department of the treasury internal_revenue_service te_ge eo examinations commerce street mc dal dallas tx tax_exempt_and_government_entities_division date number release date uil certified mail dear taxpayer_identification_number person to contact identification_number contact telephone number this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter to you dated date is hereby revoked and you are no longer exempt under sec_501 of the code effective september 20xx the revocation of your exempt status was made for the following reason s as a result of our examination for the tax_year ended december 20xx it was determined that your organization became inactive during 20xx and that there have been no operations or regular financial activities conducted or planned as such you failed to meet the operational requirements for continued exemption under sec_501 contributions to your organization are no longer deductible under sec_170 after september 20xx you are required to file income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the tax_year ending december 20xx and for all tax years thereafter in accordance with the instructions of the return processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination under the declaratory_judgment provisions of sec_7428 of the code a petition to the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia must be filed before the day after the date this determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication you may write to these courts at the following addresses united_states tax_court second street nw washington d c united_states court of federal claims madison place nw washington d c united_states district_court for the district of columbia constitution avenue nw washington d c the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs free tas will do everything possible to help you visit taxpayeradvocate irs gov or call if you qualify for tas assistance which is always if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely mary epps acting director eo examinations enclosure publication department of the treasury internal_revenue_service tax exempt and government entities irs exempt_organizations examinations date date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax manager's name id number manager's contact number response due_date certified mail- return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren't an organization described in sec_501 after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code if we don't hear from you if you don't respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation letter rev catalog number 34809f if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn't apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn't a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation enclosures report of examination sincerely margaret von lienen director eo examinations letter rev catalog number 34809f form_6018 publication publication letter rev catalog number 34809f form 886-a ites taaeay schedule number or exhibit explanations of items name of taxpayer tax identification_number year period ended december 20xx issue whether of the internal_revenue_code irc qualifies for exemption under sec_501 facts was incorporated in the state of on january 20xx the purposes of per the article of incorporation are as follows a b c d e was sole financial was auto revoked activities for 20xx as follows was selected for examination for tax_year ended 20xx was reinstated in 20xx and the ruling date is september of 20xx source_of_income received interest_income recognized to be exempt from federal_income_tax as an organization described in sec_501 according to exempt organization’s auto revocation website for failure_to_file form_990 for three consecutive years the revocation date is may 20xx revocation posting date is june 20xx xx xx xx xx xx xx xx -x xx -x xx -x xx -x xx -x xx -x xx -x xxk publish no irs gov department of the treasury-internal revenue service form 886-a catalog number 20810w page form 886-a hen januany i explanations of items schedule number or exhibit tax identification_number year period ended name of taxpayer december 20xx total interest_income expenditures bank service charges total bank service charges supplies check check check total computer and internet expenses supplies check xx xx xx -x xx -x xx -x xx -x xx xx fees xx annual inactive acct fee xx xx xxx xx xxx xx xx prospects x xxx xx x xxx xx xxx xxk xx x xx x xxx xx xxx xx xxx xx check xx x total sponsorship did not receive any source_of_income or incurred any expenses amended 20xx form 990-ez stating in part that total computer and internet expenses sponsorsh ip according to form 990-ez for tax_year ended 20xx organization’s sole source_of_income is from gross_sales of inventory less returns and allowances in amount of dollar_figurexx xxx and the sole expense is from professional fees and other_payments to independent contractors in amount of dollar_figurexxx sec_501 exempts from federal_income_tax organizations which are organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals no part of the publish no irs gov department of the treasury-internal revenue service form 886-a catalog number 20810w page law form 886-a rev date explanations of items schedule number or exhibit name of taxpayer tax identification_number year period ended december 20xx net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office tax reg sec_1_501_c_3_-1 states that an organization may be exempt as an organization described in c if or more of the following purposes religious charitable scientific testing for public safety literary educational or prevention of cruelty to children or animals it is organized and operated exclusively for one tax reg sec_1_501_c_3_-1 of the regulations provides that in order to be exempt as an organization described in sec_501 of the code the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section it tax reg sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 revrul_58_617 1958_2_cb_260 jan rulings and determinations letters granting exemption from federal_income_tax to an organization described in sec_501 of the internal_revenue_code of to which contributions are deductible by donors in computing their taxable_income in the manner and to the extent provided by sec_170 of the code are effective only so long as there are no material changes in the character of the organization the purposes for which it was organized or its methods of operation failure to comply with this requirement may result in serious consequences to the organization for the reason that the ruling or determination_letter holding the organization exempt may be revoked retroactively to the date of the changes affecting its exempt status depending upon the circumstances involved and subject_to the limitations on retroactivity of revocation found in sec_503 of the code organization for the year under examination in order to meet the operational_test must show that such exempt purposes specified in section sec_501 we will not regard an engages primarily in activities which accomplish one or more of meets the operational_test for a sec_501 failure to meet the operational_test publish no irs gov department of the treasury-internal revenue service has failed to show us that government’s position form 886-a catalog number 20810w page form 886-a rev date schedule number or exhibit explanations of items name of taxpayer tax identification_number year period ended december 20xx organization as having met this test if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose as evidence of failure to operate for exempt purposes we reviewed ez filings and found little or no support for exempt operations 990-ez for tax_year ended 20xx form 990-ez does not state the exempt_purpose or describe the activities in part ill the subsequent year return also does not show any exempt_purpose activities clearly activities since 20xx which is required for a sec_501 organization to keep their tax- exempt status accordingly we are proposing revocation because operate for exempt purposes has not been performing exempt_purpose does not form originally filed form taxpayer’s position taxpayer's position is unknown at this time conclusion does not qualify for exemption from federal income if you disagree please submit a statement of your position if you agree to this conclusion please sign the attached form_6018 failed to show any evidence of their exempt fails to it is the irs’s position that tax under sec_501 because activities and failed to operated primarily for exempt purposes as such meet the operational requirements to continue its exemption status under sec_501 accordingly the organization’s exempt status is revoked effective september 20xx publish no irs gov department of the treasury-internal revenue service form 886-a catalog number 20810w page


internal_revenue_service department of the treasury number release date index number re washington dc person to contact telephone number refer reply to cc psi 4-plr-134595-01 date date legend settlor spouse child a child b date trust trust a first corporate trustee successor corporate trustee dear this is in response to the date letter requesting a ruling on the generation-skipping_transfer_tax consequences of the judicial reformation of trust a the facts submitted and representations are as follows settlor died on date prior to date survived by spouse child a and child b_trust was created in item vii of settlor’s will under paragraphs a and b of item vii during spouse’s lifetime trust was to be held for the benefit of spouse and settlor’s living descendants on spouse’s death the trust property was to be divided into separate equal shares to provide one share for each then living child of settlor and one share for each then deceased child of settlor who died leaving a spouse and or issue under item vii paragraph d a share created for a child living at spouse’s death is to be held in further trust under paragraph d subparagraph sec_1 and the income from the share is to be paid to or for the benefit of the child for life the corporate trustee may also pay to or apply for the benefit of the child such sums of principal of the share as deemed necessary or desirable for medical_care comfortable plr-134595-01 maintenance and welfare taking into consideration to the extent the corporate trustee deems advisable any other income or resources of the child known to the trustee the terms of the trust provide that no individual trustee of the trust is to have any authority to make distributions under this provision under subparagraph sec_3 and on the death of the child leaving issue the trustee is to distribute outright to the child’s issue per stirpes the undistributed balance of the share along with any accumulated but undistributed_income if the child leaves no issue but leaves a surviving_spouse the share will be retained in further trust with income payable for the spouse’s benefit until the spouse’s death or remarriage on the spouse’s death or remarriage the principal is to pass for the benefit of settlor’s other child under item xiv paragraph sec_1 and spouse and first corporate trustee were designated as the co-trustees if spouse ceased to act as trustee child a and child b were to be the co-trustees along with the corporate trustee trust was established on settlor’s death spouse has since died and pursuant to item vii paragraph b on spouse’s death trust was divided into equal shares one such share trust a was created for child a successor corporate trustee and child a are serving as the co-trustees of trust a successor corporate trustee has petitioned the local probate_court to reform trust a pursuant to the proposed reformation item vii paragraph d subparagraph will provide that the trustee will pay distribute or disburse to or for the benefit of the child child a for life in each calendar_year an amount equal to five percent of the average fair_market_value of the child’s share trust a as of the close of the last business_day of the three previous calendar years or the net_income from the child’s share for the calendar_year whichever is greater under the proposed reformation the corporate trustee will have the authority to petition the local probate_court to change the five percent distribution rate in appropriate circumstances any such change must be approved by the probate_court further no individual trustee shall have any authority to determine if the rate shall be changed under item vii paragraph d subparagraph sec_2 and all computations of fair_market_value will include accounting_income and principal but no accruals are required if the trust includes assets for which there is not a ready market the trustee will adopt a method of evaluation as the trustee deems reasonable in its discretion under the circumstances the distribution amount is to be paid first from net accounting_income next from net realized short-term_capital_gains then from net realized long-term_capital_gains and as necessary from principal in all other respects the terms of the reformed trust a will be identical to those of the original trust a requested ruling plr-134595-01 you have asked us to rule that the reformation of trust a as proposed will not cause trust a to lose exempt status for generation-skipping_transfer_tax purposes discussion sec_2601 of the internal_revenue_code imposes a tax on every generation- skipping transfer gst which is defined under sec_2611 as a taxable_distribution a taxable_termination or a direct_skip under of the tax_reform_act_of_1986 the act the generation-skipping_transfer gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the tax does not apply to a transfer under a_trust that was irrevocable on date except to the extent the transfer is made out of corpus added to the trust by an actual or constructive_addition after date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 will not cause the trust to lose its exempt status these rules are applicable only for purposes of determining whether an exempt trust retains exempt status for generation-skipping_transfer_tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in a beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a generation-skipping_transfer or the creation of a new generation-skipping_transfer sec_26_2601-1 example illustrates a situation where a_trust that is otherwise exempt from the gst tax provides that trust income is payable to a for life and upon a’s death the remainder is to pass to a’s issue per stirpes in the appropriate local court approves a modification to the trust that converts a’s income_interest into the right to receive the greater of the entire income of the trust or a fixed percentage of the trust assets valued annually unitrust_interest to be paid each year to a for life the example concludes that the modification does not result in a shift in beneficial_interest to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the plr-134595-01 modification rather the modification can only operate to increase the amount distributable to a and decrease the amount distributable to a’s issue in addition the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the modification will not subject the trust to the provisions of chapter in this case the modification of trust a to provide for the distribution to child a of the greater of the trust a income for the calendar_year or an amount equal to five percent of the average fair_market_value of trust a as of the close of the last business_day of the three previous calendar years does not result in a shift of any beneficial_interest in trust a to any beneficiary who occupies a generation lower than the persons holding the beneficial interests prior to the modification see sec_26_2601-1 example further the modification does not extend the time for vesting of any beneficial_interest in trust a beyond the period provided for in the original trust accordingly based on the facts submitted and the representations made the modification to trust a as proposed will not cause trust a to lose its exempt status for gst tax purposes the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by the appropriate party while this office has not verified any part of the material submitted in support of the request for rulings it is subject_to verification and examination except as specifically ruled above no opinion is expressed as to the federal tax consequences of the facts described above under the cited provisions or any other provisions of the code or regulations we are specifically not ruling on the gift_tax and income_tax consequences of the transaction this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours george l masnik chief branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


t c no united_states tax_court ralph p waterman petitioner v commissioner of internal revenue respondent docket no filed date p accepted an offer for an early separation which had been made to him by the u s navy pursuant to a downsizing program at the time of acceptance p was in a combat_zone and had served over years the vast majority of which were not in a combat_zone p would not have been entitled to a pension until he had served years the amount of p's severance payment was calculated on the basis of his length of service sec_112 i r c provides that compensation received for active_service in a combat_zone is excludable from gross_income the regulations under sec_112 emphasize that the right to the income must accrue during service in a combat_zone but the payment may be received after the combat service r determined that none of the payment received by p was excludable under sec_112 on brief r conceded that an apportioned amount of the severance payment attributable to the time in a combat_zone over total time served would be excludable p argues that the entire severance payment is excludable because his right to the payment arose at the time of his acceptance of the offer for an early separation and he accepted that offer while in a combat_zone held p's severance payment is not excludable from gross_income under sec_112 cynthia l mire for petitioner william henck for respondent opinion gerber judge respondent by means of a statutory_notice_of_deficiency determined an income_tax deficiency of dollar_figure and sec_6651 and a additions to tax in the amounts of dollar_figure and dollar_figure respectively for petitioner's taxable_year respondent has conceded that petitioner is not liable for the additions to tax the remaining issue for our consideration is whether the special separation payment to which petitioner became entitled while serving in a combat_zone is excludable from petitioner's gross_income under sec_112 background this case was submitted fully stipulated pursuant to rule petitioner ralph f waterman served in the u s navy for years and months as an enlisted person petitioner was stationed aboard the u s s america in the persian gulf a 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the year under consideration and all rule references are to this court's rules_of_practice and procedure designated combat_zone from january through date on date petitioner accepted an early separation offer from the navy as part of its downsizing program petitioner agreed to leave the navy by accepting the separation offer and payment petitioner was not entitled to any future_benefits including a pension which would have first become available after years_of_service the amount of the lump-sum special separation payment was in part measured by petitioner's years and months of active military service petitioner left the ship pursuant to this agreement and also left the persian gulf region on date petitioner received an honorable discharge from the navy on date in norfolk virginia the navy withheld dollar_figure from petitioner's dollar_figure separation payment in substantial part the withholding was for federal_income_tax upon acceptance of the navy's offer for early separation petitioner was advised by the navy that payments received pursuant to his early separation would be excludable from gross_income if accepted while serving in a designated combat_zone in accord with that advice petitioner requested and the navy issued an dollar_figure check to petitioner representing the previously withheld federal tax portion of the original dollar_figure withholding respondent determined that the dollar_figure separation payment constituted taxable_income and was not excludable under sec_112 on brief respondent conceded that dollar_figure the portion of the separation payment that was measured by time served in a combat_zone is excludable under sec_112 discussion we consider here a matter of first impression involving whether an early separation payment the right to which arose and became fixed while a member of the military was serving in a combat_zone is excludable from gross_income under sec_112 respondent contends that the portion of the separation payment apportioned as to time served while petitioner was not in a combat_zone represents compensation that is not excludable under sec_112 conversely petitioner contends that the entire separation payment is excludable from gross_income under sec_112 as compensation_for an act performed and or a right to compensation that became fixed while he was in a combat_zone we hold that no portion of the separation payment would be excludable from gross_income under sec_112 sec_112 was enacted to provide a tax_benefit to members of the armed services whose lives were placed at risk because of in the notice_of_deficiency respondent determined that no part of the separation payment should be excluded under sec_112 on brief respondent conceded that the portion of the payment apportioned by reference to the portion of time served in a combat_zone should be excluded from income our interpretation of sec_112 would not permit any portion to be excluded because of respondent's concession however petitioner is entitled to exclude the dollar_figure of the dollar_figure severance payment their service to their country sec_112 in pertinent part provides that gross_income does not include compensation received for active_service for any month during any part of which such member served in a combat_zone sec_112 and the underlying regulations do not specifically address the question of whether severance_pay is excludable in construing a statute we generally give effect to the plain and ordinary meaning of its language 471_us_84 310_us_534 words with a fixed legal or judicially settled meaning on the other hand generally must be presumed to have been used in that sense unless such an interpretation would lead to absurd results see 263_us_179 101_tc_260 our principal objective in interpreting any statute is to determine congress' intent in using the statutory language being construed united_states v american trucking associations supra pincite when a statute is ambiguous we may look to its legislative_history and the purposes for its enactment 489_us_235 with respect to sec_112 however there is a paucity of legislative_history or discussion concerning the legislative intent see 550_f2d_624 use of the word for in the sec_112 language compensation received for active_service in a combat_zone requires that the compensation be earned for a person's service in a combat_zone this statutory language is not ambiguous concerning the subject of when and how the compensation must be earned as to when the payment is received the underlying regulation contains the following pertinent language the time and place of payment are irrelevant in considering whether compensation is excludable under sec_112 rather the time and place of the entitlement to compensation determine whether the compensation is excludable under sec_112 for this purpose entitlement to compensation fully accrues upon the completion of all actions required of the member to receive the compensation sec_1_112-1 income_tax regs the above-quoted language also addresses the question of when the compensation is earned the regulation does not however address how the compensation is to be earned in order to be excludable under sec_112 ie for military service performed in a combat_zone or any type of service or act that is performed or may occur in a combat_zone congress provided a specific exception from the type of compensation that may be excludable under sec_112 to wit pensions and retirement pay sec_112 respondent doe sec_3on date these regulations were retroactively amended under authority of sec_7805 to be effective date t d 1993_2_cb_65 not argue that the severance payment is a pension or a form of retirement pay therefore the question we consider is whether the severance payment is compensation received for active_service in a combat_zone by means of regulations compensation excludable from gross_income under sec_112 has not been limited to active_duty pay while in a combat_zone in particular sec_1_112-1 example income_tax regs provides in july while serving in a combat_zone an enlisted member voluntarily reenlisted after july the member neither served in a combat_zone nor was hospitalized for wounds incurred in the combat_zone in february of the following year the member received a bonus as a result of the july reenlistment the reenlistment bonus can be excluded from income as combat_zone compensation although received outside of the combat_zone because the member completed the necessary action for entitlement to the reenlistment bonus in a month during which the member served in the combat_zone this regulation to a limited extent may expand upon the statutory language compensation received for active_service because reenlistment bonuses could be to secure future service which is not served in a combat_zone example indicates that the time and place of payment are irrelevant when considering whether compensation is excludable under sec_112 more importantly the example contains a variation from the sec_112 language to the extent that there we note that neither party has challenged the validity of the regulations under consideration is acknowledgment that a portion of the reenlistment bonus in that example will not be earned for service in a combat_zone sec_1_112-1 income_tax regs instead it is sufficient that the offer and acceptance of the reenlistment occur while the member is serving in the combat_zone we note however that as a matter of policy the potential for continued service in a combat_zone exists where a person reenlists petitioner wishes us to go a step further than example and hold that the language of sec_112 as interpreted in sec_1_112-1 income_tax regs would extend to a severance payment even though that payment is being made to ensure that there would be no further service in a combat_zone or otherwise we do not find petitioner's argument to be persuasive petitioner's proposed approach does not comport with the statutory language and does not carry out the intent of the statute respondent makes no effort to distinguish example but instead argues that example of the regulation is more analogous sec_1_112-1 example income_tax regs provides from march through december an enlisted member became entitled to days of annual leave while serving in a combat_zone the member used all days of leave in the following year the member may exclude from income the compensation received for those days even if the member performs no service in the combat_zone in the year the compensation is received respondent finds support in this example because the excludable amount is limited to an amount attributable solely to leave accrued while the member was in a combat_zone we find example analogous to the extent that the excludable_portion accrued while the member was in a combat_zone but it is excluded from income even though utilized and received while the member was not in a combat_zone we do not find that example controls our factual situation respondent's argument focuses on the fact that the amount of the severance payment here was measured in part by time served outside a combat_zone on the basis of that observation respondent argues that the payment was earned in corresponding part outside a combat_zone respondent also concludes that petitioner is entitled to exclude the portion of the severance payment that is allocable to his past service in a combat_zone although we agree that petitioner is not entitled to exclude the severance payment we disagree with respondent's reasoning petitioner's severance payment is in exchange for his agreement to leave the military although measured by length of service the severance payment is not for prior service either in a combat_zone or otherwise in the same manner as the reenlistment example when petitioner accepted the navy's early separation offer he did not then become entitled to any additional compensation_for the services previously performed accordingly the severance payment cannot be considered compensation_for earlier services rather it must be considered compensation_for petitioner's agreeing to early separation from the navy ultimately the statute requires that the member's service be performed in a combat_zone respondent argues that the severance payment was received in exchange for the pension petitioner would have received if he had completed years_of_service the parties in this case stipulated that petitioner accepted the separation offer as part of the navy's downsizing program and as a result he would not be eligible for a pension after years_of_service accordingly respondent's argument that the severance payment was received in exchange for pension benefits is a matter of conjecture on the basis of the parties' stipulation petitioner was not entitled to a pension at the time he accepted the early separation petitioner had served just over years and was almost years short of having vested pension benefits it is true that as a result of petitioner's agreeing to sever his relationship with the military he would not be able to serve long enough to be entitled to a pension that is a far cry from exchanging his pension for a severance payment the only similarity between a pension which by statute is not exempt under sec_112 and a severance payment is that both are calculated by means of length of service there is no evidence here that there was any other correlation or connection between a severance payment and a government military pension we accordingly hold that the severance payment here is not excludable from petitioner's gross_income under sec_112 to reflect the foregoing and because of concessions by the parties decision will be entered under rule


t c memo united_states tax_court leon steinhardt petitioner v commissioner of internal revenue respondent docket no 20658-17l filed date leon steinhardt pro_se wendy c yan for respondent memorandum opinion gerber judge this collection review case filed pursuant to sec_6330 was calendared for trial at the richmond virginia session of the court scheduled to commence on date on date the court filed respondent’s motion for summary_judgment and the supporting declaration of settlement officer stephan r harding so harding on date the court filed petitioner’s notice of objection to motion for summary_judgment and motion to remand background respondent determined federal_income_tax deficiencies against petitioner for and based on substitutes for returns respondent prepared pursuant to sec_6020 and on date the court entered a decision in docket no for those years petitioner also failed to file federal_income_tax returns for and on date respondent sent petitioner a letter requesting that petitioner file federal_income_tax returns for and or agree to the proposed deficiencies pursuant to the substitutes- for-returns procedures respondent prepared substitutes for returns for and pursuant to sec_6020 on date respondent sent notices of deficiency to petitioner’s virginia beach virginia address for and those notices were sent via certified mail to the same address petitioner used on 1all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure his petition to this court petitioner did not challenge the proposed deficiencies for and and respondent assessed the deficiencies based on the substitutes for returns on date respondent issued petitioner a notice_of_intent_to_levy and your right to a hearing relating to and years in issue on date petitioner timely submitted his form request for a collection_due_process or equivalent_hearing requesting a collection_due_process_hearing for the years in issue on the form petitioner stated that he was disputing these alleged taxes or penalties associated with these taxes and strongly believe s that he do es not owe them and requested a face-to-face hearing closer to his home petitioner also requested consideration of collection alternatives i f at the end of his hearing it is proven that he owe s the tax although he did not check any of the respective boxes relating to collection alternatives on date so harding from respondent’s appeals_office in atlanta georgia sent petitioner a letter acknowledging that respondent received 2the notice_of_determination references respondent’s letter dated date the record includes and both respondent’s counsel and petitioner reference a letter dated date the date reference appears to be a typographical error on respondent’s part petitioner’s form relating to the years in issue and scheduling a telephone conference for date so harding informed petitioner that he was not permitted to dispute the liabilities for and because petitioner had previously disputed these liabilities in a collection_due_process_hearing since so harding was unable to verify petitioner’s receipt of the notices of deficiency for and he informed petitioner that he could challenge the underlying liabilities relating to and but needed to provide his and amended federal_income_tax returns so harding also informed petitioner that he could qualify for a face-to-face collection_due_process_hearing if he was in current compliance with his filing_requirements in order for so harding to consider collection alternatives he requested that petitioner provide the following information a completed form 433-a collection information statement for wage earners and self-employed individuals a completed form 433-b collection information statement for businesses and signed tax returns for and or proof of his compliance with filing_requirements so harding requested additional information including a form_656 offer_in_compromise and financial information on date petitioner called so harding and informed him that he would not be calling in for the collection_due_process telephone hearing petitioner also sent so harding a letter dated date which stated i will not be able to participate in the telephone conference you scheduled for date petitioner also alleged that he was entitled to a face-to-face collection_due_process_hearing the assignment of his hearing to the atlanta georgia appeals_office was in error because he resided in virginia beach virginia and he was able to dispute the liabilities relating to and because he believe d that the amounts of interest and penalties were incorrect and the irs makes a lot of mistakes additionally petitioner contended that he had not received a notice_of_deficiency for or so harding’s date letter gave petitioner days to provide the requested information and days to provide the federal tax returns petitioner did not provide the requested information before the scheduled collection_due_process_hearing nor did he request additional time to collect the information so harding did not contact petitioner after reviewing petitioner’s letter which did not include the requested information before the issuance of the notice_of_determination so harding reviewed the information available to him including the information returns provided by third- party payors he determined that petitioner would have a filing requirement for each of hi sec_2010 through taxable years additionally he determined respondent had grounds for making the and assessments and that the notices of deficiency were mailed to petitioner’s last_known_address via certified mail although delivery could not be established so harding determined that although petitioner can and does dispute these and tax assessments no documentation has been provided to indicate the amount of the dispute or evidence to support a reduction of these assessments so harding also determined that all penalty and interest assessments for the years at issue appear correct after he had considered all of information available to him on date respondent issued to petitioner a notice_of_determination sustaining the notice_of_intent_to_levy relating to the years in issue on date petitioner while residing in the state of virginia filed his petition with the court disputing the notice_of_determination on his petition petitioner stated that t he irs never gave him a face-to- face hearing ignoring his request for a collection_due_process_hearing respondent contends that petitioner did not qualify for a face-to-face hearing 3the case activity record states that the post office does not hol d sic the proof of delivery on line back to when these notices were issued and proof of delivery or intentional refusal of delivery cannot be established petitioner did not explicitly challenge in his petition the underlying liability for or or his receipt of the notices of deficiency for and respondent contends in his motion for summary_judgment that petitioner conceded the underlying tax_liabilities for the years in issue petitioner challenged respondent’s contention regarding the concession of the underlying liabilities in his notice of objection petitioner stated that he had raised numerous issues in his date letter including that he objected to a settlement officer from atlanta holding the hearing he did not receive notices of deficiency for and and he wished to dispute the penalties and interest for and in his motion to remand petitioner again contended that the case should be remanded to the irs appeals_office for a face-to-face hearing discussion either party may move for summary_judgment on all or any part of the legal issues in controversy rule a the court may grant summary_judgment only if there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule b see 85_tc_527 as the moving party respondent bears the burden of proving that no genuine dispute exists as to any material fact and that respondent is entitled to judgment as a matter of law see 98_tc_518 aff’d 17_f3d_965 7th cir the party opposing summary_judgment must set forth specific facts which show that a genuine question of material fact exists and may not rely merely on allegations or denials in the pleadings rule d see sundstrand corp v commissioner t c pincite in deciding whether to grant summary_judgment the factual materials and the inferences drawn from them must be considered in the light most favorable to the nonmoving party ie petitioner in this case 115_tc_554 naftel v commissioner t c pincite where the record viewed as a whole could not lead a reasonable trier of fact to find for the nonmoving party there is no genuine issue for trial 475_us_574 this court has jurisdiction under sec_6330 to review the commissioner’s administrative determinations see sec_6330 see also 122_tc_287 generally the court may consider only those issues that the taxpayer properly raised during the hearing see sec_301_6330-1 q a-f3 proced admin regs see also 129_tc_107 magana v commissioner t c at a collection_due_process_hearing the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy sec_6330 the taxpayer may also raise challenges to the existence or amount of the underlying tax_liability if the taxpayer did not receive a statutory_notice_of_deficiency with respect to the underlying liability or did not otherwise have an opportunity to dispute that liability sec_6330 rule b however requires petitioner to include in his petition clear and concise assignments of each and every error which petitioner alleges to have been committed in the notice_of_determination any issue not raised in the assignments of error shall be deemed conceded see 138_tc_228 westby v commissioner tcmemo_2007_194 the petition contained only arguments relating to respondent’s failure to provide him a face-to-face collection_due_process_hearing petitioner however contended in his notice of objection that he indirectly challenged the underlying liabilities relating to the years in issue and the receipt of the notices of deficiency relating to and in his petition and explicitly challenged these issues in a letter to so harding irrespective of whether he conceded his underlying liabilities petitioner cannot challenge his underlying tax_liabilities for and petitioner previously disputed the underlying liabilities for those years and on date the court entered a decision against him in docket no for those years when the underlying tax_liability is not at issue the court reviews the determinations regarding the collection action for abuse_of_discretion 114_tc_176 petitioner challenged the underlying liabilities for and and so harding determined that petitioner could do so petitioner however did not participate in the collection_due_process_hearing or provide to the settlement officer his amended and federal_income_tax returns petitioner did not properly dispute the underlying tax_liabilities for the years at issue and accordingly the court will not consider any adjustments to the amounts see goza v commissioner t c pincite sec_301_6330-1 q a-f3 proced admin regs the court reviews the determinations regarding the collection action for the years in issue for abuse_of_discretion pursuant to this standard the taxpayer must prove that the determination was arbitrary capricious or without sound basis in fact or law see 114_tc_604 112_tc_19 collection_due_process hearings are informal may consist of one or more oral or written communications between an appeals officer and the taxpayer and do not require the appeals officer and the taxpayer to have a face-to-face conference see sec_301_6330-1 q a-d6 proced admin regs while petitioner contends that he was denied a face-to-face collection_due_process_hearing this court has consistently held that a face-to-face hearing is not required pursuant to sec_6320 or sec_6330 and a proper collection_due_process_hearing may be held by telephone or by correspondence under certain circumstances see 115_tc_329 rice v commissioner tcmemo_2009_169 huntress v commissioner tcmemo_2009_161 moline v commissioner tcmemo_2009_110 aff’d 363_fedappx_675 10th cir a taxpayer may request a face-to-face collection_due_process_hearing at the appeals_office closest to the taxpayer’s residence see sec_301_6330-1 q a-d7 proced admin regs however a face-to-face cdp conference concerning a collection alternative such as an installment_agreement or an offer to compromise liability will not be granted unless another taxpayer would be eligible for the alternative in similar circumstances see id q a-d8 for example if a taxpayer is not in compliance with his filing obligations or has not made certain required deposits of tax as set forth in form_656 no face-to-face conference will be granted to the taxpayer if he wishes to make an offer-in- compromise but has not fulfilled these obligations id so harding informed petitioner that he needed to be in compliance with his federal_income_tax filing obligations in order to qualify for a face to face hearing concerning collection alternatives from review of the information available to him so harding determined that petitioner had federal tax filing obligations for through petitioner however did not provide any of the information requested including whether he was in compliance with hi sec_2010 through federal_income_tax filing obligations and did not participate in the telephone collection_due_process_hearing accordingly the court concludes that there was no abuse_of_discretion in respondent’s determinations and respondent’s motion for summary_judgment will be granted to reflect the foregoing an appropriate order and decision will be entered


internal_revenue_service department of the treasury significant index nos olrlo5s 01-00vashington dc bpo 2s person to contact telephone number refer reply to dgrp ra‘t a1 sep re plan a plan b employer association c employer association d employer e this is in reply to a ruling_request made on your behaif by your authorized representative with respect to the creation of plan b and its effect on plan a you have requested the following rulings under the internal_revenue_code the code that the establishment of plan b will not cause plan a to lose its qualified status under code sec_401 that the allocation of contributions to plan b will not cause plan a to lose its qualified status under sec_401 that employer contributions allocated to plan b under the terms of collective bargaining agreements will continue to be deductible by the employers under code sec_404 that payment of plan b benefits before all contributing employers to pian a have signed a collective bargaining agreement agreeing to allocation of contributions to plan b will not affect the tax deductibility of the contributions to plan a or plan b or the qualified status of plan a under sec_401 if the plan b benefits are paid to an employee who worked for an employer that is signatory to a collective bargaining agreement or consent agreement authorizing allocation of contributions to plan b that payment of plan b benefits before all contributing employers to plan a have signed a collective bargaining agreement agreeing to allocation of contributions to plan b will not affect the tax deductibility of the contributions to plan a or plan b or the qualified status of plan a under sec_401 a if the plan b benefits are paid to an employee who worked for an employer that is not signatory to a collective bargaining agreement or consent agreement authorizing allocation of contributions to plan b plan a is a qualified multiemployer defined_benefit_plan the date of its most recent determination_letter is date plan a is established pursuant to numerous collective bargaining agreements approximately employers contribute to plan a of those approximately participate under a consent agreement to the master labor agreement negotiated between employer association c and the sponsoring local unions approximately participate under a consent agreement to the master labor agreement between employer association d and one of the sponsoring local unions and approximately participate under a collective bargaining agreement negotiated by the individual employer with one of the sponsoring local unions the contributions required to plan a vary by collective bargaining agreement employer contributions to plan a are made monthly based upon the hours_of_service during the preceding month by employees covered by the collective bargaining agreement an employee's monthly accrued_benefit under plan a is based on a percentage of the amount their employer was required to contribute under the applicable collective bargaining agreement employees who become entitled to benefits receive the benefits regardless of whether the employee's employer has made the required contributions plan b is a non-qualified employee_benefit_plan established pursuant to sec_3 of the employment retirement income security act of erisa which provides participants with a supplemental benefit intended to offset any restriction on benefits caused by sec_415 of the code participants in plan b shall include all participants in plan a who are qualified for and are receiving benefits under plan a and whose benefits under plan a are limited by code sec_415 separate bookkeeping accounts will be maintained for all participants in plan b a board_of trustees consisting of the same trustees who administer plan a will administer plan b contributions paid to plan b will be made pursuant to amended master labor agreements for employer associations c and d and pursuant to the amended independent collective bargaining agreement of employer e the amendments will provide that a portion of the contributions previously intended solely for plan a will be utilized to fund and administer plan b such portion shall be the amount necessary to provide each plan b participant with the amount by which such participant’s benefit under plan a without taking into account the code sec_415 limits exceeds the benefit under plan a considering sec_415 employment_taxes and administrative expenses benefits are payable from plan b only to retirees who are receiving benefits from plan a not to active employees furthermore the benefits payable from plan b are based upon all periods of service taken into account by plan a limits plus the plan b trustees will have the discretion to authorize make-up benefits for prior periods in which the plan a benefits were reduced because of the code sec_415 limits in no event shail these make-up benefits be paid from reallocations of amounts previously contributed to plan a the trustees will also have authority to reduce plan b benefits if continuing benefits under plan b will impair the funding status of plan a it is anticipated that the approximately remaining independent collective bargaining agreements will eventually be amended to providing for the funding of plan b however it is possible that not all employers will sign independent agreements agreeing to fund plan b contributions made by a particular employer will be utilized to fund plan b prior to the date such employer signs a revised bargaining agreement that provides for funding of plan b by pension contributions of that employer under the provisions of plan a the assets of plan a cannot be used to provide the benefits of plan b similarly under the provisions of plan b the assets of plan b cannot be used to provide the benefits of plan a in any event no portion of the pension 02s sec_3 of erisa defines an excess_benefit_plan as one maintained solely for the purpose of providing benefits for certain plan participants in excess of the limitations imposed by sec_415 of the code without regard to whether the plan is funded sec_401 of the code provides the requirements for qualification of a_trust created or organized in the united_states and forming part of a stock bonus pension or profit sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries sec_401 of the code provides that a_trust shall not constitute a qualified_trust if the plan of which such trust is a part provides for benefits or contributions which exceed the limitations of sec_415 of the code sec_404 of the code provides if contributions are paid_by an employer to or under a stock bonus pension profit-sharing or annuity plan or if compensation is paid_or_accrued by an employer on account of any employee under a plan deferring the receipt of such compensation such contributions or compensation is not deductible under chapter of the code but if it would otherwise be deductible is deductible under sec_404 subject_to that limitations of that section sec_404 of the code provides that contributions or compensation paid under a nonqualified_plan or arrangement deferring the receipt of compensation if otherwise deductible are deductible in the taxable_year in which an amount attributable to the contribution are includible in the gross_income of the employees participating in the plan but in the case of a plan in which more than one employee participates only if separate_accounts are maintained for each employee sec_412 of the code provides minimum_funding requirements that must be satisfied in pension plans sec_415 of the code provides limitations on benefits_and_contributions that may be provided under a qualified_trust sec_501 of the code provides that an organization described in sec_401 is exempt from taxation sy n o w e a s b r c t e f e r e c sec_1_404_a_-12 of the income_tax regulations the regulations provides that a deduction is allowable for a contribution under sec_404 only in the taxable_year of the employer in which or with which ends the taxable_year of an employee in which an amount attributable to such contribution in includible in his gross_income as compensation and then only to the extent allowable under sec_404 sec_1 -1 b of the regulations provides that a plan is a single_plan if and only if on an ongoing basis all of the plan assets are available to pay benefits to employees who are covered by the plan and their beneficiaries sec_1_404_b_-1t q a-2 of the temporary regulations provides that a plan or method or arrangement defers the receipt of compensation to the extent it is one under which an employee receives compensation or benefits more than a brief period of time after the end of the employer's taxable_year in which the services creating the right to such compensation or benefits is performed because the assets of plan b are not available to pay benefits under plan a and the assets of plan a are not available to pay benefits under plan b plan a and plan b do not constitute a single_plan furthermore the benefits and provisions of plan b do not affect the amounts of benefits payable from plan a thus the existence of plan b does not affect the tax-qualified status of plan a because the existence of plan b does not affect whether plan a meets the requirements for qualification of sec_401 of the code the existence of the plan b does not affect whether plan a meets the requirements for exemption from taxation of sec_501 of the code thus the existence of plan b does not affect the tax-exempt status of the plan a if the establishment of plan b was not accompanied by an increase in the pension fund contribution rate under the collective bargaining agreements the method of funding of plan b may cause pian a to fail to meet the funding requirements of sec_412 of the code however a plan does not lose its tax-qualified status or its tax-exempt status merely because it fails to meet the minimum_funding requirements of sec_412 thus the method of funding of plan b does not affect the tax-qualified status of plan a or the tax deductibility of employer contributions to plan a ass because plan b is a plan deferring the receipt of compensation under b -1t q8 a-2 of the temporary regulations contributions to plan b are deductible only under the rules of sec_404 of the code because plan b is a nonqualified_plan the provisions of sec_404 of the code are applicable because plan b provides for the maintenance of separate_accounts for each employee contributions to plan b made by contributing employers for the benefit of employees are deductible for the contributing employer's taxable_year in which or with which ends the employee’s taxable_year in which an amount attributable to the contributions is includible in such employee's gross_income therefore we hold that the establishment of plan b does not cause plan a to lose its qualified status under code sec_401 the allocation of contributions to plan b will not cause plan a to lose its qualified status under code sec_401 assuming the requirements for deductibility are met employer contributions to plan b are fully deductible by the contributing employers in the taxable_year in which or with which ends the employee’s taxable_year in which an amount attributable to the contributions is includible in such employee's gross_income - payment of plan b benefits before ail contributing employers to plan a have signed a collective bargaining agreement agreeing to the allocation of contributions to plan b will not affect the tax deductibility of the contributions to plan a or plan b or the qualified status of plan a under sec_401 if the plan b benefits are paid to an employee who worked for an employer that is signatory to a collective bargaining agreement or consent agreement authorizing allocation of contributions to plan b payment of plan b benefits before all contributing employers to plan a have signed a collective bargaining agreement agreeing to the allocation of contributions to plan b will not affect the tax deductibility of the contributions to plan a or plan b or the qualified status of plan a under sec_401 if the plan b benefits are paid to an employee who did not work for an employer that is signatory to a collective bargaining agreement or consent agreement authorizing allocation of contributions to plan b sb this ruling does not consider the more general issue of plan a's qualified status specifically whether plan a complies with all the code requirements for qualification this letter addresses only the impact if any of the adoption and funding of plan b on the purportedly otherwise qualified status of plan a this ruling is directed only to the taxpayer that requested it sec_61 k of the internal_revenue_code provides that it may not be used or cited by others as precedent sincerely a ballin james e holland jr manager employee_plans actuarial group tax_exempt_and_government_entities_division


t c memo united_states tax_court chad b hessing and kelli b hessing petitioners v commissioner of internal revenue respondent docket no filed date jeremy d deus and barbara zanzig lock for petitioners kelly andrew blaine for respondent memorandum findings_of_fact and opinion gerber judge respondent in a notice_of_deficiency mailed date determined a dollar_figure deficiency in petitioners’ income_tax the issues remaining for our consideration are whether petitioners must recognize dollar_figure in income from the sale of three parcels of realty during whether petitioners are entitled to business_expense deductions in excess of those respondent allowed in the notice_of_deficiency and whether the period of assessment of tax for petitioners’ tax_year expired or remains open under sec_6501 findings_of_fact petitioners resided in boise idaho at the time their petition was filed chad hessing petitioner wa sec_22 years old during and he intended to pursue a career in the construction business petitioner was generally familiar with his father’s construction businesses for two years before and after the completion of less than one year of college petitioner went on a religious mission he had agreed with his father that upon his return he would work for and learn about his father’s construction businesses their understanding was that petitioner would learn about the construction business by working as an employee and would receive a monthly salary of dollar_figure petitioner’s father’s businesses had fully extended credit and petitioners had a good credit rating the father asked petitioners to use their good credit section references are to the internal_revenue_code in effect for the year in issue petitioners had few assets but their credit card history was good rating and act as purchasers of three parcels of realty so that he could develop more properties in his construction businesses at all times during petitioner’s father ran the construction businesses and petitioner was an employee petitioner did not receive and or retain any proceeds from the transactions related to his father’s construction businesses any checks that were drawn to petitioner as payee in connection with the real_property and the construction businesses were turned over to his father petitioners acted as a conduit for petitioner’s father’s businesses concerning the three real_property transactions during petitioner received the dollar_figure per month salary as he and his father had agreed the first parcel lot was to be used to construct a home for kip and amy fife lot was purchased in petitioners’ names on date and the closing with the fifes took place on date the fifes paid dollar_figure and after the payoff of the mortgage loan on the property and expenses of sale the net amount shown as due petitioners was dollar_figure petitioners did not receive any portion of the dollar_figure the second parcel lot was purchased in petitioners’ names and then on the same day date sold or transferred to one of petitioner’s father’s business entities as part of the lot transaction checks were drawn to petitioner in various amounts which petitioner in turn gave to his father the purchase and sale of lot the third parcel was similar to the lot and transactions and the sale of lot closed at the end of date petitioners’ names appear in the transaction documents but petitioners did not retain any of the checks or funds that the documentation reflected as attributable to them attached to petitioners’ joint federal_income_tax return was a schedule c profit or loss from business reflecting dollar_figure in gross_receipts and a net profit or taxable_amount of dollar_figure petitioner’s father prepared the return for petitioners to account for the form_1098 mortgage interest statement and form 1099-misc miscellaneous income that were issued in petitioners’ names in connection with the three real_estate transactions for which petitioners acted as agents or conduits for petitioner’s father petitioner had no background in business accounting or taxation and was unfamiliar with the source or financial consequences of the figures his father reported on the return petitioner trusted his father to present the circumstances properly to the government opinion the seminal question in this case is whether petitioners underreported gross_income and if they did whether the amount of underreported gross_income was sufficient to meet the threshold requirement of sec_6501 providing for a six-year period within which respondent may assess a tax_deficiency for petitioners’ tax_year if we decide that petitioners were not required to report additional gross_income then the remaining questions become moot because of respondent’s inability to assess additional tax for if we decide that petitioners were required to report or more of additional gross_income we must then decide whether they are entitled to deductions in excess of those respondent allowed in the notice_of_deficiency burden_of_proof petitioners raised the question of burden_of_proof for the first time in their opening brief they contend that under sec_7491 respondent bears the burden_of_proof for going forward with the evidence respondent argues that petitioners’ attempt to raise the burden_of_proof is untimely at trial the court asked the parties is there any question in this case about who has the burden_of_proof and who has the burden of proceeding with the evidence counsel for petitioners replied no your honor and he proceeded to call his first witness the entire trial was conducted under the premise that petitioners had the burden_of_proof under these circumstances it would be prejudicial and unjust to allow petitioners to raise in a posttrial brief questions concerning the burden_of_proof accordingly we hold petitioners to their trial admission that they had the burden_of_proof and deny their attempt to raise the question of burden on brief see 96_tc_858 aff’d 959_f2d_16 2d cir whether petitioners underreported gross_income for we consider this issue first because it may be determinative of the outcome of this case normally the commissioner has three years within which to assess tax sec_6501 under sec_6501 however the commissioner has six years within which to assess tax where a taxpayer omits_from_gross_income an amount properly includible therein which is in excess of percent of the amount of gross_income stated in the return see sec_6501 but for sec_6501 respondent would not be able to assess an income_tax deficiency in this case because the normal three-year period had expired at the time that the notice_of_deficiency was mailed accordingly we must decide whether petitioners had an omission of gross_income and whether it was in excess of of the amount reported petitioners argue that they were acting as an agent or conduit for petitioner’s father and that the assignment_of_income_doctrine requires that the principal report the income citing 57_tc_91 respondent does not question or disagree with the legal foundation for petitioners’ argument instead respondent argues that the record in this case does not support their argument that they were agents for petitioner’s father respondent argues that petitioner was in the construction business and that his income was understated the deeds and conveyancing documents concerning the three real_estate transactions bear petitioners’ names and various underlying documents including checks also bear petitioners’ names on the other hand petitioner’s and his father’s testimony contradict the form of these transactions taken at face the testimony presents a young man who acceded to his father’s request to lend his credit reputation to facilitate the acquisition of real_estate to be used in his father’s construction businesses ultimately we find petitioner’s and his father’s testimony to be credible and on that basis hold that petitioners did not have unreported gross_income see 58_tc_560 there were multiple business entities and we have not detailed their interrelationship because it is of no consequence to the basic question of whether petitioners acted as agents or conduits for petitioner’s father the primary case precedent petitioners rely upon is a case decided by this court in similar circumstances see 57_tc_91 that case involved a husband and wife who excluded from their gross_income a deposit into the husband’s bank account the deposit represented the proceeds of the sale of mexican bonds the husband’s mother owned at the husband’s instruction his bank purchased u s bonds with the funds and his name was shown on the purchase order the husband immediately instructed the bank to change the name on the order to his mother’s name the commissioner determined a deficiency in the taxpayers’ federal_income_tax for the amount of the deposit this court held that the deposit was made into the husband’s account in his capacity as an agent for his mother and was not income to him like the husband’s name in brittingham petitioners’ names appear on transactional documents but they were in no other respect owners of the properties and or entitled to the benefits or subject_to the burdens of the properties see also 56_tc_530 aff’d 492_f2d_286 7th cir we find it somewhat problematic that petitioners had a schedule c reflecting income from a construction business petitioners however do not ask the court to ignore the form_1098 and 1099-misc income that petitioner’s father caused them to report on their schedule c petitioners argue that the income that was not reported in form_1098 or 1099-misc should not be attributed to them respondent argues that petitioners were in the construction business and that all gross_income connected with the three parcels of realty should be attributed to them respondent is in the unique position of arguing that petitioner’s father was not the true recipient even though it appears that he was the operator of the businesses normally in a situation like this where the individuals named in the documentation do not appear to be the true parties_in_interest the commissioner has contended that the assignment_of_income_doctrine would apply to attribute the income to the party in interest respondent is not in a position in this case to do so because the three-year period for assessment has expired so it appears that respondent’s only recourse here is to attempt to attribute the unaccounted-for income to petitioners respondent asks the court to apply special scrutiny to petitioner’s and his father’s testimony because of their familial relationship we have carefully scrutinized the testimony and other evidence in the record in this case and they do not support respondent’s argument petitioner and his father credibly testified to we note that a taxpayer is not limited to arguing the position taken on his tax_return although it is a factor to be considered 38_tc_357 the contrary although on its face petitioners’ schedule c supports respondent’s position the remainder of the record overwhelmingly does not petitioners are in no way principals or the operators of the various construction business entities other than the form_1098 and 1099-misc income that was reported on petitioners’ return there is little or no nexus to petitioner’s father’s business entities that would provide this court with a foundation to hold that petitioners had unreported income wherefore we hold that petitioners did not have unreported gross_income and that the period for assessment of tax for petitioners’ tax_year has expired it is accordingly unnecessary to consider other issues raised by the parties to reflect the foregoing decision will be entered for petitioners


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 b01 plr-152129-05 date date ------------------ --------------------- ----------------------------------------- legend legend x -------------------------------------------------- country d dear -------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-152129-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-152129-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely enclosures heather c maloy associate chief_counsel passthroughs and special industries copy of this letter copy for ' purposes cc


t c memo united_states tax_court roger farmer petitioner v commissioner of internal revenue respondent docket no filed date roger farmer pro_se michelle or for respondent memorandum opinion nameroff special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined deficiencies in petitioner's unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure and federal income taxes in the amounts of dollar_figure and dollar_figure respectively the issue for decision is whether petitioner is entitled to carry forward and net operating losses to the tax years at issue some of the facts have been stipulated and they are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time he filed his petition petitioner resided in arcadia california background petitioner operated a sole_proprietorship selling yachts during the years relevant to this case in he incurred a net_operating_loss nol of dollar_figure in petitioner incurred another nol in the amount of dollar_figure petitioner carried the nol’s forward and because of additional nol’s incurred in and the losses were carried forward to the years in issue and petitioner did not carry the and nol’s back to prior years nor did he make an election to waive carryback to prior years if petitioner had carried the and nol’s back they would have been fully absorbed in respondent’s determination in the notice_of_deficiency includes the allowance of the carryforward of the and losses and their full absorption in respondent disallowed the and nol’s in and contending that petitioner failed to first carry the losses back and also failed to make an election to waive the carryback petitioner admitted that the nol's were carried forward erroneously petitioner contended that if the nol’s are disallowed for and he should be entitled to carry them back for refund to the proper years and under the mitigation provisions of the code alternatively he contended that the refund should offset the deficiencies herein under some equitable_recoupment theory discussion individuals are permitted to carry net operating losses from one taxable_year to another sec_172 in general taxpayers who sustain nol’s must first carry such losses back years and if unabsorbed by those years then forward years sec_172 and however the taxpayer may elect to relinquish the entire carryback period and simply carry the loss forward for succeeding years sec_172 to make this election the statute expressly requires the taxpayer to file the election to relinquish the carryback period by the due_date including extensions of time for filing the taxpayer’s return for the taxable_year of the nol the election once made is irrevocable moreover the statute directs that the election shall be made in the manner prescribed by the secretary sec_172 such an election shall be made by a statement attached to the return or amended_return for the taxable_year the statement required shall indicate the section under which the election is being made and shall set forth information to identify the election the period for which it applies and the taxpayer’s basis or entitlement for making the election sec_301_9100-12t temporary proced admin regs fed reg date redesignating sec temporary income_tax regs fed reg date petitioner did not file an election under sec_172 in addition it was agreed that if the and nol’s had been properly carried back both nol’s would have been entirely absorbed in the carryback period therefore we must conclude that petitioner is not entitled to any carryover to and petitioner argues that the mitigation provisions sec_1311 through apply in this circumstance and he should be allowed to carry back the nol’s to and respondent argues that the court is without jurisdiction to consider petitioner’s mitigation argument because the tax years and are not before the court and there has not been a determination as required under sec_1313 where applicable the mitigation provisions permit the correction of an item that is shown to be erroneous by a determination in an administrative or judicial proceeding relating to another year fruit of the loom inc v commissioner tcmemo_1994_492 affd 72_f3d_1338 7th cir if the mitigation provisions apply the taxable_income for the year of the error may be adjusted under sec_1314 sec_1311 in essence the mitigation provisions of the code act as an exception to the statute_of_limitations if the requirements of sec_1311 through are met a year closed by the statute_of_limitations can be reopened for the limited purposes of the mitigation sections in this case if mitigation were to apply it would mean reopening and in order to carry back the and nol’s however respondent determined deficiencies for and which petitioner petitioned for review we have jurisdiction only to redetermine the and deficiencies the mitigation provisions do not apply to and accordingly we lack jurisdiction to redetermine petitioner’s income_tax_liability for and sec_6214 finally petitioner requests that the refunds that would be generated as a result of the carrybacks to and apply as a credit to offset the tax_liability he owes for and petitioner is in effect raising the theory of equitable_recoupment putting aside questions of the court’s jurisdiction to apply equitable_recoupment see estate of mueller v commissioner __ f 3d __ 6th cir date affg 107_tc_189 it is not available in these circumstances equitable_recoupment may apply in certain circumstances to overcome the bar of the statute_of_limitations a claim of equitable_recoupment will lie only where the government has taxed a single transaction item or taxable_event under two inconsistent theories 494_us_596 n here there are no inconsistent theories of taxation involved if an nol is claimed in the wrong year it is not allowable and that is respondent’s consistent position therefore there is no basis for petitioner’s equitable_recoupment claim to reflect the foregoing decision will be entered for respondent