department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uil code contact person identification_number contact number employer_identification_number form required to be filed tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final since you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions the instructions in notice if you agree with our deletions you do not need to take any further action if you disagree with our proposed deletions you should follow in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements letter cg catalog number 47632s if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your sincerely lois lerner director exempt_organizations enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter letter cg catalog number 47632s department of the treasury internal_revenue_service washington d c contact person identification_number contact number fax number employer_identification_number uil s dollar_figure dollar_figure dollar_figure dollar_figure tax_exempt_and_government_entities_division date date legend b individual o i p m m m m a i a i z i v o j m i i c i l x i k k n individual individual - individual l i individual individual business individual individual business plan business business state state business dollar amount dollar amount dollar amount dollar amount dollar amount date date date dear we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 based on the information submitted we have concluded that you do not qualify for exemption under that section the basis for our conclusion is set forth below issue a b cc are you formed to obtain grants primarily benefitting b and c through m yes for the reasons given below will you operate in a commercial non-exempt manner yes for the reasons given below will your activities serve substantial non-exempt purposes contrary to sec_501 of the code yes for the reasons stated below facts b and c owners founders of m and n were approached by j about opportunities to pursue grants j works for h a professional grant writing company based in p m a for profit business is a mobile home park community that operates on land owned by b and c m is also managed operated by b and c r was created with the intention of learning the construction business so property of m could be further developed r later became n b engaged in land reclamation activities such as the planning and design of land parcels clearing grading hauling water and sewer construction and road construction b owned and operated excavators back hoes bul dozers and dump trucks these experiences gave b the background he needed to begin company m in as well as offered opportunities for b to gain insight into working with the public much of the infrastructure work for m although the building of the water and sewer pump station and asphalt paving were subcontracted n completed j informed b and c that h could provide specialized services focused primarily on but not limited to the grant writing process as a result beginning on date y h contracted with b and c through m to perform the following professional business service sec_1 executive summary company structure product and service description marketing plan three year financial projections letter writing grant writing service sec_1 foundation research grant application preparation and packaging grant writing consulting clients on best avenue to reach grant funding goals as part of the grant writing process h has promised over dollar_figure paid to either you or m b and c have paid h over dollar_figure services would be secured and to date for all contracted as part of this process for obtaining grants b and c were instructed by h to form a non- profit entity and file form_1023 for exemption another contract was created for h to aid in this service a charter with filed articles a corporate minute book with bylaws sample minutes a corporate seal and customized stock certificates would be received under the guidance of h on date x you were incorporated in the state of p and form_1023 was submitted on date z b also investigated what sec_501 required and discussed his findings with k a senior case manager with h b could reach the goals of providing affordable housing preserving natural environments and offering educational opportunities related to the housing and environmental aspects through your organization b stated these goals seemed to be a natural fit for sec_501 when b looked at part iii sec_1 of form_1023 which states sec_501 requires that organization’s documents list their exempt_purpose s such as charitable religious educational and or scientific purposes’ b stated that at least three of the purposes would fit your activities when asked why you applied for exemption you stated that b was pursuing small_business grants for b’s for-profit company m when you were contacted about h’s grant services b first conducted research on h found them in good standing and then proceeded to sign contracts with h for grant writing services for b’s for-profit company m you stated that h is acting as a conduit and or facilitator to assist b to seek grant funding from foundations for m your articles of incorporation list g as the registered agent and f as the incorporator both g and f are affiliated with h your articles and bylaws both state you are organized for exclusively c purposes your governing body includes b as president d as treasurer and e as secretary your stated mission is to share the blessing of residing in the low county of state q so that others may have improved quality of life through affordable residences access to natural landscapes and opportunities that will foster growth as a family and a community you have access to numerous leased lots on acres of land where mobile homes can be installed and offered to people whose modest incomes do not allow them to live in more affluent communities you describe the property as having brick underpinning paved driveways spacious decks and landscaped yards street lights underground utilities and public water and sewer are already operational unlike other mobile home parks in the area this community offers large lots with mature trees in a natural setting the web site for m also reflects similar information on the community roads are paved with curbs gutters your executive summary states that you are a start-up nonprofit foundation that seeks to provide affordable housing and hands on vocational education experiences you will operate in an already established for-profit mobile home community to provide housing opportunities to persons of moderate incomes you plan to lease or rent mobile homes and 2-bedroom energy-efficient green cottages you hope to sell some of the mobile home units to interested tenants once the economy becomes profitable again you will purchase each 1400sq ft mobile home for dollar_figures and construct each sq ft energy efficient cottage for a cost of st you will secure leases for sixteen lots place mobile homes on ten of them build cottages on five and build one office apartment building you state if funding is received you will add more residences for sale or lease with a percentage of the proceeds used for charitable purposes and improving community amenities additionally you want to construct a nature walk through the wetlands a picnic area by the lake and add playground equipment all improvements and additions are being done on the acres of land operated by m and owned by b and c the lots referenced in your plan are provided through a lease agreement with m and financial resources for the homes cottages equipment and employees will be provided through grant funding income from rentals and leases will eventually allow you to support your activities your business plan has a section for ‘milestones’ under that section the following planned implementations were included e pay off mortgage on infrastructure costs e sq ft mobile homes 3-bdrm e purchase ton long bed company truck e mini excavator e equipment trailer e ford e-350 15-passenger van e track loader e farm tractor e playground equipment e7 sq ft mobile home 3-bdrm e construct nature walk picnic e construction of sq ft cottages e construct office building each of these milestones had exact cost figures listed with cost projections ranging from less then dollar_figure to over dollar_figure totaling over dollar_figure that you anticipated paying through the promised funding your current physical location is an office within a maintenance building of m you explained that funding received by m would pay off the mortgage of the property owned by b and c and that you would then have a year lease of that property the rental income from this lease would then pay off additional mortgage debt incurred by m from infrastructure construction done on the surrounding properties owned by b and c while you provided executed agreements for_the_use_of equipment and other facilities from m you did not provide a signed and dated copy of the rental agreement for_the_use_of the building office paying down this existing infrastructure debt will entitle you access to numerous leased lots on acres of land owned by b and c where mobile homes can be installed and offered to people whose modest incomes do not allow them to live in more affluent communities while you listed zero dollars in revenue and expenses on form_1023 your business plan shows you anticipate approximately dollar_figure in revenue primarily consisting of government and private grants of that you project approximately dollar_figure in expenses including payroll marketing construction expenses depreciation and asset purchases start-up expenses would include creation as a legal entity the business plan and pursuit of grant funds which have been paid for from b and c’s personal funds you will reimburse b and c for those expenses when grant funding is attained the balance_sheet in your business plan also shows excess funding will actually satisfy a current mortgage once grant funding is received b and c are the primary members of your management team b will manage all aspects of the park related construction tasks and responsibilities receiving a salary in the amount of dollar_figureu c will serve as the administrative secretary bookkeeper and receive a salary of dollar_figurev the two officers individual d treasurer and individual e secretary will also serve as consultants and receive a salary of dollar_figurew each annually law sec_501 of the internal_revenue_code provides for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable educational and other purposes provided that no part of the net_earnings inure to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 of the regulations provides an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_c_3_-1 of the regulations provides an organization is not organized and operated exclusively for one or more exempt purposes unless it serves public rather than private interests thus to meet the requirement it is necessary for an organization to establish that it is not organized and operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests in 326_us_279 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes 302_f2d_934 ct_cl the court considered an organization that provided analyses of securities and industries and of the economic climate in general it sold subscriptions to various periodicals and services providing advice for purchases of individual securities the court noted that education is a broad concept and assumed arguendo that the organization had an educational purpose however the totality of the organization’s activities which included the sale of many publications as well as the sale of advice for a fee to individuals was indicative of a business therefore the court held that the organization had a significant non-exempt commercial purpose that was not incidental to the educational purpose and was not entitled to be regarded as exempt church by mail inc v commissioner t c memo affd 765_f2d_1387 cir church by mail sent out sermons in numerous mailings which required a great deal of printing services a for-profit company controlled by the same ministers provided the printing and the mailing the services were provided under two contracts the contracts were signed by the two ministers for both the organization and the for-profit company the organization’s business comprised two-thirds of the overall business done by the for-profit company the court determined that there was ample evidence in the record to support the finding that the organization was operated for the substantial non-exempt purpose of providing a market for the services of the for-profit company the court_of_appeals pointed out that the critical inquiry is not whether particular contractual payments to a related for- profit organization are reasonable or excessive but instead whether the entire enterprise is carried on in such a manner that the for-profit organization benefits substantially from the operation of the church moreover the ministers’ dual control of both the church and the for-profit company enables them to profit from the affiliation of the two entities through increased compensation in international postgraduate medical foundation v commissioner tcmemo_1989_36 the tax_court concluded that when a for-profit organization benefits substantially from the manner in which the activities of a related nonprofit organization were carried on the latter organization was not operated exclusively for exempt purposes within the meaning of sec_501 even if it furthers other exempt purposes kj's fund raisers inc v commissioner t c memo affirmed aftr 2d while the organization raised money for charitable purposes it also operated for the substantial benefit of private interests the organization's founders were the sole owners of a bar kj's place the organization sold lottery tickets exclusively at kj's place during regular business hours while in ku's place the lottery ticket purchasers were sold beverages the initial directors were the two founders and a related individual the initial board was replaced several times until the two founders were no longer on the board at all times these two individuals were the organization's officers salaries had been paid to them and rent had been paid to kj's place the organization maintained that the fact that salaries and rent were no longer paid in this fashion indicated the independence of the board the court took another view although those practices ceased and are not in issue here the current board_of directors is composed of at least the majority of the same members who allowed those amounts to be paid application of law you are not organized and operated exclusively for charitable educational or religious purposes consistent with sec_501 c of the code nor sec_1 c -1 a of the income_tax regulations and therefore fail to meet the operational_test specifically you were formed for the purpose of obtaining non-profit grant funding used to make capital improvements to land owned by b and c and operated by their for-profit company m thereby serving the private interests of b and c you do not meet the provisions of sec_1_501_c_3_-1 of the regulations as funding to your organization will be used to further the personal interests of b and c as you have stated funding that is secured through your organization will be used to pay off existing infrastructure debt on property owned by b and c through m as well as to make capital improvements on the same property in addition funding will be used to compensate b and c in reclaiming funds expensed for services provided by h you also do not meet the provisions of sec_1_501_c_3_-1 as you are set up to benefit b and c directly inurement is present so you are also serving substantial private interests as seen in the better business bureau ruling the presence of any non exempt_purpose if substantial in nature will preclude exemption despite your educational activities of training individuals your overall purpose is to further benefit the business of m and its founders b and c improving the property on which m operates as well as using your organization as a vehicle for which to obtain grant funding for m consistent with the american institute for economic research ruling because your primary purpose is to construct for sale or lease manufactured homes on property owned by b and c and then generate rental income through those homes you are operating in a commercial manner indistinguishable from the activities conducted by m and n because you are operating for commercial purposes you do not qualify for exemption under c similar to the organization in kjs fund raisers as the same individual b that will have control_over your operations will also be simultaneously managing m private rather then public interests are being served the decision to use m and n’s property equipment and facilities demonstrates a lack of public oversight and or control and limited public benefit and private interests are being served improvements made on site through your training programs directly benefit the owners b and c you are structured to allow for the flow of funds to m through any grant funding that is received additionally although c is not a positioned member of your governing body she directly benefits as well through her relationship with b similar to the organization in church by mail dual control exists between certain members of your board and m that enables those owners of m your founders to benefit from this relationship through your activities m will be funded through grant applications and rental income while capital improvements will be done to properties under m’s control further the owners of m b and c will be receiving salaries and rent through lease agreements for_the_use_of those facilities for your exempt activity like the organization in international postgraduate medical foundation m benefits substantially from your operations in the form of the receipt of public funding to expand and supplement its business purposes because you are formed to further private interests through your operations you do not qualify for exemption under sec_501 applicant’s position you stated the following e e the information submitted thus far was created a long time ago and that your activities now are educational by providing vocational training for students to receive hands-on training in the construction field your purpose is to create educational opportunities for students to participate in hands-on experiences that are related to the construction industry the grant money received for the for-profit will be used to improve the mobile home community owned by for-profit company m money generated by for-profit company m through its current business operations and grant money specifically earmarked for the for-profit company m will be used to make improvements to for-profit company m mobile home community the grant money received by you will be for salaries and buying equipment used for the vocational training of students payroll or salaries will be used for classroom instruction and minimal administrative costs associated with the foundation many hands-on activities will not improve the property on which they occur because these activities will be happening over the over again ie finding property corners identifying setback creating a mock site plan based on lot size using equipment to dig and trench and then refill it improvements to property are made those improvements will only occur on land that belongs to you the long term goal is for you to secure your own facility for educational_purposes everything the non-profit purchases will be owned by the non-profit all assets of the foundation will remain assets of yours you hope to purchase a 15-passeneger van to transport students it will belong to you only you hope to purchase some equipment for training purposes that equipment will belong to you if service response to applicant’s position your articles of incorporation were filed on x and your signed contracts were signed in april may and june of respectively your business plan was for the year sec_2010 sec_2011 and sec_2012 your application_for exemption was filed in date these recent facts contradict your assertion that the operational information you have presented thus far is obsolete you indicated that your exempt_purpose would be to provide educational opportunities for students in the field of home construction while this purpose could be considered educational under sec_501 c of the code the construction of homes on property owned by b and c constitutes inurement to insiders which bars exemption under sec_501 c of the code in addition the future rental or sale of homes is a substantial non-exempt commercial purpose contrary to sec_501 c while you indicated that future grant funds received by you as well as the for-profit m will be kept separate your grant funds will be used to provide for the capital improvement of land owned by b and c who are your insiders this circumstance qualifies as inurement to insiders and is prohibited under sec_501 c of the internal_revenue_code lastly you indicate that improvements to property via the construction of homes will be made only to property you own as its your long term goal to secure your own facility the facts however demonstrate that current capital improvements will be made to property owned by b and c which will be leased to you this situation constitutes inurement of earnings and is a bar to exemption under sec_501 c of the internal_revenue_code conclusion you do not meet the requirements under sec_501 because you fail the operational_test your primary purpose is operation of a mobile home community allowing vocational students to develop and expand b and c’s property we find that you operate for non-exempt commercial purposes and for the private interests of b and c through m accordingly you do not qualify for exemption as an organization described in sec_501 of the code consideration was given to whether the applicant organization qualifies for exemption under other subsections of sec_501 of the code however based on the information that you have submitted we cannot find that you are entitled to exempt status under sec_501 of the code because you are operating for a significant non-exempt commercial purpose and for the private interests of b and c based on the above facts and law we conclude that you do not qualify for exemption under sec_501 you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues types of information that should be included in your appeal can be found on page of publication under the heading regional_office appeal these items include the organization’s name address and employer_identification_number astatement that the organization wants to appeal the determination the date and symbols on the determination_letter a statement of facts supporting the organization’s position in any contested factual issue a statement outlining the law or other authority the organization is relying on and a statement as to whether a hearing is desired the statement of facts item must be declared true under penalties of perjury this may be done by adding to the appeal the following signed declaration under penalties of perjury declare that have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete your appeal will be considered incomplete without this statement if an organization’s representative submits the appeal a substitute declaration must be included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if we do not hear from you within days we will issue a final adverse if you do not intend to protest this determination you do not need to take any further action determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to internal_revenue_service eo determinations quality assurance main street room cincinnati oh internal_revenue_service eo determinations quality assurance room p o box cincinnati oh deliver to you may fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois lerner director exempt_organizations enclosures publication


lrter mac fovewme sei it uniform issue list nw 2b legend taxpayer a amount b ira c brokerage firm d dear this is in response to your request of date through your authorized representative for a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a is an 83-year old widower during the past two years taxpayer a has been in and out of the hospital for various medical reasons he has been showing increasing signs of confusion and misunderstanding which is worsen by a serious hearing problem during the early part of taxpayer a entered into a dialogue with brokerage firm d to diversify his investment portfolio in order to maximize the return on his money page taxpayer a had ira c and other investment accounts with brokerage firm d apparently there was a serious misunderstanding between taxpayer a and the broker of brokerage firm d regarding the accounts to be used for various investment transactions due to the misunderstanding between the parties amount b was transferred from ira c to one of taxpayer a’s personal accounts it was never taxpayer a’s intention to deplete his ira c account by these investment withdrawals and to create any adverse tax consequences taxpayer a had funds other than those in ira c to diversify his investments it was not until taxpayer a contacted his customary tax advisers that he realized that amount b in ira c had been incorrectly transferred to taxpayer a’s personal account any effort to rectify the incorrect distributions was too late because the 60-day period allowed by the internal_revenue_code the code to avoid the tax_liability had already expired based on the above facts and representations you request that the service waive the 60-day rollover requirement with respect to the distribution of amount b because of your medical_condition and the misunderstanding with brokerage firm d and that the failure to waive such requirement would be against equity or good conscience sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 page sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casuaity disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented by taxpayer a indicates that his overall medical conditions and the misunderstanding with brokerage firm d’s personnel caused an unexpected distribution from ira c therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount b taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount b into ira c provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contributions these amounts will be considered rollover_contributions within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as precedent page a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office if you wish to inquire about this ruling please contact please address all correspondence to ld at sincerely yours -y dollar_figure chew fig z alan c pipkin manager ' employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person telephone number identification_number number release date date february employer_identification_number legend b c d dear ------------------ sec_4945 of the internal_revenue_code the information submitted indicates that grants will be administered and supervised by b b is exempt from federal_income_tax under sec_501 of the internal_revenue_code and has been classified as other than a private_foundation under sec_509 and sec_170 your scholarship program is called c under the terms of an agreement you will make annual contributions to b to fund scholarships for the benefit of minority youth from the d area b will prepare and furnish application forms receive all applications determine the recipients and amount to be awarded notify the recipients of the award confirm enrollment in an educational_institution make payment of the award and supervise and investigate the use of the grant funds by the recipients in their educational programs recipients are determined solely by b utilizing selection criteria whereby each candidate is evaluated based on the following scholastic aptitude as measured by performance on the scholastic aptitude test scholastic performance measured by rank in class counselor appraisal and interests activities and leadership contributions in addition financial need is not a requirement in the selection of the recipients the c program does not involve scholarships granted to children of employees of a particular company this is in reference to a letter requesting advance approval of your grant procedures under scholarships will only be awarded to students that plan to enroll in an institution that meets the requirements of sec_170 of the code the recipient will not be restricted in his her course of study sec_4945 of the code provides for the imposition of taxes on each taxable_expenditure of a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 sec_4945 of the code provides that sec_4945 shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if it is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_institution described in sec_170 because your scholarships are not employer-related grants the provisions of revproc_76_47 c b are not applicable based upon the information submitted and assuming your program will be conducted as proposed with a view to providing objectivity and nondiscrimination in the awarding of scholarship grants we rule that your grants to b for the awarding of scholarship grants comply with the requirements of sec_4945 of the code expenditures made in accordance with these procedures will not constitute taxable_expenditures within the meaning of sec_4945 of the code and as such are eligible for the exclusion from income provided for in sec_117 of the code to the extent that such grants are actually used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this ruling is conditioned on the understanding that there will be no material changes in the facts upon which it is based it is further conditioned on the understanding that no grants will be awarded to your organization’s creators officers directors trustees or members of the selection committee or for a purpose inconsistent with the purposes described in sec_170 of the code the approval of your grant-making procedures is a one time approval of your system of standards and procedures for selecting recipients of grants that meet the requirements of sec_4945 of the code thus approval will apply to succeeding grant programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request we are informing the ohio te_ge office of this action please keep a copy of this ruling with your organization’s permanent records if you have any questions about this ruling please contact the person whose name and this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent telephone number are shown in the heading of this letter carter t hull lois g lerner director exempt_organizations rulings agreements sincerely


internal_revenue_service number release date index number ----------------------------------------- -------------------------- -------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-154120-06 date date --------------------------------- ------- ---------------- legend company -------------------------------------------------------------------- date date a b c x state dear -------------- ------------ -------- -------- -- -- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of company requesting a ruling that the rental income to be received by company from property under the leases is not passive_investment_income under sec_1362 of the internal_revenue_code facts plr-154120-06 company incorporated under state law in date and elected to be an s_corporation effective date company has accumulated_earnings_and_profits of approximately x company is engaged_in_the_business_of_farming grain crops it owns a acres of farmland the property in state presently company’s day-to-day farming activities are performed by b full-time employees and a part-time_employee company’s employees cannot continue to perform the day-to-day farming activities as a result company plans to enter into crop-share agreements the leases for the property under the proposed leases company plans to be actively involved in most management decisions for example company will decide what crops to plant monitor crop rotation determine varieties of seeds to plant and decide what chemicals to apply to the crops further in return for percent of the crops company will pay percent of crop inputs such as storage chemical treatment and seed company will remain liable for real_estate_taxes insurance tiling and building repairs including maintenance of the dryers elevator leg grain blower and storage bins company’s tenants will be responsible for labor and machinery company will be at risk for crop yields and marketing company plans to have c employees after it enters into the leases law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for the year sec_1362 provides that an election under sec_1362 shall be terminated whenever the corporation has accumulated_earnings_and_profits at the close of each of three consecutive taxable years and has gross_receipts for each of such taxable years more than percent of which are passive_investment_income sec_1362 provides that except as otherwise provided in sec_1362 the term passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1_1362-2 of the income_tax regulations provides that rents means amounts received for_the_use_of or the right to use property whether real or personal of the corporation sec_1_1362-2 provides that rents does not include rents derived in the active trade_or_business of renting property rents received by a corporation are derived in the active trade_or_business of renting property only if based plr-154120-06 on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based on all the facts and circumstances including but not limited to the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation conclusion based on the facts submitted and representations made we conclude that the rents company will receive from the property under the leases will not be passive_investment_income under sec_1362 except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding company’s eligibility to be an s_corporation further the passive_investment_income rules of sec_1362 are independent of the passive_activity rules of sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 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 under a power_of_attorney on file with this office a copy of this letter is being sent to company’s authorized representative 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 an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely s mary beth collins senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service national_office technical_advice_memorandum date number release date third party communication none date of communication not applicable index uil no case-mis no tam-137619-15 director of field operations western compliance practice area - southwest paul j curtis taxpayer's name taxpayer's address taxpayer's identification no years involved date of conference --------------------------------------------------------------- --------------------------------------- ------------------- ------------------------------------ ----------------- --------------- ----------------------- legend taxpayer ------------------------------------------------------ signals ----------------------- issues for purposes of the domestic_production_activities_deduction under sec_199 of the internal_revenue_code code whether a package that includes multiple channels of video programming or the signals transmitted by taxpayer to distribute the package of video programming together referred to as a subscription package is a qualified_film within the meaning of sec_199 and sec_1_199-3 of the income_tax regulations whether the gross_receipts that taxpayer derived from its subscription packages qualify as domestic_production_gross_receipts dpgr under sec_199 and sec_1_199-3 tam-137619-15 conclusions no a subscription package is not a qualified_film within the meaning of sec_199 or sec_1_199-3 because it is not property described in sec_168 any motion picture film or video tape or live or delayed television programming within the meaning of sec_1_199-3 no the gross_receipts that taxpayer derived from its subscription packages were not from the disposition of a qualified_film produced by taxpayer and are not dpgr under sec_199 and sec_1_199-3 however the gross_receipts that taxpayer derived from any individual film included in a subscription package that is a qualified_film produced by taxpayer may qualify as dpgr thus a portion of taxpayer’s gross_receipts may be dpgr under sec_199 and sec_1_199-3 and each qualified_film produced by taxpayer may be considered an item as provided by sec_1 d ii facts taxpayer is a multichannel video programming distributor mvpd regulated by the federal communications commission fcc as a telecommunications service provider an mvpd is defined as a person such as but not limited to a cable operator a multichannel multipoint distribution service a direct broadcast satellite service or a television receive-only satellite program distributor who makes available for purchase by subscribers or customers multiple channels of video programming u s c sec_522 as an mvpd taxpayer is subject_to the rules in the communications act of as amended by the telecommunications act of telecommunication services are defined as the offering of telecommunications for a fee directly to the public regardless of the facilities used u s c sec_153 telecommunications is defined as the transmission between or among points specified by the user of information of the user’s choosing without change in the form or content of the information as sent and received u s c sec_153 the term cable channel or channel is defined as a portion of the electromagnetic frequency spectrum which is used in a cable system and which is capable of delivering a television channel as television channel is defined by the fcc by regulation u s c sec_522 in exchange for various monthly fees taxpayer distributed to customers via the transmission of signals thousands of channels containing television programs advertisements and interstitials the television content taxpayer’s customers received varied depending on their subscription package and geographic location the reference to the gross_receipts that taxpayer derived from its subscription packages includes all fees attributable to each subscription package tam-137619-15 some of taxpayer’s subscription packages included access to channels containing films and television programs with visual depictions of actual sexually explicit conduct for which records are required to be maintained under u s c in addition taxpayer provided to customers access to pay-per-view films and television programs taxpayer also provided to customers the equipment necessary to receive the signals transmitted by taxpayer the terms and conditions of the contractual relationship between taxpayer and customers are set forth in customer agreements which are service contracts in total taxpayer distributed around -------- television channels to customers taxpayer licensed almost all of these television channels from unrelated third parties for the tax years at issue taxpayer produced television programs for ---- of the television channels it distributed however a significant portion of the content provided on these ---- channels was also licensed from unrelated third parties it is unclear how many subscription packages included these ---- channels taxpayer claimed a total of approximately dollar_figure-------------- in sec_199 deductions for the tax years at issue summary of taxpayer and lb_i positions taxpayer takes the position that each one of its subscription packages is a new film that is also a qualified_film produced by taxpayer thus the various monthly fees customers paid to taxpayer in exchange for access to its subscription packages qualify as dpgr under sec_199 and sec_1_199-3 taxpayer relies on i r s technical_advice_memorandum date the tam to support its assertion lb_i disagrees with taxpayer that a package of television channels is a qualified_film according to lb_i as a matter of law a subscription package is not a film and thus is not a qualified_film for sec_199 purposes lb_i asserts that the reference to any motion picture film video tape or live or delayed television programming film in sec_199 and sec_1_199-3 is limited to individual films lb_i further disagrees that the gross_receipts taxpayer derived from the disposition of its subscription packages are dpgr from a qualified_film produced by taxpayer under sec_199 and sec_1_199-3 lb_i asserts that the only gross_receipts that are dpgr under sec_199 and sec_1_199-3 are those derived from the individual films that are the components of a subscription package if such films on an individual basis meet the as a preliminary matter the tam has no precedential value and taxpayer cannot rely on it directly or indirectly see sec_6110 and k tam-137619-15 requirements to be a qualified_film produced by taxpayer accordingly the gross_receipts taxpayer derived from its subscription packages are not dpgr because they are not attributable to the disposition of a qualified_film produced by taxpayer thus a subscription package is not taxpayer’s item under sec_1_199-3 and taxpayer must apply the rules of sec_1_199-3 to each individual film included in its subscription packages however lb_i recognizes that taxpayer may be entitled to include the gross_receipts allocable to each individual film that meets the definition of qualified_film and that was produced by taxpayer under sec_1_199-3 in its sec_199 deduction calculation that is lb_i asserts that only films that taxpayer establishes are individually a qualified_film produced by taxpayer may be treated as the item under sec_1_199-3 because the gross_receipts from such films are dpgr thus only the gross_receipts taxpayer derived from those individual qualified films components that were produced by taxpayer may qualify as dpgr law under sec_199 the sec_199 deduction is determined by applying a percentage to the lesser_of the taxpayer's qualified_production_activities_income qpai or taxable_income determined without regard to the sec_199 deduction the applicable_percentage i sec_3 percent for taxable years beginning in and percent for taxable years beginning in through and percent for taxable years beginning after under sec_199 qpai is determined by taking dpgr for the taxable_year less cost_of_goods_sold cgs allocable to such dpgr less other expenses losses or deductions which are properly allocable to such dpgr sec_199 provides that dpgr means the gross_receipts of the taxpayer that are derived from any lease rental license sale exchange or other_disposition collectively disposition of any qualified_film produced_by_the_taxpayer sec_199 defines the term qualified_film as any property described in sec_168 if not less than percent of the total compensation relating to the production of such property is compensation_for services performed in the united_states by actors production personnel directors and producers such term does not include property with respect to which records are required to be maintained under u s c regarding material containing the depiction of sexually explicit conduct a qualified_film shall include any copyrights trademarks or other intangibles with respect to such film the methods and means of distributing a qualified_film shall not affect the availability of the deduction sec_168 property is any motion picture film or video tape tam-137619-15 under sec_1_199-3 a taxpayer may use any reasonable method satisfactory to the secretary based on all facts and circumstances to determine whether gross_receipts qualify as dpgr on an item-by-item basis and not for example on a division-by- division product line-by-product line or transaction-by-transaction basis sec_1_199-3 defines the item as the property offered by the taxpayer in the normal course of taxpayer’s business for lease rental license sale exchange or other_disposition to customers if the gross_receipts from such property qualify as dpgr sec_1_199-3 provides that if such property does not qualify under sec_1_199-3 then any component of such property described in sec_1 d i is treated as the item provided that the gross_receipts that are attributable to the disposition of the component of such property qualify as dpgr each component that meets the requirements to be treated as the item must be treated as a separate item and may not be combined with a component that does not meet the requirements of sec_1_199-3 sec_1_199-3 provides that for purposes of sec_1_199-3 in no event may a single item consist of two or more properties unless those properties are offered for disposition in the normal course of the taxpayer’s business as a single item regardless of how the properties are packaged sec_1_199-3 states that the term qualified_film means any motion picture film or video tape under sec_168 or live or delayed television programming film if not less than percent of the total compensation relating to the production of such film is compensation_for services performed in the united_states by actors production personnel directors and producers for purposes of sec_1_199-3 the term actors includes players newscasters or any other persons who are compensated for their performance or appearance in a film for purposes of sec_1_199-3 the term production personnel includes writers choreographers and composers who are compensated for providing services during the production of a film as well as casting agents camera operators set designers lighting technicians make-up artists and other persons who are compensated for providing services that are directly related to the production of the film except as provided in sec_1_199-3 the definition of a qualified_film does not include tangible_personal_property embodying the qualified_film such as dvds or videocassettes sec_1_199-3 provides in general that dpgr include the gross_receipts from the disposition of any qualified_film produced by such taxpayer sec_1_199-3 provides that the not-less-than-50-percent-of-the-total- compensation requirement under sec_1_199-3 is calculated using a fraction the numerator of the fraction is the compensation_for services performed in the united tam-137619-15 states and the denominator of the fraction is the total compensation_for services regardless of where the production activities are performed sec_1_199-3 treats a qualified_film as produced_by_the_taxpayer for purposes of sec_199 if the production activity performed by the taxpayer is substantial in nature within the meaning of sec_1_199-3 the special rules of sec_1_199-3 regarding a contract with an unrelated_person and aggregation apply in determining whether the taxpayer’s production activity is substantial in nature sec_1_199-3 and are applied by substituting the term qualified_film for qualifying_production_property qpp and disregarding the requirement that the production activity must be within the united_states the production activity of the taxpayer must consist of more than the minor or immaterial combination or assembly of two or more components of a film for purposes of sec_1_199-3 the relative value added by affixing trademarks or trade names as defined in sec_1_197-2 will be treated as zero sec_1_199-3 provides that a film will be treated as a qualified_film under sec_1_199-3 and produced_by_the_taxpayer under sec_1_199-3 qualified_film produced_by_the_taxpayer if the taxpayer meets the requirements of sec_1_199-3 and ii a taxpayer that chooses to use the safe_harbor must apply all the provisions of sec_1_199-3 analysis an income_tax deduction is a matter of legislative grace and a taxpayer has the burden of proving that it is entitled to the deduction 141_tc_298 taxpayer can satisfy its burden by showing that it meets all the requirements to receive the deduction under sec_199 and the amount deductible to demonstrate that it meets the requirements of sec_199 taxpayer must show that it derived gross_receipts from a qualified_film that it produced in this case taxpayer must first establish that a subscription package is a qualified_film as defined in sec_199 and sec_1_199-3 to do this taxpayer must show that a subscription package is property that is a film motion picture film or video tape under sec_168 or live or delayed television programming at least percent of the total compensation relating to the production of such film is compensation_for services performed in the united_states by actors production personnel directors and producers and it is not property for which records are required to be maintained under u s c issue for purposes of the domestic_production_activities_deduction under sec_199 whether a subscription package is a qualified_film under sec_199 and sec_1 k a a subscription package is not a qualified_film under sec_199 because it is not property described in sec_168 or sec_1_199-3 tam-137619-15 sec_199 defines the term qualified_film as any property described in sec_168 provided such property meets the other requirements of sec_199 property described in sec_168 is any motion picture film or video tape see 541_us_176 the inquiry begins with the statutory text and ends there as well if the text is unambiguous our office does not consider a subscription package a motion picture film or video tape under even the most liberal reading of the phrase in sec_168 and we are unaware of any authority that indicates otherwise instead we view each of the individual films included in a subscription package as a motion picture film or video tape under sec_168 the definition of the term qualified_film under sec_1_199-3 is also limited to individual films in addition to property described in sec_168 sec_1_199-3 includes live or delayed television programming within the definition of the term film for sec_199 purposes while this added language describes a type of programming the phrase must be read in conjunction with the statutory reference to sec_168 this leads to the conclusion that the phrase refers to individual television programs that are broadcast live or on a delayed basis it is therefore inappropriate to interpret the inclusion of the word programming as allowing for a package of live or delayed programs to be considered an individual film for sec_199 purposes this is also consistent with the regulatory text to illustrate immediately following the phrase live or delayed television programming is a parenthetical with an express reference to the term film in the singular thus while each program is a film that may individually be a qualified_film a package of multiple programs is not a film and therefore not a qualified_film interpreting the definition of the term qualified_film in the singular is also consistent with congress’ expressed intent to limit the tax benefits of sec_199 to film production rather than film distribution the code and regulations both reference compensation paid for services performed in the united_states by actors production personnel directors and producers that relate to the production of a film rather than producing programming content taxpayer’s activities with respect to a subscription package primarily consist of distributing through the transmission signals the television channels included in the subscription package the signals are the medium in which the films are distributed generating and transmitting signals to distribute a subscription package does not result in the production of any new programming content further it does not involve the performance of services performed by actors production personnel directors and producers the assertion that taxpayer’s activities are not those that congress intended to incentivize is further supported by sec_199 which provides in relevant part that t he methods and means of distributing a qualified_film shall not affect the availability of the deduction under this section congress intended to exclude transmission and distribution activities from the production of a qualified_film as they do not affect the availability of the deduction under sec_199 consequently expanding the definition of qualified_film to include a package of films could improperly extend the benefits of sec_199 to taxpayers engaged film distribution via the transmission of signals rather than film production tam-137619-15 the legislative_history surrounding the provisions relating to film production reinforces both the statutory and regulatory language cited above congress was concerned by the decreasing number of films being produced domestically see s rep no pincite to best effectuate congress’ express desire to encourage domestic film production the qualified_film determination must be made on an individual film basis if the determination was made on a subscription package basis taxpayer could potentially claim the sec_199 deduction for films produced outside the united_states qualified films that it did not produce and films that are property described under u s c the legislative_history indicates congress’ intent to encourage the production of films domestically there is nothing however to suggest that congress intended to incentivize the transmission of signals and distribution of films within the united_states if any of the terms used to define qualified_film are ambiguous they must be interpreted in a manner that is consistent with their common meaning 444_us_37 a fundamental canon of statutory construction is that unless otherwise defined words will be interpreted as taking their ordinary contemporary common meaning merriam-webster’s online dictionary defines the term motion picture as a series of pictures projected on a screen in rapid succession with objects shown in successive positions slightly changed so as to produce the optical effect of a continuous picture in which the objects move and a representation as of a story by means of motion pictures it also defines the term video tape as a movie tv program etc that is recorded on videotape it is our office’s view that a subscription package does not fall within the common meaning of the term motion picture film or video tape further the phrase live or delayed television programming in sec_1 specifically the senate report states that while discussing provisions making depreciation rules more favorable to the film industry the committee understands that over the past decade production of american film projects has moved to foreign locations specifically in recent years a number of foreign governments have offered tax and other incentives designed to entice production of u s motion pictures and television programs to their countries these governments have recognized that the benefits of hosting such productions do not flow only to the film and television industry these productions create broader economic effects with revenues and jobs generated in a variety of other local businesses hotels restaurants catering companies equipment rental facilities transportation vendors and many others benefit from these productions congress specifically did not intend to benefit the distribution of television signals h_r rep no n conf_rep u s c c a n n explaining that distribution activities do not affect whether taxpayer qualified for benefits staff of j comm on taxation general explanation of tax legislation enacted in the 108th congress n comm print jcs-5-05 explaining the same the proposed_regulations under sec_199 also clarify that film production activities do not include film transmission or distribution including the transmission of a film by electronic signal and the activities facilitating such transmission such as formatting that enables the film to be transmitted prop_reg sec_1_199-3 sec_80 fr date tam-137619-15 k refers to live television programming or delayed television programming both are types of programs that fall within the definition of the term film however a subscription package as a whole does not fall within the common meaning of either of those types of programs rather only the individual films that were included in taxpayer’s subscription packages satisfy the common meaning of film for sec_199 purposes further reading the common meaning of these terms to refer to a particular type of film in the singular is consistent with the statutory reference to sec_168 thus a subscription package and the television channels upon which such films are simultaneously distributed does not fall within the common meaning of any terms used to define qualified_film for sec_199 purposes sec_199 and the regulations thereunder as well as the legislative_history require a qualified_film to be an individual film and not a package including multiple films like the subscription package consequently taxpayer cannot circumvent the statutorily prescribed mandate that only one individual film may be a qualified_film for sec_199 purposes b application of the other elements in the definition of the term qualified_film in sec_199 and sec_1_199-3 supports analyzing films on an individual basis sec_199 provides in part that property is a qualified_film if it is property described in sec_168 at least percent of the total compensation relating to the production of such film is compensation_for services performed in the united_states by actors production personnel directors and producers and it is not property for which records are required to be maintained under u s c above our office explained why a subscription package is not property described in sec_168 and sec_1_199-3 consideration of the other qualified_film requirements makes clear that treating a subscription package as a qualified_film is inconsistent with the statutory and regulatory scheme of sec_199 taxpayer argues that a subscription package as a whole is a qualified_film that meets the percent compensation requirement because most of its activities with respect to a subscription package occur in the united_states at the same time however taxpayer intends to exclude property described under u s c on an individual film-by-film basis so that the inclusion of such property in the subscription package does not disqualify the entire package taxpayer’s position results in an inconsistent application of two statutory requirements found in the definition of qualified_film the failure to satisfy either element results in the exclusion of property from the definition of qualified_film each element of sec_199 must be applied on an individual film-by-film basis taxpayer also relies on sec_1_199-3 the item rule to further support its position that a subscription package is a qualified_film as long as taxpayer can establish that it tam-137619-15 meets the percent compensation requirement on a subscription package basis however taxpayer’s position misconstrues the item rule the item rule provides that the term item means the property offered by the taxpayer in the normal course of the taxpayer’s business for disposition to customers if the gross_receipts from such disposition qualify as dgpr taxpayer argues that the rule implies that a subscription package can be a film and even a qualified_film because taxpayer disposed of the subscription package in the normal course of its business and the subscription package included films the item rule provides only the basis for determining whether gross_receipts are dpgr it does not modify the statutory or regulatory definitions of qualified_film thus whether taxpayer satisfies the percent compensation requirement or any other requirement of sec_199 on a subscription package basis is immaterial because a subscription package is not a film consequently a subscription package may not be the item under sec_1_199-3 because it does not satisfy the requirements of sec_199 issue whether the gross_receipts taxpayer derived from the disposition of its subscription packages qualify as dpgr under sec_199 and sec_1_199-3 as explained above a subscription package does not meet the statutory or regulatory definitions of the term qualified_film because a subscription package is not a film as a result the gross_receipts taxpayer derived from its subscription packages were not derived from the disposition of a qualified_film produced by taxpayer thus the gross_receipts taxpayer derived from its subscription packages are not dpgr under sec_199 and sec_1_199-3 further any gross_receipts taxpayer derived from non-qualifying services are non-dpgr under sec_1_199-3 any component in this case any individual film included in taxpayer’s subscription packages may be treated as an item provided the gross_receipts from the disposition of the subscription packages that are attributable to the components qualify as dpgr in this case taxpayer licensed nearly all of the television channels included in its subscription packages from unrelated third parties these channels included the individual films that are the components of its subscription packages because taxpayer licensed all of these films from unrelated third parties taxpayer cannot be considered to have produced any of these films within the meaning of sec_1_199-3 as a result a significant portion of the gross_receipts that taxpayer derived from its subscription packages are attributable to films that were not produced by taxpayer here the facts indicate that taxpayer only produced programs on ---- channels that were included in its various subscription packages thus it is appropriate to evaluate the individual films included in a subscription package to determine whether any one film is a qualified_film produced by taxpayer and a potential item under sec_1_199-3 for the gross_receipts from any of these films to qualify as dpgr taxpayer must establish that an individual film meets the requirements of sec_199 and sec_1 tam-137619-15 k to be a qualified_film outlined above and that taxpayer produced the qualified_film within the meaning of sec_1_199-3 alternatively taxpayer may apply the safe_harbor in sec_1_199-3 to determine whether a film may be treated as a qualified_film under sec_1_199-3 and produced by taxpayer under sec_1_199-3 in either case taxpayer’s activities relating to the transmission of signals and distribution of licensed television channels via signals are not qualified_film production activities for purposes of sec_1_199-3 or sec_1_199-3 because qualified_film production activities are limited to those activities that result in the creation of property described in sec_199 and sec_1_199-3 in conclusion taxpayer may be entitled to include as dpgr in its sec_199 deduction calculation gross_receipts from the components of its subscription packages that taxpayer can establish meet the definition of qualified_film and which were produced by taxpayer assuming all of the other requirements of sec_199 are met for each component caveats a copy of this technical_advice_memorandum is to be given to the taxpayer sec_6110 of the code provides that it may not be used or cited as precedent


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 corp plr-127630-13 date november legend taxpayer --------------------------------------------------------------------- ---------------------------------------------------------------- -------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- ------------------------------------------------------------ -------------- ---------------- ------------------------ ------------------------ state a exchange date date dear ------------- this letter responds to your date request for rulings under sec_301 and sec_305 of the internal_revenue_code_of_1986 as amended the code the information received in that request is summarized below facts taxpayer a state a corporation is registered as a closed-end management investment_company as defined by the investment_company act of as amended taxpayer elected to be treated as a regulated_investment_company a ric under subchapter_m plr-127630-13 of chapter of the code taxpayer regularly distributes its earnings_and_profits as required under sec_852 taxpayer has one class of common_stock outstanding the common_stock the shares of which are listed and publicly traded on the exchange taxpayer has adopted a dividend_reinvestment_plan drip that generally provides for the reinvestment of its distributions on behalf of the holders of its common_stock unless a stockholder affirmatively elects to receive cash subject_to the approval of taxpayer’s board_of directors taxpayer intends to pay one or more future dividends and or future spillback dividends dividends made after the close of the taxable_year that relate to that taxable_year pursuant to an election under sec_855 with respect to its common_stock for its taxable years ending on date and date in the form of cash subject_to the cash limit as defined below or common_stock at the election of each of its stockholders except where otherwise indicated references herein to a special dividend or the special dividend refer to each of the dividends referred to in the preceding sentence and references to the special dividends refer to all of the special dividends the total amount of cash payable in a special dividend will be limited to not less than percent of the total value of the special dividend in no event will the total amount of cash available be less than percent of the total value of a special dividend taxpayer expects to declare a special dividend using an election mechanism substantially_similar to that described below taxpayer will transmit to each holder of common_stock an election form relating to a special dividend each stockholder may elect by the election deadline to receive his her or its portion of the special dividend in the form of a cash the cash_option or b common_stock of equivalent value the stock_option if a stockholder fails to make a valid election by the election deadline that stockholder will be deemed to have made an election to receive percent stock the total number of shares of common_stock to be issued in a special dividend will equal i the total amount of the special dividend minus the amount of cash payable pursuant to elections under the cash_option but subject_to the cash limit as defined below divided by ii the average trading price of a share of common_stock on the exchange as of the close of trading during a three-business-day period ending on a date that is as close as possible to the dividend payment_date but that is sufficiently in advance of that date to allow taxpayer to determine the number of shares of common_stock that it will issue and distribute in the special dividend the average trading price although the calculation of the number of shares of common_stock to be received by any stockholder will be determined as close as practicable to the dividend payment_date the value of a share of common_stock may change between the time that the average trading price is determined and the dividend payment_date in that plr-127630-13 event the total value of the shares of common_stock actually distributed in the special dividend may not be equal to the amount of cash that the stockholders electing to receive such shares would have received if those stockholders had elected to receive all-cash distributions although each stockholder will have the option to elect to receive cash in lieu of common_stock for the stockholder’s entire entitlement under a special dividend taxpayer intends to limit the aggregate amount of cash to be distributed in a special dividend to not less than percent of the special dividend such amount the cash limit any cash paid in lieu of fractional shares of common_stock will not count towards the cash limit in no event will the total amount of cash available be less than percent of the total value of a special dividend thus taxpayer may pay more than percent of a special dividend in cash if for any special dividend the total number of shares of common_stock for which a cash election is made cash election shares would result in the payment of cash in an aggregate amount that is less than or equal to the cash limit then the entire portion of such special dividend that is allocable to such cash election shares will be paid in cash if the number of cash elections shares would result in the payment of cash in an aggregate amount that is greater than the cash limit then holders of cash election shares will receive their respective portions of such special dividend on their cash election shares as follows a in cash on each stockholder’s cash election shares equal to the proportion that such stockholder’s cash election shares bear to the total cash election shares of all stockholders multiplied by an amount equal to the cash limit plus b in shares of common_stock based on the average trading price as to the remainder as a result if too many stockholders elect to receive a special dividend in cash a holder of cash election shares will instead receive a pro_rata amount of cash but in no case less than percent of the stockholder’s entitlement under a special dividend in cash with respect to any stockholder participating in the drip the drip will apply to a special dividend only to the extent that in the absence of the drip the stockholder would have received the distribution in cash rulings plr-127630-13 based solely on the information provided and the representations made we rule as follows any and all cash and common_stock distributed in each special dividend by taxpayer will be treated as a distribution of cash and property with respect to its stock to which sec_301 applies and not as a distribution to which sec_305 applies sec_301 and sec_305 the amount of any distribution of common_stock received by any stockholder who receives common_stock in a special dividend will be considered equal to the amount of money which could have been received instead by such stockholder sec_1_305-1 and sec_1_305-2 ex caveats except as expressly provided herein no opinion is expressed or implied concerning the tax treatment of the special dividends under other provisions of the code and regulations or the tax treatment of any condition existing at the time of or effects resulting from the special dividends that is not specifically covered by the above rulings in particular no opinion is expressed with regard to whether taxpayer qualifies as a ric under subchapter_m of the code or whether the distributions made pursuant to the ruling will satisfy the required_distribution requirement under sec_4982 as modified by sec_852 procedural statements the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination 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 a copy of this letter 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 plr-127630-13 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely marie c milnes-vasquez chief branch office of associate chief_counsel corporate cc


internal_revenue_service number release date index number ----------------------------------------------- ----------------------------- ---------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------- id no ----------------- telephone number ------------------- refer reply to cc intl br1 plr-153554-12 date date ty -------------- legend taxpayers ------------------------ ------------------------------------------------------------- ------------------------------------------------------------- ------------------ year year year year year ------- ------- ------- ------- ------- rrsp ----------------------------------------------------------------------- ----------------------------- rrsp ----------------------------------------------------------------------- ------------ rrsp ------------------------------------------------------------------------------ -------------------------- tax years ---------------- plr-153554-12 dear -------------------------------------- this is in reply to a letter dated date requesting an extension of time under sec_301_9100-3 for taxpayers to elect the provisions of revproc_2002_23 2002_1_cb_744 for tax years the rulings in this letter are based upon information and representations submitted by the taxpayers and accompanied by penalty of perjury statements executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts taxpayers husband and wife are canadian citizens in year taxpayers moved to the united_states and became u s residents taxpayers established rrsp rrsp and rrsp rrsps in canada prior to moving to the united_states since moving to the united_states they have not made any further contributions or taken any distributions from any of the rrsps taxpayers have filed timely u s income_tax returns for all relevant tax years beginning in year taxpayers hired a tax_return_preparer to assist them with their u s income_tax filing obligations for year through year in year through year taxpayers self-prepared and filed their own income_tax returns in year taxpayers hired a different tax_return_preparer to help prepare their income_tax returns and they were informed for the first time of the need to make an election pursuant to paragraph of article xviii of the u s -canada income_tax treaty in order to defer u s tax on income accrued in their rrsps after learning about the requirement to make an election taxpayers sought legal advice and subsequently decided to file this request for an extension of time to make the election pursuant to revproc_2002_23 as of the date of this ruling_request taxpayers state that the internal_revenue_service had not communicated with them concerning their rrsps ruling requested whether taxpayers may receive an extension of time under sec_301_9100-3 to elect the provisions of revproc_2002_23 2002_1_cb_744 for tax years law and analysis sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in treas reg plr-153554-12 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation the election provided in revproc_2002_23 is a regulatory election within the meaning of sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayers an extension of time provided that taxpayers satisfy the standards set forth in sec_301_9100-3 based solely on the information submitted and representations made we conclude that taxpayers satisfy the standards of sec_301_9100-3 accordingly taxpayers are granted an extension of time until days from the date of this ruling letter to make an election for tax years under revproc_2002_23 as provided in sec_301_9100-1 the granting of an extension of time is not a determination that taxpayers are otherwise eligible to make the above-described election pursuant to section dollar_figure of revproc_2002_23 the election once made cannot be revoked except with the consent of the commissioner for each open tax_year taxpayers must file form 1040x amended u s individual_income_tax_return and attach a form_8891 u s information_return for beneficiaries of certain canadian registered retirement plans for each rrsp for each subsequent tax_year through the tax_year in which the final distribution is made from an rrsp taxpayers must attach a form_8891 for the rrsp to their u s income_tax return except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter a copy of this letter 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 this letter_ruling plr-153554-12 this letter_ruling is directed only to the taxpayers who requested it sec_6110 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 will be sent to your authorized representatives sincerely elizabeth u karzon chief branch cc intl br1 office of the associate chief_counsel international enclosure copy for sec_6110 purposes cc


t c memo united_states tax_court edward j fine petitioner v commissioner of internal revenue respondent docket no filed date edward j fine pro_se timothy froehle for respondent memorandum findings_of_fact and opinion haines judge respondent determined a dollar_figure deficiency in petitioner’s federal_income_tax for after concessions the sole issue for all amounts are rounded to the nearest dollar petitioner concedes he failed to report dollar_figure of dividend income respondent concedes petitioner’s gambling_losses equal his gambling income respondent also concedes petitioner was at least years old on the last day of continued decision is whether petitioner is entitled to an itemized_deduction for home mortgage interest we hold he is not findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the supplemental stipulation of facts together with the attached exhibits are incorporated herein by this reference petitioner resided in california when the petition was filed petitioner filed a federal_income_tax return for on the schedule a itemized_deductions attached to petitioner’s return he claimed a dollar_figure deduction for home mortgage interest respondent issued petitioner a deficiency_notice disallowing the claimed mortgage interest_deduction petitioner filed a petition with this court contesting the deficiency_notice continued petitioner’s tax_year and further concedes therefore that petitioner is entitled to an additional exemption see sec_1_151-1 income_tax regs i burden_of_proof opinion generally the commissioner’s determinations are presumed correct and the taxpayer bears the burden of proving otherwise rule a see 290_us_111 the burden_of_proof may shift to the commissioner if the taxpayer proves that he or she has satisfied certain requirements sec_7491 see 122_tc_143 petitioner has neither claimed that the burden shifts to respondent nor shown that he complied with the requirements of sec_7491 the burden_of_proof therefore remains on petitioner see rule a ii home mortgage interest_deduction petitioner claims he is entitled to a home mortgage interest_deduction for subject_to certain limitations not applicable here a taxpayer is generally allowed to deduct home mortgage interest_paid within the taxable_year see sec_163 h d deductions however are a matter of legislative grace and a taxpayer bears the burden of proving that he has complied with the specific requirements for any deduction claimed indopco inc v commissioner unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code as amended and in effect for the year at issue u s 292_us_435 see also rule a taxpayers bear the burden of substantiating the amount of any claimed deduction by maintaining the records needed to establish entitlement see sec_6001 65_tc_87 aff’d 540_f2d_821 5th cir a taxpayer’s self-serving declaration is generally not a sufficient substitute for records weiss v commissioner tcmemo_1999_17 petitioner failed to present any documentation or other credible_evidence showing that he paid home mortgage interest in petitioner rather offered only his own self-serving and uncorroborated testimony we are not required to accept such testimony nor do we here see 87_tc_74 petitioner has failed to meet his burden_of_proof accordingly we sustain respondent’s determination to disallow the dollar_figure home mortgage interest_deduction in reaching our holdings herein we have considered all arguments made and to the extent not mentioned above we conclude they are moot irrelevant or without merit to reflect the foregoing decision will be entered under rule