internal_revenue_service department of the treasury person to contact employee id number tel fax refer reply to in re eo revocation ein uil form required to be filed release number release date date date a b certified mail dear a this is a final adverse determination as to your exempt status under sec_501 of the internal_revenue_code irc it is determined that you do not qualify as exempt from federal_income_tax under sec_501 effective date the organization is not operated exclusively for an exempt_purpose under sec_501 it has operated for a substantial non-exempt purpose by providing private benefits to individuals and entities furthermore the manner in which the organization accepts and holds conservation easements does not further charitable purposes or any other exempt_purpose contributions to your organization are not deductible under code sec_170 you are required to file federal_income_tax returns on the form indicated above for all tax years not barred by the statute_of_limitations you should file these returns within days from the date of this letter uniess a request for an extension of time is granted file the returns in accordance with their instructions and do not send them to this office processing of income_tax returns and assessment of any taxes due will not be delayed because you have filed a petition for declaratory_judgment under code sec_7428 if you decide to contest this determination under the declaratory_judgment provisions of code sec_7428 a petition to the united_states tax_court the united_states court of claims or the district_court of the united_states for the district of columbia must be filed within days from the date this determination was mailed to you contact the clerk of the appropriate court for rules for filing petitions for declaratory_judgment to secure a petition form from the united_states tax_court write to the united_states tax_court second street n w washington d c you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt arid proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at sincerely zak re charles fisher appeals team manager x department of the treasury tax_exempt_and_government_entities_division date org address internal_revenue_service eq examinations commerce dallas tx taxpayer_identification_number form tax_year s ended person to contact il number contact numbers telephone fax certified mail return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eq examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process arid publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with section c of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been reso’ved through normal channels gets prompt arid proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely marsha a ramirez director eq examination enclosures publication publication report of examination letter catalog number 34809f legend org organization name city dir-2 dir-3 ra at state state 38p ost t 67th pir co-1 co-2 co-3 xx date bayou bayou address address city dir-1 co-4 co-5 c0-6 co-7 co-8 ra-1 ra-2 ra-3 ra-4 county county gt companies org tax_year ending december 20xx issue presented whether the org operates exclusively for an exempt_purpose described within internal_revenue_code sec_501 a whether org is engaged primarily in activities that accomplish an exempt_purpose b whether more that an insubstantial part of org’s activities are in furtherance of a non-exempt purpose c whether org operated for the purpose of serving a private benefit rather than public interests facts background org hereafter referred to as org located at address city state was incorporated under the laws of the state of state as a corporation not-for-profit on january 19xx org’s articles of incorporation were filed with the state division of corporations on january 19xx which under article iii provides it’s purpose as follows a the primary purpose for which this corporation is organized is to provide a vehicle for the acquisition conservation and maintenance of environmentally sensitive lands historically significant lands and lands which can be utilized in the furtherance of the education of the people of the co-i in relation to the inherent value of good stewardship over the natural historical and cultural resources of the region b this corporation is organized and operated exclusively to carry out the social political and educational activities which support the primary purpose listed above and no part of any net_earnings shall inure to the benefit of an member director or officer c this corporation shall have and exercise all rights and powers conferred upon corporations under the laws of the state of state within the limits of purposes set out in subparagraphs a b of this article on october 19xx org filed form_1023 application_for recognition of exemption with the internal_revenue_service org provided a detailed description of its activities in its form_1023 application part ii activities and purpose provides as follows the org conservancy was established to restore protect and preserve the historic ecologic communities of the co-1 through the restaraunt management maintenance stewardship and acquisition of regional ecosystem components major goals of the include restoration and management of upland and wetland communities maximization of habitat and the protection of populations of imperiled plant and animal species bridging the gap between local and state preservation and conservation programs definition and implementation of regional significant wildlife corridors enhancement of pubic education opportunities particularly as they relate to ecosystem restoration development of cooperative stewardship programs the goals feels that the human population is compatible with the attainment of these org governing body includes the following dir-1 - president director address city state dir-2 - secretary treasurer director address city state dir-3 - director address city state conservation easements were contributed to org the revenue_agent accompanied by dir-2 conducted a field inspection of three of the the properties are described below conservation_easement properties the co-2 state limited_partnership - perpetual _ contribution by the limited_partnership co-2 acre track org accepted a perpetual - here after referred to as co-2 on april 20xx the conservation_easement is a of land located on the grounds of the resort that is located in city state according to the president and director of org dir-1 the property is owned by the home owners association inc of the co-2 co-2 is a gated condominium tennis resort located directly on the state the entrance to co-2 resort property is guarded by a security guard twenty-four hours a day access to the resort and the conservation_easement property is restricted to residents and their guests condominium association or condominium_owners the ‘ property is located within the resort development beside two owner occupied high rise condominium buildings the property is not beach front nor is it an environmentally sensitive area of land the property donated to org is approximately two-thirds storm water retention area and one third miniature golf course the miniature golf course is used for the recreation and pleasure of the residents of co-2 the storm retention area was created in this resort location for the purpose of collecting rising tidewater from the state during storms and also lowered the property owners insurance premiums general_public is not allow to enter the resort property without the permission of the co-2 condominium unit owners voted to create the easement to org an appraisal of the donation of the conservation_easement property to org and to donate the property was made prior to the the co-2 defined in sec_50 c and does not meet the definition of a qualified does not qualify as an tax exempt conservation_easement as in accordance with revrul_70_186 1970_1_cb_129 the co-2 condominium_owners took charitable_contribution deductions on their tax_return for their share of the appraised value of the contribution the charitable_contribution_deduction taken by co-2 condominium_owners on their tax retums was not a qualified charitable_contribution the donated conservation_purpose and was not a qualified charitable was not donated for a co-3 perpetual conservation_easement granted by co-3 to the org is located on co-3 here referred to as co-3 donated in perpetuity a conservation_easement of acres to org on june 19xx the is a small bayou that is connected to a much larger body of water city in south county state according to the officers of org co-3 initially purchased the t property as part of a larger land purchase co-3 originally purchased acres of property in a home building venture where he had planned to build and to sell homes for a profit the state department of environmental protection file required that co-3 set_aside approximately acres of wetlands adjacent to the project site in 19xx in order for co-3 obtain permits to construct a drainage ditch and to subdivide the remaining _ acres into single family home building sites the agent observed illegally dumping abandoned home appliances and garbage on the ‘ in addition the examining agent observed evidence where four wheel drive vehicles have driven over the sensitive wetland grasses that are the habitat for marine sensitive marine species that live in the wetlands the purpose of the is to assure that the subject lands and wetlands will be retained and maintained forever predominantly in the vegetative and hydrologic condition existing at the time of execution of this the ‘ prohibits the following activities construction or placing of buildings roads signs billboards or other advertising utilities or other structures on or above the ground dumping or placing of soil or the substances or material as landfill or dumping or placing of trash waste or unsi ghtly or offensive materials removal or destruction of trees shrubs or other vegetation with the exception of nuisance and exotic plans species as be required by grantee excavation dredging or removal of lam peat gravel soil rock or other materials in such a manner to effect the surface co-4- deed to assure that the subject lands and wetlands co-4 is a small residential community located on the north side of city in county state the community is made up of large water front residential lots and wooded interior lots that are not waterfront property co-4 donated easement lots within the subdivision to org on f ebruary 19xx the purpose of the will be retained and maintained forever predominantly in the natural vegetative and hydrologic condition existing at the time of the execution of this the included wetlands which are to be enhanced or created shall be maintained forever in the enhanced or created conditions required by the aforementioned permit co-4 is an exclusive small waterfront residential development located in county county state subdivision lots were identified between home sites as conservation property to add wooded space between the existing homes located in the subdivision the lots that were donated to org as property the u s army corps of engineers acoe issued a permit to co-4 inc file no 19xx-02186 ip-jg that allowed impacts to approximately acres of acoe jurisdictional wetlands in exchange for the permit co-4 inc agreed to an onsite preservation and restoration plan a large part of this plan was the removal of planted pine trees and the implementation of a long-term prescribed fire management program to restore historic wet fatwood communities the examining agent noted from pictures properties were found to be very high and dry sandy provided by the organization that there is evidence of some monitoring of the easement where burning of the conservation area was performed as a fire management tool restore the prairie type ecosystems that once existed when natural lighting fires were a dominant force in this area of the country org did collect funds for the management of the areas claiming to be property these collected funds were used to conduct a controlled burn a sec_2 means of property monitoring to prevent forest fires the controlled burn was conducted to limit property damage from natural light created forest fires the controlled burn was confined only to the lots in co-4 homeowners_association the residents of co-4 who are the members of co-4 were the primary beneficiaries of the exempt_organization that thinned the under brush of community lots reducing a localized risk to properties owners living in co-4 co-4’s made up of home owners residing in co-4 donated the the internal revenue_agent conducting the examination of org noted there was substantial encroachment by the residential homeowners on and into the area while conducting a field inspection of the property the officers and directors of org admitted that org has made no attempts to take legal action to correct the following encroachments to conservation_easement property donated by co-4 to org ‘org two large ponds were developed in the recreation of the residents of co-4 inc a boat recreational vehicle storage_facility with built on the property for the exclusive use of the residents of co-4 inc an elevated wooden walkway was built into and over the wetlands located on the association’s property for the recreation and pleasure of the residents of co-4 inc property for the pleasure and revrul_70_186 1970_1_cb_129 wl provides that a nonprofit organization formed to preserve and improve a lake used extensively as a public recreational facility qualifies for exemption under sec_501 of the code sec_501 c provides for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable purposes federal regulation sec_1_501_c_3_-1 provides that an organization is not organized or operated exclusively for one or more exempt_purpose unless it serves a public rather than a private interest federal regulation sec_1 -1 d provides that the term charitable in used in sec_50 c in its generally accepted legal sense and includes among other things the erection or maintenance of public buildings monuments or works and the lessening of the burdens of government the large ponds boat recreational vehicle storage_facility and elevated wooden walkway built on the conservation_easement property was built for_the_use_of home owners living in the small and private residential community of co-4 the two follows co-5 properties the revenue_agent was unable to inspect were as contribution of the co-5 was made on december 20xx by the individual and general partners of co-6 a state general_partnership the partners are ra-1 ra-2 ra-3 and ra-4 org accepted this limited conservation_easement on december 20xx and as stated in the the exempt_organization accepted this easement for only a limited time period of approximately ten years document the expires on date the limited exceptions and reservations such as no buildings roads signs dumping removal or destruction of trees vegetation water drainage and wet areas provisions also restrict the use of the property to specific the property borders december 20xx the examination year the property is fenced with a locked gate according to org the donor of the conservation_easement has the only key to open the gate acre property that is rectangular in shape one side of the which is an inter-coastal waterway during the year ending tis a org president director dir-1 and dir-2 treasurer director stated to the examining revenue_agent the is permanently restricted closed to public use by the fence and a locked gate where only the donor can unlock the gate during the examining agents opening interview of org president director dir-1 and dir-2 treasurer director statements were made by dir-1 and dir-2 to examining revenue_agent the co-5 property is exclusively for the personal_use of the donor and his family for reunions and other private functions cqo-7 - donated a perpetual in 19xx to org over _ _acres of wetlands grant of on march 20xx this permit no to fill approximately one quarter of one acre of wetlands in county as part of a commercial development project as part of the permit agreement co-7 has agreed to place for the purpose of leaving the property in its including a deed was granted to org in perpetuity by co-7 was associated with co-7 being issued county acres in 19xx in a conservation natural vegetative and hydrologic condition existing at the time of the execution of the deed the acres of property was deeded to org march 20xx acres is in a wetlands area adjacent to the state owned co-8 and is not accessible by a the truck the monitoring of the co-7 conservation photograph the last aerial photograph was in 20xx and according to org there have been no negative impact to the was not made in years 20xx or 20xx has only been made by aerial area monitoring of the indenture the co-5 acre from the date the contribution of the easement is made the expired and the donor of the contribution easement property would be entitled to use the property for any non-conservation purpose ‘ property is limited to a ten-year term after ten years purpose is irs determination_letter in its form_1023 application_for recognition of exemption org requested that it be recognized as a publicly_supported_organization described sec_509 of the code sec_509 describes organizations that normally receives not more than one-third of its support from gross_investment_income and more than one-third of its support from contributions membership fees and gross_receipts from activities related to its exempt functions subject_to certain exceptions the examination of the records of the org revealed that substantially_all of its sources of income were received from monitoring fees it collected from easement properties it received and these sources of income do not qualify as public support in meeting tests required to qualify as a public foundation under sec_501 c of the code and federal regulations the income statement and balance_sheet reported sources of income assets and liabilities as follows for the year ending december 20xx dividend and interest_income dollar_figure total cash assets and total liabilities dollar_figure the internal_revenue_service issued an advance_ruling determination_letter to org on january 19xx because it was a newly created organization and could not make a final ruling of its private_foundation_status based on the financial information submitted by org with its application_for exemption the internal_revenue_service determined that org could reasonably be expected to be a publicly_supported_organization described in sec_509 or sec_509 of the code later after an advance_ruling follow up of org on october 20xx an adverse_ruling letter was issued to org to reclassify the organization as a private_foundation described in sec_509 org received substantially_all of its income from monitoring fees which do not qualify as public support needed to qualify as a publicly supported foundation the internal_revenue_service determination_letter informed org of the following you are required to file form_990-pf return of private_foundation or sec_4947 trust treated as a private_foundation form_990-pf must be filed by the 15th day of the fifth month after the end of your annual_accounting_period a penalty of dollar_figure a day is charge when a return filed late unless there is reasonable_cause for the delay however the maximum penalty charged cannot exceed dollar_figure or percent of your gross_receipts for the year whichever is less org realized dollar_figure in gross_receipts and total assets from monitoring fees collected of dollar_figure as of december 20xx law and argument sec_501 of the code provides for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable or educational_purposes provided no part of the net_earnings inures to the benefit of any private_shareholder_or_individual sec_1 c - c of the income_tax regulations provides that an organization operates exclusively for exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified in sec_501 of the code an organization must not engage in substantial activities that fail to further an exempt_purpose in 326_us_279 the supreme court held that the presence of a single nonexempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes sec_1 c - d organized or operated exclusively for exempt purposes unless it serves a public rather than a ii provides that an organization is not private interest to meet this requirement it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests sec_1_501_c_3_-1 defines the term charitable as used in sec_501 of the code as including the relief of the poor and distressed or of the underprivileged and the promotion of social welfare by organizations designed to lessen neighborhood tensions to eliminate prejudice and discrimination or to combat community deterioration the term charitable also includes the advancement of education sec_170 states that the term contribution of a qualified_real_property_interest to a qualified_organization exclusively for conservation_purpose v means a sec_170 states that the term following interests_in_real_property means any of the - the entire_interest of the donor other than a qualified_mineral_interest - a remainder_interest and - a restrictive granted in perpetuity on the use which may be made of the real_property sec_170 states that the term qualified_organization means an organization which - is described in clause v or vi of subsection b a or - is described in sec_501 and meets the requirements of sec_509 or meeting the requirements of a sec_170 states that the term areas for outdoor recreation by or the education of the general_public - the protection of a relatively natural habitat of fish wildlife or plants or similar ecosystem - the preservation of open space where such preservation is for the scenic enjoyment of the general_public or pursuant to a clearly delineated federal sate or local_government significant public benefit or the preservation of an historically important land area or a certified_historic_structure sec_170 provides that the term a of a qualified_real_property_interest b to a qualified_organization c exclusively for means - the preservation of land policy and will yield a means a contribution purposes sec_170 provides that a qualified_real_property_interest for the purpose of a qualified_conservation_contribution means any of the following in real_property a the entire_interest of the donor other than a qualified_mineral_interest b a remainder_interest and c a restriction granted in perpetuity on the use which may be made of the real_property lrcd h provides that the term qualified_organization mean an organization which - a is described in clause v or vi of subsection b a or b is described in sec_501 and - i meets the requirements of sec_509 or ii meets the requirements of sec_509 and is controlled by an organization that is described subparagraph a or in clause i of this subparagraph a in general for purposes of this subsection the term preservation of land area for outdoor recreation by or the education of the general_public ii the protection of a relatively natural habitat of fish wildlife or plants or similar ecosystems iil the preservation of open space including farmland and forest land where such preservation is - ’ means - i the purpose defined i for the scenic enjoyment of the general_public or ii pursuant to a clearly delineated federal state or local governmental will yield a significant public benefit or vi the preservation of an historically important land area or a certified_historic_structure sec_170 states that conservation_purpose must be protected a contribution shall not be treated as exclusively for protected perpetuity purposes unless the policy and purpose is that are not for the protection of a relatively natural contributions of habitat of fish wildlife or plants or similar ecosystems that restrict the entrance of the general_public from their benefit and education that benefit only a private residential community of home owners that restrict entrance to only the easement contributors that are not donated in perpetuity that are not monitored by the exempt_organization on are regular basis do not qualify as charitable conservation_easement contributions as defined under the code sections and revenue_ruling as stated in law section of this revenue agent’s report revrul_70_168 describes a nonprofit organization formed to preserve and improve a lake used extensively as a pubic recreational facility qualifies for exemption under sec_501 of the code revrul_70_186 1970_1_cb_129 wl provides that a nonprofit organization formed to preserve and improve a lake used extensively as a public recreational facility qualifies for exemption under sec_501 of the code sec_501 provides for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable purposes federal regulation sec_1 c - d ii provides that an organization is not organized or operated exclusively for one or more exempt_purpose unless it serves a public rather than a private interest federal regulation section -1 d provides that the term charitable in used in sec_501 c in its generally accepted legal sense and includes among other things the erection or maintenance of public buildings monuments or works and the lessening of the burdens of government sec_6033 states that every organization_exempt_from_taxation under sec_50 a shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purpose of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and shall keep such records render under oath such statement make such other returns and comply with such rules and regulations as the may from time to time prescribe governments position the organization has accepted the donation of qualify as such under the code the co-2 easement contains a private miniature golf course and does not serve a properties that do not purpose the organization has not properly monitored and enforced the that it has accepted the organization has allowed the co-3 property be damaged by illegal dumping and vehicles the organization has allowed the co-4 property to be developed in violation of the easement indenture the organization has not adequately monitored the co-7 either the co-s is a limited duration sec_170 therefore it is not a qualified easement under irc org is not operating exclusively for an exempt_purpose as defined in sec_501 and sec_170 h because more than an insubstantial part of org activities are in furtherance of a non-exempt purpose the non-exempt purpose of accepting non-qualifying conservation_easement contributions by org serves the private interest of donors rather than an sec_501 purpose accordingly org does not qualify for exemption as an organization described in sec_501 of the code contributions to org are not deductible by contributors under sec_170 of the code organization’s position the agent does not have a position from the organization at this time conclusion the examination of org by the internal_revenue_service concludes it was not operated as it provided in its application_for exemption our examination concludes that org is accepting donations from donors that do not qualify as conservation easements under the internal_revenue_code and regulations in summary org is not operating exclusively for an exempt conservation_easement purpose as defined in sec_501 and sec_170 h because more than an insubstantial part of org activities are in furtherance of a non-exempt purpose the non-exempt purpose of accepting non-qualifying conservation_easement contributions by org serves the private interest of donors rather than an sec_50 c purpose the examining agent recommends that exempt status held by org be revoked effective january 19xx


department of the treasury internal_revenue_service attn mandatory review mc dal tax_exempt_and_government_entities_division commerce st dallas tx date date number release date uil code dear employer_identification_number person to contact id number contact numbers in a determination_letter dated november 19xx you were held to be exempt from federal_income_tax under sec_501 c of the internal_revenue_code the code based on recent information received we have determined you have not operated in accordance with the provisions of sec_501 c of the code accordingly your exemption from federal_income_tax is revoked effective january 20xx this is a final adverse determination_letter with regard to your status under sec_501 c of the code we previously provided you a report of examination explaining why we believe revocation of your exempt status is necessary at that time we informed you of your right to contact the taxpayer_advocate as well as your appeal rights on november 20xx you signed form 6018-a consent to proposed action agreeing to the revocation of your exempt status under sec_501 c of the code you are required to file form_1120 u s_corporation income_tax return for year ending december 20xx with the ogden service_center in addition for future periods you are required to file form_1120 with the appropriate service_center indicated in the instructions for the return the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for tas assistance which is always free tas will do everything possible to help you visit taxpayeradvocate irs gov or call1-877-777-4778 if you have any questions please contact the person whose name and telephone number are shown at the beginning of this letter thank you for your cooperation sincerely paul a marmolejo acting director eo examinations department of the treasury internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examination sec_11 commerce street mc4900dal dallas tx date date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers manager's name id number manager's contact number response due_date certified mail- return receipt requested dear why you are receiving this letter enclosed is a copy of our report of examination explaining why revocation of your organization's tax-exempt status is necessary what you need to do if you agree if you agree with our findings please sign the enclosed form 6018-a consent to proposed action and return it to the contact at the address listed above we'll send you a final letter revoking your exempt status if we don't hear from you if we don't hear from you within calendar days from the date of this letter we'll process your case based on the recommendations shown in the report of examination and this letter will become final effects of revocation letter 3610-r catalog number 59432g in the event of revocation you'll be required to file federal_income_tax returns for the tax_year s shown above file these returns with the contact at the address listed above within calendar days from the date of this letter unless a request for an extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns what you need to do if you disagree with our findings if you disagree with our position you may request a meeting or telephone conference with the supervisor of the contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn't apply after we issue this letter if you and appeals don't agree on some or all of the issues after your appeals_conference or if you don't request an appeals_conference you may file suit in united_states tax_court the united_states court of federal claims or united_states district_court after satisfying procedural and jurisdictional requirements you may also request that we refer this matter for technical_advice as explained in publication please contact the person identified in the heading of this letter if you're considering requesting technical_advice if we send a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office then no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate service tas tas is your voice at the irs this service helps taxpayers whose problems with the irs are causing financial difficulties who have tried but haven't been able to resolve their problems with the irs and those who believe an irs system or procedure is not working as it should if you believe you are eligible for tas assistance you can call the toll-free number or tty too for more information go to wwwjrs goy adyocate if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please call the contact at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you letter 3610-r catalog number 59432g thank you for your cooperation enclosures report of examination form 6018-a publication publication sincerely margaret von lienen director eo examinations letter 3610-r catalog number 59432g form 886-a rev date name of taxpayer issue explanations of items tax identification_number schedule number or exhibit year period ended 20xx whether exemption as an organization described within internal code sec_501 c given it does not operate for fraternal purposes is not operated under the lodge_system and does not devote its entire net_earnings to exclusively charitable or fraternal purposes hereinafter referred to as organization continues to qualify for facts the c of the code according to its charter of incorporation the organization was formed for the purpose of received exemption november 19xx as a fraternal_organization described in it also states tha t - - - - - - - - - - - - - - - - - - - - - - - is a membership_organization comprised of two officers board members the the organization holds title to the property and handles the day to day operations of the facility on ____________ ultimately insuring the building is usable by the _________ '------ all social functions that take place at the facility are run by the the organization does not participate or organize these functions according to the organizations financial documents provided during the audit the organization is not performing any exempt_activities the organization does not devote all of its earnings to certain specified purpose essentially religious charitable educational scientific literary or fraternal purposes the organizations membership is comprised of members that are members of the membership from the the organization does not have its own separate the membership is one in the same form 886-a catalog number ow page_1_ publish no irs gov department of the treasury-internal revenue service form 886-a rev date name of taxpayer explanations of items tax identification_number schedule number or exhibit year period ended 20xx the main source_of_income for the organization is investment_income the organization as of december 20xx has dollar_figure account the organization receives no income from members the organization does not have a parent organization and retains earnings and income from year to year investment in a based on the organizing documents provided the organization was unable to show that they are under a parent or have rules governed by a parent organization during the onsite visit with the organization an initial interview was held where the history and activities were discussed according to _________ board_of director member the organization was created in order to prevent assets accumulated by the from being taken by other third parties treasurer and is a separate_entity formed many years in order to prevent assets accumulated by the ____ _ an affidavit received september 20xx states that while the ______________ the ago by members of the from being raided and taken by the the deposit accounts of which primarily treat contributions donations to the the fire occurring in june 20xx and the damages from such fire have been mitigated so that the _____ intends to resume producing income from rental of such building are dedicated by its members to support the ____ _ suffered the loss of part of its building from a or other third party entities the assets including and further donations to the makes both direct is an affiliate of and the through the according to the organizations disbursement journal as illustrated below the net_earnings are not exclusively devoted to charitable or fraternal purposes based on the disbursement journal the organization made a dollar_figure and all other expenses are for overhead there is no indication that the net_earnings are exclusively devoted to charitable or fraternal purposes donation to the form 886-a catalog number ow page_2_ publish no irs gov department of the treasury-internal revenue service form 886-a rev date name of taxpayer explanations of items tax identification_number schedule number or exhibit year period ended 20xx sec_501 c of the code exempts from federal_income_tax domestic_fraternal_societies orders or associations operating_under_the_lodge_system the net_earnings of which are devoted exclusively to religious charitable scientific literary educational and fraternal purposes and which do not provide for the payment of life sick accident or other_benefits sec_1 c -1 of the regulations explain that certain fraternal beneficiary societies for taxable years beginning after date an organization will qualify for exemption under sec_501 if it is a domestic fraternal beneficiary society order or association described in sec_501 and the regulations thereunder except that it does not provide for the payment of life sick accident or other_benefits to its members and devotes its net_earnings exclusively to religious charitable scientific literary educational and fraternal purposes fraternal means a common tie or goal a common tie required more than just engaging in social activities even if members of an organization enjoy a common tie or goal the organization does not serve a fraternal purpose unless its members engage in fraternal activities fraternal activities and benefits must be primary form 886-a catalog number 20810w page_3_ publish no irs gov department of the treasury-internal revenue service form886-a rev date name of taxpayer explanations of items tax identification_number schedule number or exhibit year period ended 20xx one of the requirements for tax exempt status for a fraternal_organization is operating_under_the_lodge_system this means carrying on activities under a form of organization that is comprised of local branches chartered and generally supervised by a parent organization but are largely self governing the local branches called lodges councils or chapters must be separately organized and self-governing but operated under the general control and supervision of the parent lodge and subject_to its rules laws and edicts the member of a fraternal society must have a common fraternal bond in order to have a common fraternal bond the members must have adopted the same or very similar calling avocation profession or be working in unison to accomplish some worth objective or common cause revrul_81_117 1981_1_cb_346 states an organization that does not conduct any fraternal activities or operate under the lodge_system but does operate exclusively for the benefit of members of certain related domestic_fraternal_societies operating_under_the_lodge_system does not qualify for exemption under sec_501 c of the code the reference in sec_1 c -1 a of the regulations to the description offraternal beneficiary societies found in sec_501 c of the code and the regulations thereunder is directed at the fraternal and lodge_system characteristics which organizations described in sec_501 c and c have in common the reference does not incorporate the subcategory of organizations which operate for the exclusive benefit of the members of a fraternity itself operating_under_the_lodge_system in its definition of a domestic fraternal_organization under sec_501 c since that subcategory was added to a predecessor of sec_501 c to cover the separately organized insurance branches of the fraternal beneficiary societies it does not apply to sec_501 c organizations which cannot provide insurance or other_benefits to their members furthermore even though the subject organization is operating for the exclusive benefit of the members of certain related fraternities themselves operating_under_the_lodge_system it does not operate under the lodge_system or conduct any fraternal activities an organization that does not conduct any fraternal activities or operate under the lodge_system but does operate exclusively for the benefit of the members of certain related domestic_fraternal_societies themselves operating_under_the_lodge_system does not qualify for exemption from federal_income_tax under sec_501 c of the code taxpayer's position the taxpayer's position has not been determined at this time form 886-a catalog number ow page____ _ publish no irs gov department of the treasury-internal revenue service form 886-a rev date name of taxpayer explanations of items tax identification_number schedule number or exhibit year period ended 20xx government's position is not eligible for exemption under c of the code as a domestic the fraternal society order or association sec_501 c of the code exempts from federal_income_tax domestic_fraternal_societies orders or associations operating_under_the_lodge_system the net_earnings of which are devoted exclusively to religious charitable scientific literary educational and fraternal purposes and which do not provide for the payment of life sick accident or other_benefits the organization does not meet the requirements of an organization described in sec_501 c members of the organization do not have a common fraternal bond the members do not adopt the same of very similar calling avocation profession or are working in unison to accomplish any worthy objective or common cause the organization has not been operating for religious charitable scientific literary educational and fraternal purposes nor has the organization devoted its net_earnings exclusively to religious charitable scientific literary educational and fraternal purposes the purpose of the organization is the scope of their stated mission is outside the allowed for fraternal society order or association exempt under c of the code as their organizing document does not meet the organizational_test required for exemption under c of the code the organization does not qualify for exemption under this code section ii the term fraternal is used to describe an organization that is in the pursuit of a common object calling or profession these types of endeavors usually have a tendency to create a brotherly feeling among those who are thus engaged the activities rituals ceremonies and regalia are evidence of fraternal activities- you will not find any of there with the meetings are held or when new members are initiated also the organization does not have its own membership instead it considers the organization does not have any rites or rituals when the members as their members does not have any fraternal an organization is operating_under_the_lodge_system if it operates under the general control and supervision of a parent lodge and is subject_to the laws and edicts of the parent lodge it is generally understood that such an organization holds regular meetings at a designated place adopts a representative form of government and performs its work according to a ritual form 886-a catalog number 20810w page_5_ publish no irs gov department of the treasury-internal revenue service form 886-a rev date name of taxpayer explanations of items tax identification_number schedule number or exhibit year period ended 20xx revrul_81_117 c b states an organization that does not conduct any fraternal activities or operate under the lodge_system but does operate exclusively for the benefit of members of certain related domestic_fraternal_societies operating_under_the_lodge_system does not qualify for exemption under sec_501 c of the code any fraternal activities or operate under the lodge_system does not conduct conclusion in the case of organization described in sec_501 of the code because it is not entitled to exemption from federal_income_tax as an you are not operated for fraternal purposes you are not operated under the lodge_system you do not devote your entire net_earnings to exclusively charitable or fraternal purposes consequently january 20xx please file u s_corporation income_tax return form_1120 for tax periods ending december 20xx as well as subsequent years exemption from federal_income_tax is being revoked starting form 886-a catalog number ow page__ __ publish no irs gov department of the treasury-internal revenue service


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 b03 plr-114053-18 date date legend x ------------------------------------------ ------------------------------------- a -------------------------- date ------------------------ date -------------------------- date --------------------- date ---------------------- date ---------------------- trust ------------------------------------------ ---------------------------------------------------- state -------------- dear --------------- an earlier version of this private_letter_ruling dated date plr-101478-17 was published this letter responds to the letter dated date that was submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the code this letter as of its effective date supersedes plr-101478-17 plr-114053-18 facts the information submitted states that x was incorporated in state on date and elected to be an s_corporation on date on date a a shareholder of x transferred x stock to trust trust was a grantor_trust described in sec_1361 of which a was the deemed owner on date a died and trust ceased to be a grant trust but continued to qualify as an eligible s_corporation shareholder under sec_1361 for the 2-year period beginning on the day of the deemed owner's death however trust continued to hold the x stock after the 2-year period had ended on date according to x trust qualifies as a qualified_subchapter_s_trust qsst but its beneficiary made no qsst election as a result x's s_corporation_election terminated on date x represents that trust met the requirements of a qsst within the meaning of sec_1361 at all time since date except that the beneficiary of trust failed to make the election under sec_1361 x also represents that x and its shareholders including trust have filed income_tax returns consistent with the treatment of x as an s_corporation law sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that a small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder of an s_corporation sec_1361 provides that for purposes of sec_1361 in the case of a_trust described in sec_1361 the deemed owner shall be treated as the shareholder plr-114053-18 sec_1361 provides that a_trust which was described in sec_1361 immediately before the death of the deemed owner and which continues in existence after such death is a permitted shareholder but only for the 2-year period beginning on the day of the deemed owner's death sec_1361 provides in part that in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 a such trust shall be treated as a_trust described in sec_1361 b for purposes of sec_678 the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1362 provides in part that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which it was 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 such ineffectiveness were inadvertent no later than a reasonable period of time after discovery of the event resulting in the ineffectiveness steps were taken a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness the corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely upon the facts submitted and the representations made we conclude that the termination of x's s_corporation_election on date 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 date and thereafter provided x's s_corporation_election was valid and was not otherwise terminated under sec_1362 this ruling is contingent upon the beneficiary of trust filing a qsst election effective date within days from the date of this letter a copy of this letter should be attached to the election if x or its shareholders fail to treat themselves as described above this ruling is null and void except as specifically ruled upon above 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 the eligibility of x to be an s_corporation plr-114053-18 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely ______________________________ by richard t probst senior technician reviewer branch office of the associate chief_counsel passthroughs special industries


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b04-plr-114865-02 date july in re legend decedent trust date date date date trustee local court dear this letter is in reply to your letter of date requesting a ruling regarding the generation-skipping_transfer gst tax consequences of a proposed division of a_trust facts decedent created trust an irrevocable_trust on date date is prior to date paragraph v of the trust instrument provides that a during the term and period of the natural life of donor said trustee shall pay to her all of the net_income from said trust at least semi- annually at the same time furnishing her a statement of the transactions and condition of said trust as of the completed period b upon the death of donor the corpus of said trust fund with plr-114865-02 accruals shall be divided into three funds one consisting of thereof shall be denominated fund a another consisting of thereof fund b and the third consisting of thereof fund c and the income therefrom shall be paid to the persons hereinafter named for the term and period given and in the proportions mentioned in the following paragraphs paragraph vi provides donor has classified the named beneficiaries under this trust in the manner which follows indicating the class taking a particular fund by the corresponding letter class a consists of donor’s brother and sisters class b consists of donor’s nephews and nieces class c consists of donor’s grand nephews and grand nieces of her late husband paragraph viii provides for and during the term and period of the respective natural lives of the members of class a and the survivor of them my trustee shall pay unto them in equal shares the net_income from fund a viz of the net_income arising from this trust in the event of the death of any member of said class during the continuance of this trust without leaving any child of children or other lineal_descendants the share of such deceased member shall be paid in equal shares to the surviving members of said class the lineal_descendants of any other deceased member of said class to take by representation in equal shares if there be more than one the share of such deceased member of that class in event of the death of any member of said class leaving any child or children lawful issue or other lineal_descendants then living such child or children or lineal_descendants shall take the ancestor’s share in equal shares if there be more than one and such payments of income continue during the term and period of this trust if such beneficiaries shall so long live the issue of any deceased beneficiary thus taking the parent’s share always per stirpes and not per capita paragraph ix provides in like manner after the death of donor and for and during the natural life of the members of class b my trustee shall pay the net_income from fund b viz of the net_income from said trust in equal shares to the said members of class b upon the death of any member of class b leaving no child or children lawful issue of his or her body then living the share of such deceased member shall go to and be paid in equal shares to the surviving members of class b and the lineal plr-114865-02 descendants of deceased members of class b the latter taking the parent’s share per stirpes and not per capita in the event of the death of any member of class b leaving such child or children lawful issue or lineal_descendants then living the share of such deceased member of class b shall go to and be paid to such child children or lineal_descendants in equal shares if there be more than one and taking per stirpes and not per capita paragraph x provides the members of class b are children of certain members of class a and are the principal beneficiaries under this trust this trust shall continue for and during the term and period of the life time of the members of class a and class b and the survivor of them and twenty- one years thereafter as and when the death of any one of the members of said class occurs the appropriation of the income to said member shall automatically fall to the lineal_descendants of such deceased member following the line of descent from generation to generation and taking always per stirpes until this trust be determined if at any time during the term hereof the line of descent from any member of class a shall become totally extinct so that there be no lineal descendant of such member of class a then living then the income above appropriated to such member and the children or the lineal_descendants of such member shall go and be paid in equal shares and per stirpes to the surviving lineal_descendants of the other members of class a in equal shares if there be more than one at the termination of this trust the corpus of funds a and b hereof with all accumulations shall vest in and be paid to the lineal_descendants of the members of class a then living such descendants of each member of class a to take as a class one equal share thereof and in equal shares amongst themselves if there be more than one paragraph xi provides in like manner after the death of donor and for and during the natural lives of the members of class c my trustee shall pay the net_income from fund c viz of the net_income from said trust in equal shares to the said members of class c upon the death of any member of class c leaving no child or children lawful issue of his or her body then living or any issue of a deceased child or children the share of such deceased member shall go to and be paid in equal shares to the surviving members of class c and the lineal_descendants of any deceased member of class c the latter taking the parent’s share per stirpes and not per capita in event of the death of any member of class plr-114865-02 c leaving such child or children lawful issue or lineal_descendants then living the share of such deceased member of class c shall go to and be paid to such child children or lineal_descendants in equal shares if there be more than one and taking per stirpes and not per capita and so on from generation to generation until the termination of this trust as and when the death of any one of the members of said class occurs the appropriation of income to said member shall automatically fall to the lineal_descendants of such deceased member following the line of descent from generation to generation and taking always per stirpes until this trust be terminated if at any time during the term hereof the line of descent from any member of class c shall become totally extinct so that there be no lineal descent of such member then living then the income above appropriated to such member shall go and be paid in equal shares and per stirpes to the surviving lineal_descendants of the other members of class c in equal shares if there be more than one at the termination of this trust the corpus of fund c with accumulations shall vest in and be paid to the lineal_descendants of the members of class c then living such descendants of any member of class c to take as a class one equal share thereof and in equal shares amongst themselves if there be more than one paragraph xii provides if during the continuance of this trust all of the members of class c shall have died leaving no lawful issue or other lineal_descendants then living and thus the line of descent from the members of class c shall have become totally extinct then the said trust fund c shall go to and become a part of trust fund b and the income thereof be paid and the corpus thereof vest and be distributed in accordance with the terms and provisions relative to said fund b as above set forth paragraph xv provides this trust shall end and determine in any event at the end of the term and period of twenty-one years after the death of all of the members of class b above named and the survivor of them upon such termination of the trust the trustee shall pay and turn over to the parties thereunto entitled the balance of the trust fund in its hands with accruals after deducting its compensation and all proper charges and expenses and liabilities in relation thereto and may at its discretion turn the same over in whole or in part in_kind plr-114865-02 the trust instrument was supplemented on date the supplement amended paragraph v section a to provide a until september 30th the trustee shall pay to donor if she shall so long live so much of the net_income from said trust as she may from time to time require any of said net_income then remaining to become a part of the corpus of said trust and beginning with october 1st all of the net_income then remaining and to accrue during the lifetime of donor shall in like manner be and become a part of the corpus of said trust and subject_to all the terms and provisions of this indenture on date trust was modified by local court decree the decree provides that funds a and b under the indenture of trust created date and supplement dated date established by donor deceased-settlor are hereby separated from fund c and funds a and b shall henceforth be held as a separate trust trust a b the current beneficiaries of trust a b represent six family lines these beneficiaries seek to divide trust a b into six separate trusts representing the six family lines to accommodate their different investment and financial needs the assets of trust a b will be divided on a pro_rata basis into six separate equal trusts income shall continue to be paid according to the terms of trust instrument and supplement as reformed by the decree upon the death of a named beneficiary his or her share is distributable to his or her descendants per stirpes all other terms and conditions of the trust instrument and the supplement as reformed by the decree shall remain in full force and effect the trustee petitioned local court to approve the division of trust a b into six separate trusts on date local court issued an order approving the division pending a favorable ruling from the internal_revenue_service on this ruling_request there have been no additions actual or constructive to trust or trust a b since date the trustee has requested a ruling that the proposed division of trust a b into six separate trusts will not cause trust a b and the six separate trusts to lose their exempt status for gst tax purposes law and analysis sec_2601 of the internal_revenue_code imposes a tax on every generation- skipping gst transfer which is defined under sec_2611 as a taxable_distribution a taxable_termination or a direct_skip under section a of the tax_reform_act_of_1986 the act the gst tax is generally applicable to generation-skipping transfers made after date however under section b a of the act and plr-114865-02 sec_26_2601-1 of the generation-skipping_transfer_tax regulations the gst tax does not apply to any generation-skipping_transfer under a_trust that was irrevocable on date sec_26_2601-1 provides that except as provided in sec_26_2601-1 or c any trust as defined in b in existence on date is considered an irrevocable_trust however this exemption does not apply to additions actual or constructive that are made to the trust after date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer in this case trust was irrevocable on date and no additions actual or constructive have been made to trust since that date trustee proposes to divide trust a b into six equal and separate trusts each of the six separate trusts will benefit one of the family lines of the current beneficiaries otherwise each of the six separate trusts will have provisions identical to those of trust the proposed division of trust a b will not shift a beneficial_interest in the six separate trusts to any beneficiary who occupies a lower generation than the persons who held the beneficial_interest prior to the division the proposed division will not extend the time for vesting of any beneficial_interest in the six separate trusts beyond the time provided for in trust accordingly based on the facts submitted and the representations made and provided there are no further additions to the six separate trusts we conclude that the division of trust a b into six separate trusts will not cause trust a b or the six separate trusts to lose their exempt status for gst tax purposes except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer plr-114865-02 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely lorraine e gardner assistant to the branch chief branch office of associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------- --------------------------- ------------------------------ ---------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-104323-07 date date x a legend ------------------------------------------------------------------------------------------------------ ------------------------ ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------ -------------------------- ------------------------- state -------- d1 dear ---- ---------- we received the letter dated date and subsequent correspondence submitted by x requesting a ruling under sec_1362 of the internal_revenue_code this letter responds to your request facts x was incorporated under the laws of state on d1 a x’s sole shareholder represents that he intended for x to be an s_corporation as of d1 however form_2553 election by a small_business_corporation was not filed timely x represents that both x and its shareholder have reported their income consistent with x’s intended status as an s_corporation x requests a ruling that it will be recognized as an s_corporation effective d1 plr-104323-07 law and analysis sec_1362 provides in general that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that in general an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a a small_business_corporation makes an election under sec_1362 for any taxable_year and b such election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then such election shall be treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply conclusion based solely on the facts submitted and representations made we conclude that x has established reasonable_cause for failing to make a timely s_corporation_election thus we conclude that x is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 effective d1 within days following the date of this letter we rule that the election shall be treated as timely made a copy of this letter should be attached to the form_2553 except for the specific ruling above no opinion is expressed or implied concerning the federal tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed or implied regarding as to whether x otherwise qualifies as a subchapter_s_corporation under sec_1361 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-104323-07 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely s tara p volungis senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes


washington dc department of the treasury internal_revenue_service number release date index number person to contact telephone number refer reply to cc psi - plr-119774-02 date date legend a b c d e f g h i j k l m n o plr-119774-02 p q r s t u v w x y z country1 country2 country3 d1 d2 d3 d4 d5 dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of b c d e f g h i j k l m n o p q r s t u v w x y and z by their authorized representatives requesting a ruling that b c d e f g h i j k l m n o p q r s t u v w x y and z each be plr-119774-02 given an extension of time to elect under sec_301_7701-3 of the procedure and administration regulations to be classified as a disregarded_entity for federal tax purposes facts the information submitted states that a is a us partnership owned by us investors b a wholly owned subsidiary of a was formed on d1 pursuant to the laws of country1 c a wholly owned subsidiary of b was formed on d2 pursuant to the laws of country2 d a wholly owned subsidiary of c was formed on d3 pursuant to the laws of country3 e a corporation formed under the laws of country3 became a wholly owned subsidiary of d as of d4 on d4 c and d purchased f g h i j k l m n o p q r s t u v w x y and z immediately after the purchase the properties owned by the subsidiaries were transferred to e e owns f and g f owns h h owns i j k l m n o and p j owns q r s t u v w x and y p owns z b represents that pursuant to sec_301_7701-3 b is a foreign eligible_entity that is not required to be classified as a corporation for federal tax purposes b has a single owner that has limited_liability as defined in sec_301_7701-3 b intended to be disregarded for federal tax purposes effective on d1 however b inadvertently failed to timely file a form_8832 entity classification election c represents that pursuant to sec_301_7701-3 c is a foreign eligible_entity that is not required to be classified as a corporation for federal tax purposes c has a single owner that has limited_liability as defined in sec_301_7701-3 c intended to be disregarded for federal tax purposes effective on d2 however c inadvertently failed to timely file a form_8832 entity classification election d represents that pursuant to sec_301_7701-3 d is a foreign eligible_entity that is not required to be classified as a corporation for federal tax purposes d has a single owner that has limited_liability as defined in sec_301_7701-3 d intended to be disregarded for federal tax purposes effective on d3 however d inadvertently failed to timely file a form_8832 entity classification election e f g h i j k l m n o p q r s t u v w x y and z represent that pursuant to sec_301_7701-3 e f g h i j k l m n o p q r s t u v w x y and z are each a foreign eligible_entity that is not required to be classified as a corporation for federal tax purposes e f g h i j k l m n o p q r s t u v w x y and z each has a single owner that has limited_liability as defined in sec_301_7701-3 e f g h i j k l m n o p q r s t u v w x y and z each intended to be disregarded for federal tax purposes effective on d5 however e f g h i j k l m n o p q r s t u v w x y and z each inadvertently failed to timely file a form_8832 entity classification election plr-119774-02 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-2 sec_301_7701-3 provides that unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owners if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides that when elections under sec_301 c i for a series of tiered entities are effective on the same date the eligible entities may specify the order of elections on form_8832 sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center sec_301_7701-3 provides that an election will be effective on the date specified on the form_8832 or on the date filed if no such date is specified the effective date specified on the form_8832 cannot be more than days prior to the date the election is filed under c the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or an announcement published in the internal_revenue_bulletin sec_301_9100-1 and sec_301_9100-3 provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-119774-02 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result b is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes effective for d1 c is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes effective for d2 d is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes effective for d3 e f g h i j k l m n o p q r s t u v w x y and z each is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect under sec_301_7701-3 to be classified as a disregarded_entity for federal tax purposes effective for d5 additionally in accordance with sec_301_7701-3 the entities may specify that the order of the elections of e f g h i j k l m n o p q r s t u v w x y and z be deemed made in order from the bottom subsidiary to the top subsidiary on form_8832 a copy of this letter should be attached to each form_8832 a copy is included for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent plr-119774-02 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


legend wife date trust trust trust trust 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 b07 plr-139758-06 date date ------------------------------------------------------------------------------------------------- ------------------------ ---------------------- ------------------------------------------- ------------------------------------------------------------------------------------------------- ----------------------- ------------------------------------------------------------------------------------------------- ----------------------- ------------------------------------------------------------------------------------------------- ----------------------- child child child husband ------------------------------------------------------------------------------------------------- ---------------------------- -------------------------------- ------------------------------ ----------------------- ----------------------- ------------------------- ------------------------- ------- ------- date date date year year dear -------------------- of time under sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to make allocations of generation-skipping_transfer gst_exemption to trusts created by wife this is in response to your letter dated date requesting an extension the trust agreement provides that during each child’s life the trustees may in the facts and representations submitted are summarized as follows on date plr-139758-06 wife created trust for the benefit of her descendants under the terms of the trust agreement the principal was immediately divided into three separate shares trust trust and trust trust is held for the benefit of child trust is held for the benefit of child and trust is held for the benefit of child their discretion distribute net_income or principal to or for the benefit of the child for whom the trust is held and his or her descendants husband may not participate in distribution decisions relating to distribution of net_income net_income may be distributed for a beneficiary’s education maintenance health support in reasonable comfort and other purposes as the trustees may deem in a beneficiary’s best interests principal may be distributed for a beneficiary’s education maintenance health and support in reasonable comfort on a child’s death the child has a limited power to appoint the trust assets held for his or her benefit to wife’s descendants other than the child for whom the trust is held in trust or outright if a child fails to exercise his or her power_of_appointment the principal shall be distributed to his or her descendants per stirpes if there are none the principal shall be distributed to wife’s descendants per stirpes unless terminated earlier all trusts created under the trust agreement shall terminate twenty-one years after the death of the last to survive of husband and the descendants of wife’s mother living on date date date date date and date are all in year husband and wife each filed a form_709 united_states gift and generation-skipping_transfer_tax return gift_tax_return for year reporting the transfers to the trusts on each return husband and wife elected to split_gifts under sec_2513 taxpayers relied upon qualified_tax professionals to prepare the year tax returns and the qualified_tax professionals failed to properly allocate each taxpayer’s gst_exemption to the transfers husband and wife transferred assets to each trust on date date and in year a qualified_tax professional other than the tax professional who husband and wife have each requested an extension of time to allocate gst prepared the year tax returns found the failure to allocate the gst_exemption in year when assisting the taxpayers with additional tax planning in order to correct the error the taxpayers made late allocations of their gst_exemption exemption to the year transfers to each trust and a ruling that the year late allocations are invalid than the other spouse shall for the purposes of this chapter be considered as made one-half by him and one-half by his spouse but only if at the time of the gift each spouse is a citizen or resident_of_the_united_states sec_2513 provides that a gift made by one spouse to any person other sec_2631 provides that for purposes of determining the inclusion_ratio sec_2513 provides that paragraph shall apply only if both spouses sec_2601 imposes a tax on every generation-skipping_transfer a generation- plr-139758-06 have signified under the regulations provided for in subsection b their consent to the application of paragraph in the case of all such gifts made during the calendar_year by either while married to the other sec_25_2513-2 of the gift_tax regulations provides that consent to the application of the provisions of sec_2513 with respect to a calendar_period shall in order to be effective be signified by both spouses if both spouses file gift_tax returns within the time for signifying consent it is sufficient if the consent of each spouse is signified on his own return skipping transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip 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 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 provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime other than in a direct_skip is made on form_709 united_states gift and generation-skipping_transfer_tax return an allocation of gst_exemption to a_trust is void to the extent the amount of the allocation exceeds the amount necessary to obtain a zero inclusion_ratio with respect to the trust sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period 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 sec_2632 provides that any allocation by an individual of his or her gst sec_2642 provides generally that the secretary shall by regulation sec_26_2632-1 of the generation-skipping_transfer_tax regulations notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time sec_2642 provides that in determining whether to grant relief under plr-139758-06 requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph 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 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 gst_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 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except in subtitles e g h and i for regulatory elections that do not meet the requirements of sec_301_9100-2 must be made under the rules of sec_301_9100-3 date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an election described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 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 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 to advise the taxpayer to make the election sec_301_9100-3 provides that in general requests for extensions of time sec_301_9100-3 provides that a taxpayer is deemed to have acted under sec_301_9100-1 a regulatory election includes an election whose due requests for relief under sec_301_9100-3 will be granted when the taxpayer plr-139758-06 based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore husband and wife are each granted an extension of time of days from the date of this letter to file a form_709 for year the form_709 should include a notice of allocation properly allocating each taxpayer’s gst_exemption to the year transfers to trust trust and trust each allocation will be effective as of the date of the transfer and the gift_tax value of the transfer to each trust will be used in determining the amount of gst_exemption to be allocated to the trust the inclusion_ratio for each trust will be determined under sec_2642 and sec_2642 to the extent that the year allocations of gst_exemption result in a zero inclusion_ratio for a_trust the year late allocations are invalid a copy of this letter should be attached to the supplemental form_709 and filed with the internal_revenue_service center cincinnati ohio a copy is included for this purpose concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion regarding the value of the property transferred to the trusts in year 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 being sent to the taxpayer’s representative 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 this ruling is directed only to the taxpayer requesting it sec_6110 except as expressly provided herein no opinion is expressed or implied the rulings contained in this letter are based upon information and sincerely william p o’shea william p o'shea associate chief_counsel passthroughs and special industries enclosures copy of this letter for sec_6110 purposes copy of this letter