department of the treasury internal_revenue_service number release date washington d c date cc el gl br1 uilc memorandum for assistant district_counsel kansas-missouri attn dale p kensinger from alan c levine chief branch1 general litigation cc el gl subject warning of enforcement actions against corporations this is in response to your memorandum dated date you requested our advice under the significant advice procedures with respect to whether the internal_revenue_service service should issue a notice_of_intent_to_levy upon a corporate officer rather than a person holding a power_of_attorney for the corporation in your memorandum you concluded that sec_6331 of the internal_revenue_code code requires the service to give the notice_of_intent_to_levy to a corporate officer rather than the power_of_attorney and further that sec_6304 does not require the service to give the notice to the power_of_attorney our views are provided below with respect to the positions stated in your memorandum issue whether the notice_of_intent_to_levy required by sec_6331 should be issued to a corporate officer rather than a person holding a power_of_attorney when the corporation has authorized a person to represent the corporation conclusion the notice_of_intent_to_levy required by sec_6331 should be issued to a corporate officer and a person holding a power_of_attorney when the corporation has authorized a person to represent the corporation facts the corporation has authorized a person holding a power_of_attorney to represent the corporation in accordance with sec_6331 a notice_of_intent_to_levy is to be issued to the corporation for an unpaid tax_liability discussion a a notice_of_intent_to_levy must be sent to a corporate officer the treasury regulations regulations and case law support the conclusion that a notice_of_intent_to_levy must be issued to a corporate officer sec_6331 of the code provides that the service may levy upon property of any person only after the secretary has notified such person in writing of his intention to make such levy sec_6331 states the following the notice required under paragraph shall be- a given in person b left at the dwelling or usual place of business of such person or c sent by certified or registered mail to such person’s last know address no less than days before the day of the levy emphasis added the regulations unambiguously state that the notice_of_intent_to_levy must be sent to the taxpayer sec_301_6331-2 of the regulations provides that the service may levy on the property of a taxpayer after the director has notified the taxpayer in writing of the intent to levy the notice must be given in person be left at the dwelling or usual place of business_of_the_taxpayer or be sent by registered or certified mail to the taxpayer’s last know address emphasis added thus the commissioner has by regulation construed sec_6331 of the code to require that a notice_of_intent_to_levy be issued to the taxpayer furthermore case law strongly supports that the notice_of_intent_to_levy must be served upon the taxpayer the fourth circuit noted the following the term person shall be construed to mean and include an individual company or corporation sec_7701 the term taxpayer means any person subject_to any internal revenue tax sec_7701 since congress has delegated to the commissioner the power to promulgate all needful rules and regulations for the enforcement of the internal_revenue_code sec_7805 the courts will defer to the regulatory interpretations of the code so long as they are reasonable cottage sav ass’n v c i r 111_sct_1503 see also national muffler dealers assn inc v united_states 99_sct_1304 sec_6331 provides that the government can make a levy upon a person’s property subject_to a tax_lien only after the secretary has notified such person in writing of his intention to make such a levy see sec_6331 and such notice must be served on the person upon whose property levy is intended no less than days before the day of the levy see sec_6331 emphasis added see 841_f2d_97 4th cir see eg 970_f2d_750 10th cir haggert v philips medical systems inc 39_f3d_1166 1st cir moreover courts have held that strict compliance with this procedure is ‘necessary to effect a valid levy and seizure ’ potemken f 2d pincite quoting matter of 40_br_201 n d ga see also james f 2d pincite b a copy of the notice_of_intent_to_levy must be sent to the power_of_attorney the regulations require that a copy of the notice_of_intent_to_levy be sent to a person holding a power_of_attorney for the corporation sec_601_502 et seq provides the rules for powers of attorney sec_601_501 states that t hese rules as to the power_of_attorney apply to all offices of the internal_revenue_service in all matters therefore the power_of_attorney rules must apply to the service’s notice_of_intent_to_levy sec_601_506 provides that a ny notice or other written communication or copy thereof required or permitted to be given to a taxpayer in any matter must be given to the taxpayer and to the representative however failure to give notice or other written communication to the recognized representative of a taxpayer will not affect the validity of any notice sec_601_506 thus a person holding a power_of_attorney for a taxpayer must receive a copy of the notice_of_intent_to_levy c sec_6304 does not require that a notice_of_intent_to_levy be sent to the power_of_attorney sec_6304 does not require that the service send a notice_of_intent_to_levy to the power_of_attorney sec_6304 of the code provides that the service may not communicate with the taxpayer in connection with the collection of any unpaid tax if the service knows the taxpayer is represented by any person authorized to practice before the internal_revenue_service with respect to such unpaid tax sec_6304 is not limited in application to individual taxpayers but applies to all taxpayers with respect to any unpaid tax including corporate tax the congressional intent of sec_6304 was to address the concerns regarding a person holding a power_of_attorney for a taxpayer must be a recognized representative of the taxpayer in accordance with sec_601_502 et seq abusive or harassing contact with taxpayers see s rep no pincite we believe that a notice_of_intent_to_levy does not have the potential to harass a taxpayer to the contrary strict compliance with this procedure is necessary to effect a valid levy and seizure in order ‘to give the taxpayer a last chance to avoid the drastic consequences of seizure by payment of the tax_liability ’ 815_fsupp_1444 n d fla quoting potemken f 2d pincite moreover sec_6304 is currently substantially codified in off-code provisions and is in the internal_revenue_manual see irm therefore we believe it does not significantly impact current business practices with regard to notices of intent to levy see internal_revenue_service u s dep’t of the treasury pub no irs restructuring and reform act of conduct provisions accordingly we agree with your position that statutorily required notices such as the notice_of_intent_to_levy do not come within the purview of sec_6304 in sum we conclude that a notice_of_intent_to_levy must be issued to a corporate officer and a person holding a power_of_attorney when the corporation has authorized a person to represent the corporation if you have any further questions please call


internal_revenue_service number release date index number department of the treasury washington dc person to contact telephone number refer reply to cc psi 4-plr-114716-02 date july re legend father father’s trust daughter daughter’s trust stepgrandchild stepgrandchild stepgrandchild family_trust no stepgrandchild family_trust no stepgreatgrandchild 2a stepgreatgrandchild 2b stepgreatgrandchild 2c date date date date date date date date state plr-114716-02 dear this is in response to your submission dated date on behalf of stepgrandchild family_trust no in which you request a ruling that the exercise of a power_of_appointment will not cause the trust to be subject_to the generation-skipping_transfer_tax under sec_2601 of the internal_revenue_code on date prior to date father established father’s trust for the benefit of daughter under the terms of father’s trust after daughter attained the age of all net_income was to be paid to daughter for her life on daughter’s death the trust corpus was to be held for the benefit of daughter’s children however if daughter died without children surviving the trust corpus was to be paid to father or his estate in addition father retained the right to revoke the trust in which case the corpus was to be paid to father on date prior to date father released his retained right to revoke the trust subsequently on date prior to date father and the trustee of father’s trust executed an agreement pursuant to which father daughter and the trustee of the trust consented to the amendment of father’s trust to provide that should daughter die with no children surviving then the principal of the trust was to be distributed to such person or persons as daughter shall direct pursuant to the terms of her last will it is represented that this agreement amending the trust was effective under state law authorizing the modification of a_trust if the grantor trustee and beneficiaries consent to the modification or alternatively effectuated an assignment of father’s reversionary_interest on date prior to date daughter released her rights under the power_of_appointment granted in the date agreement except the right to appoint to her spouse her descendants the descendants of her spouse or the spouses of her descendants on date daughter amended and restated a revocable_trust daughter’s trust that she had previously established in addition on date daughter executed her will daughter subsequently amended the trust on date daughter died without issue on date after date survived by stepgrandchild and the issue of stepgrandchild stepgreatgrandchild 2a stepgreatgrandchild 2b and stepgreatgrandchild 2c under article iii of the will daughter exercised her power_of_appointment over father’s trust by directing that one-half of the corpus be distributed to the stepgrandchild family_trust no and one-half to the stepgrandchild family_trust no both established under the terms of daughter’s trust daughter’s trust as amended and restated became irrevocable at her death and provides for the disposition of daughter’s property any discretionary power over the disposition of property under daughter’s trust is to be exercised by an independent_trustee section dollar_figure of article v of daughter’s trust provides that property distributed pursuant to daughter’s exercise of the power_of_appointment under article iii of her will is to be divided equally between two trusts stepgrandchild family_trust no and stepgrandchild family_trust no stepgrandchild family_trust no is to be held in accordance with article vii for the benefit of stepgrandchild and his issue and stepgrandchild family_trust no is to be held in accordance with article vii for the benefit of the issue of stepgrandchild plr-114716-02 section b of article vii of daughter’s trust provides that stepgrandchild family_trust no is to terminate unless sooner terminated as provided in section upon the occurrence of the earlier of the death of the last to die of the stepgrandchild and his issue or the expiration of twenty-one years after the death of stepgrandchild on termination the corpus is to be distributed outright to the living issue of the primary beneficiary identifying the trust and if none to the living issue of daughter’s deceased husband and if none to charity under section income of stepgrandchild family_trust no may be distributed to or used or expended for the benefit of stepgrandchild and his issue as the independent_trustee shall determine each distribution use or expenditure in accordance with the provisions of this section shall be in the sole discretion of the independent_trustee under section accumulated income or corpus of stepgrandchild family_trust no may be distributed to or used or expended for the benefit of stepgrandchild and his issue as the independent_trustee shall determine each distribution use or expenditure in accordance with the provisions of this section shall be in the sole discretion of the independent_trustee section dollar_figure provides that stepgrandchild family_trust no is to terminate prior to the time specified in section dollar_figure when and if the entire stepgrandchild family_trust no corpus has been distributed used or expended pursuant to the prior provisions of article vii the trust is to be administered under the laws of state it is represented that stepgrandchild was born on date prior to date the independent_trustee of daughter’s trust requests a ruling that daughter’s testamentary exercise of the power_of_appointment which she held over father’s trust does not cause stepgrandchild family_trust no to be subject_to the generation-skipping_transfer_tax under sec_2601 law and analysis sec_2601 imposes a tax on each generation-skipping_transfer made by a transferor to a skip_person under section a of the tax_reform_act_of_1986 the generation-skipping_transfer_tax is generally applicable to generation-skipping transfers made after date however under section b a of the tax reform act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date under sec_26_2601-1 however this rule does not apply to a transfer of property pursuant to the exercise release or lapse of a general_power_of_appointment that is treated as a taxable transfer for estate or gift_tax purposes under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides that except as provided under sec_26 b v b where any portion of a_trust remains in the trust after the post date release exercise or lapse of a power_of_appointment over that portion of the trust and plr-114716-02 the release exercise or lapse is treated to any extent as a taxable transfer under chapter or the value of the entire portion of the trust subject_to the power that was released exercised or lapsed is treated as if that portion had been withdrawn and immediately retransferred to the trust at the time of the release exercise or lapse sec_26_2601-1 provides that the release exercise or lapse of a power_of_appointment other than a general_power_of_appointment as defined in sec_2041 will not be treated as an addition to a_trust if - such power_of_appointment was created in an irrevocable_trust that is not subject_to chapter under sec_26_2601-1 and in the case of an exercise such power_of_appointment is not exercised in a manner that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period measured from the date of creation of the trust extending beyond any life in being at the date of creation of the trust plus a period of years sec_2041 provides in part that the gross_estate shall include the value of all property with respect to which a general_power_of_appointment created on or before date is exercised by the decedent through his will or by a disposition which if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 through inclusive the failure to exercise such a power or the complete release of such a power will not be deemed an exercise of that power sec_2041 provides that if a general_power_of_appointment created on or before date has been partially released so that it is no longer a general_power_of_appointment the exercise of the power will not be deemed to be the exercise of a general_power_of_appointment if the partial_release occurred before date sec_2041 provides that a general_power_of_appointment is a power which is exercisable in favor of the decedent his estate his creditors or the creditors of his estate except where the decedent's power is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent in the present case father’s trust became irrevocable prior to date daughter’s power_of_appointment with respect to father’s trust was created prior to date the power as originally created constituted a general_power_of_appointment as described in sec_2041 however prior to date daughter partially released the power so that after the release the power was not a general power in accordance with sec_2041 daughter’s testamentary exercise of the power is not treated as the exercise of a general power for estate_tax purposes under daughter’s will daughter exercised her power_of_appointment over father’s trust by directing that the property subject_to such power be distributed one-half to the stepgrandchild family_trust no and one-half to the stepgrandchild family_trust no stepgrandchild family_trust no is to terminate upon the occurrence of the earlier of the death of the last to die of stepgrandchild or his issue or the expiration of twenty-one years after the death of stepgrandchild at which time the corpus will be distributed outright to beneficiaries as described in the trust instrument as noted above stepgrandchild was alive prior to the date that father’s trust became irrevocable thus daughter’s power was not exercised in a manner that may postpone or suspend vesting of the trust corpus passing to plr-114716-02 stepgrandchild trust no for a period measured from the date of creation of father’s trust extending beyond any life in being plu sec_21 years sec_26_2601-1 accordingly based on the facts submitted and representations made daughter’s exercise of the power_of_appointment which she held over father’s trust does not cause stepgrandchild family_trust no to be subject_to the generation-skipping_transfer_tax under sec_2601 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 the rulings it is subject_to verification on examination except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to the independent_trustee of stepgrandchild family_trust no the 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 sincerely yours george l masnik chief branch associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes cc


internal_revenue_service number release date index number --------------------------- --------------------------- -------------------------------------- -------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b6 plr-110962-13 date date --------------------------- --------------------------- -------------------------- ------------------------------------ ---------- ------------- ------------ ------------------------------ ------------------------------------------------------ ------------------------------------------ ------- -------------- ------------------ -------------- ------ ------------------------ --------- --------- legend taxpayer company seller state a state b state c site generator generating station year a date a date b date c chemical a chemical b a b dear --------------- plr-110962-13 this is in response to your request for rulings submitted by your authorized representative concerning the federal_income_tax consequences of the transaction described below background taxpayer a state a corporation is treated as a corporation for federal_income_tax purposes taxpayer is the sole owner of the company for federal_income_tax purposes the company is a state b limited_liability_company and is a disregarded_entity for federal_income_tax purposes the company represents that its is a producer of refined_coal the facility the taxpayer indirectly through the company owns a refined_coal facility the facility located at the generating station near the site the facility was acquired from an indirect wholly-owned subsidiary of the seller a state c limited_liability_company the seller originally placed the facility in service during year a prior to the taxpayer’s acquisition of the facility technology the facility utilizes proprietary technology sublicensed from the seller to produce refined_coal the technology the technology involves treating the feedstock coal with two chemical additives that are metered on to feedstock coal at a rate proportional to the weight of coal as measured by coal belt scales as the coal is transported by coal belts into bunkers that feed the boiler the first chemical additive is a form of chemical a that changes the chemistry of the coal ash in a utility’s boilers allowing for reduced nox emissions the second chemical additive is a chemical b that reacts with the mercury and increases mercury capture in the fly ash that is collected in the particulate control devices of a utility the taxpayer and the company expect to obtain all the facility’s feedstock coal from a single lignite mine near the site it is expected that the lignite coal provided to the company will be a blend of production from multiple seams rather than being drawn exclusively from a single seam for any extended period although this could change the company has also entered into a long-term_contract to sell all of its production to generator at a price per ton equal to the company’s cost for the coal feedstock including certain administration costs under this contract generator may use a limited amount of wood or similar waste material instead of or in addition to refined_coal this may require that the coal feedstock or refined_coal be mixed with such wood or similar waste if the taxpayer is required by the generator to mix a material amount of wood or similar waste material with the coal feedstock it uses to produce refined_coal then taxpayer will treat such addition as a change in feedstock and thus expects to conduct new testing for qualified emissions reduction as required by notice_2010_54 alternatively taxpayer may decide to not claim tax_credits for the period such non-coal materials are being used or seek further guidance from the service plr-110962-13 testing as part of placing the facility in service and again in date a and in date b the seller conducted a full-scale continuous emissions monitoring system cems field test to measure the reduction in nitric oxide and nitrogen dioxide collectively nox and mercury emissions nox and mercury emissions were measured as required by the cems field testing procedures described in section of notice_2010_54 emissions for both the feedstock coal and refined_coal were measured under the same operating conditions over a period of at least three hours during which the boiler operated at a steady state and at least percent of full load generator’s plant has no separate nox air pollution equipment so nox was measured at the stack and mercury was measured downstream of the baghouse outlet each of the three sets of cems field tests demonstrated the required reductions in both nox and total mercury emissions both determined on a lb btu basis to satisfy the requirements of at least nox reduction and at least mercury reduction on date c taxpayer conducted cems testing for qualified emissions reductions at the facility the certification relating to this testing concludes that there was an approximately a reduction in mercury emissions compared to baseline measurements for the feedstock coal and an approximately b reduction in nox compared to baseline measurements for the feedstock coal the taxpayer expects to continue to conduct testing as required to comply with notice_2010_54 however the taxpayer may elect to rely on the special method of redetermination testing permitted by section b of notice_2010_54 the taxpayer indicates that samples will be taken for redetermination testing within six months after the last emissions test satisfying the qualifying emissions reduction requirement thereafter within six months after such date another set of samples will be taken for redetermination testing although the precise intervals may vary eg it may be only four or five months between tests all samples will be taken from a moving conveyor belt before and after the facility using a manual collection device held by operator personnel who will collect a sample by scooping coal from both edges and the center of the belt the samples will be bagged and labeled during each period of up to six months constituting the redetermination period samples of both feedstock coal and refined_coal will be collected on a regular basis and manually blended into a multi-day gross sample the samples will be collected using a scoop from each gross sample sealed and labeled these samples will then be sent to an independent laboratory for preparation and analysis standard laboratory techniques will be used to measure the sulfur and mercury content of these samples the testing results for sulfur and mercury content for the gross plr-110962-13 samples of feedstock and refined_coal respectively will then be averaged for comparison to the appropriate ranges the taxpayer expects to rely primarily on redetermination tests under section b of notice_2010_54 during the next nine years and to conduct testing under section dollar_figure of that notice when required the taxpayer may however also conduct testing under section dollar_figure on other occasions such testing is expected to be conducted using cems testing when possible but the taxpayer may choose to conduct pilot plant testing or to use any other methods that may be approved by the service from time to time the taxpayer has also indicated that it may decide to use epa method 30b when not using laboratory testing to test for mercury emissions in that case the taxpayer will also test for nox emissions using traditional cems testing methodology rulings requested based on the foregoing you have requested that we rule as follows the refined_coal produced and sold using the technology constitutes refined_coal within the meaning of sec_45 of the code provided that such refined_coal is produced from feedstock coal that is the same source or rank as the feedstock test coal and provided further that the refined_coal satisfies the qualified_emission_reduction test stated in sec_45 of the code increasing the amounts of chemical additives to the feedstock coal to a higher level than the rate shown to have produced a qualified emissions reduction in a determination or redetermination will not be construed as a change in process requiring a redetermination under section dollar_figure of notice_2010_54 to establish qualified emissions reductions nor will later resuming application at the rate used in such original test constitute such a change the use of epa method 30b is an acceptable alternative to the use of cems field testing for measuring mercury emissions reductions under section dollar_figure of notice_2010_54 the results set forth in a test or a redetermination test report for production may be relied upon after the date of testing even if the report is not received until after the six-month period specified in section i of notice_2010_54 or if the testing was conducted prior to the taxpayer’s acquisition of the facility producing refined_coal pursuant to section b of notice_2010_54 the redetermination requirement of section dollar_figure of notice_2010_54 may be satisfied by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and the refined_coal on average do not vary by more than percent below the bottom nor by plr-110962-13 more than percent above the top of the range of the sulfur content and range of the mercury content of the feedstock coal and the refined_coal used in the most recent determination pursuant to section dollar_figure of notice_2010_54 if the facility was placed_in_service prior to date within the meaning of sec_45 of the code a subsequent modification or relocation of the facility will not result in a new placed-in-service date for the facility for purposes of sec_45 provided the fair_market_value of the original property of the modified or relocated facility is more than percent of the facility’s total fair_market_value at that time law and rationale sec_45 of the code generally provides a credit against federal_income_tax for_the_use_of renewable or alternative resources to produce electricity or fuel for the generation of steam sec_45 of the code provides that in the case of a producer of refined_coal the credit available under sec_45 of the code for any taxable_year shall be increased by an amount equal to dollar_figure5 per ton of qualified refined_coal i produced_by_the_taxpayer at a refined_coal_production_facility during the 10-year period beginning on the date that the facility was originally placed_in_service and which is ii sold by the taxpayer to an unrelated_person during such 10-year period and such taxable_year for purposes of sec_45 of the code section dollar_figure of notice_2010_54 provides that the term refined_coal means a fuel which i is a liquid gaseous or solid fuel including feedstock coal mixed with an additive or additives produced from coal including lignite or high carbon fly ash including such fuel used as a feedstock ii is sold by the taxpayer with the reasonable expectation that it will be used for the purpose of producing steam and iii is certified by the taxpayer as resulting when used in the production of steam in a qualified_emission_reduction section dollar_figure of the notice provides that the term qualified_emission_reduction means in the case of refined_coal produced at a facility placed_in_service after date a reduction of at least twenty percent of the emissions of nitrogen oxide and at least forty percent of the emissions of either sulfur dioxide or mercury released when burning the refined_coal excluding any dilution caused by materials combined or added during the production process as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of date sec_45 of the code generally provides that the term refined_coal_production_facility means a facility which is placed_in_service after date and before date section dollar_figure of notice_2010_54 provides that a refined_coal_production_facility will not be considered to have been placed_in_service after date if more than plr-110962-13 percent of the total fair_market_value of the facility the cost of the new property plus the value of the used_property is attributable to property that was placed_in_service on or before date section dollar_figure of notice_2010_54 generally provides that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining as defined in sec_613 a c or i of the code if performed by the mine owner or operator accordingly in determining whether a qualified_emission_reduction has been achieved the emissions released when burning the refined_coal must be compared to the emissions that would be released when burning the feedstock coal feedstock coal is the product resulting from processes that are treated as mining including any such processes that are actually applied by a taxpayer in any part of the taxpayer's process of producing refined_coal from coal sec_613 of the code describes treatment processes that are not considered as mining unless they are provided for in sec_613 or are necessary or incidental to a process provided for in sec_613 any cleaning process such as a process that uses ash separation dewatering scrubbing through a centrifugal pump spiral concentration gravity concentration flotation application of liquid hydrocarbons or alcohol to the surface of the fuel particles or to the feed slurry provided such cleaning does not change the physical or chemical structure of the coal and drying to remove free water provided such drying does not change the physical or chemical identity of the coal will be considered as mining section of the notice provides in part that emissions reduction may be determined using continuous emission monitoring system cems field testing section a provides in part that cems field testing is testing that meets all the following requirements i the boiler used to conduct the test is coal-fired and steam-producing and is of a size and type commonly used in commercial operations ii emissions are measured using a cems iii if epa has promulgated a performance standard that applies at the time of the test to the pollutant emission being measured the cems must conform to that standard iv emissions for both the feedstock coal and the refined_coal are measured at the same operating conditions and over a period of at least hours during which the boiler is operating at a steady state at least percent of full load and v a qualified_individual verifies the test results in a manner that satisfies the requirement of section b section of the notice provides that methods other than cems field testing may be used to determine the emission reduction the permissible methods include a testing using a demonstration pilot-scale combustion furnace if it establishes that the method accurately measures the emission reduction that would be achieved in a boiler described in section a i and a qualified_individual verifies the test plr-110962-13 results in a manner that satisfies the requirements of section c i ii v and vi of the notice and b a laboratory analysis of the feedstock coal and the refined_coal that complies with a currently applicable epa or astm standard and is permitted under section b i or ii section of the notice provides that a taxpayer may establish that a qualified_emission_reduction determined under section dollar_figure applies to production from a facility by a determination or redetermination that is valid at the time the production occurs a determination or redetermination is valid for the period beginning on the date of the determination or redetermination and ending with the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of the feedstock coal that occurs after the date of such determination or redetermination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination section of the notice provides that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure must use a method that meets the requirements of section in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that a the sulfur or mercury content of the amount of refined_coal necessary to produce an amount of useful energy has been reduced by at least percent percent in the case of facilities placed_in_service after date in comparison to the sulfur or mercury content of the amount of feedstock coal necessary to produce the same amount of useful energy excluding any dilution caused by materials combined or added during the production process or b the sulfur or mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the sulfur and mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the notice finally section dollar_figure of the notice provides that the certification requirement of sec_3 c of the notice is satisfied with respect to fuel for which the refined_coal credit is claimed only if the taxpayer attaches to its tax_return on which the credit is claimed a certification that contains the following a statement that the fuel will result in a qualified emissions reduction when used in the production of steam a statement indicating whether cems field testing was used to determine the emissions reduction if cems field testing was not used to determine the emissions reduction a description of the method used a statement that the emissions reduction was determined or redetermined within the six months preceding the production of the fuel and that there have been no changes in the source or rank of the feedstock coal used in the process of producing refined_coal from feedstock coal since the emissions reduction was most recently determined or redetermined and a declaration signed by the taxpayer in the following form under penalties of perjury i declare that i have plr-110962-13 examined this certification and to the best of my knowledge and belief it is true correct and complete with respect to the first two ruling requests the technology starts with two chemical additives being added to the feedstock coal prior to its combustion in a furnace section dollar_figure of the notice provides generally that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining if performed by the mine owner or operator in the instant case the process used at the facility is not a mining process further section dollar_figure of the notice clarifies sec_45 of the code and specifically provides that refined_coal includes feedstock coal mixed with additives thus additive processes that mix certain chemicals or other additives with the coal in order to achieve emissions reductions may qualify for the refined_coal production_tax_credit additionally section dollar_figure defines comparable coal as coal that is of the same rank as the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal accordingly we conclude that a the refined_coal produced by using the technology constitutes a refined_coal within the meaning of sec_45 of the code provided that the refined_coal i is produced from feedstock coal that is the same source or rank as the tested coal and ii satisfies the qualified_emission_reduction test stated in sec_45 of the code and b increasing the amounts of chemical additives to the feedstock coal will not be construed as a change in process requiring additional testing for qualified emissions reductions under section dollar_figure of notice_2010_54 nor will it be construed as a change in process to later resume application at the rate used in the original test with respect to the third ruling_request the taxpayer has also indicated that when not using laboratory testing it may decide to use epa method 30b to test for mercury emissions the method involves use of a sorbent trap that collects mercury in flue gas as the gas exits the stack downstream from the scrubber or other pollution control devices the collected mercury is then analyzed to determine the mercury emissions epa method 30b is an epa approved method for measuring mercury emissions from coal-fired boilers epa method 30b is a form of cems testing based on the foregoing we conclude that the use of epa method 30b is an acceptable alternative to the use of a continuous emissions monitoring system during cems field testing for measuring mercury emissions reductions under section dollar_figure of notice_2010_54 as a corollary epa method 30b should also qualify as an acceptable method for satisfying the redetermination requirement under section dollar_figure of notice_2010_54 when doing cems field testing for redeterminations however the taxpayer may not mix and match in the sense of using cems field testing to satisfy part of the redetermination requirement while using the laboratory analysis described in section to satisfy the remainder in addition if taxpayer elects to use epa method 30b it will also have to i test for nox emissions using conventional cems methodology and ii test nox baseline emissions in the manner contemplated by section dollar_figure of notice_2010_54 plr-110962-13 with respect to the fourth ruling_request it is expected that the taxpayer will engage in redetermination testing every six months or more frequently however the taxpayer may not always receive the written report required by section a of notice_2010_54 within the six month period thus although the redetermination is completed within the six month period the report may be received after the six month period nonetheless the taxpayer will be informed of the results of the test on the day of the tests so that it will be able to take in account the results of the redetermination within the six month period nevertheless the delay in issuing and receiving the report cannot be indefinite further allowing the taxpayer to rely on testing and reports conducted before its acquisition of the facility on behalf of the seller is consistent with the rationale behind notice_2010_54 which concludes that once a qualified emissions reduction is established further testing is not required for six months or until there is a change in feedstock or process accordingly we conclude that i the results set forth in a redetermination report for production may be relied upon after the date of testing even if the report is not received until after the six-month period specified in section i of notice_2010_54 so long as the taxpayer receives the written report within days from the date of testing and ii the taxpayer can rely on testing and reports conducted before its acquisition of the facility with respect to the fifth ruling_request section of notice_2010_54 provides that where a redetermination is required because of a change in the process of producing refined_coal the redetermination must use one of the general methods for satisfying the emissions reduction requirements listed in section dollar_figure of the notice however in any other case section of the notice provides that the redetermination requirement may be satisfied by laboratory analysis establishing that the sulfur and mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the sulfur and mercury content of the feedstock coal and the refined_coal used in the most recent determination which may be the original cems test that meets the requirements of notice_2010_54 accordingly we conclude that pursuant to section of notice_2010_54 the redetermination requirement of section dollar_figure of notice_2010_54 may be satisfied by laboratory analysis establishing that the average sulfur and mercury contents of both the feedstock coal and the refined_coal do not vary by more than percent from the range of sulfur and mercury content of the feedstock coal and the refined_coal used in the most recent determination that meets the requirements of section dollar_figure of notice_2010_54 with respect to the sixth ruling_request section dollar_figure of notice_2010_54 provides that a refined_coal_production_facility will not be considered to have been placed_in_service after date if more than percent of the total fair_market_value of the facility the cost of the new property plus the value of the used_property is attributable to property that was placed_in_service on or before date this rule provides a test for determining whether modifications to a facility will result in a new placed_in_service_date accordingly we conclude that if the facility is placed-in- plr-110962-13 service prior to date within the meaning of sec_45 of the code a subsequent modification or relocation of the facility will not result in a new placed-in- service date for the facility for purposes of sec_45 provided that the fair_market_value of the original property of the facility is more than percent of the facility’s total fair_market_value at that time this ruling expresses no opinion about any issue not specifically addressed in this ruling letter including whether any person has sold refined_coal to an unrelated_person or when the facility was actually placed_in_service in particular we express or imply no opinion that the taxpayer has sufficient risks and rewards of the production activity to qualify as the producer of the refined_coal the service may challenge an attempt to transfer the credit to a taxpayer who does not qualify as a producer including transfers structured as partnerships sales or leases that do not also transfer sufficient risks and rewards of the production activity in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives a copy of this ruling must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent we are sending a copy of this letter_ruling to the industry director sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs special industries cc


internal_revenue_service index no number release date department of the treasury p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si - plr-120480-98 date date re legend taxpayer date date trust a_trust trust partnership x a b c d e f g h i we received your authorized representative’s letter dated date requesting a ruling concerning the application of sec_2632 of the internal_revenue_code and sec_301_9100-1 of the procedure and administration regulations this letter responds to that request on date taxpayer created trust a taxpayer was the initial trustee of trust a the trust agreement directed taxpayer as trustee to divide the trust property into two separate trusts trust and trust for the primary benefit of taxpayer’s two daughters each referred to as a beneficiary article sec_1 of the trust agreement directs the trustee to keep a separate_account for each of the separate trusts created under the trust agreement but to administer such trusts as a single fund article sec_1 provides that while taxpayer serves as trustee she will not have any power to distribute any income or principal of any trust to any beneficiary other than the withdrawals provided for in sec_1 relating to certain withdrawal rights granted to individual descendants of taxpayer instead while the taxpayer is trustee all of the net_income of each trust created under this trust agreement shall be accumulated when the taxpayer is not serving as trustee of a_trust created by the trust agreement the trustee shall distribute to the beneficiary of the trust such amounts of the income and principal of such trust as are necessary when added to the funds reasonably available to such beneficiary from all other sources known to the trustee to provide for the beneficiary’s health support maintenance and education taking into consideration age education and station in life in addition the trustee has discretion to distribute to the beneficiary’s descendants such amounts of the income and principal of such trust that the trustee deems necessary to provide for their health support maintenance and education taking into consideration age education and station in life article sec_1 provides that each living descendant of the taxpayer is a distributee it further provides that notwithstanding any other provision of this trust agreement except sec_5 each distributee shall have the right to withdraw cash or other_property from the trusts at any time during any calendar_year in which a gift as defined in sec_2512 is made to the trusts in an amount not in excess of i of the maximum amount that can be excluded in calculating the taxable_gifts of one donor to one donee under sec_2503 as of the first day of such calendar_year times the number of donors who make gifts to the trusts during such calendar_year or ii an amount equal to the value of such distributee’s equal share of all gifts made to or for the benefit of the trusts during such calendar_year whichever amount is less such withdrawal rights shall be cumulative the cumulative amount of each distributee’s unexercised withdrawal rights shall lapse on december of each year to the extent of the greater of dollar_figure or of the value of the trusts on that date and such lapses shall apply to unexercised withdrawal rights in the order that they arose article sec_1 provides that each trust created under this article for a beneficiary who is a daughter grandchild or great grandchild of the taxpayer shall continue for such beneficiary’s lifetime and shall terminate upon such beneficiary’s death every other trust created under the article shall terminate when the beneficiary thereof attains age or upon the death of the taxpayer whichever is later and upon such termination the trustee shall distribute all remaining unappointed property of such trust to the beneficiary thereof taxpayer resigned as trustee of both trust and trust in in and taxpayer transferred dollar_figurea dollar_figureb and dollar_figurec respectively to trust also in and taxpayer transferred dollar_figured dollar_figuree and dollar_figuref respectively to trust these transfers were reported on timely filed gift_tax returns with respect to the and transfers taxpayer requests a ruling that she substantially complied with the requirements for making a timely allocation of her gst tax exemption in the amount of dollar_figurea and dollar_figured to the transfers to trust sec_1 and respectively on her gift_tax_return and in the amount of dollar_figureb and dollar_figuree to the transfers to trust sec_1 and respectively on her gift_tax_return with respect to the transfers taxpayer filed a timely gift_tax_return reporting the transfers on date on date within months of date taxpayer filed an amended gift_tax_return reporting total transfers of i dollars and properly allocating gst_exemption with respect to the transfers taxpayer requests a ruling that she made a timely allocation of a portion of her gst_exemption to the transfers made to trust and trust on her amended form_709 pursuant to the automatic relief provisions of sec_301 of the procedure and administrative regulations ruling_request sec_2601 imposes a tax on every generation-skipping_transfer gst a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2612 provides that the term direct_skip means a transfer subject_to a tax imposed by chapter or of an interest in property to a skip_person sec_2613 provides that the term skip_person means a natural_person assigned to a generation that is two or more generations below the generation assignment of the transferor or a_trust if all interests in the trust are held by skip persons sec_2613 provides in part that a_trust is a skip_person if i all interests in the trust are held by skip persons or ii no person holds an interest in the trust and no distributions other than a distribution the probability of which occurring is so remote as to be negligible including distributions at the termination of the trust may be made after the transfer to a person other than a skip_person under sec_2652 a person has an interest_in_property_held_in_trust if at the time the determination is made such person has a right to receive income or corpus from the trust or is a permissible current recipient of income or corpus and is not described in sec_2055 under sec_2602 the amount of the gst tax is determined by multiplying the amount of the gst transfer by the applicable_rate under sec_2641 the applicable_rate with respect to any generation-skipping_transfer is the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2642 defines the inclusion_ratio in the case of a transfer from a_trust as the excess of over the applicable_fraction with respect to trust the applicable_fraction with respect to a_trust is a fraction the numerator of which is the amount of gst_exemption allocated to the trust and the denominator of which is the value of the property transferred to the trust reduced as provided in the section sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure that may be allocated by the individual or his executor to any property with respect to which the individual is the transferor sec_2631 provides that any allocation under sec_2631 once made is 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 the individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_26_2632-1 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 the allocation must clearly identify the trust to which the allocation is made the amount of gst_exemption allocated to it and if the allocation is late or an inclusion_ratio greater than zero is claimed the value of the trust assets at the effective date of the allocation the allocation should also state the inclusion_ratio of the trust after the allocation generally an allocation of gst_exemption may be expressed by a formula eg the allocation may be expressed in terms of the amount necessary to produce an inclusion_ratio of zero an allocation is void if the allocation is made with respect to a_trust that has no gst potential with respect to the transferor making the allocation at the time of the allocation for this purpose a_trust has gst potential even if the possibility of a gst is so remote as to be negligible sec_26_2632-1 provides that generally an allocation of gst_exemption is effective as of the date of any transfer as to which the form_709 on which it is made is a timely filed return a timely allocation with respect to a timely allocation an allocation of gst_exemption becomes irrevocable after the due_date of the return an allocation to a_trust made on form_709 filed after the due_date for reporting a transfer to a_trust a late allocation is effective on the date the form_709 is filed and is deemed to precede in point of time any taxable_event occurring on such date sec_2652 provides that except as provided in sec_2653 the term transferor means a in the case of any property subject_to the tax imposed by chapter the decedent and b in the case of any property subject_to the tax imposed by chapter the donor an individual shall be treated as transferring any property with respect to which such individual is the transferor the issue is whether taxpayer made timely allocations of her gst tax exemption to the transfers to trust sec_1 and on her and gift_tax returns in the present case the transfers to the trusts were not direct skips an allocation of gst_exemption to property transferred during the transferor’s lifetime other than in a direct_skip is made on form_709 the allocation must clearly identify the trust to which the allocation is made and the amount of gst_exemption allocated to it the allocation should also state the inclusion_ratio of the trust after the allocation the instructions for form_709 applicable for the returns filed by the taxpayer during the period state you may wish to allocate your exemption to transfers made in trust that are not direct skips for example if you transferred property to a_trust that has your children as its present beneficiaries and your grandchildren as future beneficiaries the transfer was not a direct_skip because the present interests in the trust are held by non-skip persons however future terminations and distributions made from this trust would be subject_to gst tax you may elect to reduce the trust’s inclusion_ratio by allocating part or all of your exemption to the transfer because this transfer would be entered on schedule a part i of form_709 it will not be shown on schedule c to allocate your exemption to such transfers attach a statement to the form_709 and entitle it notice of allocation the notice should contain the following for each trust the trust’s ein if known the item number s from column a schedule a part of the gifts to that trust the values shown in column e schedule a part for gifts adjusted to account for split_gifts if any reported on schedule a part line the annual exclusion claimed against each gift the net value of each gift after the reduction for the annual exclusion if applicable and the amount of your gst_exemption allocated to each gift in this case it appears that taxpayer did not literally comply with the instructions on form_709 taxpayer reported the and gifts to trust and trust on schedule a part gifts subject_to both gift and gst tax and completed portions of schedule c in addition taxpayer did not attach to the or returns a notice of allocation of gst_exemption however elections may be held to be effective where the taxpayer complied with the essential requirements of a regulation even though the taxpayer failed to comply with certain procedural directions therein see 67_tc_736 acq in result 1979_1_cb_1 the allocations will be deemed valid if there are enough facts and circumstances to indicate that the taxpayer intended to allocate part of her exemption to the trusts we believe that there is sufficient information provided on taxpayer’s and gift_tax returns to conclude that taxpayer intended to allocate part of her exemption to trust and trust on the and gift_tax returns taxpayer reported the transfers on schedule c for the gifts taxpayer entered a total of dollar_figureg dollar_figurea dollar_figured on schedule c part gst_exemption reconciliation line exemption claimed on this return on schedule c part column c gst_exemption allocated taxpayer entered a total of dollar_figureg dollar_figurea dollar_figured for the gifts taxpayer entered a total of dollar_figureh dollar_figureb dollar_figuree on schedule c part gst_exemption reconciliation line exemption claimed on this return on schedule c part column c gst_exemption allocated taxpayer entered a total of dollar_figureh dollar_figureb dollar_figuree in addition taxpayer attached statements to her and returns which provided the trust identification numbers and the value of the property transferred to each trust we note that taxpayer did not complete the gst portions of the form correctly in view of the fact that the transfers were not direct skips however based on the information provided on the return we conclude that taxpayer substantially complied with the requirements for making an allocation of gst_exemption for the transfers reported on the and gift_tax returns taxpayer is therefore deemed to have allocated the exemption as described above for the and transfers to trust and trust ruling_request sec_301_9100-1 of the procedure and administration regulations provides that the commissioner of internal revenue may grant a reasonable extension of time to make a regulatory election or a statutory election but not 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 if the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer has acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-2 grants an automatic_extension of months from the due_date of a return excluding extensions to make regulatory or statutory elections whose due dates are the due_date of the return or the due_date of the return including extensions provided the taxpayer timely filed its return for the year the election should have been made and the taxpayer takes corrective action within that 6_month extension period corrective action means taking the steps required to file the election in accordance with the statute or the regulation published in the federal_register or the revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin for those elections required to be filed with a return corrective action includes filing an original or amended_return for the year the regulatory or statutory election should have been made and attaching the appropriate form or statement for making the election in this case based on the representations made taxpayer timely filed her form_709 however taxpayer failed to comply with the provisions of the regulations with respect to the allocation of gst_exemption taxpayer took corrective action by filing an amended_return under sec_301_9100-2 on date which was prior to the date which is months from the due_date of her original return excluding extensions accordingly the allocation made on date is a timely allocation effective as of the date of the transfers made in to trust sec_1 and which are reported on the amended form_709 in the amount of dollar_figurei except as ruled above we express or imply no opinion concerning the federal tax consequences of this transaction under the cited provisions of the code or any other provision of the code we are expressing no opinion regarding the value of the transfers to the trusts whether the transfers qualified for the annual exclusion under sec_2503 or regarding the inclusion_ratio with respect to the trusts this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours _________________ paul kugler assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


t c summary opinion united_states tax_court paul parisi petitioner v commissioner of internal revenue respondent docket no 26257-13s filed date paul parisi pro_se lauren b epstein and randall b childs for respondent summary opinion vasquez judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when 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 unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a dollar_figure deficiency in petitioner’ sec_2011 federal_income_tax the issues for decision are whether a withdrawal of dollar_figure from petitioner’s individual_retirement_account was a taxable_distribution and if so whether petitioner is liable for the additional tax on the distribution under sec_72 background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by reference petitioner resided in california at the time he filed the petition petitioner a high school teacher was laid off from his job in barstow california at the end of the school year he remained unemployed until sometime in in petitioner who wa sec_50 years old at the time of trial respondent adjusted petitioner’s miscellaneous_itemized_deductions because after adjustments to petitioner’s gross_income the aggregate amount of those deductions did not exceed the floor of sec_67 the adjustment to petitioner’s miscellaneous_itemized_deductions is a computational matter the resolution of which depends on our disposition of the two disputed issues identified above withdrew dollar_figure from an individual_retirement_account ira he had with charles schwab co inc charles schwab in petitioner started pursuing certifications in software programs offered by adobe systems inc adobe that year he took two online exams called visual communication using adobe photoshop c sec_5 offered by a company called certiport neither of which he passed in he passed this exam and received a certificate recognizing him as an adobe certified associate in visual communication using adobe photoshop c sec_5 petitioner also took various online computer training courses at valencia college and piedmont community college in and the skills petitioner developed through his online education helped him obtain a teaching position in florida where he was employed at the time of trial charles schwab issued petitioner a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc for the form 1099-r reported that he had received a dollar_figure distribution from his ira petitioner timely filed hi sec_2011 income_tax return but did not report the distribution discussion i burden_of_proof generally the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of proving that the determinations are erroneous rule a 290_us_111 the burden_of_proof shifts to the commissioner however if the taxpayer produces credible_evidence to support the deduction or position the taxpayer complied with the substantiation requirements and the taxpayer cooperated with the secretary with regard to all reasonable requests for information sec_7491 see also 116_tc_438 petitioner does not contend that sec_7491 should shift the burden here and the record establishes that he did not satisfy the sec_7491 the term secretary means the secretary_of_the_treasury or_his_delegate sec_7701 and the term or_his_delegate means any officer employee or agency of the treasury_department duly authorized by the secretary_of_the_treasury directly or indirectly by one or more redelegations of authority to perform the function mentioned or described in the context sec_7701 requirements consequently petitioner bears the burden_of_proof as to any disputed factual issue see rule a under sec_6201 if a taxpayer asserts a reasonable dispute with respect to an item_of_income reported on an information_return filed by a third party and the taxpayer meets certain other requirements the commissioner bears the burden of producing reasonable and probative evidence in addition to the information_return concerning the deficiency attributable to the income item petitioner has not raised any reasonable dispute with respect to the accuracy of the information_return consequently the burden of production with respect to the income did not shift to respondent under sec_6201 ii ira distribution includible in gross_income we first address whether the ira distribution is includible in petitioner’s gross_income for the tax_year respondent argues that petitioner failed to establish that any portion of the distribution is nontaxable subject_to certain exceptions amounts distributed from an ira are includible in a taxpayer’s gross_income as provided in sec_72 sec_408 petitioner who admits to receiving the ira distribution in has neither at trial we ordered both parties to file posttrial opening briefs petitioner failed to do so argued nor established that an exception applies accordingly the distribution is includible in the calculation of petitioner’s taxable_income iii sec_72 additional tax we now address whether petitioner is liable for the additional tax on the ira distribution imposed by sec_72 petitioner who wa sec_50 years old at the time of trial argues that the exception for qualified_higher_education_expenses under sec_72 applies to him respondent argues that petitioner failed to establish that he had qualified_higher_education_expenses for for the reasons set forth below we agree with respondent sec_72 imposes a additional tax on the taxable_amount of an early distribution from a qualified_retirement_plan as defined in sec_4974 a distribution is early if made to an employee who has not attained age sec_72 among other exceptions not here relevant a taxpayer may be able to reduce the amount of an early distribution from an ira that is subject_to the additional tax by the amount of a taxpayer’s qualified_higher_education_expenses paid in the year of the early distribution sec_72 qualified the term qualified_retirement_plan includes an individual_retirement_account described in sec_408 sec_4974 the sec_72 higher education exception applies only to qualified continued higher education expenses paid in a year other than the year of an early ira distribution do not reduce the amount of the early distribution subject_to the additional tax see id lodder-beckert v commissioner tcmemo_2005_162 in general qualified_higher_education_expenses means qualified_higher_education_expenses as defined in sec_529 for education furnished to the taxpayer the taxpayer’s spouse or any child of the taxpayer or the taxpayer’s spouse at an eligible_educational_institution sec_72 these include tuition fees books supplies and equipment sec_529 in the case of an individual who is an eligible_student as defined in sec_25a for any academic period the term also includes reasonable costs for the period as determined under the qualified_tuition_program for room and board while attending an eligible_educational_institution sec_529 in general the term eligible_student means with respect to any academic period a student who is enrolled at least half time in a degree or certificate program at an eligible institution_of_higher_education see sec_529 sec_25a u s c sec_1091 continued plans that meet the sec_7701 definition of an individual_retirement_plan ie individual_retirement_accounts and individual retirement annuities petitioner argues that he had qualified_higher_education_expenses because he was pursuing adobe certifications in however petitioner failed to introduce any evidence that he was actually enrolled in an eligible_educational_institution in while petitioner took two online adobe certification exams that year he offered no testimony or other evidence specifying what courses he took if any to prepare for these exams furthermore with the exception of a printout from certiport’s web site showing that an adobe certified associate exam voucher costs dollar_figure petitioner neither specified nor substantiated education-related expenses for tuition fees supplies or equipment for at trial petitioner suggested that his rent payments constitute qualified_higher_education_expenses however since nothing in the record indicates that petitioner was enrolled at least half time in an eligible_educational_institution in we cannot conclude that he was an eligible_student under sections this undated document is of no help to petitioner given the absence of evidence that he was enrolled in any courses in in contrast petitioner was able to produce numerous documents evidencing that he took technology courses offered by valencia college and piedmont community college in and even if petitioner had specified the amounts of his expenses pertaining to this coursework which he did not those expenses would not reduce the amount of the early distribution subject_to the sec_72 additional tax because they were not incurred in e b i and 25a b consequently petitioner’ sec_2011 rent payments do not constitute room and board under sec_529 accordingly we hold that petitioner did not have qualified_higher_education_expenses under sec_72 in reaching our holdings herein we have considered all arguments made and to the extent not mentioned above we find them to be moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent because petitioner failed to substantiate any expenses for education for we need not decide whether adobe’s online certification training program constitutes an eligible_educational_institution under sec_72 and sec_529


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc ita b02 genin-102797-13 number release date uil --------------------- -------------------------------- ------------------------------------ ----------------------------------------------------------------- --------------------------------- dear ------------------- this responds to your letter dated date requesting information on the tax treatment of expenses for radon testing and mitigation in particular you ask whether indoor radon testing and mitigation costs are expenses for medical_care under sec_213 of the internal_revenue_code and therefore are eligible for reimbursement under health_savings_accounts and flexible savings arrangements you state that exposure to radon gas poses a significant health risk and that making radon testing and mitigation costs eligible for reimbursement has great potential for reducing the number of radon-related cancers sec_213 provides a deduction for expenses paid for medical_care of the taxpayer spouse or dependent to the extent the expenses exceed percent of adjusted_gross_income sec_213 defines medical_care as amounts paid for the diagnosis cure mitigation treatment or prevention of disease or for the purpose of affecting a structure or function of the body while we understand the importance of residential radon testing abatement and mitigation we do not currently have a published position that treats radon testing and mitigation costs as medical_care under sec_213 however we plan to address this issue in proposed_regulations under sec_213 these proposed_regulations are a project on the department of the treasury’s priority guidance plan and as such are a priority for the internal_revenue_service that we are actively working genin-102797-13 we appreciate the valuable input of stakeholders such as the ----------------------------------- ---------- we understand that this issue is a high priority for your office and we look forward to helping resolve the treatment of radon remediation expenses through publication of proposed_regulations under sec_213 please contact ------------- at ------------- ------------- or me at ---------------------- if we can assist you further sincerely ______________________ andrew j keyso associate chief_counsel income_tax accounting


internal_revenue_service department of the treasury washington dc number release date index number x person to contact telephone number refer reply to cc p si - plr-113365-01 date date a b d1 dear this letter responds to a letter dated date and subsequent correspondence submitted by you on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 a and b are the shareholders of x a the president of x represents that x intended to be an s_corporation effective d1 however due to a miscommunication between a and the attorney for x a form_2553 election by a small_business_corporation was not filed for x effective d1 sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x sincerely yours jeanne sullivan acting senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service national_office technical_advice_memorandum date third party communication none date of communication not applicable number release date 263a tam-136086-04 index uil no case-mis no district_director -------- ------ --------------------------- ------------------------------ taxpayer's name taxpayer's address ------------------------------------ ----------------------------- -------------------------- ---------------- ---------- -------------------- taxpayer's identification no years involved date of conference legend taxpayer products country x taxable_year dollar_figurea dollar_figureb dollar_figurec dollar_figured dollar_figuree dollar_figuref dollar_figureg ------------------------------------ ------- -------- ------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------1 all amounts have been rounded to the nearest dollar tam-136086-04 issue s whether refunds of anti-dumping and countervailing duties that were imposed paid and recovered through cost_of_goods_sold in prior taxable years are includible in taxpayer’s gross_income or treated as a reduction in the amount of duties or other costs capitalized under sec_263a conclusion s taxpayer must include refunds of anti-dumping_duties in its gross_income facts taxpayer imports products from country x into the united_states for distribution taxpayer used the first-in_first-out fifo inventory cost-flow presumption taxpayer is often required to pay anti-dumping and countervailing duties on its products in accordance with title vii of the tariff act of as amended u s c and seq anti-dumping_duties are levied by the department of commerce doc on companies that allegedly market products in the united_states at significantly lower prices than their domestic market prices u s c countervailing duties are levied on companies whose products are allegedly subsidized by their own governments u s c taxpayer’s detail of duty expenses for the taxable_year was as follows regular duty expense - dollar_figurea countervailing duty expense - dollar_figureb antidumping duty expense - dollar_figurec antidumping duty bond expense dollar_figured these expenses totaled dollar_figuree a company may appeal a final_determination by doc assessing antidumping and or countervailing duties hereinafter antidumping duties if a company appeals doc initiates a review process for antidumping duty rates applied to those products as part of its review doc considers both information submitted by the company that paid the antidumping duties and the u s makers of the company’s products in cases where doc concludes the antidumping duty was excessive or not justified at all u s customs issues refund checks to the company that had been required to pay the antidumping duties during taxable_year taxpayer received dollar_figuref in refunds of antidumping duties that were assessed and paid two to three years prior to taxable_year for tax purposes taxpayer had included these duties in inventory costs when incurred and recovered them through cost_of_goods_sold in a taxable_year prior to taxable_year for financial statement purposes taxpayer initially deducted dollar_figuree of duties as cost_of_goods_sold and included antidumping duty refunds in the amount of dollar_figuref as other income non-operating income taxpayer’s independent auditors reclassified duty refunds tam-136086-04 from other income to cost_of_goods_sold taxpayer not only offset its entire taxable_year antidumping expense dollar_figurec but also its entire countervailing duty expense dollar_figureb and dollar_figureg in general duties for tax purposes taxpayer now maintains that the duty refunds should be treated as a reduction of its sec_263a costs for taxable_year that are allocated between ending inventory and cost_of_goods_sold as a result of this treatment income_recognition of the part of the duty refunds allocated to ending inventory is effectively deferred law and analysis law sec_61 generally provides that gross_income means all income from whatever source derived sec_111 provides that gross_income does not include income attributable to the recovery during the taxable_year of an amount deducted in any prior taxable_year to the extent such amount did not reduce the amount of tax_imposed_by_chapter_1 of the internal_revenue_code sec_1_263a-1 provides in part that under sec_263a taxpayers must capitalize their direct costs and a properly allocable share of their indirect_costs to property produced or property acquired for resale sec_1_263a-1 provides in part that the amount of any cost required to be capitalized under sec_263a may not be included in inventory or charged to capital accounts or basis any earlier than the taxable_year during which the amount is incurred within the meaning of sec_1_446-1 in revrul_85_30 1985_1_cb_20 the service held in pertinent part that to the extent the cost of tires for which a taxpayer received reimbursement of excise_taxes did not remain in ending inventory and had been recovered through cost_of_goods_sold the taxpayer should treat the reimbursement as an item_of_gross_income in revrul_88_95 1988_2_cb_28 the service held in pertinent part that inventory protection payments and first handler payments for cotton accrued by a taxpayer should be treated as an item_of_gross_income to the extent the cost of cotton giving rise to the payments was deemed to have been relieved from inventory and accounted for through cost_of_goods_sold as of the date the payments were accrued under the taxpayer’s method_of_accounting revrul_2001_8 c b clarified revrul_85_30 and revrul_88_95 revrul_2001_8 held in pertinent part that payments made or received for floor_stocks affect gross_income to the extent the invoice price or production cost of the goods on tam-136086-04 hand that gave rise to the payments had been included in cost_of_goods_sold thus not included in ending inventory under the taxpayer’s cost-flow assumption analysis the tax_benefit_rule is a judicially developed principle designed to allay the inflexibilities of the annual accounting system it is used in situations where strict adherence to an annual accounting system would create transactional inequities 460_us_370 unless a statutory nonrecognition_provision applies the tax_benefit_rule generally requires the inclusion of income when events occur after an earlier deduction that are fundamentally inconsistent with the deduction hillsboro pincite the subsequent event is one that was unforeseen at the time of the deduction and that would have foreclosed the deduction had it occurred in the same year hillsboro pincite the recovery_of a previously deducted bad_debt is a classic example of the operation of the tax_benefit_rule a taxpayer deducts the amount of a supposedly bad_debt from income in one year thinking the debt is worthless in a later year the debt is paid repayment of a debt that is the recovery_of_capital normally is not taxable under the tax_benefit_rule the subsequent payment is an event fundamentally inconsistent with the prior deduction because it would have foreclosed the deduction had it occurred in the same year furthermore no nonrecognition provisions of the internal_revenue_code apply to the subsequent payment accordingly the taxpayer in the example must include the subsequent payment in income in the year received even though it represents a return_of_capital sec_111 is a legislative acknowledgment of the judicially-created tax_benefit_rule it does not codify the tax_benefit_rule rather sec_111 is an exception to the rule providing that gross_income will not include income attributable to the recovery during the tax_year of an amount previously deducted if the previously deducted amount did not reduce the amount of tax in the year of the deduction under sec_111 if taxpayer did not benefit from its deduction of the anti-dumping_duties in the prior years the refund in a later year will not be included in its income for the year of the ruling no such showing has been made here so sec_111 is inapplicable here taxpayer correctly capitalized the gross amount of the current duties under sec_263a on its return for the taxable_year and likewise correctly initially included refunds of previously imposed antidumping duties in its gross_income as non-operating income in the year received this was the correct treatment because under the tax_benefit_rule the refund was fundamentally inconsistent with the prior inclusion of the antidumping duties in cost_of_goods_sold taxpayer now maintains however that the refunds should be netted against taxpayer’s current duty expense this is not the proper treatment of the refunds tam-136086-04 because the previously imposed duties from which the refunds stem were capitalized and recovered through cost_of_goods_sold the amount of the antidumping duties to be capitalized in the current_year is the amount of duties actually imposed in the year regardless of the recovery or refund of the prior years’ antidumping duties therefore taxpayer is required to include the refund of the antidumping amounts in its taxable_income for the taxable_year rather than netting it against current duty expense case law supports this conclusion in 43_tc_460 the petitioner purchased watches from several manufacturers as promotional items the watches were subject_to a federal excise_tax that was included on the invoice the petitioner currently deducted the excise_taxes in a later year the petitioner was entitled to a refund of the excise_taxes the tax_court held that petitioner was required to include the refund of excise_taxes in taxable_income in the year of receipt because it had realized a tax_benefit in the year it deducted the excise_taxes here taxpayer is virtually in the same position as the petitioner in turtle wax the antidumping duties like the excise_taxes were reduced income in a prior year in a later year a portion of the antidumping duties was refunded just as the excise_taxes were refunded having received a tax_benefit in the year it included the antidumping duties in cost_of_goods_sold taxpayer must therefore include the refund in taxable_income in the year of receipt additionally the service has published several rulings concluding that to the extent an expense has been included in cost_of_goods_sold and the taxpayer received a resulting tax_benefit refunds of the expense in a subsequent year must be included in the taxpayer’s gross_income revrul_85_30 1985_1_cb_20 revrul_88_95 1988_2_cb_28 revrul_2001_8 c b here taxpayer has capitalized ie included in inventory costs all of its duties under sec_263a each year taxpayer currently included a portion of the duties in cost_of_goods_sold and allocated the remaining duty expense to ending inventory based on taxpayer’s fifo cost- flow assumption the refunded anti-dumping_duties allocated to inventory have already been included in cost_of_goods_sold in an earlier tax_year and reduced its tax_liability for the year taxpayer has clearly received a tax_benefit for the entire amount of the duties consequently taxpayer is required to include refunds of anti-dumping_duties in its gross_income in the year of receipt caveat s a copy of this technical_advice_memorandum is to be given to the taxpayer s sec_6110 of the code provides that it may not be used or cited as precedent