office_of_chief_counsel internal_revenue_service memorandum number release date cc ita b01 --------- posts-149008-09 uilc date june to appeals officer from andrew m irving senior counsel branch income_tax accounting subject casualty_loss issue this chief_counsel_advice responds to your request for assistance dated date this advice may not be used or cited as precedent legend taxpayer -------------------------------- local commission ---------------------------------------------- state --------- successive storms --------------------------------------------------------------- public counsel ------------------------------------------ year year year x ------- ------- ------- -------------- posts-149008-09 y issue ------ ------------------------------ a ratemaking body awarded taxpayer --- --------- utility a ------- ----------------------customer ------------- representing costs incurred to recover from --- ------ ---------------------------------------------in year does the ------------- constitute compensation_for the loss which precludes a casualty_loss deduction under sec_165 of the internal_revenue_code or should the utility take the full amount of the casualty_loss deduction in year and treat the ------------- as income from providing ------------ in successive years when it is collected conclusion the ------------- is an increase to the rate charged by taxpayer for ------------ -------------- -- ------- not compensation_for the ------------ losses in year facts taxpayer is a regulated utility ---------------------------------- taxpayer is regulated by the local commission an agency of state --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------- in year state was hit by --------------- ------- taxpayer incurred approximately dollar_figurex in damages ------------------------------------------------- -------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ------------- specifically local commission ruled that taxpayer did not have to amortize the costs but could recover the full amount of the -----------------------costs through a ------------- ------ --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------ posts-149008-09 taxpayer claimed a casualty_loss deduction under sec_165 for the year --------- because there are some features of this situation that arguably distinguish it from the fact pattern considered in revrul_87_117 discussed below you ask whether the ------ ------------- should be treated as compensation or reimbursement for the loss for purposes of sec_165 and the corresponding regulations law sec_165 allows a deduction for any sustained loss not_compensated_for_by_insurance_or_otherwise in 16_tc_1084 aff’d on another issue 196_f2d_923 1st cir interpreting the phrase insurance or otherwise the service argued that loss resulting from the abandonment of an elevated railway structure was compensated for by legislation the public control act guaranteeing the taxpayer operating profits sufficient to pay dividends the court disagreed stating that regardless of the amounts of any possible losses sustained by petitioner no payments would be forthcoming to it if its income were sufficiently high after absorbing the losses and other charges to pay the required dividends id pincite in 63_tc_21 which involved federal disaster relief payments the tax_court determined that the general term or otherwise must be construed consistently with the specific term_insurance the court stated that the general purpose of insurance is to spread the risk of loss from any peril among a large number of those who are exposed to a similar peril in 74_tc_725 the court citing shanahan determined that the phrase insurance or otherwise in an analogous provision sec_2054 contemplates that the type of compensation received must be such that it was structured to replace what was lost id pincite the court held that a disbursement from a_trust fund established by a state bar association in compensation_for losses_incurred due to an attorney’s unethical behavior was in the nature of insurance revrul_87_117 1987_2_cb_61 involves a regulated_public_utility that abandons a partially-completed nuclear plant the ratemaking authority in determining to grant the utility a subsequent rate increase permits the utility to amortize the cost of the plant over a specified number of years and include that amortization in its cost of service for ratemaking purposes holding that the rate increase does not reduce the utility’s loss deduction on abandoning the plant the ruling reasons that although the utility other casualty-related issues in the case involve capitalization of post-casualty restoration costs see eg am and identification of the single identifiable property damaged or destroyed by the casualties see eg tam these are independent issues that are not addressed directly or by implication in this memorandum posts-149008-09 commission may give consideration to the fact that a utility suffered a loss in determining whether a rate increase is warranted the rate is not structured to reimburse the utility for its loss rather the rate increase is structured to enable the utility to perform its functions of serving its customers at a fair charge while at the same time maintaining its financial integrity and its ability to attract capital at reasonable terms by paying its investors a reasonable rate of return on their investment if the taxpayer were not a regulated company it could raise its price at will and revenues produced by its price increase could not be considered as compensation_for a loss by insurance or otherwise the governmental grant of authority to increase rates is of the same nature as a price increase by an unregulated company the function of the utility commission is merely to assure that the increase is warranted analysis applying this case law and revrul_87_117 to the ------------- in this case in some respects the --------------was structured to replace what was lost and insurance-like in nature - at least in its effect on taxpayer-------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ---- --------------------------- it is also clear that government compensation_for casualty damage - whether in the form of a cash grant debt forgiveness or a purchase of property for pre-casualty value - is insurance-like compensation that reduces or eliminates a loss deduction and if it exceeds the basis_of_property is eligible for deferral under sec_1033 the right to the --------------arose after the loss occurred and is contingent on future sales however for a payment to be treated as compensation that reduces a loss under sec_165 it is not essential that the right to the payment exist at the time of the loss or even that there be a legal or moral obligation to make the payment see estate of bryan t c pincite citing shanahan t c pincite on the other hand here as in revrul_87_117 the utility’s customers are the source of the funds not the government whose role is only to set rates for ------------ in paying the ------------- the customers are not primarily interested in compensating taxpayer for its losses from the customers’ point of view the ------------- is simply part of a mandatory payment for -------------deductible under sec_162 for a business customer- whether the ------------- is separately identified on the customer’s bill or not the ------------- is temporary which is also a common characteristic of insurance however this does not distinguish revrul_87_117 where the cost of the abandoned plant was amortized over a set time period arguably whether costs are amortized a sec_2 in addition to shanahan see 76_tc_464 revrul_74_206 1974_1_cb_198 revrul_71_160 1971_1_cb_75 treating the -------------- as compensation_for the loss would require that taxpayer exclude a portion of what would normally be ordinary_income from operations and presumably apply that amount to reduce the basis of assets that were affected by the casualties a potentially complex task from an administrative standpoint posts-149008-09 in revrul_87_117 or recovered directly as here is largely a matter of form in both cases the taxpayer is arguably recovering over a set period the amounts the taxpayer seeks to deduct as a loss the ------------- was granted -------------------------------------------------------------------------------- ------------------------------------------------------------------------------ unlike the compensation in boston elevated railway it was not limited to amounts necessary to achieve a certain level of profit nevertheless as in revrul_87_117 the ------------- was granted because -------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- finally as noted in revrul_87_117 treatment of the ------------- as a reimbursement arguably treats taxpayer a regulated business differently from a similarly-situated unregulated business since the basic method for setting a regulated rate is to allow the business to recover its costs plus a reasonable rate of return arguably all of a regulated business’ expenses and capital expenditures are reimbursed which would lead to treatment of a regulated business largely as a conduit for tax purposes however regulated businesses are not taxed in this way but generally compute their gross_income and offsetting deductions in the same manner as unregulated businesses if an unregulated business incurs a casualty_loss it must reduce its deduction by any insurance or insurance-like payment such as a government grant but the loss deduction is not denied because the business intends to and does recover the amount of the loss by selling goods or services and its business income is not treated as an excludible return_of_capital to the extent of the denied loss deduction arguably the result should not differ because a business’ rates are set by a government regulator rather than the market -- taking all these factors into account we conclude that this situation is not sufficiently distinguishable from the situation in revrul_87_117 to call for a different result please call if you have any further questions by _____________________________ andrew m irving senior counsel branch income_tax accounting


t c summary opinion united_states tax_court sharon r davis petitioner v commissioner of internal revenue respondent docket no 17074-07s filed date sharon r davis pro_se stephen j neubeck and robert d kaiser for respondent goeke judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a federal_income_tax deficiency of dollar_figure for the sole issue for decision is whether petitioner is liable for the 10-percent additional tax under sec_72 on early distributions from an individual_retirement_account ira background the stipulation of facts and the accompanying exhibits are incorporated by this reference petitioner resided in ohio at the time of filing her petition in date petitioner was laid off and began receiving state unemployment_compensation benefits petitioner understood that she would forfeit her unemployment benefits if she received any distributions from her retirement plans during the period she received such benefits petitioner received weeks of unemployment benefits in date petitioner received dollar_figure in unemployment benefits thereafter her unemployment benefits terminated during petitioner received distributions from two iras of dollar_figure and dollar_figure for a total of dollar_figure petitioner had not attained age at the time of these 1unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year at issue and all rule references are to the tax_court rules_of_practice and procedure distributions petitioner used a portion of the distributions to pay health insurance premiums incurred during periods of unemployment in and petitioner also used a portion of the distributions to pay the mortgage on her principal_residence which she had acquired in in date petitioner closed a preexisting roth_ira because of concerns with improper activities by the investment firm she withdrew the entire account balance of dollar_figure which constituted the remainder of her initial dollar_figure investment respondent concedes that petitioner is entitled to a capital_loss of dollar_figure from the loss on her investment in her roth_ira petitioner timely filed form_1040 u s individual_income_tax_return for and attached form_5329 additional taxes on qualified_plans including iras and other tax-favored accounts on which she claimed that dollar_figure of the distributions was excepted from the 10-percent additional tax but did not identify a specific statutory exception that applied to the distributions on date respondent issued a notice_of_deficiency for determining that the entire ira distribution of dollar_figure was subject_to the 10-percent additional tax the notice_of_deficiency stated that respondent did not accept petitioner’s form_5329 due to financial hardship not being a valid exception to the premature_distribution tax discussion petitioner contends that the notice_of_deficiency is invalid because respondent did not accept her form_5329 petitioner asserts that the form_5329 did not claim financial hardship as an exception to the 10-percent additional tax as stated in the deficiency_notice petitioner further complains of a disingenuous process both before and after the notice was issued including unreasonable requests for information sec_6212 requires the commissioner to determine that a deficiency exists before issuing a notice_of_deficiency the notice_of_deficiency at issue unambiguously identifies petitioner the amount of the deficiency the basis for the deficiency and the year at issue and was sent to petitioner’s last_known_address see sec_7522 accordingly the notice is valid on its face irrespective of petitioner’s allegation that the notice incorrectly stated that she claimed financial hardship as an exception to the 10-percent additional tax as a general_rule the court will not look behind a notice_of_deficiency to examine the evidence used or the commissioner’s motives policies or procedures in determining the deficiency 91_tc_179 affd without published opinion 872_f2d_411 3d cir we hold that the notice_of_deficiency is valid sec_72 and provides for a 10-percent additional tax on early distributions from qualified_retirement_plans before the attainment of age unless a statutory exception applies petitioner argues that she satisfies the statutory exceptions for distributions made to unemployed individuals to pay health insurance premiums under sec_72 and distributions for first-time home purchases under sec_72 petitioner concedes that dollar_figure of the distribution did not qualify for a statutory exception to the sec_72 10-percent additional tax as she reported on her return distributions from an ira taken after separation from employment and used to pay health insurance premiums are not subject_to the 10-percent additional tax if the taxpayer received unemployment_compensation for consecutive weeks under any federal or state unemployment_compensation law by reason of such separation the distribution was made during the taxable_year during which such compensation is paid or the succeeding taxable_year and the distribution does not exceed the amount_paid during the taxable_year for health insurance sec_72 petitioner has established that she received unemployment_compensation for over consecutive weeks in the year preceding the ira_distributions satisfying the first two requirements respondent concedes that dollar_figure of the distributions qualifies for the health insurance premium exception petitioner has established that she paid an additional dollar_figure to union fidelity insurance co for health insurance while unemployed during respondent contends that petitioner is not eligible for the health insurance premium exception for the amount_paid to union fidelity because she paid a part of it in date before receiving the first ira distribution in date sec_72 requires the distributions do not exceed the amount_paid during the taxable_year for insurance there is no requirement that the distribution be received before payment of the health insurance premium accordingly the dollar_figure is not subject_to the 10-percent additional tax petitioner contends that a portion of the distribution should be applied to her health insurance premiums because she was prevented from taking a distribution from her ira during on account of state unemployment_compensation laws petitioner also contends that she used a portion of the distribution to pay health insurance premiums during as stated above the statutory exception for health insurance premiums is limited to the amount of premiums_paid during the taxable_year of the distribution petitioner is not entitled to claim the exception for the amounts of premiums that she paid in or this is so even though petitioner may have been prevented from taking a distribution from her ira in because of state unemployment_compensation laws a qualified first-time home buyer distribution is a distribution from an ira in an amount not to exceed dollar_figure that is used within days of its receipt to pay qualified_acquisition_costs with respect to a principal_residence of a first-time home buyer sec_72 a and b a first-time home buyer is an individual who has not had a present ownership_interest in a principal_residence during the 2-year period ending on the date_of_acquisition of a principal_residence sec_72 the date_of_acquisition is the date on which a binding contract to acquire the principal_residence is entered into or when construction or reconstruction is commenced sec_72 qualified_acquisition_costs are the costs of acquiring constructing or reconstructing a residence and include any usual or reasonable settlement financing or other closing costs sec_72 petitioner contends that she used the statutory limit of dollar_figure of the ira_distributions to pay her mortgage and those payments qualified for the first-time home buyer exception petitioner has owned her residence since petitioner had a present ownership_interest in a residence during the 2-year period before she received the distributions sec_72 see cole v commissioner tcmemo_2006_44 accordingly the distributions do not qualify for the first- time home buyer exception under sec_72 to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court james c platts petitioner v commissioner of internal revenue respondent docket no filed date james c platts pro_se julia l wahl for respondent memorandum findings_of_fact and opinion colvin judge respondent determined deficiencies in petitioner’s federal_income_tax additions to tax and penalties as follows addition_to_tax penalties year deficiency dollar_figure big_number big_number sec_6651 dollar_figure -0- dollar_figure sec_6662 -0- -0- dollar_figure sec_6663 dollar_figure dollar_figure dollar_figure the issues for decision are whether certain purported records of the pinnacle building co pinnacle are admissible into evidence we hold they are not whether dollar_figure that petitioner received in was taxable wages or repayment of loans he had made to pinnacle we hold that this amount was taxable wages whether dollar_figure that petitioner received in and dollar_figure that he received in were constructive dividends or repayment of loans from pinnacle we hold that petitioner had constructive dividends of dollar_figure for and dollar_figure for whether petitioner is entitled to a capital_loss deduction for or capital_loss carryforward deductions for and we hold that he is not whether petitioner is entitled to a charitable_contribution_deduction for the donation of building parts to a tax-exempt_organization in we hold that he is not whether petitioner is liable for additions to tax under sec_6651 for the late filing of his and income_tax returns we hold that he is whether petitioner is barred by the doctrine_of collateral_estoppel from denying that respondent’s assessments of tax for and were timely we hold that he is whether petitioner is liable for the accuracy-related_penalty under sec_6662 for or the fraud_penalty under sec_6663 for and we hold he is not findings_of_fact some of the facts have been stipulated and are so found petitioner petitioner resided in pennsylvania when he filed the petition he attended pennsylvania state university for approximately two years after he graduated from high school in petitioner was married to deborah l platts during 1unless otherwise indicated section references are to the internal_revenue_code in effect at all relevant times and rule references are to the tax_court rules_of_practice and procedure and petitioner and his wife maintained a checking account at citizens bank from date through pinnacle during the years at issue petitioner was the sole owner and president of pinnacle a residential construction business pinnacle was a subchapter_c_corporation pinnacle filed forms u s_corporation income_tax return for petitioner signed the forms as president of pinnacle pinnacle reported that it had loans from shareholders on its returns for years up to and including pinnacle did not report the existence of any loans from shareholders after its tax_year and no loans from shareholders were shown on the books_and_records of pinnacle after the mid-1990s petitioner owed money to pinnacle from through pinnacle did not file forms for any period after pinnacle’s earnings_and_profits were dollar_figure at the end of and exceeded dollar_figure in and dollar_figure in payments from pinnacle to petitioner in and pinnacle paid net wages to petitioner biweekly in years before and in the first few months of petitioner reported wages from pinnacle on his through tax returns in pinnacle had a bank account with national city bank petitioner’s gross salary from pinnacle was dollar_figure per two-week pay_period in until pinnacle ceased operating later that year in petitioner received six checks from pinnacle for dollar_figure each ie dollar_figure less withholding and three checks for dollar_figure each the six checks for dollar_figure bore the preprinted phrase payroll check the three checks for dollar_figure did not bear a preprinted phrase identifying them as payroll checks taxes were not withheld from these three payments all nine checks were from pinnacle’s checking account at national city bank the last of these nine checks was dated date during petitioner endorsed five checks payable to pinnacle totaling dollar_figure and deposited them into his personal account at citizens bank in pinnacle recorded the six payments of dollar_figure and the three payments of dollar_figure as wages in its books_and_records in petitioner cashed or deposited into his personal checking account at citizens bank four checks totaling dollar_figure which were payable to pinnacle and which were written by its customers pinnacle development group on date petitioner and his wife opened a checking account at citizens bank in the name of pinnacle development group they were the only individuals with signature_authority over the account and in petitioner wrote three checks payable to himself totaling dollar_figure from pinnacle development group’s account at citizen’s bank in date petitioner deposited three checks totaling dollar_figure which represented payment by pinnacle’s customers for services it rendered into the pinnacle development group_account at citizens bank the only other deposits into the pinnacle development group_account in were a dollar_figure check from building group an entity that petitioner controlled and dollar_figure in miscellaneous deposits petitioner’s charitable_contribution to the pine valley bible camp in petitioner was one of two partners in the registry group a real_estate development partnership the registry group owned real_estate on registry lane including a house pincite registry lane which it used as an office the registry group sold lots on registry lane for residential development the registry group donated the house pincite registry lane to the pine valley bible camp the tax-exempt status of which is not in dispute with the understanding that camp volunteers would disassemble the house and move the building materials to the camp they did that in date on form_1040 u s individual_income_tax_return for petitioner reported without reference to the registry group that he had donated an intact house with a value of dollar_figure to the pine valley bible camp the reported value of dollar_figure was the appraised value of the intact house as of date as stated in an independent appraisal prepared by r robert barone jr which petitioner obtained on date petitioner wrote a note to his certified_public_accountant c p a stating that he and his wife had donated an intact house to their church in the prior year and wanted to deduct half of its value on their return in an accompanying letter dated both date and date petitioner estimated that the value of the intact house was dollar_figure petitioner’s tax returns petitioner and his wife filed joint form sec_1040 for and petitioner filed their form_1040 on date and their form_1040 on date petitioner obtained an extension of time until date to file their form_1040 petitioner did not provide the c p a who prepared the return with any verification of the reported amounts of income the c p a required petitioner and his wife to sign a letter acknowledging inter alia that they had provided the c p a with no verification of those amounts that pinnacle had gone out of business during and that its stock had become worthless in on schedule d capital_gains_and_losses of the form_1040 petitioner reported a long-term_capital_loss of dollar_figure calculated by netting certain amounts reported on pinnacle’s return against petitioner’s claimed dollar_figure loan to pinnacle petitioner carried over the unused portion of the long- term capital_loss dollar_figure to the and form sec_1040 petitioner’s criminal cases a income_tax evasion and withholding_tax evasion on date petitioner was indicted under sec_7201 on one count of income_tax evasion for and four counts of evasion of withholding_tax from wages and fica_taxes due and owing by pinnacle for three quarters of and the first quarter of on date petitioner’s defense counsel in his income_tax evasion case filed a motion in that case to obtain permission for petitioner to travel to florida in that motion petitioner’s defense counsel stated that petitioner wanted to visit his daughter in florida for christmas and return with an automobile clothing and two pets the motion did not say petitioner wanted to obtain pinnacle records from a storage unit in florida that were essential to his defense in that case petitioner did not present any documentary_evidence at the trial in his income_tax evasion case that he had made loans to pinnacle which were outstanding in on date petitioner was convicted on all counts he was sentenced to months in prison b money laundering and mail fraud on date a grand jury sitting in the u s district_court for the western district of pennsylvania indicted petitioner on six counts of money laundering mail fraud and conspiracy the indictment alleged that petitioner had conspired with others to falsely and fraudulently obtain mortgages petitioner pleaded guilty to all of the counts in the indictment he was sentenced to prison for months on each count to be served concurrently notice_of_deficiency and petition respondent issued a notice_of_deficiency to petitioner and his wife for their taxable years and petitioner timely petitioned this court trial was held in pittsburgh pa petitioner appeared for the first day of the trial but not for the second day 2respondent granted ms platts relief from joint_and_several_liability under sec_6015 burden_of_proof opinion petitioner contends that the burden_of_proof shifts to respondent under sec_7491 if a taxpayer complies with all substantiation and recordkeeping requirements under the internal_revenue_code and introduces credible_evidence with respect to any factual issues relevant to ascertaining the taxpayer’s liability the commissioner has the burden_of_proof with respect to that issue see also sec_7491 and a and b rule a petitioner has not satisfied the requirements of sec_7491 to shift the burden_of_proof to respondent thus petitioner bears the burden_of_proof see rule a whether records petitioner contends were in a storage unit in florida and his home before and during the income_tax evasion trial are admissible petitioner offered into evidence documents which he contends are pinnacle business records that were in his home before petitioner also contends that these documents were in a storage locker in florida from to and were again in his possession from until the time of trial in this case the record sec_3the parties dispute whether they stipulated to include in the record of this case the testimony at petitioner’s income_tax evasion trial of pinnacle’s former bookkeeper victoria mazur f k a victoria orris f k a victoria skinner hereinafter ms mazur we need not decide this dispute because we have not considered ms mazur’s testimony in deciding this case at issue purport to be resolutions of the directors of pinnacle minutes of special meetings promissory notes which authorize petitioner to act on behalf of pinnacle to borrow money from petitioner and documents relating to purported loans from petitioner to pinnacle petitioner contends that these records show that pinnacle’s payments to him in were not salary but were repayments of loans he had made to pinnacle and petitioner sustained capital losses when pinnacle ceased operations in because pinnacle had failed to repay various notes owing to him respondent objected on several grounds to the admission of these records as discussed next we hold that these records are not admissible petitioner had a compelling reason to introduce these records into evidence at his income_tax evasion trial if these records had been offered admitted and found credible they would have rebutted the prosecution’s primary theory but petitioner did not offer them into evidence even though he testified at the trial in this case that he and or his daughter had access to these records before and during his income_tax evasion trial petitioner testified that other records were seized from his home in when a search warrant was executed on his home and that these records also were there hidden in his home during the search were not discovered and were not otherwise provided to prosecutors or his defense counsel before that trial petitioner did not explain why he sought to conceal records which might well have rebutted the criminal charges these circumstances cause strong doubts that the records are what petitioner contends they are the trial in the income_tax evasion case was held in date petitioner’s daughter apparently moved to florida in petitioner contends that he took the records to florida at that time and placed them in a storage locker that the documents remained in storage in florida until and that in his daughter sent the records to him in pennsylvania he first provided the records to respondent in this case in petitioner contends that one of his reasons for wanting permission to travel to florida in was to obtain access to the records the motion petitioner filed in his income_tax evasion case did not refer to pinnacle’s records even though he had a compelling reason to obtain those records to support his defense in that case petitioner testified that there were only a couple of boxes of records in the storage locker it appears that petitioner’s daughter could have sent records to him at any time we do not understand why this would not have been done for records that were essential to his defense in the income_tax evasion case we decide whether a witness’ testimony is credible by relying on objective facts the reasonableness of the testimony the consistency of statements made by the witness and the demeanor of the witness see 140_us_417 338_f2d_602 9th cir aff’g 41_tc_593 330_f2d_119 5th cir 89_tc_105 ndollar_figure we may discount testimony which we find to be unworthy of belief see 87_tc_74 but we may not arbitrarily disregard testimony that is competent relevant and uncontradicted see 39_f3d_658 6th cir aff’g and remanding 99_tc_370 and tcmemo_1992_616 at trial petitioner asked that the court mark for identification exhibits 66-p through 106-p the court reserved ruling on the admissibility of the exhibits and ordered the parties to address the issue in their posttrial briefs exhibits 66-p through 106-p were not provided to respondent days before trial as required by our standing_pretrial_order served on the parties in this case five months before trial the court follows the federal rules of evidence sec_7453 evidence is inadmissible if it has not been authenticated or identified fed r evid petitioner has not authenticated these exhibits petitioner in effect asserts that these records exonerating him from income_tax evasion charges were available to him before and during that trial but he did not arrange either himself or through his defense counsel or his daughter to bring them to that trial that is so unlikely that we do not accept that the documents are what petitioner says they are we therefore sustain respondent’s objections to the admission of exhibits 66-p through 106-p except for those exhibits or portions thereof which respondent has stipulated whether payments petitioner received in from pinnacle were taxable wages or repayment of loans he had made to pinnacle petitioner has not denied that he received payments from pinnacle in in the amounts respondent determined petitioner contends that these amounts were the nontaxable repayment of loans that he had made to pinnacle we have found inadmissible the notes petitioner says were proof of these loans thus the only evidence in the record of any loans to pinnacle is petitioner’s testimony petitioner testified that payroll checks were loan repayments because pinnacle’s supply of general checks was exhausted we disagree the record 4respondent has now stipulated the admission of the following exhibits or portions of exhibits offered by petitioner which are therefore admitted into evidence exhibit c d and e exhibit c exhibit c and d exhibit c exhibit c exhibit c exhibit c exhibit c and d exhibit c d h i and j exhibit b exhibit c exhibit c d e f g i and j exhibit c exhibit c exhibit h i j and k exhibit c exhibit c and d exhibit c exhibit c d e and f exhibit c and d exhibit c and d exhibit c exhibit exhibit exhibit exhibit exhibit and exhibit shows that some general checks were written after these payments were made using payroll checks petitioner contends that he made several loans to pinnacle however he claimed a long-term_capital_loss resulting from only one of them on his return pinnacle reported outstanding loans from shareholders on its and returns pinnacle’s returns show that there were no outstanding loans to pinnacle after we do not understand why petitioner would have claimed a loss resulting from only one loan for dollar_figure if he had lent far more than that or why pinnacle did not report outstanding loans to shareholders as it had done in the past if in fact the loans were genuine around special_agent jeffrey miller who worked in the irs criminal_investigation_division was assigned to an investigation for petitioner’s tax_year special_agent miller interviewed petitioner regarding whether petitioner had received wages that were not reported on his return petitioner told special_agent miller that the only loans he made to pinnacle were made in the early 1990s special_agent miller interviewed ms mazur and reviewed pinnacle’s books_and_records with her mr miller also reviewed records of pinnacle that had been seized by the district attorney’s office mr miller did not find any record of loans from petitioner to pinnacle after petitioner testified in his income_tax evasion trial that it would not make sense to draft a promissory note to himself when taking money out of his account and depositing it into pinnacle’s account because it would be basically out of one pocket and putting it into another petitioner’s testimony at the trial in this case that his loans to pinnacle had been duly recorded with promissory notes is contrary to his testimony thus we conclude that pinnacle did not have outstanding loans to petitioner during the years at issue and that its payments to petitioner were salary whether dollar_figure petitioner received in and dollar_figure he received in were constructive dividends or repayment of loans from pinnacle petitioner does not dispute receiving the payments which respondent determined were constructive dividends but contends that those amounts were loan repayments gross_income includes dividends sec_61 a dividend is any distribution_of_property made by a corporation to its shareholders from earnings_and_profits sec_316 sec_301 provides that funds distributed by a corporation over which the taxpayer shareholder has dominion and control are taxed under sec_301 a dividend is ordinary_income to the recipient under sec_301 to the extent of the earnings_and_profits of the corporation a constructive_dividend arises where a corporation confers an economic benefit on a shareholder without the expectation of repayment even though neither the corporation nor the shareholder intended a dividend 140_tc_420 on date petitioner opened a bank account in the name of pinnacle development group the account was controlled solely by petitioner and his wife the record reveals no purpose for pinnacle development group other than to serve as a conduit to transfer money from pinnacle to petitioner on date pinnacle made its final biweekly wage payment to petitioner shortly before that on date petitioner deposited the first in a series of checks totaling dollar_figure made payable to pinnacle by pinnacle customers into his own bank account in date petitioner deposited three checks totaling dollar_figure payable to pinnacle into the pinnacle development group_account in petitioner wrote three checks to himself from the pinnacle development group_account totaling dollar_figure the sum of these three groups of checks is dollar_figure which respondent contends represents the constructive dividends to petitioner for respondent double counted as to the dollar_figure which petitioner withdrew from the pinnacle development group_account the checks payable to pinnacle totaling dollar_figure that petitioner deposited into his own account and the checks totaling dollar_figure payable to pinnacle that he deposited into the pinnacle development group_account were an economic benefit to petitioner petitioner had constructive dividends of dollar_figure for in addition the four checks written to pinnacle which petitioner cashed or deposited into his account in totaling dollar_figure were constructive dividends to petitioner for if a corporation has insufficient earnings_and_profits the distribution is a return_of_capital and if the shareholder’s basis in the stock is consumed then the distribution is capital_gain sec_301 and pinnacle had earnings_and_profits of dollar_figure at the end of pinnacle did not file an income_tax return after there is no evidence in the record to show any change to pinnacle’s earnings_and_profits before the sum of pinnacle’s and distributions to petitioner is dollar_figure thus pinnacle’s distributions to petitioner in and were taxable to petitioner as ordinary_income whether petitioner is entitled to a capital_loss deduction for or capital_loss carryforward deductions for and petitioner reported a long-term_capital_loss on his return his claim for entitlement to that deduction is based on his claim that pinnacle owed him dollar_figure the c p a who prepared petitioner’s return was unable to verify the existence of the claimed loans and asked petitioner to sign a statement that the return was based entirely on amounts provided by petitioner and his representation of the amounts of outstanding loans there is no credible_evidence that petitioner made loans to pinnacle after or that there was any outstanding debt from pinnacle to petitioner in when petitioner reported the loss therefore petitioner is not entitled to the capital_loss deduction for or the capital_loss carryforward deductions for and whether petitioner is entitled to a charitable_contribution_deduction for the donation of a demolished building to a tax-exempt_organization in petitioner claimed a charitable_contribution_deduction for for the donation of building materials taken from a demolished house owned by the registry group a partnership in which petitioner was a partner petitioner claimed that the fair_market_value of his contribution was dollar_figure which was of the value of the house as appraised by mr barone petitioner did not claim half of that amount as a partner in support of his claimed deduction petitioner attached to hi sec_2001 return form_8283 a date letter from his appraiser an unsigned undated square foot appraisal form and a page containing several photographs of a standing residence sec_170 allows a deduction for charitable_contributions made during the taxable_year according to sec_1_170a-13 income_tax regs in order to claim a charitable_contribution_deduction in excess of dollar_figure for a donation of property a donor must obtain a qualified_appraisal for the contributed_property attach a fully completed appraisal_summary to the return and maintain records containing certain information if the contributed_property is a partial interest the appraisal shall be of the partial interest id because petitioner through the registry group owned only of the house at most he would be able to deduct of its value however as discussed next petitioner may not deduct even one-half of the value of the claimed charitable_contribution_deduction for if a taxpayer makes a charitable_contribution of property other than money the amount of the contribution is generally equal to the fair_market_value of the property at the time of the contribution see sec_1_170a-1 income_tax regs to be entitled to deduct a charitable_contribution a taxpayer must satisfy numerous statutory and regulatory substantiation requirements see sec_170 first petitioner did not contribute an intact structure he merely contributed building parts petitioner did not provide an appraisal of the building parts an appraisal of an intact structure is not relevant to deciding the value of the building parts extracted from that structure see 135_tc_471 aff’d 668_f3d_888 7th cir second as reported to the irs by the donee organization petitioner made the donation in date he deducted it for tax_year a charitable_contribution may be deducted only for the year in which it was made sec_170 third the appraisal prepared by mr barone which petitioner attached to form_8283 of hi sec_2001 return is not a qualified_appraisal for several reasons a qualified_appraisal must be received by the donor before the due_date including extensions of the return on which a deduction is first claimed sec_1 170a- c iv b income_tax regs the due_date of petitioner’ sec_2001 return with extensions was date mr barone’s appraisal transmittal letter was prepared on date after the date due_date for filing the form_1040 therefore the appraisal was prepared too late to qualify under the regulations also the valuation_date in the barone appraisal was date the donee received the donation in date a qualified_appraisal is one that is made no earlier than days before the date of contribution of the appraised property sec_1_170a-13 income_tax regs therefore the valuation_date was too early for the appraisal to qualify under the regulations a qualified_appraisal shall include a description of the donated property in sufficient detail to ascertain that the property that was appraised is the property that was contributed id subdiv ii a both the barone appraisal and petitioner’s self-made appraisal identify and value the donated property as a standing dwelling rather than building parts the regulations require that a qualified_appraisal include the terms of any agreement by or on behalf of the donor or donee that relates to the use sale_or_other_disposition of the property id subdiv ii d a taxpayer may be able to deduct a charitable_contribution by substantial compliance with the detailed requirements in the regulations 100_tc_32 63_tc_316 however petitioner’s compliance here was far from substantial we conclude that petitioner is not entitled to a charitable_contribution_deduction for the donation of building parts in whether petitioner is liable for additions to tax under sec_6651 for the late filing of his and income_tax returns sec_6651 imposes an addition_to_tax for failure to timely file a required tax_return sec_7491 places on the commissioner the burden of producing evidence of liability for additions to tax to meet that burden the commissioner must produce evidence showing that it is appropriate to impose that particular addition_to_tax but the commissioner need not produce evidence relating to defenses such as reasonable_cause or substantial_authority 116_tc_438 h_r conf rept no pincite 1998_3_cb_747 respondent has met the burden of production with respect to the additions to tax because petitioner did not timely file his returns for and once the commissioner meets the burden of production the taxpayer must in order to avoid liability for the addition_to_tax produce evidence that the failure was due to reasonable_cause and not willful neglect sec_6651 469_us_241 higbee v commissioner t c pincite h_r conf rept no supra pincite c b pincite reasonable_cause exists if the taxpayer exercised ordinary business care and prudence but nevertheless could not file within the prescribed time boyle u s pincite petitioner has provided no explanation for his failure to timely file his returns therefore petitioner is liable for the additions to tax for and whether petitioner is barred by the doctrine_of collateral_estoppel from denying that respondent’s assessments of tax for and were timely petitioner contends that the time limits for assessing tax for the tax years at issue here have passed the commissioner generally must assess any income_tax within the three-year period after a taxpayer files his or her return sec_6501 respondent mailed the notice_of_deficiency on which this case is based on date more than three years after petitioner’s through income_tax returns were filed in the case of a false_or_fraudulent_return with the intent to evade tax however tax determined to be due may be assessed at any time sec_6501 a conviction for income_tax evasion for a year under sec_7201 after a trial on the merits collaterally estops a taxpayer from denying fraudulent intent under sec_6501 for that year collateral_estoppel applies if the issue to be precluded is the same as that involved in the prior action that issue was actually litigated the issue was determined by a final and valid judgment and the determination was essential to the prior judgment see 698_f3d_160 3d cir aff’g tcmemo_2009_ under the doctrine_of collateral_estoppel conviction for income_tax evasion for a year conclusively establishes that the defendant committed tax_fraud for that year 994_f2d_1542 11th cir aff’g tcmemo_1991_636 880_f2d_260 10th cir aff’g tcmemo_1984_392 petitioner was convicted of income_tax evasion for therefore petitioner’s underpayment for is attributable to fraud and an exception to the general three-year period of limitation applies see sec_6501 116_tc_79 thus respondent’s assessment for petitioner’s tax_year is timely a portion of each underpayment for and results from the carryforward of the fraudulently claimed capital_loss from an underpayment is due to fraud when it is caused by the carryback or carryover of a fraudulent loss 923_f2d_1005 2d cir rev’g tcmemo_1990_30 hall v commissioner tcmemo_1990_ thus petitioner is barred by the doctrine_of collateral_estoppel from denying that he committed tax_fraud for and because of the carryover of capital losses from to those years whether petitioner is liable for the accuracy-related_penalty under sec_6662 for or the fraud_penalty under sec_6663 for and respondent determined that the portion of the underpayment resulting from the disallowance of the charitable_contribution_deduction that petitioner claimed for for the donation of materials from a house was subject_to the sec_6662 accuracy-related_penalty respondent did not determine that petitioner is liable for the fraud_penalty with respect to this adjustment respondent also determined that petitioner is liable for the fraud_penalty under sec_6663 for and petitioner disputes in his pleadings and at trial that he is liable for either of these penalties as noted petitioner’s and tax years remain open under sec_6501 because of collateral_estoppel however petitioner is not liable for the fraud_penalty under sec_6663 if the record does not show that penalty was properly determined by respondent see graev v commissioner t c ___ ___ slip op pincite date supplementing t c ___ date in order to meet the burden of production for either of these penalties respondent must show that there was written supervisory approval of the initial penalty determination see sec_6751 sec_7491 851_f3d_190 2d cir aff’g in part rev’g in part tcmemo_2015_42 graev v commissioner t c at ___ slip op pincite the record contains no evidence of the requisite supervisory approval for either of these penalties thus respondent did not meet the burden of production and petitioner is not liable for the accuracy-related_penalty for or the fraud_penalty for see ford v commissioner tcmemo_2018_8 petitioner’s other arguments petitioner contends that he had a right to have a hearing and to present evidence during respondent’s audit of his returns at issue in this case we note that on date after the conclusion of the income_tax evasion case internal revenue_agent heather whitmore wrote petitioner to advise him that she had been assigned to examine his returns to determine the correct_tax penalties and interest for the years at issue in that letter she offered to schedule a meeting the record does not show whether petitioner met with ms whitmore petitioner also contends that certain unspecified business records were seized from him during one of the criminal cases and not returned to him petitioner provided insufficient factual support or legal authority to prevail on either of these contentions to reflect the foregoing decision will be entered under rule


internal_revenue_service department of the treasury index numbers number release date washington dc person to contact telephone number refer reply to cc dom corp 3-plr-106889-00 date date distributing controlled state y a b c d e f g h i j k plr-106889-00 l m n o p q r s t u v w x business a date this letter replies to a request for rulings dated date on the federal_income_tax consequences of a proposed transaction concerning sec_355 of the internal_revenue_code we received additional information in letters dated april april may may and date the information submitted for consideration is summarized below distributing is a state y company with voting and non-voting common_stock and voting and non-voting preferred_stock outstanding the stock is held by members of an extended family distributing conducts business a on the accrual_method of accounting and uses a fiscal tax_year plr-106889-00 we have received financial information indicating that distributing’s business a has had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years the taxpayer wishes to separate its business a activities into two corporations because shareholders a and t disagree on how business a should be conducted t is willing to accept greater risks in the operation of business a than shareholder a this disagreement is having an adverse effect on the day-to-day operations of distributing in order to eliminate the problems generated by this situation the following transaction has been proposed i ii distributing will organize controlled as a state y accrual basis corporation with voting and non-voting common and voting and non-voting preferred_stock outstanding distributing will transfer a portion of the business a assets the controlled assets to controlled in exchange for the assumption of related liabilities and all of the controlled stock distributing will distribute all of the controlled stock to shareholder a and members of his family b through j and partnership x group a in exchange for all of their distributing stock group a shareholders will receive the same type and class of stock in controlled that they held in distributing for example shareholders who held voting common_stock in distributing would receive voting common_stock in controlled the taxpayer has made the following representations in connection with the proposed transaction a b c the fair_market_value of the controlled stock and other consideration to be received by each member of group a approximately equals the fair_market_value of the distributing stock surrendered by each member of group a in the exchange no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation the five years of financial information submitted on behalf of distributing is representative of the corporation's present operations and there have been no substantial operational changes since the date of the last financial statements submitted d following the transaction distributing and controlled will each continue independently and with its own separate employees the active_conduct of its plr-106889-00 e f g h i j k l share of all of the integrated activities of business a the distribution of stock of controlled is being carried out for the following corporate business_purpose to eliminate irreconcilable differences between a and t concerning the management and operation of business a the distribution of the stock of controlled is motivated in whole or substantial part by this corporate business_purpose there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in either distributing or controlled subsequent to the proposed transaction other than the redemptions described in paragraph g below there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction except for the redemptions of stock of shareholders b f k l m n p q r s u v and w these redemptions will be made under the terms of agreements to redeem the shares made over ten years ago on date there is no plan or intention to liquidate distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation subsequent to the transaction except in the ordinary course of business the total adjusted bases and the fair_market_value of the assets transferred to controlled by distributing will each equal or exceed the sum of the liabilities assumed by controlled plus any liabilities to which the assets transferred are subject the liabilities to be assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred no investment_tax_credit under sec_46 has been claimed or will be claimed on the property to be transferred to controlled no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution of controlled stock payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's-length m no two parties to the transaction are investment companies as defined in sec_368 and iv plr-106889-00 n o distributing is not an s_corporation within the meaning of sec_1361 and there is no plan or intention by distributing or controlled to make an s_corporation_election pursuant to sec_1362 the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled p neither the existing distributing preferred_stock nor the controlled preferred_stock to be issued is sec_306 stock as defined within sec_306 of the code based solely on the information submitted and the representations set forth above we hold as follows the transfer by distributing to controlled of the controlled assets solely in exchange for all of the stock of controlled as described above followed by the distribution of all of the controlled stock to group a in exchange for all of their distributing stock will be a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 distributing will recognize no gain_or_loss upon the transfer of assets subject_to liabilities to controlled in exchange for controlled stock as described above sec_361 and sec_357 controlled will recognize no gain_or_loss on the receipt of controlled assets in exchange for controlled stock sec_1032 the basis of each asset received by controlled will be the same as the basis of that asset in the hands of distributing immediately prior to the transaction sec_362 the holding_period of the controlled assets will include the period during which these assets were held by distributing sec_1223 group a will not recognize gain_or_loss and no amount will be included in the income of group a upon the receipt of the controlled stock in exchange for all of their distributing stock as described above sec_355 distributing will recognize no gain_or_loss upon the distribution of all of its controlled stock sec_361 plr-106889-00 the basis that each member of group a will receive in its controlled stock will equal the aggregate basis of its distributing stock surrendered in the exchange sec_358 the holding_period of the controlled stock received by each member of group a will include the holding_period of the distributing stock surrendered in the exchange provided that the distributing stock is held as a capital_asset on the date of the exchange sec_1223 as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 of the income_tax regulations no opinion was requested and no opinion is expressed about the redemptions described in paragraph g above additionally we express no opinion about the tax treatment of the proposed transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each affected taxpayer must attach a copy of this letter to the taxpayer's federal_income_tax return for the tax_year in which the transaction covered by this ruling letter is consummated we have sent a copy of this letter to your authorized representative pursuant to the power_of_attorney on file in this office sincerely yours assistant chief_counsel corporate by ken cohen senior technician reviewer branch


department of thetreasury tax_exempt_and_government_entities_division internal_revenue_service washington d c feb uniform issue list tep rkts legend taxpayer a ira x account c account m account r financial_institution r amount a amount b provider n state b date date date financial representative s dear this is in response to your request submitted on your behalf by your authorized representative 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 age represents that he received a distribution of amount a from ira x taxpayer a asserts that his failure to accomplish a rollover within the day period prescribed by sec_408 was due to the failure of ira provider n to advise taxpayer a of the 60-day rollover requirement taxpayer a established ira x with provider n financial representative s a representative of provider n assisted taxpayer a in the establishment of ira x page at ira provider n over twenty years ago taxpayer a had begun minimum required distributions from ira x on date taxpayer a informed personnel of provider n of his intent to close ira x with the intent to transfer his investment to a financial_institution closer to his retirement residence in state b there was no representation that taxpayer a spoke to financial representative s with whom he had maintained a relationship for a number of years provider n then effected a direct transfer of amount a into a provider n non-ira account account c approximately four months later on date amount a was transferred from account c to a bank m account account m less than a month later on date amount b was transferred from account m to account r at financial_institution r in state b taxpayer a asserts that provider n erred in not informing him that the distribution was taxable unless rolled over into another ira within days based on the facts and representations you request a ruling that the internal_revenue_service waive the day rollover requirement with respect to the distribution of amount a contained in sec_408 of the code 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 of the code sec_408 of the code defines and provides the rules applicable to ira_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 sec_408 of the code 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 and any other_property is paid into an ira for the benefit of such individual not later than the 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 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 page 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 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 may waive the day requirement under sec_408 and sec_408 of the code 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 only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 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 taxpayer a has not demonstrated that his inability to complete a timely rollover of amount a was caused by any of the factors cited in revproc_2003_16 taxpayer a asserts that provider n's failure to advise him that the distribution would be taxable or that he had rollover options rises to the level of financial_institution error however the code imposes no such obligation on ira custodians absent actions on the part of a financial_institution or financial advisor undertaking such an obligation eg where a taxpayer has erroneously been advised that the rollover period i sec_90 days we will not recognize this failure as financial_institution error therefore pursuant to sec_408 of the code the service hereby declines to waive the 60-day rollover requirement with respect to the distribution of amount a from ira x page 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 pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative 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 if you wish to inquire about this ruling please contact please address all correspondence to se t ep ra t3 sincerely yours frances v sloan employee_plans technical group manager enclosures deleted copy of letter_ruling notice of intention to disclose


id office uilc cca_2008092415594864 ------------- number release date from ------------------ sent wednesday date pm to ---------------------- cc subject 92_tc_776 is the case i was thinking of i think you would have a good case for reformation is the error in identifying the person signing were to become an issue -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -----------------


department of the treasury washington dc person to contact ----------------------------------------------------- --------- telephone number --------------------- refer reply to cc psi - plr-143521-05 date december internal_revenue_service number release date index numbers - ---------------------------------- ------------------------------- ---------------------- ------------------------- --------------------- ------------------------------- x ------------------------------------ ------------- ---- country d1 --------------------- -------------------------- this letter responds to a letter dated date and subsequent dear ----------------- correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an election to be treated as a disregarded_entity for federal tax purposes on d1 pursuant to the laws of country x has a single owner that has limited_liability as defined in sec_301_7701-3 x intended to elect to be a disregarded_entity for federal tax purposes effective d1 however x inadvertently failed to timely file a form_8832 entity classification election the information submitted states that x a private limited_company was formed sec_301_7701-3 provides that an eligible_entity may elect to be sec_301_7701-3 provides guidance on the classification of a foreign sec_301_7701-3 provides that an election under sec_301_7701-3 sec_301_7701-3 provides that for purposes of sec_301_7701-3 a sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 eligible_entity for federal tax purposes under sec_301_7701-3 except as provided in sec_301 b unless it elects otherwise a foreign eligible_entity is classified as an association if all members have limited_liability 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 classified other than as provided in sec_301_7701-3 by filing form_8832 with the service_center designated on form_8832 will be effective on the date specified on form_8832 or on the date filed if no such date is specified on the form the effective date specified on form_8832 cannot be more than days prior to the date the form is filed and cannot be more than months after the date on which the form is filed reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register making certain elections 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 requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 and elect to be sec_301_9100-2 provides the rules governing automatic extensions of time for sec_301_9100-1 provides that the commissioner has discretion to grant a based on the facts submitted and representations made we conclude that the sec_301_9100-3 sets forth the standards the commissioner will use to except as specifically set forth above no opinion is expressed or implied as to treated as a disregarded_entity for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose the federal tax consequences of the transaction described above under any other provision of the code sec_6110 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer on whose behalf it was requested in accordance with the power_of_attorney on file with this office a copy of this sincerely letter is being sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes heather c maloy associate chief_counsel passthroughs and special industries