internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi 4-plr-145439-02 date march re legend husband wife child a child b_trust trust real_property accountant attorney date date date x dear this is in response to your letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations and sec_2642 of the internal_revenue_code to make allocations of generation-skipping_transfer gst tax exemptions to transfers to trusts the facts and representations submitted are summarized as follows husband and wife are married on date husband and wife created two trusts trust for the benefit of child a and her issue and trust for the benefit of child b and her issue at the same time husband contributed an undivided interest_in_real_property to trust and another undivided interest_in_real_property to trust each undivided_interest was valued at dollar_figurex the provisions of the two trusts are identical except for the beneficiary designations plr-145439-02 article i sec_1 of each trust provides that the trustee is to distribute or apply so much of the net_income to or for the benefit of the respective beneficiary as the trustee in the trustee’s sole discretion deems advisable for her health maintenance support education and welfare any net_income not so distributed or applied is to be added to principal sec_1 provides for the distribution of principal to or for the beneficiary and or to or for the benefit of the beneficiary’s living issue as the trustee may deem advisable to provide generously for the health maintenance support education and welfare of the beneficiary and or her issue sec_1 provides that the trust is to terminate on the respective beneficiary’s death and the trustee is to distribute the remaining principal and accumulated or accrued income to such of the beneficiary’s issue in such amounts or shares in further trust or otherwise as the beneficiary appoints by will to the extent the property is not effectively appointed it is to be distributed outright or in further trust to or for the beneficiary’s then living issue per stirpes sec_1 and sec_2 provide directions for distribution of the trust property in the event the beneficiary dies without issue attorney drafted the trust agreement and accountant prepared the gift_tax returns husband and wife elected to treat the gifts of undivided interests_in_real_property as made one-half by each under sec_2513 on date the gifts were reported on timely filed gift_tax returns in the course of preparing the returns however accountant inadvertently failed to allocate any of husband’s and wife’s gst_exemption to the transfers in reviewing the returns attorney noticed the omission and on date submitted the request on behalf of husband and wife for an extension of time under sec_2642 and sec_301_9100-1 and sec_301_9100-3 to allocate a portion of their unused gst_exemption to those gifts husband and wife have not allocated any gst_exemption to gifts made after the date transfers sec_2513 provides that a gift made by one spouse to any person other than such person’s spouse shall be considered as made one-half by that person and one-half by such person’s spouse but only if both spouses have signified their consent sec_2601 imposes a tax on every generation-skipping_transfer a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer is generally defined as the excess of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of the gst_exemption allocated to the trust or to property transferred in a direct_skip and the denominator is the value of the property transferred to the trust or involved in the direct_skip plr-145439-02 sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual to any property with respect to which the individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_26_2632-1 of the generation-skipping_transfer_tax regulations 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 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 the transfer or is deemed to be made under sec_2632 or c the value of the property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 sec_2642 provides that the secretary shall by regulation prescribe the 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 sec_2642 provides that in determining whether to grant relief 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 the time for making the allocation or election shall be treated as if not expressly prescribed by statute sec_2652 provides that if under sec_2513 one-half of a gift is treated as made by an individual and one-half of the gift is treated as made by the individual’s spouse the gift shall be so treated for purposes of chapter notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_transfer_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 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 months except plr-145439-02 in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_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 allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election 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 granted an extension of time of days from the date of this letter to make an allocation of available gst tax exemption with respect to the date transfers of interests_in_real_property to trust and trust the allocation will be effective as of the date of the transfers to the trusts and the inclusion_ratio with respect to each trust will be determined under sec_2642 based on the value of the transfer to each trust as finally determined for gift_tax purposes the rulings contained in this letter are based upon information and representations submitted by the taxpayers and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent the allocation should be made on supplemental form_709 united_states gift and generation-skipping_transfer_tax returns and filed with the internal_revenue_service center cincinnati ohio a copy of this letter should be attached to each supplemental form_709 two copies are enclosed for this purpose plr-145439-02 sincerely heather c maloy associate chief_counsel passthroughs and 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 b01-plr-140812-02 date nov legend x date date dear this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was formed on date the sole shareholder of x desired that x elect s_corporation treatment effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides 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 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed plr-140812-02 sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 effective date with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes 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 pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative s dianna k miosi sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------- --------------------------------- ----------------------- - department of the treasury washington dc person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 - plr-155351-03 date date re private_letter_ruling request legend settlor spouse child child child grandchild grandchild trustee trust a_trust b_trust a1 trust a2 trust a3 trust b1 trust b2 trust b3 date date date date date date foundation state x cite dear --------------- - - - - - - - - - - - - - - - - - - - - - - - - - ------------------------- ---------------------- ------------------------------------------------- -------------------------------------------- ------------------------------------------------- -------------------------- -------------------------- ---------------------------------------- ---------------------------------------- --------------------------------------- ----------------------------------------------------- ------------------------------------------------- ----------------------------------------------------- ---------------------------------------------------- ------------------------------------------------ ---------------------------------------------------- ----------------------- ---------------------- --------------------- ------------------- ---------------------- ---------------------- -------------------------- ------------ ------------------------------------------------------------ this letter is in reply to your letter of date requesting rulings settlor established trust a on date and trust b on date both dates were plr-155351-03 regarding the generation-skipping_transfer gst tax treatment of the proposed division and modification of two trusts prior to date trust a and trust b are both governed by the law of state x trustee a corporate trustee and child are the co-trustees of trust a and trustee is the sole trustee of trust b both trusts were irrevocable and had similar terms except as described below you represent that no additions constructive or otherwise have been made to either trust a or trust b after date under the terms of trust a income is to be distributed in the discretion of the corporate trustee for care education and welfare to the following beneficiaries in the following order of priorities spouse settlor’s spouse child child and child settlor’s children and if child was not living to his widow for her life and the children or descendants of child child and child distributions may be made to beneficiaries at one level of priority to the exclusion of beneficiaries at a lower level of priority any income not distributed may be distributed as income in a subsequent year or added to corpus any current income or accumulated income not distributed to spouse may be distributed or held for the benefit of settlor’s children including the widow of child if necessary share and share alike or distributed or held for the benefit of the children’s descendants per stirpes the corporate trustee may also make discretionary distributions of corpus to meet a dire or urgent need regarding the care or education of any beneficiary for which no other funds are available any corpus not distributed to spouse will be held for the benefit of settlor’s children share and share alike or for their children or descendants per stirpes any distribution to a beneficiary other than spouse will be charged against that beneficiary’s share of the corpus described above or the expiration of years after the death of the survivor of spouse child child child and grandchild all of whom were living on date upon termination the corpus will be distributed to the then living grandchildren and or descendants of settlor per stirpes in the event there are no living grandchildren or descendants of settlor upon termination the corpus will be distributed to foundation divide the trust assets into three shares and administer each share as a separate trust for each of settlor’s children if living or such child’s children or descendants per stirpes trust b has the same beneficiaries and dispositive provisions as trust a_trust b will terminate at the first to occur of the death of all the beneficiaries described above or trust a is to terminate on the first to occur of the death of all the beneficiaries article of trust a provides that after the death of spouse the trustee may settlor died on date and spouse died on date you represent that foundation was established with the intention that it qualify as on date the trustees of trust a and trust b petitioned the appropriate local plr-155351-03 the expiration of years after the death of the survivor of spouse child child child grandchild and grandchild all of whom were living on date as in trust a upon termination the trust b corpus will be distributed to the then living grandchildren and or descendants of settlor per stirpes if there are no living grandchildren or descendants the trust assets will be distributed to foundation as in trust a article of trust b provides that after the death of spouse the trustee may divide the trust assets into three shares and administer each share as a separate trust for each of settlor’s children if living or such child’s children or descendants per stirpes a charitable entity to which contributions would be deductible under sec_2055 however you represent that foundation in fact is no longer in existence court in state x to partition trust a and trust b into six separate subtrusts for the benefit of settlor’s children child child and child and their respective families the court granted the petitions on date and ordered that the trusts be partitioned contingent upon the trustees obtaining a favorable letter_ruling from the internal_revenue_service pursuant to the terms of the court order trust a will be divided into separate subtrusts trust a1 for the benefit of child trust a2 for the benefit of child and trust a3 for the benefit of child in general each separate subtrust will receive a pro_rata interest in each trust asset trust a assets include promissory notes entered into with entities related to one or more beneficiaries of trust a it is anticipated that these promissory notes will be distributed to the separate subtrust of the beneficiary whose entity borrowed the funds the distributions will be equalized by a non pro_rata distribution of cash and or securities trust b will also be divided into separate subtrusts trust b1 for the benefit of child trust b2 for the benefit of child and trust b3 for the benefit of child each separate subtrust will receive a pro_rata interest in each trust asset the provisions of the six separate subtrusts will be identical except that the income_beneficiary of each subtrust will be the specific settlor’s child the primary beneficiary for whom the subtrust is established in the case of child child 1’s widow is an alternate income_beneficiary if she survives child and their children or descendants also each subtrust will terminate upon the first to occur of the death of all the income beneficiaries of the respective subtrusts or years after the death of the survivor of the measuring lives set forth in trust a and trust b respectively and the subtrust assets will be distributed to the living children and plr-155351-03 descendants of the respective primary beneficiary in the event that there are no children or descendants of the primary beneficiary living at the termination of that respective subtrust the subtrust assets will be distributed equally to the subtrusts for the benefit of the other primary beneficiaries and their children and descendants foundation is no longer in existence and thus is not designated as a contingent_remainder beneficiary in addition the trustees of the six separate subtrusts will change for two of the new subtrusts trustee and child will remain as co-trustees of trust a1 trust b1 trust a3 and trust b3 while trustee and child will be the co-trustees of trust a2 and trust b2 specifically you request a ruling that the division and modification of trust a and trust b as described above and the creation of the resulting subtrusts trust a1 trust a2 trust a3 trust b1 trust b2 and trust b3 and any distribution from or termination of any interest in the resulting subtrusts will not subject any of the resulting subtrusts to the generation-skipping_transfer_tax law and analysis sec_2601 imposes 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 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 ' b a of the act and ' b i 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 b ii a provides that except as provided in sec_26_2601-1 or c any trust as defined in sec_2652 in existence on date is considered an irrevocable_trust unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under or if the settlor had died on date 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 sec_26_2601-1 example considers a situation where in plr-155351-03 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 grantor established an irrevocable_trust for the benefit of his two children a and b and their issue under the terms of the trust the trustee has the discretion to distribute income and principal to a b and their issue in such amounts as the trustee deems appropriate on the death of the last to die of a and b the trust principal is to be distributed to the living issue of a and b per stirpes in the appropriate local court approved the division of the trust into two equal trusts one for the benefit of a and a 's issue and one for the benefit of b and b 's issue the trust for a and a 's issue provides that the trustee has the discretion to distribute trust income and principal to a and a 's issue in such amounts as the trustee deems appropriate on a 's death the trust principal is to be distributed equally to a 's issue per stirpes if a dies with no living descendants the principal will be added to the trust for b and b's issue the trust for b and b 's issue is identical except for the beneficiaries and terminates at b 's death at which time the trust principal is to be distributed equally to b 's issue per stirpes if b dies with no living descendants principal will be added to the trust for a and a's issue the division of the trust into two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in ' than the person or persons who held the beneficial_interest prior to the division in addition the division does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the two partitioned trusts resulting from the division will not be subject_to the provisions of chapter the law of state x provides at cite unless expressly prohibited by the terms of the governing instrument when property is held or to be held in a_trust the trustee is authorized but not required to divide the trust into two or more separate trusts of equal or unequal value if the trustee determines that division of the trust is in the best interests of the beneficiaries or could result in a significant decrease in current or future federal income gift estate or generation-skipping_transfer taxes or any other tax plr-155351-03 if a trustee divides a_trust into separate trusts under this subchapter the terms of the separate trusts need not be identical but must provide for the same succession of interests and beneficiaries as are provided in the original trust differing tax elections may be made for each of the separate trusts in this case trust a and trust b were both irrevocable on date and no additions constructive or actual have been made to either trust after that date the parties propose to divide trust a into three equal subtrusts trust a1 for the benefit of child and his spouse and issue trust a for the benefit of child and her issue and trust a3 for the benefit of child and her issue likewise trust b will be divided into three equal subtrusts trust b1 for the benefit of child his spouse and his issue trust b2 for the benefit of child and her issue and trust b3 for the benefit of child and her issue the provisions in each of the resulting subtrusts regarding discretionary distributions of income and corpus by the corporate trustee are identical to those in the original trusts the resulting subtrusts will terminate based on the same measuring lives and under the same conditions as the original trusts and final distributions will be made to the same beneficiaries as under the original trusts except that foundation which no longer exists has been eliminated you have opined that if on termination there are no descendants of settlor then living the cy pres doctrine would apply and the court would designate a charitable recipient for each subtrust consequently the proposed division of trust a into trust a1 trust a2 and trust a2 and the proposed division of trust b into trust b1 trust b2 and trust b3 will not shift a beneficial_interest in the subtrusts 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 subtrusts beyond the time provided for in trust a or trust b see sec_26 b i e example accordingly based on the facts submitted and the representations made and provided that there are no further additions to the subtrusts after date we conclude that after the division trust a1 trust a2 trust a3 and trust b1 trust b2 and trust b3 will be treated as trusts that were irrevocable on date and trust a1 trust a2 trust a3 and trust b1 trust b2 trust b3 will be exempt from the gst tax imposed under sec_2601 further the proposed division will not constitute an addition to trust a1 trust a2 trust a3 trust b1 trust b2 or trust b3 accordingly future distributions from these resulting subtrusts will be exempt from gst tax 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 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 rulings contained in this letter are based upon information and plr-155351-03 the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer 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 george l masnik chief branch office of associate chief_counsel cc passthroughs special industries


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division mar uniform issue list tvep ra ts legend taxpayer a roth_ira b ira c ira d roth_ira e ira f ira g account h financial_institution financial_institution j financial_institution k amount amount 2u1525029 sec_408 of the code defines an individual_retirement_account ira to mean a_trust created or organized in the united_states and requires that the trustee be a bank or an approved non-bank trustee sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 sec_408 of the code provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money or any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 effective date all of an individual’s iras are aggregated for purposes of applying the one rollover per year limit set forth in sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary_of_the_treasury may waive the 60-day requirement under sec_408 and sec_408 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement revproc_2003_16 r b provides that the service will issue a ruling waiving the 60-day rollover requirement in cases where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the taxpayer in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a are consistent with his assertion that his failure to complete a rollover of the distributions of amount from roth_ira b amount from ira c and amount from ira d was due to taxpayer a’s medical_condition and hospitalization during the 60-day rollover period therefore pursuant to sec_408 of the code the service waives the 60-day rollover period with respect to amount amount and amount provided all other requirements of sec_408 except the 60-day requirement were met with respect to the contributions of amount to roth_ira e amount to ira f and amount to ira g the contributions of these amounts are considered rollover_contributions within the meaning of sec_408 this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent amount dear this is in response to your request dated date as supplemented by correspondence dated date and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he received a distribution equal to amount from roth_ira b amount from ira c and amount from ira d which iras were maintained by financial_institution taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to taxpayer a’s medical_condition and hospitalization on date taxpayer a had been diagnosed with and began treatment for a serious medical_condition taxpayer a was treated again for this illness on date and estimated to return to work on date on date taxpayer a withdrew amount from roth_ira b amount from ira c and amount from ira d on date taxpayer a deposited amount amount and amount into account h a non-ira account maintained by financial_institution k on date taxpayer a was hospitalized and was subsequently released on date on date taxpayer a was again treated for his illness and was still unable to return to work on date when taxpayer a was recovering from his illness taxpayer a established roth_ira e ira f and ira g with financial_institution j for purposes of depositing the amounts withdrawn from roth_ira b ira c and ira d on date taxpayer a deposited amount into roth_ira e amount into ira f and amount into ira g taxpayer a represents and the documentation shows that amount sec_1 and were not used for any other purpose based on the above facts and representations taxpayer a requests a waiver of the 60-day requirement contained in sec_408 of the code with respect to the distributions of amount from roth_ira b amount from ira c and amount from ira d if you wish to inquire about this ruling please contact at please address all correspondence to se t ep ra t1 sincerely yours carlton a watkins manager employee_plans technical group enclosures notice of intention to disclose deleted copy of this letter


internal_revenue_service number release date index number ----------------------------------------- --------------------------------------------- ---------------------------- re private_letter_ruling request 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 b09 plr-111383-05 date date legend year husband a wife b date child ------- ----------------------------------------------------------------------------------------- --------- ----------------------------------------------------------------------------------------- ----------------------- ------------------------ --------- -------------------- ----------------------------------------------------------------------------------------- ------------------------ ------- --------- --------- ------------- ----------------- c d e insurance agent year dear --------------------------- this letter responds to your authorized representative’s letter dated date that requests rulings regarding the gift and estate_tax consequences of a proposed reformation and assignment of a life_insurance_policy facts the facts and representations submitted are summarized as follows in year husband was the owner and insured of a life_insurance_policy individual policy of husband having a net interpolated_terminal_reserve_value of dollar_figurea and wife was the owner and insured of a life_insurance_policy individual policy of wife having a net interpolated_terminal_reserve_value of dollar_figureb plr-111383-05 on date husband and wife the four children of husband and wife the children and child signing as trustee of a revocable_trust created on the same date the trust each executed an instrument entitled transfer by gift paragraph of the instrument provides that husband and wife transfer and assign the individual policy of husband and the individual policy of wife to the trustee of the trust paragraph of the instrument provides that the transfer of the policies is subject_to a deferred obligation from the trust to husband and wife represented by a note in an amount equal to dollar_figurec which is the combined value of the policies less dollar_figured the amount anticipated to be excluded from the total_amount_of_gifts made by husband and wife during such year under sec_2503 of the internal_revenue_code paragraph provides that husband and wife intend to exchange the policies for a single last-to-die policy joint and survivor insurance_policy having a face_amount of dollar_figuree that will be the property of the trust in lieu of the two policies described above paragraph provides that each beneficiary of the trust acknowledges the gift to trust and that each intends to contribute sufficient funds to trust to satisfy the deferred balance and to pay ongoing premiums on the policy as needed to keep it in force subject_to the rights under the trust the final paragraph of the instrument provides that husband and wife acknowledge that the transfer is a split gift to be considered as made one-half by each spouse under sec_2513 in favor of each of their four children in an amount equal to the amount of the annual exclusion allowable under sec_2503 the trust instrument of the trust appoints child as trustee paragraph of the trust instrument acknowledges delivery of the insurance policies subject_to the note payable to husband and wife in the amount of dollar_figurec paragraph of the trust instrument vests the trustee with all right title and interest in and to the cash and policy or policies acquired by the trustee and authorizes the trustee to exercise and enjoy all the options benefits rights and privileges under the policies paragraph also directs any insurance_company that issues a policy to recognize the trustee as the absolute owner of the policy and further indicates that the trustee is fully entitled to all options rights privileges and interests under such policies paragraph of the trust instrument provides that notwithstanding any other provision the trust shall be revocable by any of the children who may at any time revoke his or her participation in the trust and withdraw his or her share of its assets shortly after the execution of the transfer by gift instrument husband and wife met with insurance agent now deceased and directed him to exchange the two individual policies for a joint and survivor insurance_policy and to title the new policy in the name of the trust insurance agent presented a number of documents for husband and wife to sign in relation to the new policy whereupon husband and wife assumed insurance agent had properly completed the transactions in fact the two individual policies were properly exchanged for a joint and survivor insurance_policy but the new policy continued to list husband and wife as owners of the policy neither husband nor wife has filed a form_709 united_states gift and generation- skipping transfer_tax return for year plr-111383-05 on january 1st of year husband and wife executed an instrument entitled declaration of gift and forgiveness of note the instrument provides that husband and wife forgive by gift the note in the amount of dollar_figurec that was executed on date by child as trustee of the trust no payments had been made on the note since the date_of_issuance of the joint and survivor insurance_policy in year premium notices on the policy have been sent by the insurance_company to child as trustee of the trust child as trustee of the trust paid all the premiums due on the policy recently it was discovered that the joint and survivor insurance_policy lists husband and wife and not the trust as the owners of the policy husband and wife now intend to reform the joint and survivor insurance_policy to clarify that the trust is the owner of the policy by executing a valid assignment of the policy in favor of the trust the following rulings have been requested the reformation and assignment of the joint and survivor insurance_policy to reflect the trust as the owner of the policy will not be considered a taxable gift under sec_2512 the proceeds of the joint and survivor insurance_policy will not be includible in the gross_estate of either husband or wife under sec_2035 if one or both die within three years of the reformation and assignment of the joint and survivor insurance_policy to reflect the trust as the owner of the policy law and analysis sec_2501 imposes a tax for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2503 as in effect in year provided that in the case of gifts other than gifts of future interests in property made to any person by the donor during the calendar_year the first dollar_figure of such gifts to such person shall not for purposes of sec_2503 be included in the total_amount_of_gifts made during such year sec_2511 provides that subject_to certain limitations the gift_tax applies whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is real or personal tangible or intangible sec_25_2511-1 of the gift_tax regulations provides that any transaction in which an interest in property is gratuitously passed or conferred upon another regardless of the means or device employed constitutes a gift subject_to tax plr-111383-05 sec_2512 provides that where property is transferred for less than an adequate_and_full_consideration in money or money’s worth then the amount by which the value of the property exceeds the value of the consideration shall be deemed a gift and shall be included in computing the amount of gifts made during the calendar_year sec_25_2512-8 provides that transfers reached by the gift_tax are not confined to those only which being without a valuable consideration accord with the common_law concept of gifts but embrace as well sales exchanges and other dispositions of property for a consideration to the extent that the value of the property transferred by the donor exceeds the value in money or money’s worth of the consideration given therefor however a sale exchange or other transfer of property made in the ordinary course of business a transaction which is bona_fide at arm’s length and free from any donative_intent will be considered as made for an adequate_and_full_consideration in money or money’s worth transactions within a family group are subject_to special scrutiny and the presumption is that a transfer between family members is a gift see 82_tc_239 aff’d without op 786_f2d_1174 9th cir in general if an individual makes a loan and as part of a prearranged plan intends to forgive or not collect on the note the note will not be considered valuable consideration and the donor will have made a gift at the time of the loan to the full extent of the loan see revrul_77_299 1977_2_cb_343 maxwell v commissioner 3_f3d_591 2nd cir 29_tc_730 sec_2513 provides that a gift made by one spouse to any person other than his spouse shall for 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 sec_2513 shall apply only if both spouses have signified under the regulations provided for in sec_2513 their consent to the application of sec_2513 in the case of all such gifts made during the calendar_year by either while married to the other sec_25_2513-2 provides that the consent required by sec_2513 may not be signified after the 15th day of april following the close of the calendar_year of the gift unless before such 15th day no return has been filed for the year by either spouse in which case the consent may not be signified after a return for the year is filed by either spouse sec_2035 provides that if the decedent made a transfer of an interest in any property or relinquished a power with respect to any property during the 3-year period ending on the date of the decedent’s death and the value of such property would have been included in the decedent’s gross_estate under sec_2036 sec_2037 sec_2038 or sec_2042 if such transferred interest or relinquished power had been retained by the decedent on the plr-111383-05 date of his death the value of the gross_estate shall include the value of any property which would have been so included sec_2042 provides in part that the value of the gross_estate shall include the value of all property to the extent of the amount receivable by all other beneficiaries as insurance under policies on the life of the decedent with respect to which the decedent possessed at his death any of the incidents_of_ownership exercisable either alone or in conjunction with any other person in general the provisions of the insurance_policy policy facts govern the relationships between the insured the insurer the owner and the beneficiary see 380_us_678 355_f2d_7 1st cir 47_tc_199 acq 1967_1_cb_2 moreover evidence to the effect that policy facts do not conform to the intent of the parties intent facts must overcome the heavy presumption in favor of policy facts in rhode island hospital trust co an insurance_policy naming decedent’s father and mother as beneficiaries was obtained on decedent's life by his father years prior to decedent's death decedent’s father regarded the policy as belonging to him and he kept the policy in his own safe deposit box and paid all the premiums on the policy on the death of decedent's mother decedent's father directed decedent to change the policy beneficiary to reflect decedent’s father as the primary beneficiary and decedent made the change in spite of these facts the first circuit held that decedent had the necessary incidents_of_ownership over the insurance_policy to bring the proceeds into his gross_estate under sec_2042 the court noted that incidents_of_ownership depend on a legal power to exercise ownership of the policy the court examined the policy at issue and determined that without gaining possession of the policy the decedent could have borrowed on the policy changed the method of using the dividends assigned the policy and revoked the assignment the court further noted that decedent’s signature was necessary to change the beneficiary to surrender the policy for cash_value to alter the policy and to change the dividend options f 2d pincite the court however indicated that there is an exception to the general_rule that the terms of the policy determine the ownership of the policy the court stated as follows to the principle of heavy predominance of the ‘policy facts' over the ‘intent facts' there must be added the caveat that where the insurance_contract itself does not reflect the instructions of the parties as where an agent on his own initiative inserts a reservation of right to change a beneficiary contrary to the intentions which had been expressed to him no incidents_of_ownership are thereby created citations omitted id pincite plr-111383-05 in estate of fuchs v commissioner supra the tax_court held that facts were within the exception referred to in rhode island hospital trust co supra in estate of fuchs each of two partners had obtained insurance on decedent-partner's life to fund a buy- sell agreement the policies specifically provided that the respective beneficiaries were the sole owners of the policies and the partnership_agreement provided that each partner was to have the incidents_of_ownership of the policies he had obtained subsequently additional policies were issued and the insurance agent was instructed that the beneficiaries were to be the owners of the respective policies the policies at issue however mistakenly gave the decedent-partner some of the incidents_of_ownership in the policies of the two partners the court determined that it was the agreement belief and understanding of the partners that each insurance_policy would be owned by its respective beneficiary and that no right title or privilege in the policy was to rest with the insured decedent-partner the court stated in the case before us miller the partners’ insurance agent failed to effectuate the partners’ explicit directions and intentions and consequently the continental casualty policies similarly failed to reflect clearly those directions and intentions we cannot see any distinction between the situation where an agent gratuitously adds an unwanted clause in an insurance_policy and the situation presented herein where the agent fails to include a desired provision or remove an undesired one we have no doubt that had the partners been aware of their agent’s error in failing to have the insurance policies reflect their wishes the policies could have been corrected by reformation t c pincite the court concluded that the insurance contracts at issue were mistakenly drawn up in a manner that did not reflect the intent of the parties accordingly the insurance proceeds were not includible in the decedent-partner’s estate t c pincite in the present case we must decide whether the policy facts or the intent facts control for purposes of determining whether the reformation and assignment of the joint and survivor insurance_policy to reflect the trust as owner will constitute a transfer subject_to gift_tax or will cause the proceeds to be includible in the estates of husband and wife if either dies within years of the assignment as in estate of fuchs the intent of the parties in the present case with respect to the ownership of the policies is set forth in contemporaneous instruments in estate of fuchs the partnership_agreement revealed that the partners intended that any partner who obtained an insurance_policy on another partner would be considered the owner of that policy in the present case the transfer by gift instrument reveals that husband and wife intended to transfer ownership of the insurance policies to the trust the trust instrument executed on the same date supports this conclusion the facts of the present case are also similar to the facts in estate of fuchs in that husband and wife plr-111383-05 instructed insurance agent to title the new policies in the trust’s name insurance agent failed to follow their instructions and ownership of the policies was not properly recorded for these reasons we have determined that the exception articulated in rhode island hospital trust co supra applies to the facts of the present case accordingly we conclude for gift and estate_tax purposes that husband transferred the individual policy of husband and wife transferred the individual policy of wife to the trust on date although not a part of this request for a ruling we have decided to rule on the gift_tax consequences of the transfer of the policies to the trust in year for purposes of sound tax_administration in year husband and wife transferred their respective life_insurance policies to their children’s revocable_trust with the expectation that the transfers would be considered transfers of present interests to each of their children furthermore after they both consented to split their gifts pursuant to sec_2513 husband and wife expected that a total of dollar_figured would be excluded in determining the total_amount_of_gifts of husband and wife for year under sec_2503 finally because the amount of the note from the trust equaled the difference between the combined value of the policies and dollar_figured husband and wife expected to owe no gift_tax on the transfers of the policies to the trust in year a few months later before any payments were made on the note husband and wife canceled the note from the trust and forgave the debt husband and wife expected that the forgiveness of the debt would be considered a transfer of a present_interest to each of their children in year and that the amount of each such transfer would be less than the amount excludable under sec_2503 thus husband and wife anticipated that no gift_tax would result in year with respect to the forgiveness of the debt owed by the trust we view the initial transfers of the policies made subject_to a deferred debt obligation and the subsequent forgiveness of such debt obligation a few months later in a different tax_year without any payments having been made on such debt obligation as part of a prearranged plan to avoid owing gift_tax with respect to the transfers of the policies accordingly we conclude for gift_tax purposes that as part of a prearranged plan husband and wife intended to forgive the note executed by the trust that was received by husband and wife at the time of the transfer of the life_insurance policies see revrul_77_299 1977_2_cb_343 maxwell v commissioner 3_f3d_591 2nd cir 29_tc_730 see also 82_tc_239 thus we rule as follows the policy will not constitute a transfer subject_to gift_tax under sec_2512 the policy will not cause the proceeds of the policy to be includible in the gross_estate of the reformation or assignment of the policy to reflect the trust as the owner of the reformation or assignment of the policy to reflect the trust as the owner of the note given to husband and wife in year by the trust is not considered plr-111383-05 either husband or wife under sec_2035 if he or she dies within three years of the reformation or assignment adequate_and_full_consideration in money or money’s worth for the transfers of the life_insurance policies in year and thus husband and wife are treated as having made a gift in year in the amount dollar_figurec the amount of the note since neither husband nor wife have yet filed form sec_709 for year husband and wife should expeditiously file individual form sec_709 for year with the internal_revenue_service center cincinnati ohio in order to a report the gifts made by each spouse in year and b to signify his and her consent to consider the gifts made by one spouse to be considered as made one-half by each spouse in accordance with sec_2513 see sec_25_2513-2 a copy of this letter should be attached to each form_709 a copy is enclosed for this purpose the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as 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 taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely james f hogan senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosure copy of letter for sec_6110 purposes copy of letter


internal_revenue_service number release date index number ------------------- ----------------------------------- ------------------------------------------------------------ ------------- -------------------------------------------------- ---------------------------------- ---------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-107039-10 date april legend x country d1 dear --------------- --------------------------------------------------------------------------- ------ ---------------- ------------ -------------------------- this responds to your letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as an association_taxable_as_a_corporation for federal tax purposes the information submitted states that x was formed under the laws of country x represents that as a foreign eligible_entity x intended to elect to be treated as an association_taxable_as_a_corporation effective d1 however x inadvertently failed to timely file a form_8832 entity classification election sec_301_7701-3 of the income_tax regulations provides that an eligible_entity with at least two members may elect to be classified as either an association and thus a corporation under sec_301_7701-2 or as a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner plr-107039-10 sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a foreign eligible_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 owner 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 an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_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 announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of days from the date of this letter to elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective d1 the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-107039-10 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to x's authorized representatives sincerely associate chief_counsel passthroughs special industries by ________________________________ melissa liquerman chief branch office of associate chief_counsel passthroughs special industries enclosure copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court charles r mangum and estate of marilyn mangum deceased charles r mangum executor petitioners v commissioner of internal revenue respondent docket no 1288-12l filed date sallie w gladney for petitioners thomas lee fenner and paul cooperman feinberg for respondent memorandum opinion buch judge this case comes before us on a petition for review of a collection determination relating to a liability for former sec_6621 tax- motivated transaction interest repealed for returns due after in1 collection review cases sec_6330 provides that taxpayers cannot challenge their underlying tax_liability if they received a statutory_notice_of_deficiency or had a prior opportunity to challenge their underlying liability pursuant to sec_6330 the mangums seek review of the internal revenue service’s irs determination that sustained the filing of a notice_of_federal_tax_lien with respect to their tax_year and they raise various arguments disputing the underlying tax_liability attributable to sec_6621 interest regardless of the merits of their arguments about the underlying liability the mangums received prior consideration in appeals before their collection hearing requests accordingly they are statutorily barred from challenging their underlying liability and the irs did not abuse its discretion by sustaining the lien omnibus budget reconciliation act of obra pub_l_no sec b stat pincite9 unless otherwise indicated all section references are to the internal_revenue_code code in effect for the relevant times and all rule references are to the tax_court rules_of_practice and procedure mrs mangum died during this dispute with the irs in this case her estate appears through her husband as executor for convenience we will refer to mr mangum and his late wife or her estate collectively as the mangums see sec_6320 background this case was submitted without trial under rule charles r mangum was a limited_partner in dillon oil technology partners the dillon oil partnership was created ostensibly to invest in enhanced oil recovery technology used to recover oil and natural_gas dillon oil was subject_to the partnership audit and litigation procedures found at sec_6221 through commonly referred to as tefra dillon oil was one of the many elektra hemisphere tax_shelter investment partnerships whose partnership items were extensively litigated in tax_court elektra and hemisphere refer to the names of the entities that purportedly licensed enhanced oil recovery technology to investment partnerships including dillon oil there were over big_number related see 99_tc_132 aff’d sub nom 28_f3d_1024 10th cir tefra is short for the tax equity and fiscal responsibility act of pub_l_no sec_402 stat pincite see krause v commissioner t c pincite see krause v commissioner t c pincite in this case the non-tefra partnerships leased enhanced oil recovery technology from elektra energy corp and the tefra partnerships leased enhanced oil recovery technology from hemisphere licensing corp the successor_corporation to elektra elektra hemisphere pre-tefra and tefra partnership cases with alleged total_tax deficiencies in excess of dollar_figure billion mr mangum’s flowthrough loss from dillon oil was dollar_figure for he and his wife marilyn filed a joint form_1040 u s individual_income_tax_return and reported that loss on their schedule e supplemental income and loss i dillon oil fpaa and tax_court proceeding the liability the mangums are challenging was determined as a result of a proceeding involving dillon oil the irs examined dillon oil’s return and issued a notice of final_partnership_administrative_adjustment for the partnership taxable_year the irs principally disallowed over dollar_figure million of dillon oil’s deductions a petition was filed with respect to dillon oil and several other similarly situated partnerships and the case was captioned 110_tc_153 named for the lead entity because of the large number of elektra hemisphere cases before the tax_court we consolidated two cases krause v commissioner and hildebrand v krause v commissioner t c pincite commissioner and tried them as a test case for the other elektra hemisphere cases we decided those cases in and the court_of_appeals for the tenth circuit affirmed in in we issued an interlocutory opinion in the dillon oil proceeding holding that krause v commissioner controlled and that sec_6621 tax-motivated transaction interest applieddollar_figure congress enacted tax-motivated transaction interest under sec_6621 into law in but later repealed it for returns due after tax-motivated transaction interest provided for interest pincite of the normal rate and applied to underpayments of tax greater than dollar_figure that were attributable to a tax-motivated transactiondollar_figure 99_tc_132 110_tc_153 interlocutory opinion in dillon oil proceeding aff’d sub nom tucek v commissioner 198_f3d_259 10th cir and aff’d sub nom drake oil tech partners v commissioner 211_f3d_1277 10th cir deficit_reduction_act_of_1984 pub_l_no sec_144 stat pincite initially codified as sec_6621 but later changed to sec_6621 by the tax_reform_act_of_1986 pub_l_no sec c a stat pincite obra sec b sec_6621 repealed we eventually dismissed dillon oil’s case for lack of prosecution the decision entered on date however is silent on whether sec_6621 interest applies ii irs’ determination that the mangums owe additional tax because of the dillon oil decision by letter dated date the irs notified the mangums that they owed additional tax and interest for because of the dillon oil partnership- level decision the irs included with this letter a form 4549a-cg income_tax examination changes which explained that the mangums’ income would be adjusted by dollar_figure because of the dillon oil decision this adjustment resulted in a tax increase of dollar_figure the total amount due for was dollar_figure consisting of dollar_figure of tax dollar_figure in statutory interest pursuant to sec_6601 and dollar_figure in tax-motivated transaction interest pursuant to sec_6621 on date the irs assessed and billed the mangums dollar_figure for tax_year because of the dillon oil proceeding which included dollar_figure in tax dollar_figure in interest and an dollar_figure credit to adjust a previously imposed late payment penalty this notice stated a lower balance due than the february letter and this lower amount is consistent with the irs’ assessment listed on form certificate of assessments payments and other specified matters for tax_year a rejection of the mangums’ offer-in-compromise on date the mangums submitted an offer-in-compromise challenging their liability for the sec_6621 tax-motivated transaction interest they offered to pay dollar_figure for tax_year and included a check for that amount they argued that the court_of_appeals for the fifth circuit in copeland v commissioner had held that the krause and hildebrand analysis of sec_183 was wrong as a matter of law and elektra hemisphere partners who are bound by the outcome in those cases are not subject_to section c penalty interest the irs rejected the mangums’ offer-in-compromise in date because the court in krause v commissioner made numerous findings_of_fact conclusively establishing that the elektra hemisphere transactions lacked economic_substance the irs explained this was a sufficient basis to conclude that the transactions were tax motivated because a tax-motivated transaction 290_f3d_326 5th cir aff’g in part rev’g in part and remanding tcmemo_2000_181 99_tc_132 includes any transaction that is a sham pursuant to sec_6621 and courts have held that sham transactions include those determined to have no economic_substance further the irs stated that courts can either inquire into whether there were any non-tax economic effects or use the analysis under section the analysis is the same whether the terminology used is that of ‘economic substance ’ ‘sham ’ or sec_183 the irs concluded that the mangums were liable for sec_6621 tax-motivated transaction interest b appeals’ rejection of the mangums’ offer-in-compromise on date the mangums appealed the irs’ decision to reject their offer-in-compromise the assigned appeals officer notified the mangums’ attorney that she was waiting for the irs office_of_chief_counsel to advise her on the sec_6621 determination ultimately the appeals officer sustained the rejection of the mangums’ offer-in-compromise the appeals officer left a message with the mangums’ attorney that she would be sustaining the rejection of the mangums’ offer the appeals officer then spoke with the mangums’ attorney by phone on date explaining that she would sustain the rejection of the mangums’ offer that same day the mangums’ attorney faxed the appeals officer a copy of a notice_of_intent_to_levy issued for that the mangums had recently received stating that her help to get this stayed until the offer is officially rejected would be greatly appreciated the appeals officer ultimately sustained the rejection of the offer later in mrs mangum passed away and mr mangum was appointed executor of her estate iii irs notice_of_intent_to_levy to the mangums the irs sent the mangums a final notice_of_intent_to_levy and notice of your right to a hearing dated date this notice was for tax_year and showed a dollar_figure balance due as well as a late payment penalty of dollar_figure the mangums submitted a form request for a collection_due_process or equivalent_hearing marking offer_in_compromise as a collection alternative which the irs received on date in it they argued that n umerous courts have held that irs imposition of the section c penalty interest rate based on the vulcan oil tax_court decision is improper as a matter of law and the irs erred in rejecting their offer-in-compromise by letter dated date the irs rejected the mangums’ collection_due_process or equivalent_hearing request the irs explained that the mangums’ request was not timely because their form was received more than one year after the irs sent a notice_of_intent_to_levy to the mangums on date however the irs’ administrative file for the mangums does not contain any information from certified mail lists for any mailings between date and date the irs sent mr mangum a form_8519 taxpayer’s copy of notice_of_levy that was dated date and explained that the irs had levied on his wells fargo bank account the mangums requested a stay on activity because the irs has not issued a formal notice_of_determination neither this notice nor any that the irs issued to the mangums as of date are before the court iv irs notice_of_federal_tax_lien to the mangums the irs sent the mangums a letter notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 on date the letter was for tax_year for a dollar_figure lien and stated the assessment_date was date on date the mangums submitted a new form marking offer_in_compromise as a collection alternative the mangums again challenged the sec_6621 tax-motivated transaction interest a settlement officer who had had no prior involvement with the unpaid liability at issue was assigned the case he determined that the mangums could not challenge the underlying liability attributable to the sec_6621 interest because they had been given a prior opportunity to challenge it he explained this in a letter he sent date and he scheduled a collection_due_process_hearing for date the settlement officer met with the mangums’ attorney on date and he reiterated that the mangums could not challenge the underlying liability because the appeals officer had sustained the rejection of the mangums’ offer-in-compromise based on doubt as to liability the mangums’ attorney told the settlement officer that the mangums never received a closing letter from appeals and wished to file another offer-in-compromise the mangums submitted an offer-in-compromise based on doubt as to liability for offering dollar_figure which the irs received on date on date the irs sent the mangums a notice_of_determination sustaining the lien for tax_year the irs explained in this determination_letter that the mangums could not challenge the sec_6621 interest because they had had a prior opportunity to challenge it when the appeals officer considered their offer-in-compromise the irs further explained that it would file an amended notice_of_federal_tax_lien to correct the assessment_date on the original filing which it did on date mr mangum while residing in texas timely petitioned in response to this notice_of_determination which sustained the lien for him and for his wife’s estate the parties moved to submit the case fully stipulated under rule and filed a stipulation of facts with exhibits the court granted their request discussion this case comes before us on a petition for review of the irs’ determination sustaining the lien for the tax_year the mangums assert that the underlying liability attributable to the sec_6621 tax-motivated transaction interest is in error the irs argues that the mangums are barred from challenging the underlying liability in this proceeding because of their prior opportunity to challenge the underlying liability with appealsdollar_figure i former sec_6621 tax-motivated transaction interest the irs assessed sec_6621 tax-motivated transaction interest on the mangums’ underpayment which stemmed from the dillon oil partnership proceeding former sec_6621 applied to substantial underpayments the irs also argues that the mangums are barred from challenging the underlying liability because they had a prior opportunity to participate in the partnership-level proceeding under sec_6226 because we find that the mangums had a prior opportunity to challenge their underlying liability with appeals we do not need to address this additional partnership-level participation argument attributable to tax-motivated transactions and increased the rate of interest on those underpayments to of the standard underpayment interest rate found in sec_6621 for this section the code defined a substantial_underpayment as an underpayment greater than dollar_figure tax-motivated transactions included among other things any sham or fraudulent transaction further congress expressly provided that the secretary could promulgate regulations to specify which transactions would be considered tax motivateddollar_figure ii collection_due_process overview and our review of irs’ determination the secretary must notify taxpayers in writing of their right to request a hearing upon the filing of a notice of lien these hearings are often called collection_due_process or cdp hearings in a cdp hearing taxpayers may raise any issue that is relevant to an unpaid tax or a collection action including sec_6621 repealed sec_6621 repealed sec_6621 repealed sec_6621 repealed sec_6320 sec_6320 and c appropriate spousal defenses challenges to the appropriateness of collection actions and offers of collection alternativesdollar_figure a underlying liability challenges taxpayers may challenge the existence or amount of the underlying tax_liability in their cdp hearing if they did not receive a statutory_notice_of_deficiency or did not otherwise have the opportunity to dispute the liability while the term underlying liability is not defined in sec_6320 or sec_6330 we have interpreted this term to include any amounts owed by a taxpayer pursuant to the tax laws further we have previously upheld regulations promulgated by the secretary that define a prior opportunity to dispute the underlying liability to sec_6330 sec_6330 115_tc_329 include a prior opportunity for a conference with appeals sec_301_6320-1 q a-e2 proced admin regs provides q-e2 when is a taxpayer entitled to challenge the existence or amount of the tax_liability specified in the cdp_notice a-e2 a taxpayer is entitled to challenge the existence or amount of the underlying liability for any_tax period specified on the cdp_notice if the taxpayer did not receive a statutory_notice_of_deficiency for such liability or did not otherwise have an opportunity to dispute such liability receipt of a statutory_notice_of_deficiency for this purpose means receipt in time to petition the tax_court for a redetermination of the deficiency determined in the notice_of_deficiency an opportunity to dispute the underlying liability includes a prior opportunity for a conference with appeals that was offered either before or after the assessment of the liability an opportunity for a conference with appeals prior to the assessment of a tax subject_to deficiency procedures is not a prior opportunity for this purpose although petitioners argue that 128_tc_48 was incorrectly decided we are bound by our court’s precedentdollar_figure 128_tc_48 holding that because congress also intended to preclude taxpayers who were previously afforded a conference with the appeals_office from raising the underlying liabilities again in a collection review hearing and before this court sec_301_6330-1 q a- e2 proced admin regs is valid as a reasonable interpretation of sec_6330 see also hassel family 368_fedappx_695 8th cir aff’g tcmemo_2009_127 298_fedappx_579 9th cir 132_tc_301 129_tc_58 see 111_tc_210 the continued the record in this case is clear that the mangums had a prior opportunity to challenge their underlying liability no one disputes that the mangums had prior consideration of their arguments related to their underlying tax_liability in appeals before their cdp hearing requests as a result we are precluded from considering the issues they raise because the mangums had a prior opportunity with appeals to challenge their underlying liability they are statutorily barred from challenging the existence or amount of that liability in this proceeding currently the mangums’ only forum to challenge their tax would be to pay the underlying liability and sue for a refunddollar_figure continued doctrine_of stare_decisis generally requires that we follow the holding of a previously decided case absent special justification aff’d 214_f3d_1254 10th cir sec_6330 d 118_tc_572 see sec_7422 sec_6511 b abuse_of_discretion review of irs’ determination because the validity of the underlying liability is not properly at issue we review the irs’ determination for abuse_of_discretion an abuse_of_discretion will be found where the determination was arbitrary capricious or without sound basis in fact or law the irs must take into consideration the verification that the requirements of any applicable law or administrative procedure have been met issues raised by the taxpayer and whether any proposed collection action balances the need for efficient collection with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary the settlement officer properly based his determination on these factors first the settlement officer verified that the requirements of applicable law and administrative procedure were met the federal government obtains a lien against all property and rights to property whether real or personal of any see 114_tc_604 114_tc_176 129_tc_107 sec_6330 person liable for federal taxes upon demand for payment and failure to pay the secretary has the discretion to withdraw the notice of lien if certain circumstances are present such as the filing of the notice was premature the taxpayer entered into an agreement to satisfy the liability withdrawal would facilitate collection or with the consent of the national_taxpayer_advocate withdrawal would be in the best interests of the taxpayer the settlement officer determined that none of the permissive circumstances for lien notice withdrawal were present he further determined that the irs had sent the mangums a bill for the tax that had not been fully paid finally although he determined that the assessment_date listed on the notice_of_federal_tax_lien was incorrect he explained that this was a non-fatal procedural error that would be corrected with the filing of an amended tax_lien the irs filed an amended tax_lien notice and notified mr mangum further the original notice_of_federal_tax_lien albeit with sec_6321 sec_6323 see cyman v commissioner tcmemo_2009_144 wl at n the notice of lien states incorrect assessment dates but that error does not invalidate the notice_of_federal_tax_lien an incorrect assessment_date was sufficient to give the mangums notice as required under section dollar_figure second the settlement officer considered the only issue raised by the mangums the mangums submitted an offer-in-compromise as a collection alternative arguing that the portion of their liability attributable to the sec_6621 tax-motivated transaction interest was in error the settlement officer investigated irs’ records for the mangums he determined the mangums were precluded from challenging their underlying liability because they had a prior opportunity to raise this issue with appeals which had sustained the rejection of their offer-in-compromise third the settlement officer determined that upholding the lien balanced the government’s need for efficient collection of tax with the mangums’ concerns that the collection action be no more intrusive than necessary 908_f2d_18 5th cir holding that a notice of assessment that contained a technical error is still valid where the taxpayer has not been misled by the error and had actual notice of the conduct that was at issue cf 571_f2d_174 3d cir a notice of a deficiency even if it contains error may nonetheless be valid where the taxpayer has not been misled as to the proper year involved or the amounts in controversy aff’g in part 66_tc_743 and 67_tc_176 accordingly the settlement officer did not abuse his discretion when he sustained the lien iii conclusion the mangums had a prior opportunity to challenge the underlying liability attributable to the sec_6621 tax-motivated transaction interest and they cannot further challenge their underlying liability here accordingly our review of the irs’ determination is limited and we find that the irs did not abuse its discretion in sustaining the lien to reflect the foregoing decision will be entered for respondent