internal_revenue_service number release date index number ---------------------- -------------------------- ------------------------- --------------- ------------------------------- in re -------------------------------- ------------------------ department of the treasury washington dc person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc psi - plr-157481-03 date october date ------------------- husband -------------------- wife --------------- date ---------------------- q --------- date ------------------------- date ------------------- applicable state law ------------------------------------------------ applicable state law ---------------------------------------------- date ------------------- date ---------------- date ------------------ date ---------------------- legend dear ----------- this is in response to your letter dated date and subsequent submissions in which you request a ruling that wife’s disclaimer of her survivorship interest in wife and husband’s joint brokerage account will be a qualified_disclaimer for purposes of sec_2518 of the internal_revenue_code the facts submitted and representations made are as follows on date husband and wife opened a joint account with rights of survivorship shortly after husband’s death wife’s stockbroker advised her that the brokerage plr-157481-03 facts brokerage account each spouse contributed equally to the brokerage account during their joint lives each spouse could unilaterally withdraw his or her contribution and direct investment and distribution of assets from the account on date husband died at husband’s date of death the brokerage account held unit investment trusts corporate bonds municipal_bonds certificates of deposit and approximately dollar_figureq in cash account could not be held under the social_security_number of a deceased individual accordingly on date approximately one month after husband’s death wife directed the stockbroker to transfer title in the brokerage account to wife’s name during the eight months after husband’s death wife directed the stockbroker to sell certain securities in the brokerage account and to purchase other_securities for the account during this period wife also withdrew certain amounts of cash from the account review husband and wife’s estate plan at the law firm’s advice on date in the ninth month after husband’s death wife executed a written disclaimer in which wife disclaimed her beneficial survivorship interest in husband’s share in the brokerage account the disclaimed interest represented husband’s share of the brokerage account less the assets in that share and earnings on those assets since husband’s death in which wife accepted benefits the disclaimer was recorded on date within nine months of husband’s death and a copy was sent to the stock broker on date predeceasing husband with respect to the disclaimed property consequently the disclaimed property is treated as passing to husband from the brokerage account by right_of_survivorship after the disclaimer on dates and the law firm directed the stock broker to establish and fund three accounts the tic account the wife’s account and the estate account the tic account held assets that could not be evenly divided this account did not include any proceeds from the securities sold in the eight months following husband’s death or any of the securities purchased during that period wife and husband’s estate held the tic account as tenants in common the remaining assets in the brokerage account were divided between the wife’s account held in wife’s name and the estate account held in the name of husband’s estate as follows the wife’s account held assets attributable to wife’s contributions to the brokerage account and also held assets attributable to husband’s contributions with respect to under applicable state law as a result of wife’s disclaimer wife is treated as approximately six months after husband’s death wife engaged a law firm to plr-157481-03 which wife directed sales or purchases after husband’s death that is any proceeds from the securities sold in the eight months following husband’s death as well as the securities purchased during that period the estate account held assets attributable to husband’s contributions with respect to which wife made no withdrawals and directed no sales or purchases after husband’s death each of the three accounts also held the earnings from the date of husband’s death on the assets placed in each account the estate account and the estate’s one-half interest in the tic account represent the disclaimed interest under husband’s will his residuary_estate including the disclaimed property ie the assets held in the estate account and the estate’s one-half interest in the tic account after the payment of debts expenses and taxes and a bequest of tangible personalty passed to the trustee under husband’s revocable_trust agreement that agreement provides for the establishment of a credit_shelter_trust funded with the largest amount needed to permit husband’s estate to use in full any estate_tax unified_credit the balance of husband’s residuary_estate passes to a marital trust under the terms of the credit_shelter_trust the net_income is to be paid to wife at least quarterly for life during wife’s life the trustee must also distribute to any among wife and husband’s children such amounts of principal as the trustee deems necessary or advisable for such beneficiaries’ health education maintenance or support wife has the noncumulative right during her life to withdraw annually principal equal to the greater of dollar_figure or percent of the market_value of the principal on the first day of the calendar_year of the withdrawal at wife’s death the remaining assets of the credit_shelter_trust will be combined with the remaining assets of the marital trust and distributed in specified amounts to husband’s sons or their issue wife and husband’s two sons are named as cotrustees of any trusts created after husband’s death wife may never serve as the sole trustee at husband’s death the value of his residuary_estate was only sufficient to fund the credit_shelter_trust the marital trust was not established wife died on date of a_trust cannot participate in trustee decisions about making any distributions to that individual as beneficiary of the trust the brokerage account is a qualified_disclaimer under sec_2518 law and analysis sec_2046 provides that disclaimers of property interests passing upon death are treated as provided under sec_2518 sec_2518 provides that if a person makes a qualified_disclaimer with respect to any interest in property the disclaimed interest is treated as if it had never been transferred to the person making the qualified_disclaimer for purposes of the federal estate gift and generation-skipping_transfer_tax provisions under applicable state law an individual who is both a trustee and beneficiary you have requested a ruling that wife’s disclaimer of her survivorship interest in plr-157481-03 under sec_2518 the term qualified_disclaimer means an irrevocable and unqualified refusal by a person to accept an interest in property but only if -- the refusal is in writing the writing is received by the transferor of the interest or his legal_representative no later than months after the date on which the transfer creating the interest in the person making the disclaimer is made or the date on which the person making the disclaimer attains age the person making the disclaimer has not accepted the interest or any of its benefits and as a result of the refusal the interest passes without any direction on the part of the person making the disclaimer and passes either to the decedent's spouse or to a person other than the person making the disclaimer sec_25_2518-2 of the gift_tax regulations provides that in the case of a transfer to a joint bank brokerage or other investment account eg an account held at a mutual_fund if a transferor may unilaterally regain the transferor’s own contributions to the account without the consent of the other co-tenant such that the transfer is not a completed_gift under sec_25_2511-1 the transfer creating the survivor’s interest in the decedent’s share of the account occurs on the death of the deceased cotenant accordingly if a surviving joint tenant desires to make a qualified_disclaimer with respect to funds contributed by a deceased cotenant the disclaimer must be made within months of the cotenant’s death the surviving joint tenant may not disclaim any portion of the joint account attributable to consideration furnished by that surviving joint tenant sec_25_2518-2 provides that a qualified_disclaimer of property cannot be made with respect to an interest in property if the disclaimant has accepted the interest or any of its benefits expressly or impliedly prior to making the disclaimer acceptance is manifested by an affirmative act which is consistent with ownership of the interest in property acts indicative of acceptance include using the property or the interest in property accepting income from the property and directing others to act with respect to the property or interest in property merely taking delivery of an instrument of title without more does not constitute acceptance further a disclaimant is not considered to have accepted property merely because under applicable local law title to the property vests immediately in the disclaimant upon the death of a decedent the acceptance of one interest in property will not by itself constitute an acceptance of any other separate interests created by the transferor and held by the disclaimant in the same property see example of sec_25_2518-2 sec_25_2518-2 provides that if a beneficiary who disclaims an interest in property is also a fiduciary actions taken by such person in the exercise of fiduciary plr-157481-03 powers to preserve or maintain the disclaimed property shall not be treated as acceptance of such property or any of its benefits thus an executor who is also a beneficiary may direct the harvesting of a crop or the general maintenance of a home a fiduciary however cannot retain a wholly discretionary power to direct the enjoyment of the disclaimed interest the regulation refers to sec_25_2518-2 for rules relating to the effect of directing the redistribution of disclaimed property sec_25_2518-2 provides that a disclaimer is not a qualified_disclaimer unless the disclaimed interest passes without any direction on the part of the disclaimant to a person other than the disclaimant except as provided in paragraph e the requirements of a qualified_disclaimer under sec_2518 are not satisfied if -- i the disclaimant either alone or in conjunction with another directs the redistribution or transfer of the property or interest in property to another person or has the power to direct the redistribution or transfer of the property or interest in property to another person unless such power is limited by an ascertainable_standard or ii the disclaimed property or interest in property passes to or for the benefit of the disclaimant as a result of the disclaimer except as provided in paragraph e under sec_25_2518-2 a disclaimer made by a decedent’s surviving_spouse with respect to property transferred by the decedent may be a qualified_disclaimer if the interest passes as a result of the disclaimer without direction on the part of the surviving_spouse either to the surviving_spouse or to another person if the surviving_spouse however retains the right to direct the beneficial_enjoyment of the disclaimed property in a transfer that is not subject_to federal estate and gift_tax whether as a trustee or otherwise such spouse will be treated as directing the beneficial_enjoyment of the disclaimed property unless such power is limited by an ascertainable_standard under sec_25_2518-3 the disclaimer of all or an undivided portion of any separate interest in property may be a qualified_disclaimer even if the disclaimant has another interest in the same property in general each interest in property that is separately created by the transferor is treated as a separate interest sec_25 a ii provides that a disclaimant shall be treated as making a qualified_disclaimer of a separate interest in property if the disclaimer relates to severable property and the disclaimant makes a disclaimer which would be a qualified_disclaimer if such property were the only property in which the disclaimant had an interest severable property is property which can be divided into separate parts each of which after severance maintains a complete and independent existence for example a legatee of shares of corporate stock may accept some shares of the stock and make a qualified_disclaimer of the remaining shares in the present case husband and wife each contributed equally to the brokerage account prior to husband’s death each spouse could unilaterally withdraw his or her contributions from the brokerage account at any time prior to his or her death thus each spouse’s contributions to the account were incomplete gifts until husband’s death consequently under c iii the transfer creating wife’s survivorship plr-157481-03 interest in husband’s share of the brokerage account occurred at husband’s death and under sec_2518 wife had months after his death to disclaim any part of her survivorship interest in husband’s share within nine months after husband’s death wife executed a written disclaimer in which she disclaimed her survivorship interest in husband’s share of the brokerage account as a result of wife’s disclaimer wife is treated as predeceasing husband with respect to the disclaimed property which consequently is treated as passing to husband by right_of_survivorship from the brokerage account after the disclaimer the disclaimed assets and the earnings on those assets since husband’s death were placed in the estate account and the estate’s share of the tic account the following assets and the earnings on the assets since husband’s death were segregated from the disclaimed property and held in wife’s account or in wife’s share of the tic account assets attributable to wife’s contributions to the brokerage account any cash proceeds obtained from the sale of certain securities directed by wife and not used to obtain more securities and securities that wife directed the broker to purchase in the eight months following husband’s death see sec_25_2518-2 and sec_25 d after husband’s death acting on advice from her stockbroker wife transferred title in the brokerage account to her name this action did not result in an acceptance by the wife of husband’s share in the brokerage account because under d the mere transfer of title of the brokerage account to wife’s name is not treated as an acceptance by wife of husband’s interest in the brokerage account or as benefiting wife for purposes of sec_2518 under sec_25_2518-3 wife’s disclaimer of the assets held in the estate account and the estate’s one-half share of the tic account may be a qualified_disclaimer even though wife withdrew cash from the account during the eight months following husband’s death the cash and securities are severable assets wife may accept and benefit from the cash withdrawals and make a qualified_disclaimer with respect to the remaining assets in the brokerage account see sec_25_2518-3 example under sec_25_2518-2 wife is treated as accepting the proceeds obtained from the sale of the securities that she directed the stockbroker to sell and is treated as accepting or benefiting from the securities held in the brokerage account that she directed the stockbroker to purchase during the eight months following husband’s death these assets were transferred to wife’s account accordingly wife may not make a qualified_disclaimer of such property wife did not disclaim these assets further as stated above the securities are severable assets wife may make a qualified_disclaimer with respect to certain securities while accepting the benefit of other_securities in the account see sec_25_2518-3 plr-157481-03 under applicable state law as a result of wife’s disclaimer wife is treated as predeceasing husband with respect to the disclaimed property consequently the disclaimed property is treated as passing to husband from the brokerage account by right_of_survivorship therefore the disclaimed assets in the estate account and the disclaimed one-half of the tic account passed under the terms of husband’s will into husband’s residuary_estate and then under husband’s revocable_trust agreement to a credit_shelter_trust thus for purposes of sec_25_2518-2 the disclaimed property passed to the credit_shelter_trust without any direction by wife during wife’s life the trustee of the credit_shelter_trust was to pay her the entire net_income at least quarterly and was to distribute to any among wife and husband’s children such amounts of principal as the trustee deemed necessary for a beneficiary’s health education maintenance or support during her life wife also had a noncumulative or power over the trust principal although wife held the power as cotrustee to distribute principal from the credit_shelter_trust to husband’s children this power was limited by an ascertainable_standard for purposes of sec_25_2518-2 and wife is not treated as directing the beneficial_enjoyment of the disclaimed property due to her interests as a beneficiary of the credit_shelter_trust or her power as cotrustee of that trust see example sec_4 and of sec_25_2518-2 we note that under applicable state law although named as cotrustee wife could not participate as a trustee in making any distributions to herself as beneficiary of the credit_shelter_trust and thus for purposes of sec_25_2518-2 could not be deemed to have accepted any part of the disclaimed property in her role as cotrustee brokerage account ie the assets held in the estate account and the estate’s one-half share in the tic account is a qualified_disclaimer under sec_2518 accordingly we rule that wife’s disclaimer of her survivorship interest in the this ruling is directed only to the taxpayer who requested it sec_6110 except as specifically ruled herein we express no opinion on the federal tax plr-157481-03 consequences of the disclaimer under the cited provisions or under any other provisions of the code provides that it may not be used or cited as precedent senior counsel branch office of associate chief_counsel enclosure copy for sec_6110 purposes cc passthroughs and special industries lorraine e gardner _________________________ sincerely yours


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n number release date form_1120 contact person telephone number tax years all years identification_number employer_identification_number date uniform issue list number dear applicant this letter constitutes a final adverse_ruling with respect to your claim of exemption from federal income_taxation under sec_501 of the internal_revenue_code we make our ruling for the following reason you have failed to establish that your private school operates in a racially nondiscriminatory manner as required by sec_501 of the code donors may not deduct contributions to your organization under sec_170 of the code the code and the regulations issued thereunder require that you file federal_income_tax returns based upon the financial information that you furnished you should file returns on the form and for the tax years indicated above within days from the date of this letter unless you request and are granted an extension of time to file the returns you should attach a copy of this letter to the returns you file questions concerning the filing of returns should be directed to the ohio tax exempt and government entities te_ge office pincite-5500 a toll free number if you decide to contest this ruling under the declaratory_judgment provisions of sec_7428 of the code you must initiate a suit in the united_states tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia before the 91st day after the date that we mailed this ruling to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment the filing of a declaratory_judgment suit under sec_7428 does not stay the processing of income_tax returns and assessment of any taxes in accordance with sec_6104 of the code we will notify the appropriate state officials of this action this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions concerning the reasons for this ruling please contact the person whose name and telephone number appear in the heading of this letter enclosure notice martha sullivan director exempt_organizations sincerely


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 plr-152760-11 date date ------------------------------------------------------------------------------------------------------ legend legend x ------------------------ state -------------------- d1 ----------------------- dear -------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was formed in state on d1 x’s sole shareholder intended for x to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x accordingly x requests a ruling that it will be treated as an s_corporation effective d1 sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 an s election made after the first two and one-half months of a corporation’s taxable_year results in the corporation not being treated as an s_corporation until the taxable_year following the year in which the s election is filed sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the plr-152760-11 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 such taxable_year and sec_1362 shall not apply x did not timely file an election under sec_1362 to be treated as an s_corporation for x’s taxable_year beginning d1 based solely on the facts and the representations submitted we conclude that x established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x’s taxable_year beginning d1 a copy of this letter should be attached to the form_2553 except as expressly set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 sincerely bradford r poston senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------ attn ----------------------------------------------------- ------ --------------------------------------------------- ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ---------- telephone number fax number -------------------- -------------------- refer reply to cc ita b6 plr-124204-14 date date legend parent --------------------------------------------------------- -------------------------------- --------- taxpayer1 --------------------------------- ---------------------- taxpayer2 -------------------------------------------------------------------- -------------------------------------- taxpayer3 -------------------------------------------------------------------- ---------------------------------------------- products ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------ date1 year1 b c dear ----------------- --------------------------- ------ ----------------------------- ----------------------------- plr-124204-14 this letter is in reply to a private_letter_ruling request dated date filed by parent on behalf of taxpayer1 taxpayer2 and taxpayer3 requesting an extension of time under sec_301_9100-1 of the procedure and administration regulations to file form sec_970 application to use lifo inventory_method parent and its wholly owned subsidiaries manufacture supply and market products to customers throughout the world in the products industries during the fiscal_year ending date1 parent restructured its consolidated_group transferring certain assets and liabilities including inventory to newly formed wholly owned entities including taxpayer1 taxpayer2 and taxpayer3 in a transaction that parent represents qualified as a tax-free_exchange under sec_351 of the internal_revenue_code the inventory transferred had been identified using the last-in first out lifo inventory_method described in sec_472 taxpayer1 taxpayer2 and taxpayer3 have identified their inventory using the lifo inventory_method upon receipt of their respective inventory parent was required by sec_1_472-3 of the income_tax regulations to file a form_970 on behalf of taxpayer1 taxpayer2 and taxpayer3 for the fiscal_year ending date1 parent used b an accounting firm to review its consolidated tax_return as prepared by parent for fiscal_year ending date1 and to inform parent of the need to make any required elections b was aware of the fact that parent used the lifo inventory_method for taxpayer1 taxpayer2 and taxpayer3 parent was not informed by b to attach the required form sec_970 to its tax_return to perform a routine internal review of parent’s lifo calculations parent engaged c in year1 c requested copies of the form sec_970 filed on behalf of taxpayer1 taxpayer2 and taxpayer3 when it was determined that the form sec_970 had not been filed c advised parent to file this private_letter_ruling request parent promptly filed this request on behalf of taxpayer1 taxpayer2 and taxpayer3 for an extension of time to file the form sec_970 parent represents that taxpayer1 taxpayer2 and taxpayer3 have used the lifo inventory_method described in sec_472 for the fiscal_year ending date1 and have used the lifo inventory_method for all subsequent taxable years parent also represents that the lifo inventory_method was used in the reports for the three entities to shareholders partners or other proprietors to beneficiaries and for credit purposes for the fiscal_year ending date1 and all subsequent fiscal years sec_472 provides that a taxpayer may use the lifo_method in inventorying goods specified in an application to use such method filed at such time and in such manner as the secretary may prescribe plr-124204-14 sec_1_472-3 provides that the lifo inventory_method may be adopted and used only if the taxpayer files with its income_tax return for the taxable_year as of the close of which the method is first to be used a statement of its election to use such inventory_method the statement is to be made on form_970 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 certain regulatory elections sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when a taxpayer provides 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 see sec_301_9100-3 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief before the failure to make the regulatory election is discovered by the internal_revenue_service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 provides that a taxpayer is deemed not to have acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty was or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences and chose not to file the election or iii uses hindsight in requesting relief plr-124204-14 sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money the section also provides that if the tax consequences of more than one taxpayer are affected by the election the government’s interests are prejudiced if extending the time for making the election may result in the affected taxpayers in the aggregate having a lower tax_liability than if the election had been timely made further sec_301_9100-3 provides in part that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section the requested election is a regulatory election as defined under sec_301_9100-1 because the due_date of the election is prescribed in sec_1_472-3 parent’s request is analyzed under the requirements of sec_301_9100-3 because the automatic provisions of sec_301_9100-2 are not applicable on the basis of the facts representations and affidavits submitted we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we hereby grant an extension of time for parent to file the missing form sec_970 on behalf of taxpayer1 taxpayer2 and taxpayer3 this extension shall be for a period of days from the date of this ruling please attach a copy of this ruling to each form_970 filed pursuant to this private_letter_ruling request the ruling contained in this letter is based upon information and representations submitted by parent and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the materials submitted in support of the request for a ruling such material is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express no opinion as to whether taxpayer1 taxpayer2 or taxpayer3 has correctly used the lifo inventory_method we also have no opinion as to the internal restructuring of parent that occurred in the fiscal_year ending date1 further we have no opinion as to the correctness of the use of the lifo inventory_method by any entity that obtained inventory in the tax-free_exchange that occurred during the fiscal_year ending date1 other than taxpayer1 taxpayer2 and taxpayer3 plr-124204-14 this ruling is directed only to parent who requested it sec_6110 provides that it may not be used or cited as precedent sincerely cheryl l oseekey senior counsel branch office of associate chief_counsel income_tax accounting enc copy for sec_6110 purposes cc


t c memo united_states tax_court steven eugene edwards petitioner v commissioner of internal revenue respondent docket no filed date steven eugene edwards pro_se timothy j driscoll jr for respondent memorandum findings_of_fact and opinion ruwe judge respondent determined a dollar_figure deficiency in petitioner’s federal_income_tax and a dollar_figure fraud_penalty under sec_6663 by amended answer respondent asserted a dollar_figure increase in unless otherwise indicated all section references are to the internal continued the income_tax deficiency and a corresponding dollar_figure increase in the fraud_penalty after concessions the issues for decision are whether petitioner had unreported interest_income of dollar_figure whether petitioner had unreported income from diverted funds of dollar_figure and whether petitioner is liable for a fraud_penalty under sec_6663 findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time the petition was filed petitioner resided in north carolina during the taxable_year petitioner was married to marian c piornack ms piornack petitioner was an owner of magna corp which was a busine sec_1 continued revenue code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined in the notice_of_deficiency that petitioner and his former spouse received dollar_figure of interest_income in the taxable_year and did not report dollar_figure of this amount respondent concedes that dollar_figure of the dollar_figure is attributable exclusively to petitioner’s former spouse and thus asserts that petitioner failed to report interest_income of dollar_figure ms piornack was granted relief from joint_and_several_liability under sec_3 b ostensibly involved in insurance sales and employee_leasing in petitioner collected health and workers’ compensation insurance premiums from various employers and represented to them that they had health and workers’ compensation coverage when in fact they did not as summarized below petitioner failed to report significant amounts of income received during the year in issue interest_income the parties stipulate that petitioner and ms piornack received interest_income of dollar_figure during the taxable_year which accrued in bank accounts held by petitioner individually and or petitioner and ms piornack jointly at englewood bank southbank centura bank and triangle bank petitioner and ms piornack reported dollar_figure of interest_income on their joint federal_income_tax return petitioner underreported his interest_income by dollar_figure ie dollar_figure dollar_figure employee_leasing involves the outsourcing of human resource functions such as employee_benefits payroll workers’ compensation recruiting and training and development the parties stipulate that petitioner and ms piornack received interest_income of dollar_figure this figure appears to be overstated by dollar_figure and we have corrected this error to comport with the underlying exhibits owl’s woods residence in petitioner paid for the construction of a primary residence for himself and ms piornack on owl’s woods lane in orange county north carolina owl’s woods residence petitioner paid for the construction of the owl’s woods residence using checks drawn on a southbank account held in the name of capital marketing capital marketing account both petitioner and ms piornack’s names are on the capital marketing account along with the address of the owl’s woods residence petitioner issued checks to the builder of the owl’s woods residence cyn-mar design inc cyn-mar as follows date account check no amount capital marketing dollar_figure capital marketing dollar_figure capital marketing dollar_figure capital marketing dollar_figure capital marketing n a dollar_figure capital marketing dollar_figure capital marketing dollar_figure capital marketing dollar_figure petitioner opened the capital marketing account using the employer_identification_number from capital marketing associates inc a company owned by alton brown an associate of petitioner’s at magna corp petitioner signed each check to cyn-mar drawn on the capital marketing account capital marketing dollar_figure capital marketing dollar_figure total dollar_figure the construction_contract designates petitioner and ms piornack as the owners of the property on which cyn-mar built the owl’s woods residence but the general warranty deed designates only ms piornack as grantee petitioner avoided titling property in his name in an effort to keep it out of the government’s reach petitioner had two built-in safes and a portable safe in the owl’s woods residence in which he stored cash petitioner also stored cash in a safe deposit box he maintained at englewood bank in florida petitioner and ms piornack also owned a townhouse in florida which they used for vacation sunshine co commission payments in petitioner issued bills to and received checks from sunshine co for commissions from the sale of workers’ compensation and health insurance according to an account ledger sunshine co issued checks payable to petitioner during the taxable_year as follows date check no amount dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure total dollar_figure the stipulation of facts calculates the sum of the above- listed amounts to be dollar_figure no explanation is given for this discrepancy and we have corrected this error to comport with the underlying exhibits these checks were payable to petitioner personally fidelity group commission payments in fidelity group issued commission checks payable to capital marketing as follows date check no amount dollar_figure dollar_figure dollar_figure total dollar_figure these checks were received and endorsed by petitioner and deposited into a personal account held in the names of petitioner and ms piornack each check from fidelity group was classified on its face as a commission payment in his petition petitioner acknowledges that the sunshine payments were payable to him personally and should have been reported as income carolina green petitioner’s roth individual_retirement_account is the owner of an entity named carolina green inc carolina green carolina green has no business function but serves as the owner of a bear stearns brokerage account bear stearns account in payments were made via wire transfer from petitioner’s capital marketing account to the bear stearns account as follows date originating account payee amount capital marketing bear stearns dollar_figure capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number capital marketing bear stearns big_number total big_number petitioner authorized each wire transfer made to the bear stearns account petitioner also made payments to various motorcycle stores and dealerships from his capital marketing account as follows date check no payee amount harley davidson dollar_figure twin specialties big_number twin specialties big_number twin specialties big_number twin specialties big_number twin specialties big_number harley davidson big_number total big_number petitioner signed each of the checks paid to the motorcycle companies the division of motor vehicles title history information recognizes carolina green as the owner of two private motorcycles and a private trailer ms piornack knew petitioner owned motorcycles but she was unaware that he owned around eight motorcycles until she discovered receipts in the den of the owl’s woods residence on date petitioner and ms piornack filed a joint federal_income_tax return for they reported total income of dollar_figure consisting of wages of dollar_figure taxable interest_income of dollar_figure ordinary dividends of dollar_figure taxable pension distribution of dollar_figure and a dollar_figure loss from schedule e supplemental income and loss petitioner’s criminal case on date petitioner was indicted by a grand jury in the u s district_court for the middle district of north carolina district_court petitioner was charged with counts of mail fraud under u s c sec_1341 counts of wire fraud under u s c sec count of financial_institution money laundering under u s c sec counts of false statements to a bank under u s c sec_1014 count of theft of healthcare funds under u s c sec_669 and counts of tax_evasion under sec_7201 count of the indictment for tax_evasion under sec_7201 states in pertinent part during the period from on or about date to on or about date petitioner a resident of durham north carolina did willfully attempt to evade and defeat a large part of the income_tax due and owing by him and his spouse to the united_states of america for the calendar_year by concealing and attempting to conceal from all proper officers of the united_states of america his true and correct income by depositing funds into and causing funds to be deposited into accounts titled in names other than his own dispensing funds from and causing funds to be dispensed from accounts titled in names other than his own receiving payments and causing payments to be issued in names other than his own and titling assets and causing assets to be titled in names other than his own and preparing and causing to be prepared signing and causing to be signed mailing and causing to be mailed a false and fraudulent joint u s individual_income_tax_return form_1040 on behalf of himself and his spouse which was filed with the internal_revenue_service on date petitioner entered a voluntary guilty plea in the district_court to counts of mail fraud count of theft of healthcare funds and count of tax_evasion on the same date a factual basis was filed in the district_court which in relevant part states from date through date the petitioner collected health insurance premiums of approximately dollar_figure from companies in south carolina florida and north carolina and elsewhere which were diverted and not used to pay claims or insurance for claims from date through date no insurance existed from date through date a reinsurance stop loss policy existed but the fidelity group a health care benefit program operated by petitioner did not receive or pay the requisite claims to invoke this policy thus thousands of health claims went unpaid because the fidelity group had insufficient funding and no insurance for the first dollar_figure in claims incurred per person the fidelity group operated in interstate commerce because it collected premiums from clients in south carolina and florida petitioner instructed employees to remove the last page of plan_description documents containing the words self-funded before allowing the plans to be mailed to clients jim sikora in south carolina received a plan with the self-funded language and was assured by both petitioner and petitioner ’s employee tim martin that a printing mistake had occured during the above time period petitioner utilized the health care premiums for his own personal_use for instance on date the sunshine group wired dollar_figure in premiums into petitioner ’s account in the name of capital marketing inc a week later on date petitioner wrote a check on this account for dollar_figure to cynmar builders to pay for construction of his home in durham the sikora group a sic their health premium in late february but tim martin later told him that fidelity made their last payment to epoch on date actually date thus in late february sikora group remitted a health care premium to petitioner ’s company fidelity for which his employees received no health care insurance protection sikora’s premium was not returned to him in date pmcs another third party administration hired by petitioner returned health claims to petitioner fidelity group because they did not receive funding petitioner instructed employees to refuse to accept shipment of claims and the claims were returned to pmcs although petitioner ’s companies collected health insurance premiums from employees then health insurance claims went unpaid and remain in storage at pmcs today in the tax_year petitioner was a resident of durham north carolina and filed or caused to be filed a joint u s individual_income_tax_return form_1040 on behalf of himself and his spouse stating that their joint taxable_income for the calendar_year was dollar_figure on which there was due and owing a tax of dollar_figure in truth and in fact as petitioner then well knew his income was substantially higher than he reported resulting in a tax due and owing of substantially more than he calculated according to irs reconstructions of his income and expenditures petitioner’s corrected taxable_income for was at least dollar_figure big_number on which there was due and owing additional taxes of dollar_figure during calendar_year petitioner recognized substantial income and made efforts to conceal his receipt of the same through purchasing property in nominee names he caused to be constructed a home situated in orange county north carolina for his wife and him but had the checks issued to the builder cynmar for the costs of construction drawn on a capital marketing inc account he also issued checks payable for the purchase of various motorcycles some of which were put in nominee names and had money wired from the capital marketing inc bank account to the bear stearns investment and brokerage house for his personal investment purposes although the investment accounts were maintained in the name of a shell entity carolina green inc all of these items constituted income to him as they were for his personal benefit petitioner and his attorney as well as the government’s attorney appeared before the district_court for a change_of plea hearing on date and the district_court accepted petitioner’s guilty plea during the change_of plea hearing petitioner pleaded guilty to counts of mail fraud count of theft of healthcare funds and count of tax_evasion and agreed under oath that the underlying factual basis was accurate on date a judgment in petitioner’s criminal case was entered by the district_court and he was sentenced to a term of months’ imprisonment notice_of_deficiency respondent issued to petitioner a notice_of_deficiency on date determining a dollar_figure deficiency in petitioner’s federal_income_tax and a dollar_figure fraud_penalty under sec_6663 on form 886a explanation of items respondent states petitioner submitted false information to insurers and failed to remit the premiums while providing false proof of insurance certifications to his clients petitioner also routinely continued to collect premiums from his clients after insurance policies were cancelled by the insurers further in order to divert the funds collected for insurance premiums to his personal_use petitioner established financial accounts in the names of nominees including his wife ms piornack capital marketing inc and carolina green inc he used the funds to acquire assets including an expensive home built in a mountain chalet investments vehicles and motorcycles also titled in nominee names in several instances none of the diverted funds were reported petitioner pled guilty to income_tax evasion under the provisions of title_26 u s c therefore petitioner is collaterally estopped from raising a defense as to the assertion of the sec_6663 fraud_penalty on date petitioner timely filed a petition disputing respondent’s determinations trial was held on date on date respondent filed a motion for leave to amend the pleadings to conform to the evidence which we granted on date by amended answer on date respondent asserted an increase in petitioner’s tax_deficiency of dollar_figure and a corresponding increase in the fraud_penalty under sec_6663 of dollar_figure opinion unreported income the commissioner’s determinations in a notice_of_deficiency are generally presumed correct and the taxpayer bears the burden of proving that the determinations are in error see rule a 290_us_111 for the presumption of correctness to attach with respect to unreported income the commissioner’s determination must be supported by some evidentiary foundation linking the taxpayer to the alleged income- producing activity 994_f2d_1542 11th cir quoting 596_f2d_358 9th cir rev’g 67_tc_672 aff’g tcmemo_1991_636 see also 999_f2d_760 4th cir aff’g tcmemo_1992_ petitioner has not disputed respondent’s determination on the grounds that it was incorrect arbitrary or did not link him to an income-producing activity and therefore the burden_of_proof remains on him to prove by a preponderance_of_the_evidence that respondent’s determination is incorrect see 293_us_507 87_tc_74 we note that while an evidentiary foundation is required in unreported income cases the required support is minimal 994_f2d_1542 11th cir aff’g tcmemo_1991_636 in addition petitioner stipulates receiving some of the income at issue in his amended answer respondent asserts that petitioner is liable for an increased deficiency as the following discussion demonstrates the evidence before the court supports an increased deficiency see rule a sec_61 defines gross_income as all income from whatever source derived this definition is construed broadly and extends to all accessions to wealth over which the taxpayer has complete control see 348_us_426 as the supreme court explained a gain ‘constitutes taxable_income when its recipient has such control_over it that as a practical matter he derives readily realizable economic value from it ’ 366_us_213 quoting 343_us_130 a taxpayer has dominion and control when the taxpayer is free to use the funds at will cortes v commissioner tcmemo_2014_181 at citing rutkin u s pincite the use of funds for personal purposes indicates dominion and control even if these funds are in an account titled in a name other than the taxpayer’s see eg gardner v commissioner tcmemo_2013_67 at petitioner reported total income of dollar_figure on his joint federal tax_return for consisting of wages of dollar_figure taxable interest of dollar_figure ordinary dividends of dollar_figure taxable pension distribution of dollar_figure and a dollar_figure loss from schedule e respondent argues that petitioner failed to report substantial income from his insurance sales and employee_leasing business by diverting funds into various bank accounts titled in names other than his own respondent further argues that petitioner used diverted funds for the construction of the owl’s woods residence and to purchase motorcycles and motorcycle accessories we address each of respondent’s contentions separately below interest_income respondent determined in the notice_of_deficiency that petitioner and ms piornack received dollar_figure of interest_income but reported only dollar_figure on their joint federal_income_tax return of the dollar_figure of alleged unreported interest_income ie dollar_figure dollar_figure respondent concedes that dollar_figure is attributable solely to ms piornack thus respondent asserts that petitioner is liable for tax resulting from dollar_figure of unreported interest_income petitioner did not address the issue of interest_income at any time during the proceedings before this court as such petitioner is deemed to have conceded this issue pursuant to rule b this is further supported by the fact that petitioner stipulates that he received dollar_figure of interest_income in his taxable_year but reported only dollar_figure accordingly we hold that petitioner received dollar_figure of unreported interest_income during his taxable_year owl’s woods residence in petitioner made numerous payments from the capital marketing account to cyn-mar for the construction of the owl’s woods residence respondent argues that petitioner diverted dollar_figure from his insurance sales and employee_leasing business for the construction of the owl’s woods residence and that this amount is taxable to him for petitioner stipulates that he made payments totaling dollar_figure to cyn-mar for the construction of the owl’s woods residence and that each check to cyn-mar was drawn on the capital marketing account and was endorsed by petitioner the capital marketing account listed petitioner’s name and the owl’s woods residence address and petitioner signed checks on this account furthermore on date petitioner pleaded guilty in the district_court to inter alia tax_evasion for his taxable_year as relevant to the owl’s woods residence the factual basis underlying the tax_evasion charge states petitioner caused to be constructed a home situated in orange county north carolina for his wife and him but had the checks issued to the builder cynmar for the costs of construction drawn on a capital marketing inc account all of these items constituted income to him as they were for his personal benefit petitioner appeared before the district_court on date and agreed under oath that this factual basis was accurate petitioner has not denied the receipt of the moneys used to pay for the construction of the owl’s woods residence in his petition petitioner appears to argue that the moneys used for construction of the owl’s woods residence were strictly loans from capital financial group nations and integrity corporation however petitioner did not expound upon this contention or present any documentation or other evidence that he received loans for the construction of the owl’s woods residence or that he intended to repay these funds moreover petitioner did not raise at trial any meritorious argument concerning the diverted funds used for the construction of the owl’s woods residence accordingly we hold that petitioner diverted dollar_figure which he used to pay cyn-mar for the construction of the owl’s woods residence and that these funds constituted taxable_income commission payments the parties stipulate that petitioner issued bills to and received checks from sunshine co totaling dollar_figure for the year in issue furthermore in the petition petitioner acknowledges that all checks received from sunshine co were petitioner seemingly acknowledges in his petition that the funds diverted to cyn-mar were characterized as loans solely to avoid paying tax on the amounts commission payments resulting from the sale of workers’ compensation and health insurance and acknowledges that these payments should have been treated as income by his accountant accordingly we hold that the dollar_figure of commission payments from sunshine co is taxable as income to petitioner for the taxable_year the parties stipulate that petitioner received and endorsed commission checks from fidelity group totaling dollar_figure and that these checks were deposited into petitioner and ms piornack’s personal bank account in the petition petitioner appears to argue that the checks from fidelity group are actually repayment of moneys he personally loaned to fidelity group to pay premiums or claims outside of this unsupported contention petitioner did not produce any testimony or other evidence that he lent money to fidelity group or that the payments received from fidelity group were repayment of loans moreover petitioner offers no explanation why if the checks are repayment for personal loans the checks are payable to capital marketing and each is classified on its face as a commission payment petitioner’s contention that the fidelity group checks are loan repayments is unpersuasive and inconsistent with the record and therefore we hold that dollar_figure of commission payments from fidelity group is taxable_income that he received in the year carolina green petitioner authorized wire transfers totaling dollar_figure from the capital marketing account to the bear stearns account in respondent argues that the distributions from the capital marketing account to the bear stearns account are taxable to petitioner as income in his petition petitioner does not dispute that the amounts transferred to the bear stearns account constitute income however he appears to argue that the bear stearns account had more than dollar_figure in losses which would offset tax owed on this income petitioner offered no evidence to substantiate that he incurred losses in the bear stearns account or when these purported losses occurred the parties stipulate that petitioner authorized wire transfers totaling dollar_figure into his bear stearns investment account in the year in issue moreover petitioner appeared before the district_court on date and agreed that he had money wired from the capital marketing inc bank account to the bear stearns investment and brokerage house for his personal investment purposes although the investment accounts were maintained in the name of a shell entity carolina green inc all of these items constituted income to him as they were for his personal benefit we hold that the dollar_figure transferred from the capital marketing account to the bear stearns account is taxable_income to petitioner for the taxable_year motorcycles parts and accessories respondent argues that funds diverted from the capital marketing account for the purchase of motorcycles and motorcycle accessories should be taxable to petitioner as income in the petition petitioner alleges that the motorcycles were purchased for employees to drive during warm weather and were not owned by him personally the parties stipulate that petitioner signed seven checks in made payable to either twin specialties or myrtle beach and or rocky mountain harley davidson--totaling dollar_figure the division of motor vehicles title history information recognizes carolina green as the owner of two motorcycles and a private trailer at trial ms piornack and alton brown testified that petitioner owned motorcycles rode these motorcycles with his friends and business associates and stored receipts for these motorcycles in the den of his personal_residence furthermore petitioner appeared before the district_court on date and agreed that he had issued checks as payment for the purchase of various motorcycles some of which were put in nominee names and that these purchases were income to him because they benefited him personally accordingly we hold that petitioner had taxable_income resulting from dollar_figure of funds he diverted from the capital marketing account to purchase motorcycles and motorcycle-related accessories for the taxable_year sec_6663 fraud_penalty respondent argues that petitioner’s previous conviction for tax_evasion under sec_7201 collaterally estops him from disputing his liability for the civil_fraud penalty under sec_6663 sec_6663 provides if any part of any underpayment_of_tax required to be shown on a return is due to fraud there shall be added to the tax an amount equal to percent of the portion of the underpayment which is attributable to fraud the commissioner bears the burden of proving fraud by clear_and_convincing evidence sec_7454 rule b to satisfy this burden the commissioner must establish that an underpayment exists and that the taxpayer intended to evade tax known to be owing by conduct intended to conceal mislead or otherwise prevent the collection of tax see 113_tc_99 94_tc_654 as discussed above respondent has satisfied his burden of showing that petitioner underpaid his income_tax for and the methods by which petitioner did this and his own admissions during the prior criminal proceeding are clear_and_convincing proof of fraud in any event collateral_estoppel precludes relitigation of any issue of fact or law that was actually litigated and necessarily determined by a valid and final judgment 440_us_147 it is well established that a conviction for tax_evasion under sec_7201 upon either a guilty plea or a jury verdict conclusively establishes fraud in a subsequent civil tax_fraud proceeding through the doctrine_of collateral_estoppel see eg 360_f2d_358 4th cir aff’g 43_tc_50 96_tc_858 aff’d 959_f2d_16 2d cir marretta v commissioner tcmemo_2004_128 tax ct memo lexi sec_130 at aff’d 168_fedappx_528 3d cir the only practical difference between the elements of criminal_tax_evasion under sec_7201 and civil tax_fraud is the larger quantum of proof required in a criminal evasion case 360_f2d_353 4th cir petitioner pleaded guilty to tax_evasion under sec_7201 for and that judgment has become final accordingly petitioner is precluded from it is immaterial that petitioner’s conviction resulted from a guilty plea from the charges brought against him rather than from a trial on the merits after a plea of not guilty see 708_f2d_243 6th cir a guilty plea is as much a conviction as a conviction following jury trial aff’g tcmemo_1981_1 a guilty plea constitutes an admission of all the elements of the criminal charge 394_us_459 challenging that he filed a false and fraudulent federal_income_tax return with the requisite fraudulent intent petitioner is therefore liable for the sec_6663 fraud_penalty on the amount determined in part of this opinion in reaching our decision we have considered all arguments made by the parties and to the extent not mentioned or addressed they are irrelevant or without merit to reflect the foregoing decision will be entered under rule


tax_exempt_and_government_entities_division release number release date legend org organization name xx date address address department of the treasury internal_revenue_service te_ge eo examinations mc dal os commerce st dallas tx may form number tax_year ended december 20xx taxpayer_identification_number person to contact employee identification_number contact telephone number in reply refer to te_ge review staff last date for filing a petition with the tax_court august 20xx dear this is a final adverse determination_letter as to your exempt status under sec_501 c of the internal_revenue_code your exemption from federal_income_tax under sec_501 c of the code is hereby revoked effective january 20xx you agreed to this adverse determination by signing form_6018 on april g our adverse determination was made for the following reasons organizations described in lr c section sol c and exempt under section sol a must be organized and operated exclusively for an exempt purposes you have ceased operating as an exempt_organization and providing any activities of any kind org also is not a charitable_organization within the meaning of sec_1 c -1 d you have not established that you have operated exclusively for an exempt_purpose since beginning of january 20xx when organization ceased all operations and activities based upon these reasons we are retroactively revoking your irc sol c tax exempt status effective for all years beginning on or after january 20xx contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 u s_corporation income_tax r-etum for the years ended december 20xx and for all years thereafter with the appropriate service_center immediately and by the due_date of fonn for all subsequent years processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be flied under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the united_states for the district of columbia before the st day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits for declaratory_judgment you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers you can call and ask for taxpayer_advocate assistance or you can contact the taxpayer_advocate from the site where the tax_deficiency was determined by calling or writing to taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to fue a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours nanette m downing director eo examinations tax_exempt_and_government_entities_division org address department of the treasury internal_revenue_service tege eo examinations group research blvd bldg i suite austin tx date taxpayer_identification_number form tax_year s ended person to contactlld 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 c 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 eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and 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 letter catalog number 34809f 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 section b 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 sec_6104 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 resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing acting director eo examinations enclosures publication publication report of examination letter catalog number 34809f form 886a name of taxpayer org department of the treasury - internal_revenue_service ex lanation of items schedule no or exhibit year period ended december 20xx legend org issue zation name xx date state state whether continues to qualify for exemption as an organization described within sec_501 c due to inactivity for several years including the year of examination fact org was incorporated under the laws of the state of state as a non-profit corporation on january 20xx in a determination_letter dated december 20xx org described in sec_501 c was determined to be exempt from federal_income_tax as an organization during the onsite audit on 20xx the incorporator of the organization stated that the organization stopped existing since july 20xx the organization established for foster care for kids and had a contract for one year with a state of state the organization role is to provide foster homes for kids the organization was running for almost months until the contract was suspended by the state of state due to as the organization incorporator said they provided the organization with more than kids and that was beyond the management ability to control as a result the organization dissolved and stopped functioning the organization provided during the exam a certificate of administrative dissolution issued from the state of state department of state stating that the org administratively dissolved or revoked effective september 20xx law sec_6001 of the code provides that every person liable for any_tax imposed by the code or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_1_6033-1 h of the regulations provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 form 886-a rev department of the treasury - internal_revenue_service page -1 form 886a n arne of taxpayer org department of the treasury internal_revenue_service ex lanation of items schedule no or exhibit year period ended december 20xx sec_1 c -1 a of the regulations provides that in order to be exempt as an organization described in sec_501 c of the code the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section sec_1 c -1 c of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 c revrul_59_95 1959_1_cb_627 provides that the failure of an organization to provide requested information about its financial status and operations may result in revocation of its exempt status on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax taxpayer's position the taxpayer declared that the organization has no operational or financial activities government's position the org provided during the exam a certificate of administrative dissolution issued from the state of state department of state stating that the org administratively dissolved or revoked effective september 20xx the government position is that the organization has been inactive for several years now and that there have been no operations or financial activities conducted you have days to provide us with a formal written response for the information written above if the service does not have the information within days the service will have no other option than to proceed with final revocation org fails to meet the operational requirements for continued exemption under sec_501 c conclusion form 886-a rev department of the treasury - internal_revenue_service page -2 form 886a name of taxpayer org department of the treasury - internal_revenue_service ex lanation of items schedule no or exhibit year period ended december 20xx the organization does not qualify for exemption under sec_501 c and its tax exempt status should be revoked effective january 20xx contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code send formal written response within days from the date of this letter to form 886-a rev department of the treasury - internal_revenue_service page -3


department of the treasury internal_revenue_service washington d c office_of_chief_counsel date number info release date conex-154045-08 uil the honorable mel martinez united_states senate washington dc dear senator martinez am responding to your letter of date on behalf of your constituent recommended removing the dollar_figure limit on capital_loss deductions that an individual taxpayer may claim each year as you requested responded directly to response lam enclosing a copy of my hope this information is helpful or if you need further assistance please call me at at sincerely george j blaine associate chief_counsel income_tax and accounting enclosure department of the treasury internal_revenue_service washington d c date office_of_chief_counsel dear am responding to your inquiry to senator mel martinez senator martinez wrote to us on your behalf and asked us to respond directly to you you recommended removing the dollar_figure limit on capital_loss deductions that an individual taxpayer may claim each year sec_1211 of the internal_revenue_code limits an individual's capital_loss deduction for capital losses greater than capital_gains to dollar_figure each year the irs does not have the authority to change that statutory requirement the statutory amendment you recommend requires an act of congress please note that sec_1211 limits only the amount deductible per year sec_1211 does not deny a deduction for capital losses in excess of dollar_figure for example if you have a capital_loss that is greater than dollar_figure you may deduct dollar_figure in the year of the loss then deduct the excess up to the dollar_figure yearly limit in later years until the entire capital_loss is fully deducted hope this information is helpful please see the enclosed copy of the instructions for schedule d form_1040 for further information if you have any additional questions please contact or identification_number identification_number at sincerely george j blaine associate chief_counsel income_tax accounting enclosure instructions for schedule d cc the honorable mel martinez