishes that a deductible expense has been incurred but cannot establish the precise amount of the deductible expense the court may estimate the amount see 39_f2d_540 2d cir in making the estimate the court bears heavily against the taxpayer who failed to more precisely substantiate the deduction see id pincite the court will not estimate a deductible expense unless the taxpayer presents a sufficient evidentiary basis on which an estimate can be made see 85_tc_731 the cohan_rule is superseded--that is estimates are not permitted--for certain types of expenses including entertainment travel and meals sec_1_274-5t temporary income_tax regs fed reg date we now evaluate each of the disallowed deductions in turn schedule a itemized_deductions a medical_expenses an individual taxpayer is permitted a deduction for expenses paid during the tax_year for medical_care of the taxpayer the taxpayer’s spouse or the taxpayer’s dependent to the extent that such expenses exceed of adjusted_gross_income sec_213 rehman introduced sufficient evidence through medical records and his own testimony to convince us that he received medical_care for back pain including a diagnosis at stand-up mri of brooklyn p c however there is nothing in the record beyond his own testimony to indicate how much he paid for that treatment or in what year he made any payments his testimony about amounts allegedly paid is implausible and unconvincing he claimed for example that he paid a doctor dollar_figure in cash for back surgery but he gave inconsistent explanations of where the back surgery was performed he failed to introduce into evidence any receipt or record of the payment for the surgery and he testified unconvincingly that he could not find such a receipt or record because the doctor had simply disappeared we are not required to find this self-serving and unsupported testimony to be sufficient to prove that rehman paid any amount for back surgery in or that the surgery even took place see 87_tc_74 65_tc_87 aff’d per curiam 540_f2d_821 5th cir rehman also testified that he paid approximately dollar_figure to a dentist for bridgework but that he did not have documents or receipts for the work because again the dentist had simply disappeared while we are persuaded that rehman had bridgework at some time in his life we do not believe his explanation for the lack of documents or receipts and we are not persuaded that he spent dollar_figure on dental care in furthermore the record does not allow us to reasonably estimate the amount of the dental expenses that rehman incurred in therefore he is not entitled to a deduction for dental expenses for see vanicek v commissioner t c pincite we hold that rehman is not entitled to any deduction for medical or dental expenses for b charitable_contributions sec_170 allows a deduction for any charitable_contribution made by a taxpayer during the taxable_year a charitable_contribution is defined as a contribution or gift to or for_the_use_of a charitable_organization sec_170 rehman claims that he made a charitable donation of dollar_figure in to a resident of india named atiqur rahman an individual is not a charitable_organization and nothing in the record shows that rahman was authorized to accept donations on behalf of a charitable_organization therefore rehman has failed to carry his burden of proving that he is entitled to a charitable-contribution deduction c unreimbursed employee business_expenses sec_162 allows a taxpayer to deduct all ordinary and necessary expenses paid_or_incurred by the taxpayer in carrying_on_a_trade_or_business sec_162 an expense is ordinary if it is normal usual or customary in the taxpayer’s trade_or_business see 308_us_488 an expense is necessary if it is ‘appropriate and helpful’ in the taxpayer’s business but it need not be absolutely essential 383_us_687 quoting welch v helvering u s pincite whether an expense is deductible under sec_162 is a question of fact to be decided on the basis of all the relevant facts and circumstances 97_tc_613 citing 320_us_467 performing services as an employee qualifies as a trade_or_business thus an employee may deduct expenses that are ordinary and necessary to his or her employment see 79_tc_1 a taxpayer employee may deduct only expenses for which he or she could not have been reimbursed by an employer id pincite 24_tc_21 i commuting and travel_expenses the unreimbursed employee expense deductions rehman claimed relate to the expense of traveling to and from client sites the expense of buying lunch on the way to or from those visits and the expense of traveling to and from the restaurants at which he ate lunch some work-related transit expenses are generally nondeductible for instance expenses_incurred for a taxpayer’s daily meals and for commuting6 between the taxpayer’s residence and the taxpayer’s place of business are generally nondeductible personal expenses sec_262 see eg 389_us_299 326_us_465 54_tc_1210 aff’d per curiam 5the travel costs were the cost of taxis and metropolitan transit authority fares although rehman claimed the expenses of traveling to and from client sites and to and from lunch and the costs of lunch throughout the year we evaluate the deductibility of these expenses as unreimbursed employee business_expenses only for the period from date to date the period he was employed by fidelis 6from rehman’s testimony and brief it is not clear whether he is seeking a deduction for commuting expenses or for expenses attributable to travel away from home we consider both alternatives 435_f2d_1290 1st cir see also sec_1_162-2 sec_1_262-1 income_tax regs however there at least two situations8 in which commuting expenses may be deductible see 73_tc_766 3_tc_544 see also bogue v commissioner tcmemo_2011_164 discussing in detail the origin of and reasons behind the exceptions one exception the so-called home-office exception requires that a taxpayer’s residence be his or her principal_place_of_business see strohmaier v 7expenses incurred on transportation between two separate places of business on the other hand are deductible as ordinary and necessary business_expenses 335_f2d_496 5th cir aff’g and remanding tcmemo_1962_233 heuer v commissioner 39_tc_947 aff’d per curiam 283_f2d_865 5th cir rehman did not claim that any of the expenses he incurred were for trips between two separate places of business he did not explain whether he had multiple client visits in any one day the lack of detailed information in his testimony and the documents he submitted means that he did not meet his burden to show he is entitled to any deduction for transportation_expenses of the type considered in steinhort 8a third potential route toward deducting commuting expenses the so-called regular-work-location exception can be found in revrul_99_7 1991_1_cb_361 this exception does not derive from our precedent bogue v commissioner tcmemo_2011_164 slip op pincite it would if valid allow a taxpayer to deduct the cost of traveling between a residence and temporary work locations if the taxpayer also has a regular work location away from his or her residence revrul_99_7 supra we need not consider this purported exception because there is no evidence in the record indicating whether rehman had a regular work location away from his residence during the relevant period commissioner 113_tc_106 curphey v commissioner t c pincite it allows a deduction for commuting expenses_incurred between the taxpayer’s principal_place_of_business his or her residence and another place of business there is no evidence in the record indicating whether rehman’s residence was his principal_place_of_business when he worked for fidelis the second exception the so-called temporary-distant-worksite exception applies to expenses_incurred outside the metropolitan area of--or an unusual distance from--the taxpayer’s residence see schurer v commissioner t c pincite see also 358_us_59 observing that the exception exists in the tax court’s precedent this exception is not relevant here because all of rehman’s transportation_expenses were incurred in the new york city area rehman has the burden of proving that he is entitled to an exception in order to be able to deduct any commuting_costs he has introduced no evidence from which we could conclude that an exception applies therefore we hold that rehman is not entitled to deduct as commuting expenses any of the unreimbursed employee business_expenses he claimed traveling expenses are treated differently from commuting expenses some traveling expenses including amounts expended for meals_and_lodging may be deducted if they are incurred while the taxpayer is away from home in the pursuit of a trade_or_business sec_162 to deduct a travel expense the taxpayer must show that he or she was away from home when he or she incurred the expense the expense is reasonable and necessary and the expense was incurred in pursuit of a trade_or_business see strohmaier v commissioner t c pincite see also commissioner v flowers u s pincite interpreting a predecessor to sec_162 under the rule_of correll 389_us_299 for a taxpayer to be considered away from home within the meaning of sec_162 the taxpayer must be on a trip that requires the taxpayer to stop for sleep or a substantial period of rest see also strohmaier v commissioner t c pincite under this sec_162 framework as interpreted in correll rehman’s trips would have to be trips away from home for the corresponding expenses to be deductible but all of rehman’s trips for fidelis took place in the new york city area at no point did rehman show the client visits took place far enough away from his home or workplace that he needed to take overnight trips to get to them or to stop to take substantial periods of rest on the way to or from the visits 9this trips-away-from-home analysis from 389_us_299 is distinct from the commuting expenses analysis discussed above because there is no evidence to show that the trips took place away from home we need not consider whether the expenses were reasonable and necessary or whether they were incurred in pursuit of a trade_or_business rehman has not met his burden of proving that he is entitled to deductions for expenses_incurred for travel away from home even if these expenses did satisfy the correll test rehman would have to substantiate the expenses in order to be entitled to a deduction in addition to the requirements of sec_162 sec_274 provides that any traveling expense including meals while traveling is not deductible unless the taxpayer substantiates the amount of the expense the time and place of the travel and the business_purpose of the expendituredollar_figure because his claimed unreimbursed employee business_expenses are attributable to travel and meals consumed while traveling rehman must satisfy sec_274 to deduct them 10expenditures related to listed_property which includes passenger vehicles must also satisfy these strict substantiation requirements sec_280f we need not decide whether rehman’s taxi expenses should be classified as listed_property expenses rather than travel_expenses because the same substantiation requirements apply in either case rehman introduced into evidence a daily log containing the headings date description and amount dollar_figure for january through may the period he worked for fidelis the entries in the log are labeled either home visit or lunch for all entries labeled lunch the amount is given as dollar_figure for the entries labeled home visit the amount varies for some days it is dollar_figure for other days it is dollar_figure dollar_figure or dollar_figure for rehman’s daily log to substantiate his expenses under sec_274 the entries in the log should have been made on or near the dates of the client visits and lunches see sec_1_274-5t temporary income_tax regs fed reg date for rehman’s daily log to qualify therefore the entries would have to have been made at different dates corresponding to the dates of the client visits and lunches however it appears that rehman prepared the log in one fell swoop long after the dates in question see infra part b therefore rehman’s attempts to substantiate the deductions he claimed for travel and lunches do not meet the requirements of sec_274 11rehman also introduced into evidence what he said was a list of his clients the list however does not contain any of the information required by sec_274 ie the amount of any expenditure the time and place of any expenditure or the business_purpose of any expenditure furthermore rehman has not shown that he was ineligible for reimbursement from fidelis his employer for his transportation_expenses rehman did not claim that fidelis lacked a reimbursement policy indeed no evidence regarding fidelis’s reimbursement policy or lack thereof is in the record at all thus rehman has failed to carry his burden of proving that he was not eligible for reimbursement from his employer and thus has failed to show that he is entitled to unreimbursed employee expense business deductions of any kind thus we hold that rehman has not shown that he is entitled to a deduction for unreimbursed employee business_expenses for commuting or travel ii meals expenses although rehman is not entitled to deduct his meals expenses under the travel-away-from-home framework it is conceivable that alternatively he might be able to deduct the cost of the lunches as meals and entertainment_expenses under sec_274 expenses for lunch meetings with clients can be deductible12 business_expenses if directly related to the active_conduct of a taxpayer’s trade_or_business sec_1_274-2 income_tax regs 12that is -deductible under sec_274 but rehman ate alone he has not met his burden of showing that the lunches related to the conduct of his business at all thus the lunch expenses are nondeductible personal expenses schedule c business_expense deductions a utilities to deduct any portion of the expenses attributable to business use of a home sec_280a requires that the taxpayer use a portion of the home exclusively for business rehman claimed a deduction for the cost of utilities in his home a one- bedroom apartment he testified that he used the living room--one room out of the three rooms in his apartment--exclusively for business purposes but rehman supplied no information about the layout of his apartment that could make this assertion seem credible and he was not a credible witness we need not accept his unsupported testimony see tokarski v commissioner t c pincite since he has not shown that he used any portion of his home exclusively for business rehman may not deduct any portion of his utilities expenses b meals and entertainment in the new york city area after rehman left fidelis on his schedule c attached to his form_1040 rehman claimed a dollar_figure deduction for meals and entertainment and a dollar_figure deduction for travel a portion of each of these amounts rehman claimed was attributable to the cost of eating lunch in the new york city area to prove he incurred these costs rehman relies on the daily log referred to earlier for the period after his job with fidelis ended the entries in the log are labeled either travel or lunch for all entries labeled lunch the amount is given as dollar_figure for all entries labeled travel the amount is dollar_figure we understand from rehman’s testimony that each dollar_figure entry supposedly corresponds to a restaurant bill and that each dollar_figure entry supposedly corresponds to the taxi fare from his apartment to the restaurant and back there is no evidence that the restaurant lunches were related to rehman’s business therefore rehman has failed to satisfy his burden of proving that the taxi and restaurant expenses are ordinary and necessary business_expenses furthermore a deduction is not allowed for meals and entertainment_expenses unless the taxpayer properly substantiates the amount of such expense the time and place of the expense the business_purpose and the business relationship between the taxpayer and the persons being entertained sec_274 the portions of the daily log referred to above do not contain any information about elements and the daily log therefore does not contain the information necessary to satisfy the requirements of sec_274 and although the log purports to set forth the amount and the date of each expense we are convinced the entries in the log were not made at or near the time any expenses were incurred the timing of the entries in his daily log of expenses is suspect for several reasons for example rehman initially testified that the dollar_figure lunch and dollar_figure travel_expenses recorded on his log for september and were incurred for lunches in new york but when confronted with evidence that he was in las vegas from september to he changed his testimony to say that the log entries for those dates were actually for expenses_incurred in las vegasdollar_figure however the log entries for september and were indistinguishable from those purportedly made on surrounding dates therefore we conclude that the log is not contemporaneous or reliable a noncontemporaneous log alone does 13see infra pt c for our evaluation of the deductibility of expenses_incurred on those trips not satisfy the requirements of sec_274 sec_1_274-5t temporary income_tax regs supradollar_figure accordingly we hold that rehman is not entitled to a meals-and- entertainment-expense deduction for the lunches in the new york area c travel_expenses and meals and entertainment_expenses incurred in las vegas rehman asserts that some of the schedule c travel meals and entertainment_expenses he claimed on his form_1040 are deductible expenses_incurred during three trips he took to las vegas in a taxpayer may claim a deduction for travel_expenses that are reasonable necessary and directly attributable to the taxpayer’s business sec_162 sec_1_162-2 income_tax regs if the trip is undertaken for both business and personal reasons travel_expenses are deductible only if the primary purpose of the trip is business see sec_1_162-2 income_tax regs whether the primary purpose of the trip is business or personal depends on all the facts and circumstances in particular the amount of time during the trip that the 14these log entries are largely unsupported by outside evidence rehman testified unconvincingly that the expenses listed in the log would have been substantiated with receipts but that they had been in a briefcase that was stolen in date taxpayer devoted to business and personal activities sec_1_162-2 income_tax regsdollar_figure rehman traveled to las vegas three times for he claims various conferences related to his work as a securities trader he submitted receipts for some of the expenditures made in las vegas all of the receipts are for meals entertainment or transportation he also testified that he gambled at night while in las vegas other than his own testimony there is nothing in the record to show that the primary purpose of the trip was business-related and not personal rehman introduced into evidence two announcements for trade fairs being conducted in las vegas around the time he was there--one in the wood products industry and the other in the online financial-services industry--but these notices do not prove that rehman attended the trade fairs or if he did that any expenses_incurred to attend them were ordinary and necessary to his business as a securities traderdollar_figure rehman did not meet his burden of proving that the expenditures were 15in addition to the requirements of sec_162 deducting expenses attributable to travel including meals while traveling requires the taxpayer to meet the substantiation requirements of sec_274 see supra pt c indeed the financial-services fair seems to have taken place or at least begun the day before rehman arrived in las vegas ordinary and necessary to his business we therefore hold that he is not entitled to a deduction for travel_expenses d supplies a taxpayer may deduct the cost of supplies if the cost is an ordinary_and_necessary_expense directly connected with the taxpayer’s business sec_162 sec_1_162-1 income_tax regs to support his claim for a deduction for supplies rehman introduced a list of expenses that showed the date a description and the amount he spent on various purchases however the list does not show that the expenses were related to rehman’s business as a securities trader rehman did not testify that the expenses were related to his business without further evidence of the relationship to his business rehman has failed to satisfy his burden of proving he is entitled to deduct the dollar_figure at issue for supplies e legal and professional services a taxpayer may deduct the costs of legal and professional services if the costs are ordinary and necessary and directly connected with the taxpayer’s business see sec_162 67_tc_694 legal services sec_1_162-1 income_tax regs the irs has already allowed a deduction for the dollar_figure that rehman spent generating necessary paperwork for the creation of an llc on legalzoom com rehman asserts that he also made a cash payment to a lawyer who he can no longer contact or find he has introduced no receipt invoice or bill and he did not explain what the payment was for his testimony is not credible and there is no other evidence that rehman spent any more money on legal and professional services related to his business than the dollar_figure the irs already alloweddollar_figure rehman has not met his burden_of_proof we hold that rehman is not entitled to any greater deduction for legal and professional services expenses than the dollar_figure the irs allowed f advertising a taxpayer may deduct the cost of advertising if the cost is an ordinary_and_necessary_expense directly connected with the taxpayer’s business sec_162 sec_1_162-1 income_tax regs rehman introduced into evidence a price quote from a legal services company hubco stating that dollar_figure was the price for hubco to advertise the 17rehman introduced a log containing an entry which reads harpireet singh professional services--dollar_figure rehman did not testify about the expenditure or in any way indicate what the service was he did not establish that the expenditure was ordinary and necessary to his business creation of rehman’s llc and file affidavits of publication with the new york department of state the hubco document read in part if you would like for us to complete the publishing please fill out the credit card information below sign off on the proof rehman’s signature and credit card information appear on the bottom of the page rehman also introduced a copy of a newspaper clipping and an affidavit of publication indicating that the advertisement ran from march to date he thus makes a plausible case that he incurred dollar_figure though not the full dollar_figure he claimed in advertising expenses connected with his business however there is no documentary_evidence to indicate that the expenditure took place in the tax_year at issue because the dates of publication were in not and because on cross-examination rehman evaded questions about the date he paid hubco and why he could not document the date of payment we cannot conclude that the expenditure took place in rehman has not met his burden of proving that he is entitled to a deduction for advertising for g other expenses rehman claimed a schedule c deduction for other expenses listing the following categories and amounts both in a handwritten log and on his schedule c dollar_figure for books magazines and disc on the log and books magazines for business on the schedule c dollar_figure for subscription for trading tips dollar_figure for educational expenses and dollar_figure for gift and gift card on the log and business_gifts on the schedule c regarding the first second and fourth categories we observe that rehman’s log contained entries corresponding to these categories however rehman did not testify about the expenditures he did not submit any other evidence about the expenditures such as invoices or credit card receipts the log featured nonchronological entries suggesting it was not made contemporaneously with the expenditures under these circumstances the log entries do not convince us that rehman incurred the expenses rehman has not met his burden to show he is entitled to deductions for books magazines and disc subscription for trading tips or gift gift card we now consider rehman’s claim that he is entitled to a deduction for educational expenses expenses that a taxpayer incurs in obtaining an education or in furthering the taxpayer’s education are not deductible unless they qualify under sec_162 and sec_1_162-5 sec_1_262-1 income tax regs the expenses must first qualify under the standards of sec_162 to be deductible--that is the expenses must be ordinary and necessary to the conduct of the business and if they do qualify under sec_162 then they must also meet the additional requirements applicable specifically to business-related educational expenses the irs has conceded that rehman is entitled to dollar_figure of the dollar_figure deduction he claimed for educational expenses thus the amount in dispute is dollar_figure rehman’s deduction relates to his alleged purchase of three sets of compact discs and digital video discs entitled respectively ultimate professional trader plus cd library professional trader cd dvd set days one through three and professional trader cd dvd set days four through seven rehman possessed these discs at trial however his testimony about the purchase_price of the discs was vague unclear internally inconsistent and unsupported by any corroborating receipts or other documentary_evidence we are not persuaded that rehman spent dollar_figure on educational expenses beyond the dollar_figure the irs conceded we cannot reasonably estimate any amount that he spent in excess of dollar_figure see vanicek v commissioner t c pincite we need not consider the additional requirements of the regulations because rehman has failed to satisfy his burden of proving that he is entitled under sec_162 to any amount of educational-expense deductions beyond the dollar_figure the irs allowed we have considered all other arguments the parties have made and to the extent that we have not discussed them we find them to be moot irrelevant or without merit to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index no cc psi - plr-121633-00 date x a d1 year dear this responds to your letter dated date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 of year the sole shareholder of x is a a x's president represents that it was a’s intent that x elect s_corporation status effective d1 of year the minutes of the special board_of directors meeting of x reflects the intent of a to have x elect s_corporation status however the form_2553 election by a small_business_corporation for x was not filed with the service_center x filed its tax_return using form_1120s u s income_tax return for an s_corporation sec_1362 provides that if-- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective for x's tax_year beginning d1 of year accordingly provided that x makes an election to be an s_corporation by filing a form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 except as specifically ruled upon above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provisions of the code including whether x was or is a small_business_corporation under sec_1361 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x sincerely yours jeanne m sullivan assistant to the chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


cca-11251527-14 --------------- 36c id office uilc number release date from -------------------------- sent tuesday date pm to ----------------- cc -------------------- subject re-adoption not required under revproc_2005_31 good afternoon -- we understand that exam is disallowing an adoption_tax_credit for a non-hague adoption on the ground that the foreign-country adoption was not followed by a u s re- adoption exam should not disallow the credit on this ground revproc_2005_31 2005_1_cb_1374 provides that if a taxpayer adopts a child in a foreign-sending country and then re-adopts the child in the home state the state of habitual residence within one or two years thereafter the taxpayer may choose to treat the year of finality as being either the year the foreign decree was entered or the year of re-adoption if the re-adoption occurs within the first or second year after the foreign adoption occurs thus revproc_2005_31 allows the taxpayer to choose the year of finality if there is a re-adoption however revproc_2005_31 does not require a re-adoption in the absence of a re-adoption the year of finality is the taxable_year in which the foreign country’s competent_authority issues the decree of adoption regards -------------------------- -------------------------- --------------------- ------------ ----------------------- --------------------------------------- ----------- ------------------------------ --------------------------- --------