department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc corp b03 posts-158256-01 uilc internal_revenue_service national_office field_service_advice memorandum for jody tancer associate area_counsel financial services manhattan cc lm fsh li from ken cohen senior technician reviewer cc corp b03 subject notice_2001_16 - posts-158256-01 this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent legend target purchaser intermediary mergersub state a individual a year year year posts-158256-01 date date date dollar_figurex dollar_figurey issues can this transaction be recast as a direct sale of target stock from its shareholders to purchaser and if so should a separate case be opened against purchaser should cases involving transactions in which intermediaries are used in accelerated lease_strip and inflated basis cases such as this one be considered listed transactions under notice conclusion sec_1 this transaction can be recast as a direct sale of target stock from its shareholders to purchaser and a separate case should be opened against purchaser cases involving transactions in which intermediaries are used in accelerated lease_strip and inflated basis cases such as this one should be considered listed transactions under notice_2001_16 facts the facts of this case were fully set forth in our prior advice to you on date see chief couns adv irs cca lexis only a short summary will be provided here during year purchaser learned that target was for sale negotiations between purchaser and target reached an impasse over price and whether the acquisition was to be a stock or asset acquisition the target shareholders wanted to sell their stock and purchaser wanted to acquire the target assets sometime during year intermediary was engaged in discussions with purchaser about an unrelated matter at that time purchaser advised intermediary of its problems with the target acquisition intermediary agreed to facilitate the transaction by acquiring the stock from the target shareholders and then selling to purchaser the target assets posts-158256-01 intermediary entered into letters of intent on or about date with both the target shareholders and purchaser reflecting that intermediary’s purchase of the target stock was conditioned on purchaser’s purchase of the target assets and purchaser’s purchase of the target assets was conditioned on intermediary’s purchase of the target stock in essence the sale and asset acquisition were inter-linked so that one would not occur without the other intermediary assigned its rights in the letters of intent to mergersub a special purpose entity created by intermediary solely for this transaction individual a the sole shareholder and director of intermediary and intermediary were cognizant of the gain which would result from target’s sale of the assets to purchaser and as part of the prearranged series of transactions planned the transfer of various assets through target from other intermediary related entities intermediary group in order to generate losses that would offset the gain from the asset sale additionally it is uncontested that individual a and intermediary would not have engaged in the target stock acquisition and immediate asset sale to purchaser if the intermediary group did not have tax_attributes that could be utilized by target to offset the tax gain on date the target shareholders sold their stock to mergersub on the same day after mergersub acquired the target stock members of the intermediary group assigned certain leases and subleases to target in exchange for shares of target stock on date target sold its assets to purchaser for dollar_figurex plus the assumption of certain liabilities target then engaged in another series of transactions transferring the leases to a member of the intermediary group purportedly resulting in deductions and capital losses these purported ordinary deductions and purported capital losses eliminated the entire gain from the target asset sale and in addition the losses generated by the transaction would be able to be carried back to prior years resulting in approximately dollar_figurey in refunds after the transactions described above target had minimal assets and its existence was terminated under state a law in year our prior advice to you focused on treating the transaction as an asset sale we now address treatment as a sale of stock law and analysis recast as sale of stock opening a separate case although our initial advice may not have discussed the possibility of recasting this transaction as a direct sale of target stock by its shareholders to purchaser we do believe it would be a viable option to do so if the transaction were recast as a direct sale of stock a separate case should be opened against purchaser posts-158256-01 as discussed below the service can challenge intermediary transactions such as these under notice_2001_16 2001_9_irb_730 and recast them as asset sales or direct sales of stock although our prior advice focused on treatment as an asset sale the factual circumstances of this case would equally if not more so lend themselves to recast as a direct sale of the target stock to purchaser with intermediary acting as purchaser’s agent or equivalent followed by the complete_liquidation of target and distribution of its assets to purchaser intermediary transaction tax_shelter ccn date sets forth certain facts that may indicate recast of a transaction like the one at issue as a stock sale purchaser’s relationship with intermediary is one of the strongest factors supporting such recast of the transaction purchaser was aware that the target shareholders only wanted to sell their stock to purchaser and not the target assets in response to this problem purchaser brought intermediary a firm with which purchaser had a previous relationship into the negotiations for the purpose of facilitating the acquisition of the target assets discussions concerning intermediary’s role in the transaction took place solely between purchaser and intermediary this fact leads to the conclusion that intermediary was the agent or the functional equivalent of an agent of purchaser in the sale of the target stock without the participation of intermediary purchaser would not have received a stepped-up_basis in the target assets upon their purchase from intermediary we recommend that you investigate the existence of any other factors set forth in ccn for recasting this transaction as a stock sale if the transaction is recast as a direct stock sale the liquidation of target into purchaser would qualify as a complete_liquidation under sec_332 with no gain_or_loss to purchaser on receipt of the target assets target would recognize no gain_or_loss on the distribution and purchaser would take a carryover_basis in the target assets sec_337 and sec_334 listed transactions under notice_2001_16 since transactions involving intermediaries such as this one are practically identical to those transactions described in notice_2001_16 they should be considered listed transactions under notice_2001_16 notice_2001_16 describes in general terms transactions that involve four parties a seller who wishes to sell the stock of a target_corporation the target_corporation an intermediary corporation and a buyer who wishes to purchase the assets but not the stock of the target_corporation as part of a plan seller sells the stock of the target_corporation to the intermediary corporation the target_corporation then sells some or all of its assets to the buyer the buyer claims a basis in the assets equal to the purchase_price of those assets posts-158256-01 whether the transaction before us should be a listed_transaction under notice_2001_16 depends on whether it is the same as or substantially_similar to those transactions described in notice_2001_16 we believe that it is the only facts in the instant case that are different from those in the notice are that a in the instant case the intermediary corporation formed a special purpose subsidiary to purchase the target_corporation stock such special purpose subsidiary then merged into the target_corporation rather than the intermediary corporation making the purchase itself and b the means by which the intermediary corporation in the instant case attempts to offset the purported income of the target_corporation on the sale of the assets is by the use of artificially created losses rather than losses_incurred by other members of its consolidated_group these facts in no way distinguish the transaction at issue and similar transactions from that described in notice_2001_16 accordingly this transaction and similar transactions must be considered to be the same as or substantially_similar to transactions described in notice_2001_16 and are thus listed transactions for purposes of sec_1_6011-4t b of the temporary income_tax regulations and sec_301_6111-2t b of the temporary procedure and administration regulations case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views please call if you have any further questions ken cohen senior technician reviewer branch office of associate chief_counsel corporate


t c summary opinion united_states tax_court andre and vena nelson petitioners v commissioner of internal revenue respondent docket no 10229-03s filed date andre and vena nelson pro sese thomas d yang for respondent wolfe special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect at relevant times and all rule references are to the tax_court rules_of_practice and procedure the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency in petitioners’ federal_income_tax of dollar_figure for the sole issue for decision is whether the passive_activity rules of sec_469 preclude petitioners from deducting the full amount of their losses from their rental_real_estate_activities background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference when they filed their petition petitioners resided in oak brook illinois commencing in date petitioner andre nelson petitioner was employed full time as a technical support team manager for the dial corporation he received a dollar_figure sign-on bonus for accepting this position during petitioner not only worked full time for dial corporation but also worked sufficient overtime to earn dollar_figure plus dollar_figure of overtime premium and dollar_figure of double time premium he also received an dollar_figure shift premium petitioner vena nelson ms nelson is a certified_public_accountant employed full time as the chief financial officer for the rock of ages baptist church in during petitioners owned three apartment buildings in illinois that they operated as rental real properties rental properties these rental properties were an apartment building located pincite north luna in chicago acquired in north luna property an apartment building located pincite south 5th avenue in maywood acquired in date maywood property and an apartment building located pincite south 5th avenue in maywood acquired in maywood property a total of tenants resided at the three apartment buildings petitioner personally attended to the management and maintenance of each of his rental properties without assistance from a management company petitioner collected monthly rents delivered late warning notices and took care of eviction proceedings when necessary when vacancies arose petitioner showed the vacant unit to prospective applicants conducted applicant interviews checked credit reports and references and attended to lease signings petitioner responded to requests for routine repairs and was responsible for general maintenance activities such as caring for the lawns shoveling snow in the winter and waste management in addition petitioner was involved in major renovation projects at two of the three rental properties in including the modernizing of outdated kitchens bathrooms and furnaces ms nelson was not actively involved with the rental properties petitioner claims that he devoted more time to his rental property activities in than to his full-time job with the dial corporation in a letter addressed to this court on date and incorporated in the stipulation of facts petitioner described his typical day in the following manner although i have a full-time job i work an off-shift which allows me time to manage the apartment buildings on a daily basis my typical schedule is 00am - pm apartment management pm - midnight full-time_employee at dial corporation 00am - 00am sleep my weekends are also heavily dedicated toward apartment management yes this is a lot of work but my job provides health insurance and other_benefits for my family i would not have this safety net without my full-time job at dial corporation in connection with the rental properties petitioners reported rental real_estate losses for on a schedule e supplemental income and loss as follows rents received total expenses property north luna maywood maywood total dollar_figure big_number big_number dollar_figure dollar_figure big_number big_number losses dollar_figure big_number big_number dollar_figure dollar_figure by notice_of_deficiency dated date respondent determined that petitioners’ rental real_estate losses were passive_activity_losses within the meaning of sec_469 and disallowed dollar_figure of the dollar_figure in rental real_estate losses claimed by petitioners as a result of this adjustment respondent determined a deficiency in petitioners’ tax of dollar_figure discussion the taxpayer generally bears the burden of proving that the commissioner’s determinations are incorrect rule a since petitioners did not meet the substantiation and recordkeeping requirements of sec_7491 the burden_of_proof remains on petitioners sec_162 permits deductions for all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business sec_212 permits deductions for all the ordinary and necessary expenses paid_or_incurred during the taxable_year for the production_of_income the amounts deductible pursuant to these provisions are not in dispute here however sec_469 generally disallows passive_activity_losses for individual taxpayers sec_469 a passive_activity_loss is the amount by which the aggregate losses from all passive activities for the taxable_year exceed the aggregate income from all passive activities for that year sec_469 a passive_activity is any trade_or_business activity in which the taxpayer does not materially participate sec_469 rental activities generally are treated as passive activities without regard to the extent that the taxpayer materially participates in the activity sec_469 rental activities involving real_estate are not necessarily passive activities if the taxpayer is a qualifying taxpayer under sec_469 see sec_1_469-9 income_tax regs instead the rental real_estate activity of a qualifying taxpayer who materially participates in the activity is not subject_to the passive_activity rules of sec_469 sec_469 sec_1_469-9 income_tax regs a qualifying taxpayer must meet the following requirements under sec_469 i more than one-half of the personal services performed in trades_or_businesses by the taxpayer during such taxable_year are performed in real_property trades_or_businesses in which the taxpayer materially participates and ii such taxpayer performs more than hours of services during the taxable_year in real_property trades_or_businesses in which the taxpayer materially participates a taxpayer is considered to materially participate in a trade_or_business if his activities are regular continuous and substantial sec_469 in establishing whether a taxpayer's real_property activities result in passive_activity_losses each interest in rental real_estate is treated as a separate rental real_estate activity unless the qualifying taxpayer makes an election to treat all interests in rental real_estate as a single rental real_estate activity sec_469 sec_1_469-9 income_tax regs petitioners did not make such a timely election so petitioner's activities must be regular continuous and substantial with regard to each individual rental property with respect to the evidence that may be used to establish material_participation temporary treasury regulations promulgated under sec_469 provide the extent of an individual’s participation in an activity may be established by any reasonable means contemporaneous daily time reports logs or similar documents are not required if the extent of such participation may be established by other reasonable means reasonable means for purposes of this paragraph may include but are not limited to the identification of services performed over a period of time and the approximate number of hours spent performing such services during such period based on appointment books calendars or narrative summaries sec_1_469-5t temporary income_tax regs fed reg date see also sec_1_469-9 income_tax regs this court has acknowledged that these temporary regulations are somewhat ambivalent concerning the records to be maintained by taxpayers but we have held that the regulations do not allow a post-event ballpark guesstimate fowler v commissioner tcmemo_2002_223 goshorn v commissioner tcmemo_1993_578 in support of their argument that petitioner was a qualifying taxpayer under sec_469 for petitioners failed to substantiate the amount of time petitioner spent on his rental_real_estate_activities relative to his full- time job at the dial corporation deductions are a matter of legislative grace and petitioners bear the burden of proving that they are entitled to any of the deductions claimed rule a 503_us_79 a taxpayer is required to maintain records sufficient to substantiate deductions claimed on his tax_return sec_6001 sec_1_6001-1 income_tax regs moreover a taxpayer who claims a deduction bears the burden of substantiating the amount and purpose of the item claimed 65_tc_87 affd per curiam 540_f2d_821 5th cir sec_1_6001-1 income_tax regs to establish the amount of time petitioner spent on his rental_real_estate_activities petitioners introduced a spreadsheet summarizing the work activities he performed on a daily basis for each of his three rental properties daily work log the daily work log was not prepared contemporaneously as petitioner performed each activity but was composed by petitioners purportedly from various receipts and documents in preparation for trial petitioners claim that they have the underlying receipts and documents from which the spreadsheet was prepared but they did not think it was necessary to bring them to court for trial or to introduce them into evidence in the absence of any corroborative evidence we do not consider the daily work log persuasive furthermore the daily work log merely identifies tasks and services performed by petitioner on a particular day it does not give any indication or approximation of how much time petitioner actually spent servicing his rental properties consequently even if we were to give weight to the daily work log that document by its own terms would not have established that petitioner spent more than one-half of his time engaged in rental_real_estate_activities or that the time petitioner spent on such rental_real_estate_activities amounts to more than hours_of_service for purposes of sec_469 other evidence introduced by petitioners at trial was petitioner's letter to the court dated date in which petitioner described his typical work schedule and petitioners’ oral testimony at trial it is well established that the court is not bound to accept at face value such uncorroborated and self-serving testimony from a taxpayer 112_tc_183 87_tc_74 petitioners did not provide appointment books calendars or narrative summaries describing in a detailed and convincing manner the hours that petitioner actually spent engaged in his real_property activity and did not call any corroborating witnesses to substantiate their own testimony in light of his full work schedule at the dial corporation petitioner would have to provide substantial and detailed evidence to convince us that he managed to spend more than one- half of his time on rental_real_estate_activities or that he even spent more than hours on them during the year in issue we do not doubt that petitioner worked hard during the year in issue but he simply failed to present convincing evidence about the amount of his work in his real_property activities we hold that petitioner was not a qualifying taxpayer in for purposes of sec_469 and therefore his rental real_estate activity during is classified as passive_activity although petitioners are not entitled to deduct the full amount of their passive rental real_estate losses sec_469 allows a taxpayer to claim up to dollar_figure per year in passive_activity_losses from rental_real_estate_activities the dollar_figure exemption subject_to a phaseout once the taxpayer’s adjusted_gross_income exceeds dollar_figure to qualify for the dollar_figure exemption the taxpayer must have actively participated in the rental real_estate activity the active_participation requirement can be satisfied without regular continuous and substantial involvement in an activity see madler v commissioner tcmemo_1998_112 s rept 1986_3_cb_1 the active_participation standard should be met as long as the taxpayer participates in a significant and bona_fide sense in making management decisions or arranging for others to provide services such as repairs madler v commissioner supra the dollar_figure exemption is phased out by percent of the amount by which the adjusted_gross_income of the taxpayer for the taxable_year exceeds dollar_figure sec_469 for this purpose the taxpayer’s adjusted_gross_income is determined without regard to any passive_activity_loss sec_469 respondent agrees that petitioner actively participated in rental_real_estate_activities and that petitioners are entitled to the dollar_figure exemption subject_to the phaseout provision on their tax_return petitioners reported dollar_figure in wages dollar_figure in taxable interest dollar_figure in taxable refunds or credits and dollar_figure in unemployment_compensation for an adjusted_gross_income without the passive_activity_loss of dollar_figure petitioners’ adjusted_gross_income exceeds dollar_figure by dollar_figure fifty percent of dollar_figure is dollar_figure rounded petitioners’ maximum offset amount of dollar_figure is reduced by dollar_figure to dollar_figure thus we find that petitioners are entitled to rental real_estate losses of dollar_figure under sec_469 as determined by respondent in the notice_of_deficiency reviewed and adopted as the report of the small_tax_case division to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number ----------------------------------------- ------------------- ---------------------- - re----------------------------------------------- ----------------- 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 plr-154666-04 date february legend -------------------------------------------------------- decedent ---------------------------------------------------- spouse ---------------------------------------------------------------------- family_trust ------------------------------------------------------------------------ marital trust ---------------- daughter ------------------- daughter ------------------ date ------------------- date ------------------------- date -------------------------- date ---------------------- date ------------------------- date -------------------- date -------------------------- date ----------------------- date ------------------- y ira ----------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- state court order -------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------ ---------------------------------------------------------- state law state law -------------- ----------------------------------------------------------------------------------------- ---------------------------------- ---------------------------------- plr-154666-04 dear -------------------------------------- tax and income_tax consequences of proposed disclaimers this is in response to your letter dated date concerning the gift the facts and representations submitted are summarized as follows decedent a resident of state died testate on date survived by his wife spouse and two children daughter and daughter spouse was appointed the personal representative of decedent’s estate at the time of his death decedent was the owner of an individual_retirement_account ira described in sec_408 of the internal_revenue_code that had a date of death value of approximately dollar_figurey at the time of his death decedent whose birth date was date had not attained his required_beginning_date as that term is defined in sec_401 spouse’s date of birth is date daughter 1’s date of birth is date and on date decedent executed two irrevocable trusts marital trust and family daughter 2’s date of birth is date trust on date decedent executed a beneficiary designation with respect to his ira beneficiary of ira sec_2 provides that if spouse disclaims any part or all of the benefits of ira then the beneficiary of the disclaimed portion is the trustee of marital trust the beneficiary designation further provides that sec_1 of the ira beneficiary designation named spouse as the primary if spouse survives decedent and disclaims any part or all of the benefits payable pursuant to sec_1 and sec_2 above then the beneficiary of such disclaimed portion or all of the account is the trustee of family_trust as amended from time to time to be paid over the nonrecalculated life expectancy of spouse daughter sec_1 and were named third contingent beneficiaries of ira to take in pursuant to the terms of marital trust an irrevocable_trust upon decedent’s the event spouse spouse as a beneficiary of marital trust and spouse as a beneficiary of family_trust disclaimed the respective interests in ira death the trustees are to pay all of the net_income from marital trust to spouse during her lifetime in quarterly or more frequent installments income is to include the income of ira which is to be distributed from marital trust to spouse no later than the end of the calendar_year sec_4 of marital trust further provides that the trustee of marital trust shall have the power to direct that distributions from ira be made to marital trust in such manner that the minimum annual ira distribution shall be the greater of a the amount necessary to comply with the requirements of sec_401 and sec_408 or b all income earned by ira during the course of a year plr-154666-04 the trustee may also invade principal including the principal of ira for spouse’s pursuant to the terms of family_trust an irrevocable_trust as modified by court benefit to provide for her reasonable health support and maintenance spouse is granted certain non-cumulative rights to withdraw all or a portion of the property of marital trust spouse also has the power to appoint by her will all or any part of the assets of marital trust to or for the benefit of any issue of decedent or their spouse as spouse may determine upon spouse’s death subject_to spouse’s limited testamentary_power_of_appointment marital trust will be distributed to the living children of decedent by right of representation daughter and daughter are the co-trustees of marital trust order dated date upon decedent’s death the trustee may make discretionary distributions of income to or for the benefit of spouse as the trustee deems necessary for her health support and maintenance if the trustee determines that spouse’s reasonable needs will be comfortably met from other resources the trustee may make unequal discretionary distributions of income to or for the benefit of decedent’s issue for their health support maintenance and education the trustee may also make discretionary distributions of principal to any one or more of a group consisting of spouse and the decedent’s issue as necessary for their health support maintenance and education spouse has the power to appoint by her will all or any part of the assets of family_trust to or for the benefit of any issue of the decedent as spouse may determine upon the death of spouse subject_to spouse’s testamentary_power_of_appointment the assets of trust shall be distributed equally to daughter and daughter by right of representation daughter and daughter are the co-trustees of family_trust beneficiary of ira will disclaim a fractional interest defined by a formula in ira plus any post-death income earned that is attributable to the disclaimed portion in a separate disclaimer spouse also proposes to disclaim any and all interest in martial trust finally spouse will disclaim spouse’s power to exercise her limited testamentary_power_of_appointment under the family_trust with respect to that portion of the family_trust attributable to the portion of the ira that passed to the family_trust as a result of the disclaimers described above the portion of the family_trust subject_to this disclaimer will be determined under sec_25_2518-2 example of the gift_tax regulations the proposed disclaimers will be in writing and will be received by the holder of the legal_title to the property no later than months after the date of decedent’s death the proposed disclaimers will also comply with the state disclaimer law state law it has been represented that spouse has not accepted any interest or any benefit from the ira spouse proposes to execute a disclaimer pursuant to which she as primary it has been represented that the documentation described in sec_1 a - of the final income_tax regulations question and answer-6 will be provided to the ira administrator no later than date furthermore it has also been represented that all debts taxes and expenses associated with the estate of decedent will be paid from plr-154666-04 assets other than ira finally it has been represented that sec_1 of state law in relevant part exempts from the concept debtors interest in or right to receive assets held or amounts payable under an individual_retirement_account you have requested the following rulings the proposed disclaimers that will be executed by spouse will be qualified disclaimers under sec_2518 family_trust is a qualified_beneficiary within the meaning of sec_1_401_a_9_-4 question and answer with respect to the portion of ira payable to the family_trust required minimum distributions within the meaning of sec_401 may be calculated based upon the life expectancy of spouse using the single life table found at sec_1_401_a_9_-9 of the final regulations question and answer ruling sec_2518 provides that if a person makes a qualified_disclaimer with respect to any interest in property then for purposes of the estate gift and generation- skipping transfer_taxes the interest will be treated as if it had never been transferred to the disclaimant sec_2518 defines the term qualified_disclaimer to mean an irrevocable and unqualified refusal by a person to accept an interest in property but only if such refusal is in writing such writing is received by the transferor of the interest the transferor's legal_representative or the holder of the legal_title to the property to which the interest relates not later than the date which is nine months after the later of the date on which the transfer creating the interest in such person is made or the day on which such person attains age such person has not accepted the interest or any of its benefits and as a result of such refusal the interest passes without any direction on the part of the person making the disclaimer and passes either to the spouse of the decedent or to a person other than the person making the disclaimer sec_25_2518-1 provides in part that if a person makes a qualified_disclaimer then for purposes of federal estate gift and generation-skipping_transfer_tax provisions the disclaimed interest in property is treated as if it had never been transferred to the person making the qualified_disclaimer instead it is considered as passing directly from the transferor of the property to the person entitled to receive the plr-154666-04 property as a result of the disclaimer accordingly a person making a qualified_disclaimer is not treated as making a gift sec_25_2518-2 provides that in the case of a disclaimer made by a sec_25_2518-2 example describes a situation where b's will decedent's surviving_spouse with respect to property transferred by the decedent the disclaimer will satisfy the requirements of sec_2518 if the interest passes as a result of the disclaimer without any direction on the part of the surviving_spouse either to the surviving_spouse or to another person if the surviving_spouse however retains the right to direct the beneficial_enjoyment of the disclaimed property in a transfer that is not subject_to federal estate and gift_tax whether as trustee or otherwise such spouse will be treated as directing the beneficial_enjoyment of the disclaimed property unless such power is limited by an ascertainable_standard established both a marital trust and a nonmarital trust b's surviving_spouse a is an income_beneficiary of the marital trust and has a testamentary general_power_of_appointment over trust assets a also has an income_interest in the nonmarital trust and possesses a testamentary nongeneral power to appoint among designated beneficiaries the will provides that any portion of the marital trust disclaimed is to pass to the nonmarital trust a disclaimed percent of the marital trust the example concludes that the requirements of sec_2518 are not satisfied unless a also disclaims the nongeneral power to appoint the portion of the trust corpus that is attributable to the property that passed to the nonmarital trust as a result of a's disclaimer assuming that the fair_market_value of the disclaimed property on the date of the disclaimer is dollar_figure and that the fair_market_value of the nonmarital trust including the disclaimed property immediately after the disclaimer is dollar_figure a must disclaim the power to appoint one-third of the nonmarital trust’s corpus under sec_25_2518-3 the disclaimer of all or an undivided portion of any separate interest in property may be a qualified_disclaimer even if the disclaimant has another interest in the same property in general each interest in property that is separately created by the transferor is treated as a separate interest for example if an income_interest in securities is bequeathed to a for life then to b for life with the remainder_interest in such securities bequeathed to a's estate and if the remaining requirements of b are met a could make a qualified_disclaimer of either the income_interest or the remainder or an undivided portion of either interest separate interest in property that meets the other requirements of a qualified_disclaimer under sec_2518 and the corresponding regulations is a qualified_disclaimer an undivided portion of a disclaimant’s separate interest in property must consist of a fraction or percentage of each and every substantial interest or right owned by the disclaimant in such property and must extend over the entire term of the disclaimant’s interest in such property and in other_property into which such property is converted sec_25_2518-3 provides that a disclaimer of an undivided portion of a sec_25_2518-3 provides that the disclaimer of a specific pecuniary amount plr-154666-04 out of a pecuniary or nonpecuniary bequest or gift can be a qualified_disclaimer provided that no income or other benefit of the disclaimed amount inures to the benefit of the disclaimant either prior to or subsequent to the disclaimer following the disclaimer the amount disclaimed and any income attributable to such amount must be segregated based on the fair_market_value of the assets on the date of the disclaimer or on a basis that is fairly representative of the value changes that may have occurred between the date of transfer and the date of the disclaimer under state law as a result of the disclaimer spouse will be treated as predeceasing decedent with respect to the disclaimed interest in this case the proposed disclaimers will be in writing further it is represented that the disclaimers will be delivered within months of the decedent’s death and that prior to the execution of the disclaimers spouse has not and will not accept any of the disclaimed interests or benefits including any income attributable to the disclaimed portion earned after decedent’s death spouse’s disclaimer as the primary beneficiary of ira of an undivided fractional interest in ira constitutes the disclaimer of an undivided portion of spouse’s interest in ira under sec_25_2518-3 further under the terms of sec_2 of the ira beneficiary designation as a result of spouse’s disclaimer of a portion of her interest as primary beneficiary of ira the disclaimed portion will pass to marital trust under sec_3 of the ira beneficiary designation as a result of spouse’s disclaimer of her interest in the marital trust the disclaimed portion of the ira will pass to family_trust as a result of spouse’s disclaimer of her limited testamentary_power_of_appointment under the family_trust with respect to that portion of the family_trust attributable to the portion of the ira that will pass to the family_trust the disclaimed portion will not pass to any recipient at the direction of spouse spouse’s limited_power_of_appointment under family_trust constitutes a separate interest in the trust property for purposes of sec_25_2518-3 accordingly spouse can make a qualified_disclaimer with respect to the limited_power_of_appointment over family_trust notwithstanding that spouse will retain a lifetime beneficial_interest in family_trust see sec_25 e example we conclude therefore based on the representations made and information submitted that assuming the disclaimers are valid under state law the proposed disclaimers by spouse will be qualified disclaimers under sec_2518 ruling sec_2 and sec_401 provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee- plr-154666-04 i date or ii will be distributed to such employee not later than the required beginning will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary sec_401 provides in general that if a plan participant ira holder dies before the distribution of his interest has begun in accordance with subparagraph a ii prior to his required_beginning_date then his entire_interest must be distributed within years of his death sec_401 provides in general that if any portion of the interest of a deceased plan participant ira holder is payable to or for the benefit of a designated_beneficiary such portion will be distributed beginning not later than year after the date of the deceased’s death or a later date as prescribed by the secretary under regulations in accordance with regulations over the life of the designated_beneficiary or a period not extending beyond the life expectancy of the beneficiary sec_401 provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the employee attains age designated as a beneficiary by the employee ira holder sec_401 defines designated_beneficiary as any individual final income_tax regulations under sec_401 and sec_408 were published in the federal_register pincite federal_register date and in the internal_revenue_bulletin pincite_19_irb_852 date the preamble to the final regulations in relevant part provide that the regulations apply for determining required minimum distributions for calendar years beginning after date for determining required distributions for calendar_year taxpayers may rely on the proposed_regulations the proposed_regulations or the final regulations in addition the final regulations have been modified in part see 2004_26_irb_1082 date the modification to the final regulations may also be relied upon with respect to required distributions for the calendar_year that with respect to the life expectancy exception to the 5-year rule described in sec_401 and in a-1 distributions are required to begin to a non-spouse beneficiary on or before the end of the calendar_year immediately following the calendar_year in which the employee died this rule also applies if another individual is a designated_beneficiary in addition to the employee’s ira holder’s surviving_spouse sec_1_401_a_9_-3 of the final regulations q a-3 a provides in general plr-154666-04 sec_1_401_a_9_-3 of the final regulations q a-4 a provides in relevant part that in the absence of a plan provision to the contrary with respect to an individual who dies prior to reaching his required_beginning_date if said individual has designated a beneficiary distributions from his plan or ira are to be made in accordance with the life_expectancy_rule of sec_401 and iv sec_1_401_a_9_-5 of the final regulations q a-5 b provides in general that if an employee dies before his required_beginning_date in order to satisfy the requirements of sec_401 or iv and the life_expectancy_rule described in a-1 of sec_1_401_a_9_-3 the applicable distribution period for distribution calendar years after the distribution calendar_year containing the employee’s date of death is determined in accordance with paragraph c of this a-5 sec_1_401_a_9_-5 of the final regulations q a-5 c provides in general that with respect to a non-spouse beneficiary the applicable distribution period measured by the beneficiary’s remaining life expectancy is determined using the beneficiary’s age as of the beneficiary’s birthday in the calendar_year immediately following the calendar_year of the employee’s death in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after the calendar_year immediately following the calendar_year of the employee’s death sec_1_401_a_9_-4 of the final regulations q a-1 provides in relevant part that a designated_beneficiary is an individual who is designated as a beneficiary under a plan either by the terms of the plan or by an affirmative election by the employee q a- further provides that a person who takes under a will or otherwise under applicable state law will not be a designated_beneficiary unless that individual also takes under a plan sec_1_401_a_9_-5 of the final regulations q a-7 a provides in summary that except as otherwise provided in paragraph c of this a-7 not pertinent to this ruling_request if more than one individual is designated as a beneficiary with respect to an employee as of the applicable_date for determining the designated_beneficiary the named beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the applicable distribution period sec_1_401_a_9_-4 of the final regulations q a-4 provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee’s death generally an employee’s designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of death q a-4 further provides in relevant part if a person disclaims entitlement to the employee’s benefit pursuant to a disclaimer that satisfies sec_2518 by that september thereby allowing other beneficiaries to receive the benefit in lieu of that plr-154666-04 person the disclaiming person is not taken into account in determining the person’s designated_beneficiary sec_1_401_a_9_-4 of the final regulations q a-3 provides that only the trust is valid under state law or would be but for the fact that there is no the trust is irrevocable or the trust contains language to the effect it becomes individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate may not be a designated_beneficiary however q a-5 of sec_1_401_a_9_-4 provides that beneficiaries of a_trust with respect to the trust's interest in an employee's benefit may be treated as designated beneficiaries if the following requirements are met corpus irrevocable upon the death of the employee interest in the employee's benefit are identifiable within the meaning of a-1 of this section from the trust instrument plan_administrator with respect to required minimum distributions after the death of the employee that documentation described therein must be provided by the trustee of the trust_beneficiary to the plan_administrator by october of the calendar_year following the calendar_year in which the employee died the documentation described in a-6 of this section has been provided to the the beneficiaries of the trust who are beneficiaries with respect to the trust's sec_1_401_a_9_-4 of the final regulations q a-6 b provides generally sec_1_401_a_9_-4 of the final regulations q a-5 c provides in relevant part that the separate_account rules under a-2 of sec_1_401_a_9_-8 are not available to beneficiaries of a_trust with respect to the trust’s interest in the employee’s benefit sec_1_401_a_9_-9 of the final regulations q a-1 sets forth the single life table used to compute the life expectancy of an individual as previously noted taxpayers must compute minimum required distributions for calendar years beginning with calendar_year in accordance with the final regulations referenced above sec_408 provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the trust is maintained plr-154666-04 with specific respect to the second ruling_request a fractional portion of decedent’s ira will be payable to family_trust after decedent files the disclaimers referenced herein family_trust by its terms is irrevocable and family_trust is valid under the laws of state furthermore a copy of family_trust will be timely delivered to the administrator custodian of ira finally the identity of the beneficiaries of family_trust can be ascertained by perusing its terms thus family_trust constitutes a see-through trust within the meaning of sec_1_401_a_9_-4 of the final regulations q a-5 therefore with respect to the second ruling_request we conclude that family_trust is a qualified_beneficiary within the meaning of sec_1_401_a_9_-4 of the final income_tax regulations question and answer with specific respect to the third ruling_request since family_trust is a see- through trust within the meaning of sec_1_401_a_9_-4 of the final regulations question and answer it is necessary to determine the appropriate life expectancy to be used to make required distributions as a general_rule if a_trust is named as the beneficiary of either a qualified_plan or an ira all of the beneficiaries of said trust must be considered for purposes of determining who if anyone is the designated_beneficiary for purposes of code sec_401 in this regard we note that spouse daughter and daughter are the beneficiaries of family_trust as noted above spouse is the eldest of the three beneficiaries furthermore as noted above spouse is decedent’s surviving_spouse although spouse is decedent’s surviving_spouse she is not the sole beneficiary of family_trust as a result she cannot be treated as the sole beneficiary of decedent’s ira thus pursuant to sec_1_401_a_9_-3 of the final regulations q a-3 a required distributions from decedent’s ira must begin no later than date furthermore pursuant to sec_1_401_a_9_-5 of the final regulations q a-5 c required distributions with respect to calendar_year must be computed using spouse’s age and life expectancy during that year computed pursuant to the table found in sec_1_401_a_9_-9 of the final regulations q a-1 in subsequent calendar years the applicable distribution period is reduced by one for each calendar_year that has elapsed after thus with respect to the third ruling_request we conclude that with respect to the portion of ira payable to family_trust required minimum distributions within the meaning of sec_401 may be calculated based upon the life expectancy of spouse using the single life table found at sec_1_401_a_9_-9 of the final regulations q a-1 this ruling letter is based on the assumption that ira either has met is meeting or will meet the requirements of sec_408 at all times relevant thereto it also assumes that family_trust is valid under the laws of state as represented finally it plr-154666-04 assumes that the disclaimers referenced herein will meet the requirements of sec_2518 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 sincerely george l masnik branch chief branch passthroughs special industries enclosures cc copy for sec_6110 purposes copy of this letter


signiticant index no department of the treasury internal_revenue_service washington d c tax exempt and government entities apr tv ' ep ‘ ra ot a re dear retirement_plan savings_plan this letter is in response to your request for a ruling which was submitted by your authorized representative on date and amended date specifically you asked us to rule on the following issues the proposed amendment to the savings_plan described below is reasonable and provides for only de_minimis increases in plan liabilities in accordance with sec_412 of the internal_revenue_code code and sec_304 of employee_retirement_income_security_act_of_1974 erisa and the amendments to the plan and the savings_plan made as a result of corrections approved in the audit cap and vc programs to increase benefits are required as a condition of qualification in accordance with sec_412 of the code and sec_304 of erisa the retirement_plan is a defined_benefit_plan with a cash balance benefit formula the retirement accruals to the retirement_plan ceased effective december plan covers the hospital’s union and non-union employees employed by the hospital as of december the savings_plan was adopted effective july sharing plan with a qualified_cash_or_deferred_arrangement under sec_401 of the code covering substantially the same group of hospital employees covered by the the savings_plan is a profit retirement_plan the savings_plan provides for annual profit sharing contributions that are allocated under a service-weighted formula plus elective contributions and matching employer contributions under the k feature profit sharing contributions range from to of each participant’s base pay depending on the participant's years_of_service the retirement_plan is subject_to a waiver of the minimum_funding_standard it received on may as such any amendment increasing benefits in the retirement_plan or any other plan sponsored by the hospital covering substantially the same group_of_employees covered by the plan is subject_to the restrictions of sec_412 of the code the date that they became certain participants who were employees represented by a particular union did not participate in the retirement_plan prior to january eligible to participate in the retirement_plan prior to participating in the retirement_plan these employees participated in a multiemployer defined_benefit_plan when the savings plans was adopted the hospital intended that the definition of years_of_service include service recognized under the retirement_plan or other plans to which the hospital contributed for each participant who was employed by the hospital on however the language in the savings_plan was interpreted and december the savings plans was operated to recognize only years_of_service recognized under the retirement_plan the union objected to the way the definition of years_of_service was interpreted and applied in the operation of the savings_plan upon reviewing the definition of years_of_service and the operation of the savings_plan the hospital agreed that the plan language defining years_of_service was ambiguous and that it was not applying the definition as had been intended when the savings_plan was adopted hence the hospital has proposed to amend the savings_plan effective for all participants represented by this union in service as of december recognize all service that would have been recognized under the retirement_plan had these participants been eligible to participate prior to january would also give these participants a make up contribution for the plan years ending december to clearly the amendment and the proposed amendment would affect at most participants the cost of the added contributions to the savings_plan for the plan years ending december and would be dollar_figure and dollar_figure respectively this would represent a increase for impacted participants are non-highly compensated and that the proposed contributions would be well below the limits under sec_415 of the code the hospital represents that all the and a increase for after the date ruling_request was submitted the hospital became aware of certain operational defects in both the retirement_plan and the savings_plan that were caused by recordkeeping errors in the retirement_plan the recordkeeper incorrectly programmed the interest rate assumption for calculating single sum distributions upon termination of employment and failed to take into account certain provisions of the retirement_plan as a result participants who terminated employment were either underpaid or overpaid the aggregate amount of the underpayments was dollar_figure and the aggregate amount of overpayments was dollar_figure in the savings_plan the recordkeeper incorrectly input certain employment and salary information into its recordkeeping system this defect caused participants to receive excess allocations of profit sharing contributions in the aggregate amount of dollar_figure the hospital intended to correct the defects under the voluntary compliance program vcp however the retirement_plan was audited prior to the hospital being able to submit the vcp application however the hospital voluntarily disclosed the defects to the auditor and the defects were corrected under audit compliance agreement program audit cap the hospital was able to submit a vcp application_for the savings_plan and received a favorable compliance statement dated july statement will not become effective until the hospital receives a favorable response to the determination_letter request submitted with the vcp application however the compliance the corrections to the defects in the retirement_plan and savings_plan involve retroactively amending each plan to authorize the overpayments or over allocations the underpayments will be corrected through payments of the shortfalls including applicable_interest to each affected participant sec_412 of the code and sec_304 of erisa provide that if a waiver of the minimum_funding_standard under sec_412 of the code and sec_303 of erisa is in effect with respect to a plan that is amended to increase the liabilities of the plan by reason of any increase in benefits any change in the accrual_of_benefits or any change in the rate at which benefits become nonforfeitable such waiver shall not apply to any plan_year ending on or after the date on which such amendment is adopted sec_412 of the code and sec_304 of erisa provide that sec_412 of the code and sec_304 of erisa shall not apply to any plan amendment which the secretary of labor determines to be reasonable and which provides only de_minimis increases in the liabilities of the plan sec_412 of the code and sec_304 of erisa provide that sec_412 of the code and sec_304 of erisa shall not apply to any plan amendment which the secretary of labor determines to be required as a condition of qualification reorganization plan no which became effective december authority indicated in sec_412 from the secretary of labor to the secretary of treasury transferred the h_r report no states it is contemplated that generally other plans of the employer may not be established or amended to establish or increase benefits during a period of waiver s report no states the committee intends that in all cases the service will condition a waiver of funding requirements by providing that the employer may not amend any plan in a way that would increase plan liabilities as long as there are any unfunded waived contributions outstanding under any of his qualified_plans is being made to clarify an ambiguous interpretation the proposed amendment to the savings_plan effective for all participants represented by the union in service as of december to explicitly recognize all service that would have been recognized under the retirement_plan had they been eligible to participate prior to january in the definition of years_of_service under the savings_plan while the existing plan language appears to clearly reach this result it was helpful in negotiations with the affected union to make the clarifying amendment accordingly the amendment to the savings_plan is reasonable the proposed amendment would only increase liabilities in the savings_plan by in savings_plan is de_minimis hence in accordance with sec_412 of the code and sec_304 of erisa sec_412 of the code and sec_304 of erisa do not apply to the proposed amendment hence the amendment to the and in the amendments to the retirement_plan and the savings_plan made as a result of corrections approved in the audit cap and vc programs are required as a condition of qualification hence in accordance with sec_412 of the code and sec_304 of erisa sec_412 of the code and sec_304 of erisa do not apply to the corrective amendments to the retirement_plan and the savings_plan this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent we have sent a copy of this letter to the manager ep classification in to the manager ep compliance unit in - and to your authorized representative pursuant to a power_of_attorney on file in this office if you require further assistance in this matter please contact sincerely yours per milohf james e holland jr manager employee_plans technical


internal_revenue_service department of the treasury number release date index numbers re washington dc person to contact telephone number refer reply to cc psi b09-plr-147852-02 date date legend taxpayer date spouse trust daughter x corporation a year date attorney law firm dear this is in response to your letter dated date on behalf of taxpayer requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an allocation of generation-skipping_transfer gst_exemption plr-147852-02 the facts and representations submitted are summarized as follows after consulting with an estate_planning attorney on date taxpayer and spouse established trust an irrevocable_trust for the benefit of daughter and her descendants sec_3_1 of trust provides that during daughter’s lifetime the trustees shall pay the annual net_income of the trust to daughter annually or at more frequent intervals sec_3_2 of trust provides that the trustees may pay such part or all of the principal of the trust to daughter at such times as the trustees deem advisable for her health education support and maintenance in her accustomed manner of living sec_4 of trust provides that on daughter’s death the trustees shall pay the remaining assets of the trust to daughter’s issue daughter’s spouse taxpayer and spouse’s grandchildren and grandchildren’s issue in such shares and in such manner whether outright or in trust as she directs by written directions to the trustees or by her will if any assets of the trust are not disposed of by the preceding provisions the trustees shall divide the same among daughter’s issue who survive her per stirpes and dispose_of the shares so provided as follows sec_4 of trust provides that the trustees shall pay the annual net_income of the trust to such child annually or at more frequent intervals sec_4 of trust provides that the trustees may pay such part or all of the principal of the trust to such child as the trustees deem advisable for such child’s health education support and maintenance in his or her accustomed manner of living sec_4 provides that on such child’s death the trustees shall pay the remaining assets of the trust to such child’s issue such child’s spouse and taxpayer and spouse’s issue in such shares and in such manner whether outright or in trust as such child directs by written directions to the trustees or by such child’s will on date taxpayer and spouse each transferred x shares of corporation stock with a reported value of dollar_figurea to trust taxpayer and spouse relied on an accountant to prepare their tax returns taxpayer and spouse each filed gift_tax returns for year reporting their transfers to trust and electing to split_gifts made by them to third parties during the calendar_year under sec_2513 however the estate_planning attorney inadvertently failed to advise taxpayer spouse and their accountant to allocate taxpayer’s and spouse’s respective gst exemptions to trust in addition the accountant did not inquire as to whether taxpayer and spouse intended trust to be gst exempt no allocation of taxpayer’s gst_exemption was made on the year gift_tax_return no additional transfers have been made to trust spouse died on date shortly after spouse’s death daughter retained attorney an estate_planning attorney with law firm to advise her regarding her own estate_planning after reviewing trust instrument and related documents attorney notified daughter that no gst_exemption had been allocated to trust plr-147852-02 taxpayer has requested the following rulings an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-1 and sec_301_9100-3 to make an allocation of taxpayer’s gst_exemption for the transfer to trust in year the allocation will be effective as of date the date of the transfer to trust and the gift_tax value of the year transfer to trust shall be used in determining the amount of taxpayer’s gst_exemption to be allocated to trust sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period its value at the time of the close of the estate_tax_inclusion_period and such allocation shall be effective on and after the date of such transfer or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted into law on date sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining plr-147852-02 whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to make an allocation of taxpayer’s available gst_exemption with respect to taxpayer’s transfer to trust in year the allocation will be effective as of date the date of the transfer to trust and the gift_tax value of the transfer to trust will be used in determining the amount of gst_exemption to be allocated to trust plr-147852-02 the allocation should be made on a supplemental form_709 united_states gift and generation-skipping_transfer_tax return and filed with the internal_revenue_service center cincinnati oh a copy of this letter should be attached to the supplemental form_709 a copy is enclosed for this purpose the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in addition we express or imply no opinion regarding the value of the property transferred to the trust in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter