significant index no tax exempt and department of the treasury internal_revenue_service washington d c mar ter rauk government entities division re dear this letter constitutes notice that waivers of the percent excise_tax due under sec_4971 of the internal_revenue_code code have been granted with respect to the liquidity_shortfall experienced by the plan for the first and fourth quarters of the plan_year ending december ending december a waiver of the percent tax under sec_4971 of the code has been granted with respect to the liquidity_shortfall experienced by the plan for the fourth quarter of the plan_year ending december and for all four quarters of the plan_year and the waivers of the percent tax and the percent tax have been granted in accordance with sec_4971 of the code for any quarter for which a waiver has been granted the amount of the waiver is equal to percent or percent as applicable of the amount of the excess of the liquidity_shortfall of the plan as determined under sec_412 of the code for the quarter over the aggregate amount of any contributions paid in the form of liquid_assets which served to reduce the liquidity_shortfall for the quarter and which were paid to the plan between the last day of the quarter and the due_date of the required_installment under sec_41 m for such quarter the liquidity_shortfall for the plan arose as a result of the inability of the company to satisfy the liquidity requirement of sec_412 of the code for the quarters ending march september and december - december march june the plan is a single employer defined_benefit_plan with a plan_year ending december the company is a communication networking company the company sponsors the plan for the benefit of certain employees of its related company sub a actuary was actuary became the the plan’s enrolled_actuary from _ plan’s enrolled_actuary in and remains in that capacity through the present time through a portion of sub a began experiencing a series of reductions in force asa _and the company has continued to make the necessary beginning in result a number of plan participants terminated employment and their benefits became in many instances the benefits were distributed in the form of single sum distributable payments these single sum payments not only reduced the amount of liquid_assets in the plan but also increased the amount of liquid_assets required to be maintained under sec_412 of the code ultimately the plan experienced liquidity shortfalls as described in the table above there have been no liquidity shortfalls since december contributions to satisfy the liquidity requirements under sec_412 of the code actuary was aware of sub a’s reductions in force and that significant distribution payments were being made from the plan hence actuary should have been aware of the potential for a liquidity_shortfall in the plan however actuary did not make liquidity requirement calculations and never informed the company about any potential for a liquidity_shortfall in the plan information of form_5500 for the plan_year ending december not complete line b concerning the plan's liquidity_shortfall for each quarter of the plan_year as required by the instructions to this form in fact in completing the schedule b actuarial actuary did but did not discover the at which time the shortfalls were brought to actuary became the enrolled_actuary for the plan in liquidity shortfalls in question until late the company's attention since no liquidity shortfalls have arisen since company has not needed to make additional contributions to meet the liquidity requirements of sec_412 of the code shortly after learning of the liquidity shortfalls the company retained legal counsel to prepare and submit this ruling_request the company has continued to make all required quarterly contributions for the and based on the information submitted with the request the liquidity_shortfall arose as a result of significant reductions in force at sub a and the resulting disbursement of benefits from the plan neither actuary nor actuary notified the company about a plan years the potential liquidity_shortfall until actuary brought it to the company's attention in by the time the company was made aware of the liquidity shortfalls in late question there was no longer a liquidity_shortfall in the plan these facts indicate that the liquidity_shortfall was due to reasonable_cause and not willful neglect furthermore by continuing to make the required quarterly contributions to the plan in the company took reasonable steps to remedy the liquidity_shortfall and based on the information above we conclude that the liquidity shortfalls experienced by the plan for the quarters ending march june cause and not willful neglect and that reasonable steps were taken to remedy such liquidity shortfalls were due to reasonable and december september december march this ruling is made with the understanding that all the representations made pursuant to this request are accurate if such representations made pursuant to this request are not accurate the company may not rely upon this ruling letter 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 authorized representative pursuant to a power_of_attorney on file in this office _and to your if you require further assistance in this matter please contact sincerely yours jor ke glo james e holland jr manager employee_plans technical


internal_revenue_service number release date index number --------------------------------------------- ---------------------------------------------- ------------------------------ ------------------------------ ty ------- legend subsidiary subsidiary 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 ita b04 plr-130318-06 date date --------------------------------------------------------------------------- --------------------------------------------------------------------------- ------------------------- ------------------------- -------------------------- ----- -------- --------------- --------- --------- -------------------------------------------- --------- ------- ------------- ------- ---------------------- shareholder corporation s t dollar_figurev w x county y state z year year year date dear ----------------- this responds to your request for a private_letter_ruling dated date specifically you have asked us to rule that a transaction involving the grant of an easement for land use credits using a qualified_intermediary and the subsequent acquisition by the qualified_intermediary of replacement_property using proceeds from the sale of the credits may qualify as an exchange of like-kind_property under sec_1031 of the internal_revenue_code facts a background plr-130318-06 in recent years state z has enacted laws designed to control and regulate its growth its legislature recognized a need for innovative planning and development strategies to address the anticipated demands of continued urbanization of state z's coastal and other environmentally sensitive areas the goal of the legislature was to accommodate less populated regions of the state which seek economic growth and which have suitable land and water resources to accommodate growth in an environmentally acceptable manner the legislature further recognized the substantial advantages of innovative approaches to development which may better protect environmentally sensitive areas maintain the economic viability of agricultural and other predominantly rural land uses and provide for the cost-efficient delivery of public facilities and services one such innovative approach adopted was a program for encouraging the designation by local governments of agricultural lands as rural land stewardship areas a rural land stewardship area includes both a stewardship sending area ssa and a stewardship receiving area sra between which transferable rural land use credits also known as stewardship credits or credits are sent and received under this rural land stewardship area program a local_government in conjunction with a regional planning council a stakeholder organization of private land owners or another local_government must notify state z in writing of its intent to designate a rural land stewardship area the written notification must describe the basis for the designation including the extent to which the rural land stewardship area enhances rural land values controls urban sprawl provides necessary open space for agriculture and protection of the natural environment promotes rural economic activity and maintains the rural character and economic viability of local agriculture under the statute counties designate rural land stewardship areas as overlays on a future land use map a rural land stewardship area cannot be less than big_number acres must be located outside of municipalities and established urban growth boundaries and must be designated by plan amendment hereinafter referred to as a plan a plan designating a rural land stewardship area is subject_to review by the department of community affairs and must provide inter alia criteria for the designation of receiving areas within rural land stewardship areas in which innovative planning and development strategies may be applied the criteria provide at a minimum for the following a the adequacy of suitable land to accommodate development to avoid conflict with environmentally sensitive areas resources and habitats b compatibility between and transition from higher density uses to lower intensity rural uses c the establishment of receiving area service boundaries which provide for a separation between receiving areas and other land uses within the rural land stewardship area through limitations on the extension of services and d connection of receiving areas with the rest of the rural land stewardship area using rural design and rural road corridors a receiving area must be designated by the adoption of a land development regulation plr-130318-06 prior to the designation of a receiving area the local_government must provide the department of community affairs a period of days in which to review a proposed receiving area for consistency with the rural land stewardship area plan and to provide comments to the local_government at the time of designation of a stewardship receiving area a listed species survey must be performed if listed species are present on the receiving area site the developer must coordinate with each appropriate local state or federal_agency to determine if adequate provisions have been made to protect those species in accordance with applicable regulations in determining the adequacy of provisions for the protection of listed species and their habitats the rural land stewardship area is considered as a whole the impact on areas to be developed as receiving areas must be considered together with the environmental benefits of areas protected as sending areas in fulfilling this criterion upon the adoption of a plan creating a rural land stewardship area the local_government must by ordinance establish the methodology for the creation conveyance and use of stewardship credits the application of which shall not constitute a right to develop land nor increase density of use of the land except as provided the total amount of stewardship credits within the rural land stewardship area must enable the realization of the long-term vision and goals respecting land use and community development of the local governments within statutory parameters stewardship credits are also subject_to certain limitations including the following stewardship credits may only exist within a rural land stewardship area stewardship credits may only be used on lands designated as receiving areas and then solely for the purpose of implementing innovative planning and development strategies and creative land use planning techniques adopted by the local_government an increase in the density of use on a parcel of land located within a designated receiving area may occur only through the assignment or use of stewardship credits a change in the density of land use on parcels located within receiving areas must be specified in a development order which reflects the total number of stewardship credits assigned to the parcel of land and the infrastructure and support services necessary to provide for a functional mix of land uses corresponding to the plan of development stewardship credits may be assigned at different ratios of credits per acre according to the natural resource or other beneficial use characteristics of the land and according to the remaining land use following the transfer of credits the highest numbers of credits per acre are assigned to the most environmentally valuable land or to locations where the retention of open space and agricultural land is a priority plr-130318-06 the use or conveyance of stewardship credits must be recorded in the public records of the county in which the property is located as a covenant or restrictive stewardship easement running with the land in favor of the county and either the department of environmental protection the department of agriculture and consumer services a water management district or a recognized statewide land trust b the transaction corporation owns approximately x acres of ranch property located in county y state z since year corporation has engaged in the cattle ranching business on that land shareholder is corporation’s largest shareholder shareholder separately owns about s acres of ranch property located in county y state z which he acquired in year subsidiary a wholly owned subsidiary of corporation separately owns t acres of real_property located in county y state z and has engaged in the business of growing and producing fruit on that property since year corporation shareholder and subsidiary are not in a partnership or joint_venture with each other they have never filed a partnership income_tax return with respect to the ownership of the land that is the subject of this letter although corporation and subsidiary are consolidated taxpayers they operate separate businesses retaining different employees although corporation uses shareholder’s separate_property in its cattle business it pays regular fees for the right to do so the parties do not carry on any joint business activity hereafter corporation shareholder and subsidiary are together referred to as taxpayer and the lands at issue which they separately own are collectively referred to as the ranch on date taxpayer entered into a contract for sale and purchase of stewardship credits and agreement to create rural land stewardship regarding the ranch the contract with buyer an unrelated individual in the land development business pursuant to the contract the parties agreed to create a rural land stewardship overlay on the ranch in accordance with statutes of state z this action would include the elimination by taxpayer of certain land use layers from about w acres of the ranch pursuant to a separate ssa credit agreement credit agreement and granting a perpetual restrictive stewardship easement to county y pursuant to a separate stewardship easement agreement easement agreement these actions which will impair the value of the ranch will amount to a legal inducement of county y to grant stewardship credits credits that reflect the value of the property rights that taxpayer permanently relinquishes buyer will purchase the credits pursuant to the contract for the credit agreement is the document by which county y will agree to issue the credits in exchange for the grant of the perpetual stewardship easement plr-130318-06 the expected sum of dollar_figurev depending on the number of credits generated from taxpayer through a qualified_intermediary qi taxpayer will structure this transaction as a like-kind_exchange using a qi as defined by sec_1_1031_k_-1 of the income_tax regulations taxpayer will comply in all other respects with the requirements of the qi safe_harbor as outlined in sec_1_1031_k_-1 among other things that regulation requires that a taxpayer seeking exchange treatment to enter into an exchange_agreement with a qi pursuant to that agreement the qi acquires the relinquished_property from the taxpayer transfers the relinquished_property acquires the replacement_property and transfers the replacement_property to the taxpayer see sec_1_1031_k_-1 the regulation also requires that the qi enter into an agreement with a person other than the taxpayer for the transfer of the relinquished_property the regulation specifically provides that this requirement may be satisfied if the rights of a party to the agreement in this context taxpayer’s rights in the contract the credit agreement and the easement agreement are assigned to the qi and all parties to these agreements are notified in writing of the assignments on or before the date of the relevant transfer of property see sec_1_1031_k_-1 more particularly taxpayer will assign its rights under the contract to a qi before taxpayer and county y enter into the credit agreement and before taxpayer county y and state z’s department of agriculture and consumer services enter into the easement agreement subsequent to that assignment but prior to the closing the credit agreement and the easement agreement will also be assigned to the qi each of these assignments will be made in the manner consistent with sec_1_1031_k_-1 by assigning its rights to the credits to the qi prior to the awarding of such credits taxpayer will not have actual or constructive receipt of the credits or the relinquished_property proceeds upon closing buyer will pay the relinquished_property proceeds directly to the qi pursuant to these assignments and receive in exchange therefor the stewardship credits these credits will entitle buyer to develop real_property it owns in a manner not permitted in the absence of the credits once buyer pays the qi for the credits the qi will use the money thus derived to acquire other real_estate identified by taxpayer as its replacement_property for purposes of this ruling letter this office presumes that normal allocations apply ie that the portion of the relinquished_property the easement credits allocated to each party constituting taxpayer will reflect each party’s pro-rata share of such amount in other words if x percent of the credits corresponds to land owned by one of the parties then that party will be allocated x percent of the proceeds for the relinquished_property corporation shareholder and subsidiary will each engage a qi separately and undertake its own like- kind exchange transaction in conjunction with the others just as each has submitted its own private_letter_ruling request plr-130318-06 taxpayer and the qi will act in such manner as to insure full and timely compliance with the identification period and replacement_period requirements set forth in sec_1031 and b as well as revproc_2000_37 2000_2_cb_308 as applicable_taxpayer held the relinquished_property and will hold the replacement_property for productive use in a trade_or_business or for investment as required by sec_1031 as noted previously sec_1_1031_k_-1 requires that the qi acquire and transfer the replacement_property to taxpayer for this purpose the qi will be treated as having acquired and transferred the replacement_property if the qi enters into an agreement with the owner of the replacement_property for the transfer of that property and pursuant to that agreement the replacement_property is transferred to taxpayer sec_1_1031_k_-1 provides that a qi will be treated as having entered into an agreement for the acquisition of replacement_property if the rights of a party to the agreement are assigned to the qi and all parties to that agreement are notified in writing of the assignment on or before the date of the transfer of the replacement_property in this case taxpayer will identify one or more replacement properties enter into agreements with the owners of such properties for their acquisition and prior to the closings of such acquisition s assign its rights as purchaser under such agreements to the qi upon the closing of such acquisition s the qi will pay the seller s of the replacement_property out of proceeds from the sale of the relinquished_property and such sellers will convey title to the replacement_property or properties directly to taxpayer law and analysis sec_1031 provides that no gain_or_loss shall be recognized on the exchange of property held for productive use in a trade_or_business or for investment if such property is exchanged solely for property of like_kind which is to be held either for productive use in a trade_or_business or for investment sec_1_1031_a_-1 provides in part that the words like_kind refer to the nature or character of the property and not to its grade or quality one kind or class of property may not be exchanged for property of a different kind or class the fact that any real_estate involved is improved or unimproved is not material for that fact relates only to the grade or quality of the property and not to its kind or class as examples of exchanges of property of like_kind sec_1_1031_a_-1 provides that no gain_or_loss is recognized if a taxpayer exchanges property held for productive use in his trade_or_business together with cash for other_property of like_kind for the same use such as a truck for a new truck or a passenger_automobile for a new passenger_automobile to be used for a like purpose or a taxpayer who is not a dealer in real_estate exchanges city real_estate for a ranch or farm or exchanges a leasehold of a fee with years or more to run for real_estate or exchanges improved real_estate for unimproved_real_estate or a taxpayer exchanges investment_property and cash for investment_property of a like_kind plr-130318-06 a number of revenue rulings three of which are summarized below address the issue of the character of easements as real_property in revrul_55_749 1955_2_cb_295 land was exchanged for perpetual water rights which are considered real_property rights under the applicable state law the ruling holds that the fee interest in the land and a water right in perpetuity are sufficiently similar to constitute property of like_kind for purposes of sec_1031 in revrul_59_121 1959_1_cb_212 the taxpayer granted an easement of indefinite duration over specified portions of its land the grantee of the easement intended to construct a dam and reservoir on the land and to use of portions of the land for the deposit of industrial waste while the taxpayer retained mineral rights and rights to otherwise enjoy the land and any buildings thereon the taxpayer was prohibited from interfering with the easement granted the revenue_ruling provides that since the easement is with respect to land it constitutes an interest_in_real_property and the proceeds derived from the sale of the easement constitute proceeds from the sale of an interest_in_real_property finally revrul_72_549 1972_2_cb_472 provides that an easement and right-of-way granted to an electric power company are properties of like_kind to both real_property with nominal improvements and real_property improved with an apartment building with respect to taxpayer’s ruling_request the stewardship easement will be in perpetuity and arises out of taxpayer’s interest in the underlying land such easements are also interests_in_real_property under the laws of state z in effect taxpayer will exchange a perpetual stewardship easement for a fee simple interest in like-kind_property in a deferred_exchange using the safe_harbor provided under sec_1 k - g the steps in the transaction to the extent outlined above conform to the rules of that safe_harbor therefore we rule as follows a perpetual stewardship easement of the type described in the facts presented is of like_kind to a fee interest in other real_property and the use of the proceeds from the relinquished perpetual stewardship easement ie the cash proceeds derived from the credits which are issued to buyer through the qi by assignments in connection with taxpayer’s grant of such easement to purchase one or on the other hand where a right or interest arising out of real_estate is for a term of something less than in perpetuity or for less than thirty years in the case of a long-term land lease and where the interest is defined in terms of a specific sum of money such an interest is not deemed of like_kind to a fee interest_in_real_property see 356_us_260 rev’g wm 241_f2d_78 5th cir holding that assignments of oil payments are not of like_kind to a ranch but were akin to payments against the principle owed on an installment_obligation for real_estate with interest plr-130318-06 more fee interests_in_real_property to be held by taxpayer for productive use in a trade_or_business or for investment will not disqualify the transaction from tax deferred_exchange treatment under sec_1031 caveat s 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 specifically we express no opinion whether the proposed transaction qualifies in all other respects for tax_deferral under sec_1031 beyond what is expressly stated in the above ruling this ruling is directed only to the taxpayer requesting it sec_6110 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 we enclose a copy of the letter for this purpose also enclosed is a copy of the letter showing the deletions proposed to be made when it is disclosed under sec_6110 sincerely michael j montemurro chief branch income_tax accounting


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 plr-125542-08 date date legend legend x --------------------------------------------------- ------------------------ date ---------------------- trust ------------------------------------------ --------------------------------------------------- dear ------------ this responds to a letter dated date submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the code x made an election to be treated as an s_corporation x’s election was inadvertently terminated effective date because x’s stock was held by trust and the trustee of trust failed to make a valid electing_small_business_trust esbt election trust is represented as being eligible to be an esbt effective date also x represents that the termination was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to plr-125542-08 acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x’s s_corporation_election on date was inadvertent within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter provided x’s s_corporation_election was valid and provided that the election was not otherwise terminated under sec_1362 trust will be treated as an esbt from date provided that trust is otherwise eligible to be an esbt until its esbt status terminates this ruling is conditioned upon the trustee of trust filing a properly completed esbt election effective date with the appropriate service_center within days following the date of this letter and upon trust filing any initial or amended returns that are necessary to comply with this ruling within days following the date of this letter a copy of this letter should be attached to the esbt election and any relevant initial or amended_return if trust does not comply with these conditions this letter is null and void except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representative sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court joy webb petitioner v commissioner of internal revenue respondent docket no filed date joy webb pro_se courtney s bacon for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax tax for her taxable_year the issues for decision for petitioner’s taxable_year are does petitioner have gross_receipts and net profit of dollar_figure from a trade_or_business we hold that she does not is petitioner entitled to a dependency_exemption deduc- tion under sec_151 a for each of her two grandchildren nina moore and kyle moore we hold that she is not is petitioner entitled to head_of_household filing_status under sec_2 we hold that she is not is petitioner entitled to the earned_income_tax_credit under sec_32 we hold that she is not findings_of_fact some of the facts have been stipulated and are so found at the time petitioner filed the petition she resided in union city georgia union city which is in fulton county georgia fulton county 1certain other issues arise from certain other determina- tions of respondent in the notice_of_deficiency issued to peti- tioner for her taxable_year resolution of those issues flows automatically from our resolution of certain issues ad- dressed herein 2all section references are to the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure 3we take judicial_notice that union city is in fulton county petitioner is the maternal grandmother of nina moore who was born on date and kyle moore who was born on date petitioner’s daughter deana moore ms moore is the mother of nina moore and kyle moore at all relevant times ms moore resided pincite rivers road fayetteville georgia fayetteville which is in fayette county georgia fayette county during nina moore was enrolled at valdosta state university where she started matriculating in the fall of a transcript with respect to nina moore that valdosta university issued on date showed her address a sec_460 rivers road fayetteville which was the residence of her mother ms moore during kyle moore was enrolled as a senior at sandy creek high school in fayette county where he started matriculat- ing in the fall of a transcript with respect to kyle moore that sandy creek high school issued on date did not show his address at no relevant time did petitioner maintain a checking account or document any money that she may have received or expended on dates not disclosed by the record petitioner provided certain babysitting services for certain children of two individ- 4we take judicial_notice that fayetteville is in fayette county uals which at times included providing food in exchange for those babysitting services petitioner received certain house- keeping services from one of those individuals and a small amount of cash from the other at no time did petitioner include the value of those housekeeping services or that small amount of cash in income in a tax_return that she filed petitioner filed form_1040 u s individual_income_tax_return for her taxable_year return in that return petitioner reported taxable interest of dollar_figure and taxable pensions and annuities of dollar_figure in schedule c-ez net profit from business schedule c that petitioner included with her return petitioner described her claimed business as childcare and claimed gross_receipts of dollar_figure no expenses and net profit of dollar_figure in her return petitioner also claimed dependency_exemption deductions for her grandchildren nina moore and kyle moore head_of_household filing_status and the earned_income_tax_credit with respect to those grandchil- dren in schedule eic earned_income_credit that petitioner included with her return petitioner claimed that during both nina moore and kyle moore lived with her for months however petitioner indicated inconsistently on page of her return on which she showed nina moore and kyle moore on line 6c as her dependents that during neither of those grandchildren lived with her respondent issued to petitioner a notice_of_deficiency notice for her taxable_year in that notice respondent inter alia determined that petitioner has no schedule c gross_receipts or net profit respondent also determined in the notice that petitioner is not entitled to dependency_exemption deductions for nina moore and kyle moore head_of_household filing_status and the earned_income_tax_credit opinion petitioner has the burden of establishing that the determi- nations in the notice are wrong see rule a 290_us_111 in support of her position with respect to each of the issues presented in this case petitioner relies primarily on her own testimony and on the testimony of her daughter ms moore we found the testimony of petitioner to be in certain material respects conclusory general vague uncorroborated and self- serving we found the testimony of ms moore to be in certain material respects conclusory vague uncorroborated and serving the interests of petitioner her mother we are not required to and we shall not rely on the respective testimonies of peti- tioner and her daughter ms moore in order to establish peti- tioner’s position with respect to each of the issues presented see eg 87_tc_74 schedule c gross_receipts and net profit petitioner claims that during ms moore her daughter paid her dollar_figure a week to watch certain of ms moore’s children the only evidence that petitioner presented in support of that claim is the respective testimonies of herself and ms moore on which we are unwilling to rely and a letter written by ms moore that stated this is a letter stating that i pay dollar_figure a week to joy webb petitioner to watch my children she has been watch- ing them for years on the record before us we reject petitioner’s claim that during ms moore paid her dollar_figure a week to watch certain of ms moore’s children even if we accepted that claim petitioner has failed to carry her burden of establishing that for her taxable_year she was in the trade_or_business of watching certain of ms moore’s children babysitting any other children or performing any other child care activities based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- 5we do not know what petitioner and ms moore intended when they used the word watch although ms moore claimed during her testimony that she paid petitioner dollar_figure a week to babysit two of her children petitioner claims on brief that her daughter ms moore paid her dollar_figure a week to to do various things such as baby-sit clean house run errands and cook lishing that for her taxable_year she has schedule c gross_receipts and net profit of dollar_figure dependency_exemption deductions sec_151 provides that the exemptions provided by this section shall be allowed as deductions to a taxpayer sec_151 provides an exemption for each dependent of the taxpayer as defined in sec_152 sec_152 defines the term dependent to mean either a qualifying_child or a qualifying_relative sec_152 defines the term qualifying_child as follows sec_152 dependent defined c qualifying_child --for purposes of this section-- in general --the term qualifying_child means with respect to any taxpayer for any tax- able year an individual-- a who bears a relationship to the taxpayer described in paragraph b who has the same principal_place_of_abode as the taxpayer for more than one-half of such taxable_year c who meets the age requirements of paragraph and d who has not provided over one-half of such individual’s own support for the calendar_year in which the taxable_year of the taxpayer begins as pertinent here for purposes of sec_152 an individual bears a relationship to the taxpayer if that individ- ual is a grandchild of the taxpayer see sec_152 as pertinent here for purposes of sec_152 an individ- ual meets the age requirements if that individual is under age as of the close of the calendar_year in which the tax- payer’s taxable_year begins see sec_152 or a student as defined in sec_152 who is not years old as of the close of that calendar_year see sec_152 sec_152 defines the term qualifying_relative as follows sec_152 dependent defined d qualifying_relative --for purposes of this section-- in general --the term qualifying rela- tive means with respect to any taxpayer for any taxable_year an individual-- a who bears a relationship to the taxpayer described in paragraph b whose gross_income for the calendar_year in which such taxable_year begins is less than the exemption_amount as defined in sec_151 c with respect to whom the taxpayer provides over one-half of the individual’s support for the calendar_year in which such taxable_year begins and d who is not a qualifying_child of such taxpayer or of any other taxpayer for any taxable_year beginning in the calendar_year in which such taxable_year begins as pertinent here for purposes of sec_152 an individual bears a relationship to the taxpayer if that individ- ual is a grandchild of the taxpayer see sec_152 or is an individual who for the taxable_year of the taxpayer has the same principal_place_of_abode as the taxpayer and is a member of the taxpayer’s household see sec_152 the disputes between the parties as to whether petitioner is entitled to a dependency_exemption deduction for each of her grandchildren nina moore and kyle moore for petitioner’s taxable_year include the following did nina moore and kyle moore each have the same princi- pal place of abode as petitioner for more than one-half of petitioner’s taxable_year as required for each of them to satisfy the definition of a dependent in sec_152 as a qualifying_child under sec_152 see sec_152 did petitioner provide for more than one-half of the total support of each of her grandchildren nina moore and kyle moore as required for each of them to satisfy the defini- tion of a dependent in sec_152 as a qualifying_relative under sec_152 see sec_152 we turn to the first question set forth above we find no reliable evidence in the record that nina moore or kyle moore resided with petitioner during any portion of on the record before us we find that petitioner has failed to carry her burden of establishing that she and nina moore and she and kyle moore had the same principal_place_of_abode at any time during that year let alone for more than one-half of that year see sec_152 on that record we find that petitioner has failed to carry her burden of establishing that for her taxable_year each of her grandchildren nina moore and kyle moore is her qualifying_child as defined in sec_152 and that therefore each of them is her dependent as defined in sec_152 we turn now to the second question stated above namely whether petitioner provided for more than one-half of the total support of each of her grandchildren nina moore and kyle moore in order to prove that she did petitioner must establish the total amount of support from all sources provided during to each of those grandchildren and that petitioner provided during that year over one-half of that total amount for each grandchild see 73_tc_963 56_tc_512 sec_1_152-1 income_tax regs the term support includes food shelter clothing medical and dental care education and the like sec_1_152-1 income_tax regs the total amount of support for each claimed dependent provided by all sources during the year in question must be shown by competent evidence blanco v commissioner supra pincite where the total amount of support provided to a child during the year in question is not shown and may not reasonably be inferred from competent evidence it is not possi- ble to find that the taxpayer contributed more than one-half of that child’s total support id pincite 31_tc_1252 we find no reliable evidence in the record establishing the total amount of any support that petitioner provided during to each of her grandchildren nina moore and kyle moore and the total amount of support from all sources provided during that year to each of them nor did petitioner proffer any evidence from which the court might infer the total amount of support from all sources provided during to each of her grandchildren nina moore and kyle moore on the record before us we find that petitioner has failed to carry her burden of establishing that for she provided more than one-half of the total support of nina moore and one-half of the total support of kyle moore on that record we further find that petitioner has failed to carry her burden of establishing that for her taxable_year each of her grandchildren nina moore and kyle moore is her qualifying_relative as defined in sec_152 see sec_152 and that therefore each of them is her dependent as defined in sec_152 based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- lishing that she is entitled for her taxable_year to depend- ency exemption deductions under sec_151 for her grandchil- dren nina moore and kyle moore head_of_household filing_status sec_1 provides a special tax_rate for an individual who qualifies as a head_of_household as pertinent here sec_2 provides that an unmarried individual shall be consid- ered a head of a household if that individual maintains as his home a household which constitutes for more than one-half of such taxable_year the principal_place_of_abode of a qualifying_child of the individual as defined in sec_152 sec_2 or any other person who is a dependent of the taxpayer if the taxpayer is entitled to a deduction for the taxable_year for such person under sec_151 sec_2 we have found that petitioner has failed to carry her burden of establishing that she and nina moore and she and kyle moore had the same principal_place_of_abode at any time during let alone for more than one-half of that year we have also found that petitioner has failed to carry her burden of estab- sec_2 contains two limitations that deny head_of_household filing_status where the taxpayer has a qualifying_child neither of those limitations is applicable in this case lishing that for her taxable_year each of her grand- children nina moore and kyle moore is her qualifying_child as defined in sec_152 or her qualifying_relative as defined in sec_151 and she is entitled to a dependency_exemption deduction for each of them based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- lishing that she is entitled for her taxable_year to head_of_household filing_status under sec_2 earned_income_tax_credit sec_32 permits an eligible_individual as a credit against tax for the taxable_year an amount equal to the credit percentage of so much of the taxpayer’s earned_income for the year as does not exceed the earned_income amount we turn first to whether for her taxable_year peti- tioner is an eligible_individual for purposes of the earned_income_tax_credit provided in sec_32 as pertinent here sec_32 defines the term eligible individ- ual to mean any individual who has a qualifying_child for the taxable_year sec_32 as pertinent here sec_32 defines the term qualifying_child to mean a 7the amount of the credit is determined according to percentages that vary depending on whether the taxpayer has one qualifying_child two or more qualifying children or no qualifying children sec_32 the credit is also subject_to a limitation based on adjusted_gross_income sec_32 qualifying_child of the taxpayer as defined in sec_152 we have found that petitioner has failed to carry her burden of establishing that for her taxable_year each of her grandchildren nina moore and kyle moore is a qualifying_child as defined in sec_152 on the record before us we find that petitioner has failed to carry her burden of establishing that for her taxable_year each of them is a qualifying_child as defined in sec_32 on that record we further find that petitioner has failed to carry her burden of establishing that for her taxable_year she is an eligible_individual as defined in sec_32 we turn now to whether for her taxable_year petitioner has earned_income for purposes of the earned_income_tax_credit provided by sec_32 as pertinent here sec_32 defines the term earned_income as follows earned_income -- a the term earned_income means-- i wages salaries tips and other employee compensation but only if such amounts are includ- 8petitioner does not claim that she is an eligible individ- ual as defined in sec_32 even if she made that claim the record is devoid of evidence establishing peti- tioner’s age before the end of as a result petitioner has failed to carry her burden of establishing that she satisfies the age requirements of sec_32 which she must satisfy among other requirements in order to qualify as an eligible_individual as defined in sec_32 ible in gross_income for the taxable_year plus ii the amount of the taxpayer’s net earn- ings from self-employment for the taxable_year within the meaning of sec_1402 but such net_earnings shall be determined with regard to the deduction allowed to the taxpayer by sec_164 sec_32 provides that for purposes of sec_32 the term earned_income does not include amounts received as a pension or an annuity we have found that petitioner has failed to carry her burden of establishing that for her taxable_year she has schedule c gross_receipts and net profit of dollar_figure the only other income that petitioner reported in her return was taxable interest of dollar_figure and taxable pensions and annuities of dollar_figure on the record before us we find that petitioner has failed to carry her burden of establishing that for her taxable_year she has earned_income as defined in sec_32 based upon our examination of the entire record before us we find that petitioner has failed to carry her burden of estab- lishing that she is entitled for her taxable_year to the earned_income_tax_credit under sec_32 we have considered all of petitioner’s contentions and arguments that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing decision will be entered for respondent


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 2-plr-108143-03 date date a b p1 p2 p3 p4 p5 p6 dear this responds to a letter dated date and subsequent correspondence submitted on behalf of p3 requesting rulings concerning the federal_income_tax consequences of the transactions described below facts plr-108143-03 according to the information submitted for various business reasons six partnerships p1 p2 p3 p4 p5 and p6 will consolidate into a single limited_liability_company that will be treated as partnership for federal_income_tax purposes by undertaking the following transactions first p1 p2 p3 p4 p5 and p6 will each contribute all of their assets and liabilities to a newly formed limited_liability_company llc in exchange for an interest in llc each partnership will receive a capital interest in llc equal to the fair_market_value net of liabilities of the property contributed by that partnership following its contribution of assets and liabilities to llc each partnership will liquidate and distribute its membership interests in llc to its partners each of the partnerships holds commercial real_estate p1 p3 p4 and p5 hold depreciable assets with a remaining basis the assets of p1 and p6 have been fully depreciated and have an adjusted_basis of zero the assets of each partnership include certain depreciable_property that was placed_in_service before a b and related_persons own of the six partnerships a and b directly own more than of p1 p2 p3 p4 and p5 a and b represent that p3 will contribute the assets having the greatest fair_market_value net of liabilities to llc law and analysis sec_708 of the internal_revenue_code provides that in the case of a merger or consolidation of two or more partnerships the resulting_partnership shall for purposes of sec_708 be considered the continuation of any merging or consolidating partnership whose members own an interest of more than percent in the capital and profits of the resulting_partnership under sec_1_708-1 if the resulting_partnership can be considered a continuation of more than one of the merging or consolidating partnerships it shall unless the commissioner permits otherwise be considered the continuation solely of that partnership which is credited with the contribution of assets having the greatest fair_market_value net of liabilities to the resulting_partnership any other merging or consolidating partnerships shall be considered as terminated sec_1_708-1 provides that when two or more partnerships merge or consolidate into one partnership under the applicable jurisdictional law without undertaking a form for the merger or consolidation or undertake a form that is not described in sec_1_708-1 any merged or consolidated partnership that is considered terminated under sec_1_708-1 is treated as undertaking the assets-over form for federal_income_tax purposes under the assets-over form each merged or consolidated partnership that is considered terminated under sec_1_708-1 contributes all of its assets and liabilities to the resulting_partnership in exchange for an interest in the resulting_partnership and immediately thereafter the terminated partnership distributes interests in the resulting_partnership to its partners in liquidation of the terminated partnership because the members of more than one of the partnerships including p3 will own an interest of more than percent in the capital and profits of llc and because p3 is credited with the contribution of assets to llc having the greatest fair_market_value net of liabilities llc will be considered the continuation of p3 accordingly the plr-108143-03 transfer of assets from p3 to llc will be disregarded and llc will be treated as the historic owner of those assets p1 p2 p4 p5 and p6 will be considered as having contributed all of their assets and liabilities to llc in exchange for an interest in llc thereafter p1 p2 p4 p5 and p6 will be considered terminated and the partners in p1 p2 p4 p5 and p6 will be considered to have received interests in llc in liquidation of these partnerships generally sec_168 applies to depreciable tangible_property placed_in_service after date sec_168 provides that sec_168 does not apply to property described in sec_168 as in effect before the amendments made by the tax_reform_act_of_1986 sec_168 provides that in the case of any property to which sec_168 would apply but for sec_168 the depreciation deduction under sec_167 is determined by the provisions of sec_168 as in effect before the amendments made by of the tax_reform_act_of_1986 sec_168 prior to the amendments made by the tax_reform_act_of_1986 provided in part that the term recovery_property does not include property placed_in_service by the transferor or distributor before date that is acquired by the taxpayer after date in a transaction described in sec_721 among other code sections to the extent that the basis of the property is determined by reference to the basis of the property in the hands of the transferor or distributor in the case of property to which sec_168 applies rules similar to the rules described in sec_381 shall apply sec_381 provides that the acquiring_corporation is treated as the distributor or transferor_corporation for purposes of computing the depreciation allowance under sec_167 and sec_168 on property acquired in a distribution or transfer with respect to so much of the basis in the hands of the acquiring_corporation as does not exceed the adjusted_basis in the hands of the distributor or transferor_corporation sec_721 provides that no gain_or_loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership sec_723 provides that the basis_of_property contributed to a partnership by a partner shall be the adjusted_basis of such property to the contributing_partner at the time of the contribution increased by the amount if any of gain recognized under sec_721 conclusions because llc is considered to be the continuation of p3 under sec_1_708-1 the depreciation methods and useful lives of the property that was placed_in_service plr-108143-03 before date by p3 and that will be transferred to llc by p3 will be unaffected by the consolidation under sec_723 llc will take a carryover_basis in the properties contributed to llc from p1 p2 p4 p5 and p6 therefore the properties that were placed_in_service by these partnerships before date and that will be transferred to llc by these partnerships will be properties described in former sec_168 under sec_168 the provisions of former sec_168 will apply accordingly the depreciation deduction under sec_167 applicable to the properties transferred to llc by p2 p4 and p5 will be determined in accordance with the rules of sec_381 consequently the depreciation methods and useful lives of the property that was placed_in_service before date by these partnerships will be unaffected by the consolidation except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code this ruling letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to p3 sincerely yours matthew lay senior technician reviewer branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b01 plr-125491-00 date date legend x country d1 d2 correspondence submitted on behalf of x requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be disregarded as an entity separate from its owner for federal tax purposes this responds to the letter dated date and subsequent facts according to the information submitted x was formed under country law on d1 for federal tax purposes x has a single owner that has limited_liability as defined in sec_301_7701-3 x intended to file an election to be classified as a disregarded_entity effective d1 however x inadvertently failed to timely file the election it is represented that x had no items of income gain loss deduction or credit that would have been reflected on a corporate return 1120f for the d2 taxable_year law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in this section sec_301_7701-3 further provides that an eligible_entity with a single owner can elect to be disregarded as an entity separate from its owner sec_301_7701-3 provides default classifications for eligible entities that do not file an election to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center sec_301_7701-3 an election can be effective on the date specified on the form_8832 or on the date filed if no such date is specified the cc psi b01 plr-125491-00 effective date specified on the form_8832 cannot be more than days prior to the date the election is filed sec_301_7701-3 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_9100-3 to make a regulatory election sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-3 as a result x is granted an extension of time to elect to be disregarded as an entity separate from its owner for federal tax purposes effective d1 x has days from the date of this letter to file form_8832 with the designated service_center except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code the ruling contained in this letter is predicated upon the facts and representations submitted by taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the ruling_request verification of the information representations and other data may be required as part of the audit process this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this ruling is being sent to taxpayer’s authorized representative s paul f kugler sincerely associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jul uniform issue list tt ep r a t legend taxpayer a ira account b account c amount d financial_institution l financial_institution m financial advisor n dear in a letter dated date as supplemented by correspondence dated date you requested a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations were submitted under penalty of perjury in support of your request for a waiver taxpayer a age represents that he withdrew all of the assets equal to amount d from ira account b an individual_retirement_account within the meaning of sec_408 of the code which was maintained with financial_institution l taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to his communications with financial advisor n which led him to believe that the only restriction on redepositing amount d in ira account b was a 30-day hold on reopening ira account b on date taxpayer a withdrew all of the assets from his ira account b equal to amount d because he was concerned about the global economy the transaction confirmation for the distribution of ira account b notified the account_holder of a 30-day waiting_period for reinvesting amounts equal to dollar_figure or more in the same ira fund taxpayer a states that at the time he withdrew amount d financial advisor n an agent of financial_institution l told him he could not reopen the ira within days which led taxpayer a to believe that he could re-establish his ira any time after days on date taxpayer a deposited amount d into a non-ira money market account account c with his federal credit_union financial_institution m on date approximately three weeks after the expiration of the day rollover period taxpayer a learned from another agent of financial_institution l that to continue his retirement savings in an ira the law requires a taxpayer to contribute a distribution from an ira back into another ira within days having passed the 60-day period taxpayer a immediately wrote to the internal_revenue_service the service requesting a waiver of the 60-day requirement taxpayer a submitted documentation that amount d has been maintained in account c at all times and has not been used by taxpayer a for any other purpose based on the above facts and representations you request that the service waive the 60-day rollover requirement with respect to the rollover of the amount d distribution from ira account b 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 the entire amount received including money or any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into ii the entire amount received including money and any other_property is such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408i received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary_of_the_treasury may waive the 60-day requirement under sec_408 and d of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 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 taxpayer a asserts that the only reason he withdrew amount d was because he was concemed about the global economy taxpayer a represents that he always intended to put amount d back into an ira once the crisis was over taxpayer a states that his communications with financial advisor n led him to believe that in ira account b was a 30-day the only restriction on re-depositing amount d waiting_period that had to transpire before ira account b could be re- established revproc_2003_16 provides that in determining whether the failure to grant a waiver would be against equity or good conscience the service will consider the surrounding facts and circumstances including financial_institution error the time elapsed since the distribution and the use of the amount distributed each of these factors favors granting taxpayer a’s request for a waiver taxpayer a has not used any portion of his life retirement savings amount d which was immediately deposited into account c where it has been maintained in its entirety since the date of the distribution taxpayer a clearly intended to continue his ira savings and was provided advice by financial advisor n regarding the timing for reopening his ira but which did not include any mention of the 60-day rollover requirement three weeks after the expiration of the 60-day rollover period when taxpayer a leamed of the 60-day requirement from another agent of financial_institution l he immediately prepared his request for a waiver the information and documentation submitted by taxpayer a his assertion that his failure to accomplish a timely rollover of amount d was due to his communications with financial advisor n which reasonably led him to believe that the only restriction on redepositing amount d in ira account b was a 30-day hold on reopening ira account b is consistent with therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute not more than amount d into a rollover ira provided all other requirements of sec_408 except the 60-day rollover requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 please note that pursuant to sec_408 of the code this ruling does not authorize the rollover of sec_401 minimum required distributions 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 that may be applicable hereto this letter_ruling is directed solely to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions regarding this ruling you may contact sincerely yours only a wethins carlton a watkins manager employee_plans technical group enclosures notice of intention to disclose deleted copy of this letter


t c memo united_states tax_court estate of kenneth f schoeneman deceased joann metz and james j riley executors petitioners v commissioner of internal revenue respondent docket no filed date sudhir r patel for petitioners james fee and michael d baker for respondent memorandum findings_of_fact and opinion foley judge by notice dated date respondent determined deficiencies of dollar_figure dollar_figure and dollar_figure and sec_6662 penalties of dollar_figure dollar_figure and dollar_figure relating to kenneth schoeneman’s and federal income taxes respectively all section references are to the internal_revenue_code in effect for the years in issue the executors of - - kenneth’s estate resided and had a business address in pennsylvania when the petition was filed the issue for decision is whether kenneth was entitled pursuant to sec_104 to exclude from income payments received in settlement of a dispute findings_of_fact kenneth and his father built a large beauty salon enterprise e beauty salons schools and supply businesses comprising three companies kenneth who had a reputation for being impeccably dressed became an owner and pilot of airplanes district governor of the rotary club and a prominent and proud businessman in pottsville pennsylvania in kenneth suffered a debilitating stroke that left him partially paralyzed kenneth never fully recovered from the stroke and remained in poor health until his death after his stroke kenneth’s businesses began to decline at the request of his sons franklin and dale kenneth in redeemed his shares of stock in two of his companies in exchange for annuities and in transferred the annuities stock in his other company and other_property to two irrevocable trusts for the benefit of himself and his wife respectively designating as trustees his sons and pennsylvania national bank and trust co bank franklin and dale took over the businesses after the transfer of the businesses kenneth’s home fell into disrepair he had trouble paying for his custom-tailored clothing and he regularly ate ina soup kitchen when kenneth discussed his sons he became so ill that his personal assistant would have to administer heart medication during and after kenneth demanded additional distributions from the trustees and sought to regain control of his businesses in date he retained attorney james riley who filed an action against dale franklin and the bank on date in the pennsylvania court of common pleas on date riley refiled the action in the orphans’ court pursuant to an order of the court of common pleas stating that exclusive jurisdiction over inter_vivos trusts and the removal of fiduciaries of trusts is vested in the orphans court division riley prepared but did not file a racketeer influenced and corrupt organizations act rico complaint against the sons and the bank both riley and the sons’ lawyer believed that kenneth probably would not recover damages relating to the orphans’ court and rico complaints nevertheless after the suit was filed and throughout the course of the litigation riley contended that kenneth’s sons’ actions were responsible for kenneth’s emotional distress and tarnished reputation on date kenneth entered into a settlement agreement and release settlement with his sons pursuant to q4e- which they agreed to pay from their personal funds to their father dollar_figure per year the settlement in pertinent part provided ken schoeneman’s injuries and demands ken schoeneman believes and has alleged in language required to bring the matter before the orphan’s court that dale schoeneman and frank schoeneman injured him both physically because of the mental distress visited upon him by virtue of the inadequate funding of the trusts for which a specific claim is barred by the statute_of_limitations and in his personal reputation in the community by depriving him of funds which would have allowed him to live comfortably and maintain his place in the community and his status therein degrading his position and his health over a period of time xk kek tax consequences a it is the intention of the parties to this agreement that all payments to ken schoeneman pursuant to paragraph hereof be considered compensation_for the personal injuries specified in paragraph and be excluded from ken schoeneman’s gross_income for purposes of federal income_taxation pursuant to sec_104 as amended or any successor thereto ob it is the intention of the parties to this agreement that all payments to ken schoeneman pursuant to paragraph hereof be considered ordinary and necessary expenses of dale schoeneman and frank schoeneman paid for the conservation maintenance preservation and protection of property_held_for_the_production_of_income and be subject_to deduction by dale schoeneman and frank schoeneman for purposes of federal income_taxation pursuant to sec_162 and or sec_212 as amended and any successor thereto c notwithstanding the statement of intent specified in subparagraphs a and b above the parties hereto agree the payments to be made to ken schoeneman pursuant to paragraph shall not be altered in timing or amount if the intended tax effects are not realized by ken schoeneman and or dale schoeneman and frank schoeneman - - kenneth did not report the payments on his returns he died on date a resident of pennsylvania opinion sec_104 provides that gross_income does not include the amount of any damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal injuries or sickness thus a taxpayer may exclude a recovery from gross_income when he can show that the underlying cause of action giving rise to the recovery is ‘based upon tort or tort type rights’ and the damages were received ‘on account of personal injuries or sickness ’ 515_us_323 quoting 504_us_229 the estate contends that the settlement payments were damages received on account of personal injuries and thus are excludable pursuant to sec_104 respondent contends that the dollar_figure payments are not excludable because they were received on account of economic rather than personal injuries respondent further contends that no personal injury was alleged in a complaint by kenneth in support of his contentions respondent asserts that the orphans’ court did not have jurisdiction over tort damages and that kenneth could not have recovered personal injury damages had he actually filed a rico complaint we reject respondent’s contentions our focus is -- - not on the jurisdiction of the orphans’ court or the unavailability of personal injury damages pursuant to rico because the determination of whether a settlement payment is exempt from taxation depends on the nature of the claim settled and not on the nature of the claim filed see 58_tc_32 the settlement’s terms which are inconsistent do not determine whether the payments are excludable see robinson v commissioner t cc stating that this court will not blindly accept the terms contained in a settlement agreement especially when those terms are tax-motivated affd in part revd in part and remanded on other grounds 70_f3d_34 5th cir the testimony of the witnesses however leads us to conclude that the claims settled were in the nature of personal injury ie stress infliction of emotional distress and damage to health and based upon tort or tort type rights none of the parties believed that kenneth would recover damages relating to the orphans’ court and rico claims the personal injury claim however while not filed was viable the sons paid the settlement on account of this claim the facts of this case are consistent with those of seay where we held that damages were excludable although the claim was not prepared or filed when the taxpayer’s attorney believed his client had a personal injury claim the payer’s attorney knew of the claim - the claim was part of the negotiation and an agreement allocated proceeds to such claim riley believed that kenneth had suffered personal injury franklin and the sons’ lawyer testified that they knew of the personal injury claims and that those claims were discussed during the course of the litigation and the settlement indicates that those claims were part of the negotiation cf commissioner v schleier supra finding that the taxpayer asserted and the parties negotiated an age discrimination in employment but not a personal injury claim united_states v burke supra finding that the taxpayer asserted and the parties negotiated a sex discrimination in employment but not a personal injury claim accordingly the payments were received on account of personal injuries and are excludable pursuant to sec_104 consequently sec_6662 1s not applicable contentions not addressed are moot irrelevant or without merit to reflect the foregoing decision will be entered for petitioners


tax exempt and government entities wwigion number release date date uil code department of the treasury internal_revenue_service washington d c contact person identification_number ‘telephone number employer_identification_number dear this is in reply to your ruling_request under sec_513 of the internal_revenue_code facts you have been recognized as exempt from federal_income_tax under sec_501 a of the internal_revenue_code as an organization described in sec_501 and as a public charity described in sec_509 you contract with commercial employers and state and local_government employers employer groups to provide comprehensive coordinated health care services for enrollees in a variety of prepaid healthcare plans operating in a number of states through a network of subordinate tax-exempt organizations including several regional health_plans and non-exempt organizations one of your subordinates is m a for-profit corporation that is licensed as an insurer in a number of states you own percent of m's preferred_stock and percent of m's voting common_stock your affiliated medical groups own the other percent of m's voting common_stock you plan to establish an administrative services only program aso program primarily for large sek-insured employers aso purchasers under the aso program aso purchasers will contract with m to receive certain administrative services including claims adjudication utilization management disease management quality assurance eligibility and enrollment and access to your integrated healthcare delivery system including physicians hospitals and other healthcare providers for covered employees collectively aso services’ m will provide certain aso services by subcontracting with you and with your subordinate regional health_plans you will receive compensation from m on a capitated or other fair_market_value basis for providing these services you represent that the amount of this compensation will be fair and reasonable in relation to the value of the services you will provide you also represent that you similarly under the aso program through will spend only a very small percentage of your time on the provision of aso services to aso purchasers as part of your arrangements with employer groups you provide various administrative services not as separately identifiable services but as necessary and integral parts of your overall arrangements with your employer groups m you will provide to aso purchasers as aso services the same types of administrative services under the aso program m will not provide aso services to any aso purchasers that do not also include access to your integrated healthcare delivery system by their covered employees the healthcare providers to which aso purchasers’ employees will have access generally wil be the same as the healthcare providers to which your employer groups’ enrollees have access under your arrangements with employer groups in order to ensure access to emergency services and to infrequently required specialty services employer groups’ enrollees occasionally receive health care services from healthcare providers who are outside your integrated healthcare delivery system but only on an episadic basis and in limited circumstances under the aso program m will have the same arrangement with aso purchasers with respect to their covered employees therefore under the aso program through m you will provide to aso purchasers as aso services the same types of related administrative services that you provide as part of your arrangements with employer groups ruling requested providing aso services in the manner described will not constitute an unrelated trace or business within the meaning of sec_513 of the code law sec_501 of the code states that an organization described in sec_501 is exempt from income_taxation sec_501 of the code describes organizations organized and operated exclusively for charitable and other purposes sec_513 of the code states that the term unrelated_trade_or_business means any trade_or_business the canduct of which is nat substantially related to the exercise or performance by such organization of its tax-exempt purpose sec_1_513-1 of the regulations states that gross_income derives from an unrelated_trade_or_business within the meaning of sec_513 of the code if the conduct of the trade_or_business which produces the income is not substantially related to the purposes for which exemption is granted sec_1_513-1 of the regulations states that a trade_or_business carried on by an organization is related to its tax-exempt purpose if the conduct of the business activities has a causal relationship to the achievement of the organization's tax-exempt purpose it is substantially related if the causal relationship is a substantial one thus the activity must contribute importantly to the accomplishment of the organization's tax-exempt purpose ‘whether an activity contributes importantly to the accomplishment of the organization’s tax- exempt_purpose depends in each case upon the facts and circumstances involved sec_1_513-1 d of the regulations states that in determining whether activities contribute importantly to the accomplishment of an exempt_purpose the size and extent of the activities involved must be considered in relation to the nature and extent of the exempt_function which they purport to serve analysis under the aso program through m you will provide to aso purchasers as aso services the same administrative services that you provide as part of your arrangements with employer groups these administrative services are provided as necessary and integral parts of your overall arrangements with your employer groups thus your provision of aso services to aso purchasers through m will be necessary and integral parts of you providing comprehensive coordinated health care services for enrollees in a variety of prepaid healthcare plans whether or not these administrative services are separately identifiable in addition the size and extent of your aso services will not be disproportionately large in relation to the nature and extent of your tax-exempt purpose see sec_1_513-1 of the regulations therefore your provision of aso services will contribute importantly to the accomplishment of your tax-exempt purpose as a achievement of your tax-exempt purpose under sec_1_513-1 of the regulations consequently your provision of these services will be substantially related to your tax-exempt purpose under sec_1_513-1 and will not constitute an unrelated_trade_or_business within the meaning of sec_513 of the code result your provision of aso services will have a substantial causal relationship to the ruling providing aso services in the manner described will nat constitute an unrelated_trade_or_business within the meaning of sec_513 of the code this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disciose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice 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 by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records ifyou have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely steven grodnitzky manager exempt_organizations technical group enclosure notice


t c memo united_states tax_court irving and elaine steinberg petitioners v commissioner of internal revenue respondent docket no 14135-05l filed date gerald w kelly barry h cantor and cheryl r frank for petitioners derek w kaczmarek for respondent memorandum opinion swift judge this matter is before us under rule on respondent’s motion for summary_judgment unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure at the time the petition was filed petitioners resided in background las vegas nevada for and petitioners filed with respondent their joint federal_income_tax returns for these years petitioners still owe respondent approximately dollar_figure in cumulative total federal income taxes including accrued interest in november of petitioners sold their home and purchased for dollar_figure a new home in an expensive neighborhood of las vegas nevada paying dollar_figure as a cash downpayment none of the proceeds from the sale of petitioners’ prior home was used by petitioners to make a payment on petitioners’ outstanding federal income taxes for and on date in an effort to collect petitioners’ unpaid federal income taxes respondent mailed to petitioners a notice_of_intent_to_levy on petitioners’ property on date petitioners filed a request for a hearing with respondent’s appeals_office challenging respondent’s proposed levy and seeking approval of an offer-in-compromise in which petitioners offered to make a total_payment of dollar_figure with regard to their federal income taxes for through beginning date petitioners petitioners’ attorney and respondent held a series of phone calls and written correspondence relating to petitioners’ appeals_office hearing some financial information was submitted by petitioners and respondent’s appeals officer reviewed that material and asked petitioners for additional information petitioners submitted some additional financial information to respondent’s appeals_office but certain financial information that had been requested by respondent’s appeals officer was not provided by petitioners for example petitioners never submitted documents requested by respondent’s appeals officer that would have established the fact of payment of petitioners’ medical and drug expenses based on the financial information petitioners submitted respondent’s appeals officer determined that petitioners had significantly more discretionary monthly income equity in assets and realizable collection potential rcp than petitioners would acknowledge the figures petitioners and respondent’s appeals officer respectively calculated are set forth below discretionary monthly income equity in assets rcp petitioners dollar_figure big_number big_number respondent dollar_figure big_number big_number big_number the disagreement between petitioners and respondent’s appeals officer focused on whether certain alleged life_insurance and medical and drug expenses should be treated as discretionary or as nondiscretionary expenses and on whether petitioners had adequately established that they actually were incurring and paying the expenses being claimed during the appeals_office hearing petitioners did not submit the documentation necessary to substantiate their payment of the disputed expenses the chart below sets forth the respective amounts petitioners claim and respondent would allow for life_insurance and medical and drug expenses type of expenses petitioners respondent life_insurance medical and drug dollar_figure big_number dollar_figure big_number petitioners’ alleged life_insurance expenses are based on whole_life_insurance policies on the life of each petitioner respondent’s offer-in-compromise guidelines allow taxpayers’ expenses only for term life_insurance coverage see administration internal_revenue_manual cch sec_5 at big_number date under sec_6330 where a taxpayer’s underlying tax_liability is not in dispute our standard of review over respondent’s appeals office’s determination on a taxpayer’s appeal of a notice_of_levy is whether respondent’s appeals_office abused its discretion 117_tc_183 we are asked to affirm as a matter of summary_judgment respondent’s appeals office’s determination to reject petitioners’ offer-in-compromise and to sustain respondent’s notice_of_levy we may grant summary_judgment where there remains no material fact issue and where a party is entitled to judgment as a matter of law rule a 85_tc_812 78_tc_412 the administrative file herein establishes that respondent’s appeals officer reviewed petitioners’ financial data that was properly and timely submitted during the appeals office’s consideration of petitioners’ appeal that petitioners failed to submit to respondent’s appeals_office requested information on time and that petitioners spent over dollar_figure in cash as a downpayment to purchase an expensive new home at a time when they had substantial federal income taxes due based on these facts we conclude as a matter of law that respondent’s appeals_office did not abuse its discretion in issuing the notice_of_determination rejecting petitioners’ offer- in-compromise and sustaining respondent’s levy notice the question before us is not whether respondent’s appeals_office would have decided differently had it received additional information rather the question before us is whether respondent’s appeals_office acted appropriately and within its proper discretion based on information it received during the appeals_office consideration of petitioners’ appeal the record before us answers that question in the affirmative petitioners now claim additional legal expenses transportation_expenses and income_averaging in order to establish that respondent’s calculation during the appeals_office hearing of petitioners’ rcp was too high these items constitute new issues and will not be allowed see 118_tc_488 furthermore as we stated in 125_tc_301 when appeals officers make reasonable requests for relevant documentation from taxpayers and taxpayers do not produce the documentation in a reasonable_time the appeals officer commits no abuse_of_discretion in making a determination without regard to the missing information for the reasons stated we shall grant respondent’s motion for summary_judgment to reflect the foregoing an appropriate order and decision will be entered for respondent