t c memo united_states tax_court max sutherland and eric p decker petitioners v commissioner of internal revenue respondent docket no filed date max sutherland and eric p decker pro sese lawrence d sledz and rubinder k bal for respondent memorandum findings_of_fact and opinion kerrigan judge respondent determined deficiencies of dollar_figure and dollar_figure and accuracy-related_penalties pursuant to sec_6662 of dollar_figure and dollar_figure with respect to petitioners’ federal_income_tax for and years at issue respectively all monetary amounts are rounded to the nearest dollar unless otherwise indicated all section references are to the internal_revenue_code code in effect for the years at issue and all rule references are to the tax_court rules_of_practice and procedure after concessions the issue before the court is whether petitioners are entitled to deductions claimed on their schedules a itemized_deductions for mr sutherland’s job search expenses mr decker’s unreimbursed employee business_expenses and a medical_expense_deduction of dollar_figure for findings_of_fact some of the facts are stipulated and are so found mr sutherland and mr decker resided in georgia when they timely filed their petition petitioners timely filed a joint form_1040 u s individual_income_tax_return for each of the years at issue on petitioners’ schedule a for respondent disallowed itemized_deductions for unreimbursed employee business_expenses of dollar_figure of this amount mr sutherland claimed dollar_figure as job search expenses and mr decker claimed dollar_figure as unreimbursed employee business_expenses for respondent disallowed itemized_deductions on petitioners’ schedule a for unreimbursed employee business_expenses of dollar_figure of this amount mr sutherland claimed dollar_figure as job search expenses and mr decker claimed dollar_figure as unreimbursed employee business_expenses after concessions discussed infra pp respondent also disallowed dollar_figure for transportation and mileage costs relating to petitioners’ medical_expense_deduction mr sutherland’s job search expenses since mr sutherland had worked as a business consultant in date mr sutherland was hired by ceadercrestone inc and signed a one-year noncompete agreement with that company his employment with ceadercrestone inc was terminated on date mr sutherland was unemployed during the years at issue for the years at issue mr sutherland reported job search expenses which included costs of preparing and sending value proposition decks to potential employers computer and office supplies internet services and networking expenses largely consisting of meals entertainment and transportation costs mr sutherland also included expenses for out of town trips to network with potential employers and attend conferences including multiple trips to florida near where 1the value proposition deck provided information on mr sutherland’s background and how he could assist a company if hired his parents lived and trips to tennessee new york and germany where he was accompanied by mr decker mr decker’s unreimbursed employee business_expenses during mr decker worked as an employee of thomasville retail inc thomasville heritage home group llc heritage and sur la table inc he was employed by heritage during thomasville was owned by furniture brands international furniture brands in furniture brands was subsequently purchased by heritage in furniture brands’ employee expense reimbursement policy addressed the requirements for reimbursable meals and entertainment_expenses with other employees or while out of town under that policy meals were reimbursed in four circumstances when a client was present when at least one company employee was from out of town when business was conducted off company premises for confidentiality purposes and when a member of the executive leadership team authorized the expense for testimonial reward or recognition purposes 2furniture brands’ employee expense reimbursement policy was in effect during both of the years at issue during the years at issue mr decker reported unreimbursed employee business_expenses for meals and entertainment to periodically recognize members of his sales team and staff expenses for team building exercises amounts spent when he traveled out of town for market trips and mileage to and from restaurants when he took his employees no clients were present during any of these occasions mr decker was not a member of the executive leadership team nor did he seek approval for or reimbursement of his claimed unreimbursed employee_business_expense deductions listed on his schedules a for the years at issue medical_expense_deduction on their jointly filed form_1040 petitioners deducted dollar_figure in medical_expenses on schedule a of which respondent disallowed dollar_figure respondent conceded an additional dollar_figure in allowable medical expense deductions after concessions dollar_figure for mileage relating to the medical_expenses remains in dispute respondent disallowed deductions for these remaining expenses for lack of substantiation opinion i burden_of_proof generally the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of proving those determinations erroneous rule a 290_us_111 under sec_7491 in certain circumstances the burden_of_proof may shift from the taxpayer to the commissioner petitioners have neither shown nor claimed that they meet the requirements of sec_7491 to shift the burden_of_proof to respondent as to any relevant factual issue accordingly the burden_of_proof remains with petitioners ii schedule a deductions sec_162 permits a taxpayer to deduct all ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business whether an expenditure is ordinary and necessary is generally a question of fact 320_us_467 an ordinary_expense is one that commonly or frequently occurs in the taxpayer’s business 308_us_488 and a necessary expense is one that is appropriate and helpful in carrying on the taxpayer’s business welch v helvering u s pincite the expense must directly connect with or pertain to the taxpayer’s business sec_1_162-1 income_tax regs pursuant to sec_262 in general personal living or family_expenses are not allowed as a deduction deductions are a matter of legislative grace and taxpayers must prove their entitlement to any deduction allowed by the code 503_us_79 292_us_435 to that end taxpayers are required to substantiate each claimed deduction by maintaining records sufficient to establish the amount of the deduction and to enable the commissioner to determine the correct_tax liability sec_6001 116_tc_438 normally the court may estimate the amount of a deductible expense if a taxpayer establishes that an expense is deductible but is unable to substantiate the precise amount see 39_f2d_540 2d cir 85_tc_731 this principle is often referred to as the cohan_rule see eg 46_f3d_760 8th cir aff’g tcmemo_1993_197 certain expenses specified in sec_274 such as vehicle expenses travel_expenses and expenses for meals and entertainment are subject_to strict substantiation rules see sec_274 notably sec_274 overrides the cohan_rule and precludes the court from estimating the amount of a deductible expense listed in that code section 122_tc_305 sec_1_274-5t temporary income_tax regs fed reg date flush language noting that sec_274 supersedes the cohan_rule to meet the heightened substantiation requirements in sec_274 a taxpayer must substantiate by adequate_records or by sufficient evidence corroborating the taxpayer’s own statement the amount of the expense the time and place the expense was incurred the business_purpose of the expense and the business relationship to the taxpayer of the persons entertained for meals and entertainment_expenses substantiation by adequate_records requires the taxpayer to maintain an account book a log a statement of expense trip sheets or a similar record prepared contemporaneously with the expenditure and documentary_evidence sec_1_274-5t temporary income_tax regs fed reg date the records and documentary_evidence of the taxpayer’s expense must establish each element of the expense see 66_tc_879 sec_274 further limits the allowable deduction for meals and entertainment_expenses to of the actual expense incurred a mr sutherland’s job search expenses sec_162 allows taxpayers to deduct expenses paid in searching for new employment within the same trade_or_business see 54_tc_374 a taxpayer’s ultimate success or lack thereof in securing employment is irrelevant to the analysis of the deductibility of job search expenses 58_tc_219 taxpayers must show that the expenses in question are proximately related to their trade_or_business 40_tc_2 likewise a taxpayer may be carrying_on_a_trade_or_business even though unemployed at the time the expenditures are paid damron v commissioner tcmemo_1983_451 during temporary periods of unemployment job search expenses can be considered and deducted as trade_or_business_expenses if the expenses are paid during a reasonable period of transition between leaving one position and obtaining another haft v commissioner t c pincite mr sutherland testified that he lost his job in date and remained unemployed through the years at issue as an unemployed business consultant mr sutherland contends that he paid expenses during the years at issue in search of employment within the field in which he previously worked most of mr sutherland’s reported job search expenses consist of meals entertainment and transportation costs we need to determine whether mr sutherland may deduct the reported job search expenses and our decision depends on his ability to substantiate those expenses some of which are subject_to the heightened substantiation requirements of sec_274 mr sutherland testified that he created value proposition decks that demonstrated his previous experience and accomplishments he sent these decks along with cover letters to companies where he sought consulting employment mr sutherland listed expenses related to these value proposition decks for and these expenses include binding material and mailing we conclude that mr sutherland used the value proposition decks to seek employment accordingly we will allow expense deductions for and which pertain to the value proposition decks however we will not allow deductions for computer supplies since there is no evidence that the supplies were not used for personal_use most of mr sutherland’s reported job search expenses consist of meals entertainment and transportation costs mr sutherland must show that he meets the heightened substantiation requirements of sec_274 for these expenses mr sutherland provided respondent with receipts documenting his alleged job search expenses additionally in preparation for respondent’s examination mr sutherland created spreadsheets of his job search expenses from these receipts including his transportation costs respondent contends that mr sutherland’s claimed business trips were personal specifically respondent argues that mr sutherland traveled to florida on multiple occasions primarily to visit his aging parents during each trip to florida mr sutherland stayed with his parents in their home near tampa bay and helped his mother care for his father one such trip to florida occurred during the independence day holiday in some instances the length of the trips and the dates of travel often did not correspond with the alleged networking and conference dates mr sutherland provided for example on one occasion mr sutherland traveled to his parents’ home on date to attend a conference in orlando florida that commenced on date five days after his arrival respondent contends that as part of his reported expenses for out of town networking and conference trips mr sutherland included travel and meal expenses for mr decker who accompanied mr sutherland on trips to new york tennessee and germany mr sutherland contends that mr decker drove him to and from meetings we do not think this is a necessary business reason petitioners offered no contemporaneously kept evidence that the travel and meal expenses were in any way related to mr sutherland’s job search although mr sutherland provided documentary_evidence of his reported meals entertainment and transportation_expenses he has failed to meet the substantiation requirements in sec_274 mr sutherland provided respondent with receipts of his reported job search expenses and spreadsheets made in anticipation of examination he failed to keep any contemporaneous documentation supporting his local and out of town job search expenses further most of the out of town travel_expenses reported suggest personal reasons for such travel without meeting the substantiation requirements of sec_274 and demonstrating a bona_fide business_purpose for the alleged job search expenses reported we conclude that petitioners are not entitled to deduct them b mr decker’s unreimbursed employee expense deductions a taxpayer may engage in the trade_or_business of being an employee 91_tc_352 pursuant to sec_162 a taxpayer may deduct unreimbursed employee_expenses as an ordinary and necessary business_expense 79_tc_1 such 3even if we found that the reported expenses were primarily paid for bona_fide business purposes petitioners claimed a deduction for the entire costs of meals and entertainment rather than the deduction allowed under the code a deduction for meals and entertainment is reduced to of the actual costs paid see sec_274 deductions are allowed only to the extent that the total deduction exceed sec_2 of adjusted_gross_income sec_67 mr decker reported expenses of dollar_figure and dollar_figure for meals and entertainment as unreimbursed employee business_expenses for the years at issue respectively the claimed unreimbursed employee_business_expense deductions were for meals and entertainment for team building and recognition of his employees and for meals while out of town on company business mr decker did not have executive-level approval for the meals and entertainment_expenses for his staff nor did he seek reimbursement for any of the expenses from furniture brands according to furniture brands’ reimbursement policy expenses paid with personal funds were reimbursable in specific circumstances one of the expenses for which reimbursement is allowable is for testimonial reward or recognition purposes if a member of the executive leadership team has authorized the expense mr decker is engaged in the business of being an employee because he could have sought reimbursement for his expenses from his employer but failed to do so we find that he cannot claim these expenses on petitioners’ schedules a as unreimbursed employee_business_expense deductions even if we allowed these reported expenses as a deduction mr decker has failed to meet the strict substantiation requirements of sec_274 by not contemporaneously maintaining a log account book or similar record of the expenses c medical expense deductions sec_213 allows a deduction for expenses paid during the taxable_year not compensated by insurance or otherwise for medical_care of the taxpayer to the extent that such expenses exceed of the taxpayer’s adjusted_gross_income medical_care includes amounts paid for transportation primarily for and essential to medical_care sec_213 a taxpayer is generally required to keep sufficient records to enable the secretary to determine the taxpayer’s correct income_tax_liability sec_6001 sec_1_6001-1 income_tax regs the regulations promulgated under sec_213 also require that taxpayers adequately substantiate their claimed medical expense deductions sec_1 h income_tax regs the remaining dollar_figure of medical_expenses at issue are mostly transportation costs associated with seeking medical attention petitioners provided no mileage logs to substantiate the claimed mileage they provided only a total mileage amount that corresponds to each medical expense without substantiating where the trip originated what vehicle was used or any other evidence to substantiate the reported expense neither were the other medical_expenses properly substantiated we find that petitioners have not met their burden of substantiating the disputed dollar_figure of medical_expenses and are not entitled to a deduction for that amount any contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing decision will be entered under rule


t c summary opinion united_states tax_court linh n nguyen petitioner v commissioner of internal revenue respondent docket no 18531-03s filed date linh n nguyen pro_se jason m kuratnick for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that the petition was filed unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the years in issue 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 this case is before the court on respondent's motion for summary_judgment under rule this proceeding arises from a petition for judicial review filed in response to a notice_of_determination concerning collection action s under sec_6320 and or sent to petitioner background respondent issued to petitioner a notice_of_deficiency for taxable years and the notice determined deficiencies of dollar_figure and dollar_figure for and respectively the notice also determined an addition_to_tax under sec_6651 for failure to timely file an income_tax return for of dollar_figure in addition respondent issued to petitioner a notice_of_deficiency for taxable_year determining a deficiency of dollar_figure and an accuracy-related_penalty under sec_6662 of dollar_figure both notices were sent to petitioner and his wife lan thi nguyen pincite pennsylvania avenue downingtown pennsylvania neither petitioner nor his wife filed a petition with the tax_court in response to the notices of deficiency subsequently respondent assessed the deficiencies and interest for tax years and respondent also assessed the 1mrs nguyen did not sign the form request for a collection_due_process_hearing or participate in the collection_due_process_hearing and is not a party to this case addition_to_tax for additionally respondent assessed the deficiency penalty and interest for tax_year respondent filed a notice_of_federal_tax_lien with respect to petitioner's tax_liabilities the unpaid balance was shown as dollar_figure thereafter respondent sent to petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 regarding the lien petitioner returned to respondent a form request for a collection_due_process_hearing it was signed only by petitioner not by his wife on the form petitioner supplied the following explanation of his disagreement with the lien i was on business and was filling sic income every year i was loss sic large money on this business and the end of it i wass sic closed this business the illegible i was loss sic large money after an in-person hearing with petitioner respondent issued a notice_of_determination concerning collection action s under sec_6320 and or collection notice for tax years and petitioner's petition challenging the collection notice was filed with the tax_court and reflected an address for petitioner pincite pennsylvania avenue downingtown pennsylvania the petition states i request that the court reevaluate and reduce my tax_liabilities for these years i did not make money in my part-time business and i filed the tax returns for these years with h_r block respondent asks for summary_judgment with respect to the notice_of_determination in that petitioner's receipt of the notices of deficiency precludes him from challenging the underlying deficiencies the only error assigned in the petition pertains to petitioner's challenge of his underlying liabilities petitioner was ordered to file a response to respondent's motion no response has been received by the court discussion rule a allows a party to move for a summary adjudication in the moving party's favor upon all or any part of the legal issues in controversy rule b directs that a decision on such a motion shall be rendered if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law the moving party bears the burden of demonstrating that no genuine issue of material fact exists and that he or she is entitled to judgment as a matter of law 98_tc_518 affd 17_f3d_965 7th cir facts are viewed in the light most favorable to the nonmoving party id however where a motion for summary_judgment has been properly made and supported by the moving party the opposing party may not rest upon mere allegations or denials contained in that party's pleadings but must by affidavits or otherwise set forth specific facts showing that there is a genuine issue for trial rule d the court has considered the pleadings and other materials in the record and concludes that there is no genuine justiciable issue of material fact regarding the collection matters in this case i collection actions--general rules sec_6321 imposes a lien in favor of the united_states upon all property and rights to property of a taxpayer where there exists a failure to pay any_tax liability after demand for payment the lien generally arises at the time assessment is made sec_6322 the secretary must notify in writing the person described in sec_6321 of the filing of a notice of lien under sec_6323 sec_6320 the notice required by sec_6320 must advise the taxpayer of the opportunity for administrative review of the matter in the form of a hearing before the internal_revenue_service office of appeals sec_6320 and sec_6320 and c grants a taxpayer who so requests the right to a fair hearing before an impartial appeals officer generally to be conducted in accordance with the procedures described in sec_6330 d and e sec_6330 addresses the matters to be considered at the hearing as relevant here a taxpayer may challenge the appropriateness of the commissioner's collection actions and submit offers of collection alternatives sec_6330 and iii the taxpayer may also raise challenges to the existence or amount of the underlying tax_liability if the taxpayer did not receive a statutory_notice_of_deficiency for the liability or did not otherwise have an opportunity to dispute the tax_liability sec_6330 once the appeals officer has issued a determination regarding the disputed collection action the taxpayer may seek judicial review in the tax_court or if the tax_court lacks jurisdiction in the matter in a u s district_court sec_6330 where the validity of the underlying tax_liability is properly at issue the court will review the matter on a de novo basis however where the validity of the underlying tax_liability is not properly at issue the court will review the commissioner's administrative determination for abuse_of_discretion 114_tc_604 ii analysis in this case petitioner's only challenge with respect to the collection notice pertains to his underlying tax_liabilities for and petitioner however was previously issued statutory notices of deficiency for each of the years in issue but failed to commence an action in this court he has at no time alleged that he did not receive the deficiency notices and there is no evidence in the record that any of the notices were returned as unclaimed or undeliverable accordingly sec_6330 precludes petitioner from disputing his underlying liabilities in this proceeding petitioner has not raised any challenges to the appropriateness of the collection action or any collection alternatives a petition for review of a collection action must clearly specify the errors alleged to have been committed in the notice_of_determination any issues not raised in the assignments of error are deemed to be conceded by petitioner rule b see 114_tc_176 see also 117_tc_183 the court will grant respondent's motion for summary_judgment accordingly respondent may keep in place the notice of tax_lien filed with respect to petitioner's tax_liabilities to reflect the foregoing an appropriate order and decision will be entered in this case


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division feb uil nos t' ev airy legend taxpayer a individual b ira x ira y annuity l annuity m amount a amount b amount c amount d amount e amount f amount g financial_institution r financial_institution s doug swoveland page of insurance_company z company y date date date date date date date date date date date dear this is in response to your request dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age represents that he received distributions from iras x and y totaling amount c and ira_annuities l and m totaling amount f taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to the misappropriation of funds by individual b taxpayer a established iras x and y with the assistance of individual b a licensed securities broker and taxpayer a’s financial advisor individual b was the manager and chief_executive_officer of company y and worked as an independent_contractor with financial_institution r doug swoveland page of on date taxpayer a acting on the advice of individual b closed iras x and y intending to consolidate the ira accounts and roll the distributions over into a single ira with financial_institution s on date amount a was distributed from ira x and amount b was distributed from ira y collectively amount c on date taxpayer a delivered a check for amount c to individual b made payable to company y and financial_institution s to establish the rollover ira taxpayer a began receiving account statements from financial_institution r listing taxpayer a as the owner and financial_institution s as custodian of the rollover ira monthly beginning on date and ending on date on date taxpayer a acting on the advice of individual b closed ira_annuities l and m intending to roll the distributions over into ira_annuities with insurance_company z on date amount d was distributed from ira annuity l and amount e was distributed from ira annuity m collectively amount f on date taxpayer a delivered a check for amount f to individual b made payable to company y to establish the rollover ira_annuities taxpayer a received an account statement from insurance_company z listing taxpayer a as annuitant and insurance_company z as custodian of the rollover ira_annuities for the period beginning on date and ending on date taxpayer a asserts that contrary to his instructions to rollover amounts c and f individual b falsely prepared the statements for the rollover iras and ira_annuities and retained the funds for her own personal benefit and use further represented that the fraud perpetrated by individual b was discovered by financial_institution r on date and has been prosecuted in federal court documentation shows that individual b pled guilty and was convicted in u s district_court on charges of mail fraud in connection with the theft of these funds as well as others that were handled by her in a similar manner it is based on the facts and representations you request a ruling that the internal_revenue_service the service waive the day rollover requirement contained in sec_408 of the code with respect to the distributions of amount c from iras x and y and amount f from ira_annuities l and m collectively amount g 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 doug swoveland page of 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 and 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 ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including 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 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information and documentation submitted is consistent with taxpayer a's assertion that his failure to accomplish timely rollovers was due to the misappropriation of amount g by individual b o ' nt038 doug swoveland page of therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distributions of amount c from iras x and y and amount f from ira_annuities l and m taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount g into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution amount g will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this ruling letter has been sent to your authorized representative in accordance with power_of_attorney on file in this office if you wish to inquire about this ruling please contact i d no at or fax please address all correspondence to se t ep ra t4 sincerely yours yo sl _-laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc


internal_revenue_service appeals_office number release date date date department of the treasury taxpayer_identification_number person to contact employee id tel fax contact hours tax period s ended uil dear we considered your appeal of the adverse action proposed by the director exempt_organizations rulings and agreements this is our final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code the code sec_501 as an organization described in sec_501 of the code our adverse determination was made for the following reasons you have not demonstrated that you are operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 and sec_1_501_c_3_-1 you do not engage primarily in activities that accomplish one or more of the exempt purposes specified in internal_revenue_code sec_501 your net_earnings inure to the benefit of private shareholders and individuals which is prohibited by internal_revenue_code sec_501 you are operated for a substantial private purpose rather that a public purpose which is prohibited by internal_revenue_code sec_501 and sec_1 c - d ii you are required to file federal_income_tax returns on forms for the tax periods stated in the heading of this letter and for all tax years thereafter file your return with the appropriate internal_revenue_service center per the instructions of the return for further instructions forms and information please visit www irs gov please show your employer_identification_number on all returns you file and in all correspondence with internal_revenue_service pursuant to a closing_agreement you have waived your right to contest this determination under the declaratory_judgment provisions of sec_7428 of the code you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling if you want taxpayer_advocate assistance please contact the taxpayer_advocate for the irs office that issued this letter you may call toll-free for the taxpayer_advocate or visit www irs gov advocate for more information if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours enclosure publication karen a skinder appeals team manager tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c date date contact person identification_number contact number fax number employer_identification_number uil index - legend b organization c chief_executive_officer d city e award f organization g date h city j state xx dollar amount dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below issues did the transfer of your predecessor's assets and liabilities to you result in inurement that precludes exemption under sec_501 of the code yes for the reasons described below are you operated exclusively for charitable or educational_purposes within the meaning of sec_501 of the code no for the reasons described below catalog number 47630w letter cg facts you were incorporated in the state of jon g your articles of incorporation list several general purposes and also includes as a purpose to financially support assist promote expand and strengthen institutions affi liated with and under the governance of the city of h your application_for exemption shows that your primary activity is to plan organize promote and foster a national truck and tractor pulling event and all related activities annually the activities promote advance and enrich the sport of truck and tractor pulling expand upgrade and improve the facilities for the participants’ benefit and foster contacts relationships’and tourism in h and the surrounding area you state to the extent that the promotion of travel and tourism constitutes ‘economic development’ the organization engages in economic development the general_public and local area businesses benefit you provided a percentage breakdown of your activities as follows -- - - - - - administrative -fundraising relating to the planning of the fundraising event - -determination of improvements of the city’s facilities - determining distribution of scholarship funds - determination of distribution of funds to other charitable organizations you are a member of the b which sanctions truck and tractor pulling events and provides necessary personnel and specialized equipment for the events you do not share common officers directors trustees or independent contractors with b however you have as a common goal to promote and organize truck and tractor pulling events you entered into a sanctioning contract with b that states in part we pride ourselves on the cooperation of our pullers with our promoters we mail newsletters periodically we will send your flyers in our newsletter if they are provided to us promoting your pull ' you submitted copies of various newspaper articles with your exemption application the articles note the large number of spectators your event has drawn your chief_executive_officer and events coordinator c was quoted as saying we think in two to - three years we could be the d of the west this statement referred to the nation’s catalog number 47630w largest truck and tractor pull event which attracts big_number people annually letter cg your event was voted one year as the e out of roughly pulls nationally by the f your pull is one of the largest pulls in the united_states another article submitted which promoted the event states c said the event is growing faster than he imagined his quote states it's going to require full-time employees pretty soon one newspaper article reported that c was planning for next year’s pull which included it expanding the seating and adding some additional classification in the truck pull indicated that there has been tremendous community support which has helped the pull to become so successful so quickly your revenue primarily comes from ticket sales gate sales concession sales and beer sales almost all of your expenses go towards paying prize purses and other expenses related to your pulling event you have indicated that a small percentage of your gross revenue will be given to charity and you will also provide student scholarships you are a successor to a for-profit limited_liability corporation which has not yet been dissolved the predecessor intends to be administratively dissolved by not filing the required biennial report your predecessor was formed in an attempt to bring a national truck and tractor pull event to h there were approximately initial members who made’a capital_contribution of x each you indicated you were formed because the predecessor failed to make a profit and it soon became apparent that in a town of approximately people the event simply could not be continued without substantial effort from volunteers your directors are identical to the predecessor and your volunteers are comprised of the predecessor's membership although there is no memorialized date on which the transfer occurred your predecessor transferred all of its assets and liabilities to you at'the time of transfer the predecessor's liabilities exceeded its assets which consisted of the total value of assets transferred to you was less thandollar_figure telephone poles frisbees t-shirts and a bank account the predecessor's only liability was a bank note due at the time of transfer the principal balance that you assumed you provided a payment history from the bank to show - outweighed your received assets by more than dollar_figure was approximately dollar_figure ' that you subsequently paid off the balance therefore your received liabilities letter cg catalog number 47630w law sec_501 of the internal_revenue_code provides in part for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable religious or educational_purposes no part of the net earings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 a of the federal tax regulations provides that in order for an organization to be exempt under sec_501 of the code it must-be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational or operational_test it is not exempt sec_1_501_c_3_-1 of the regulations provides an organization is not operated exclusively for one or more exempt purposes if its net earings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_c_3_-1 of the regulations provides that an exempt_organization must serve a public rather than a private interest the organization must demonstrate that it is not organized or operated to benefit private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests thus if an organization is operated to benefit private interests rather than for public purposes or is operated so that there is prohibited inurement of earnings to the benefit of private shareholders or individuals it may not retain its exempt status revrul_67_149 1967_1_cb_133 described an organization that was formed for the purpose of providing financial assistance to several different types of organizations which are exempt from federal_income_tax under sec_501 it carried on no operations other than to receive contributions and incidental investment_income and to make distributions of income to such exempt_organizations at periodic intervals the organization does not accumulate its investment_income this particular organization qualified for c exemption revrul_68_224 granted exemption under sec_501 not c to an organization of which their primary purpose was to conduct an annual festival that depicts regional customs and traditions ina typical year it features a banquet or barbecue a parade various contests and a rodeo at the banquet or barbecue the winners of the various contests are announced the parade is made up of school bands local riding clubs and floats built by local organizations contests relate to dress and costumes concerning the traditions of the area floats generally depict the community history and customs the festival is climaxed on the final day with the rodeo the ruling stated in letter cg catalog number 47630w carrying on the activities described the organization provides recreation for the community publicizes the community and attracts persons to it promotes community growth and provides a means whereby citizens may express their interest in local history customs and traditions these activities promote the common good and general welfare of the people of the community and bring about civic betterments and social improvements accordingly the organization qualifies for exemption from federal_income_tax under sec_501 of the code revrul_76_441 1976_2_cb_147 presents two situations conceming school operations in the first scenario a nonprofit school succeeded to the assets of afor- profit school while the former owners were employed in the new school the board_of directors was completely different the ruling concludes that the transfer did not serve part of that conclusion was based on the independence of the board private interests in the second scenario the for-profit school converted to a nonprofit school the former owners became the new schoo' 's directors the former owners new directors benefited financially from the conversion the ruling concludes that private interests were served - 326_us_279 the supreme court of the united_states interpreted the requirement in sec_501 that an organization be operated exclusively by indicating that an organization must be devoted to exempt purposes exclusively this plainly means that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number and importance of truly exempt purposes in 70_tc_352 it was stated that free or below cost service is only one of several factors to consider in determining commerciality others include the particular manner in which the organization's activities are conducted the commercial hue of those activities and the existence and amount of annual or accumulated_profits all of these must be considered for no single factor alone is determinative the court concluded that the petitioner is not an organization described in sec_501 because its primary purpose is neither educational scientific nor charitable but rather commercial in orange county agricultural society inc v c i r tcmemo_1988_380 wl it was held that a petitioner's involvement in a stock car racing enterprise a nonexempt purpose constituted more than an insubstantial part of its activities the organization which was organized to promote agriculture and horticulture sponsored an annual fair although the organization was not involved in the actual operation of the automobile races the court determined that it was associated in the operation of a commercial enterprise because it received all the profits derived from the automobile races catalog number 47630w letter cg application of law - you are not described in sec_501 of the code because you are not operated exclusively for charitable purposes you do not meet the requirements of sec_1_501_c_3_-1 a of the regulations because although you meet the organizational_test you do not meet the operational_test although your articles of incorporation state that you are organized to financially support assist promote expand and strengthen institutions affiliated with and under the governance of the city of h the facts show that you exist merely to conduct a large annual pulling event the only resources you have used to support the local_government have been to upgrade the pulling arena that is owned by the city this further shows your primary purpose is to conduct the annual pulling event and not to conduct charitable activities - you indicated that the pulling event is used as a fundraiser and that you contribute funds to other charities and provide scholarships however the facts show that the pulling event is not a fundraiser but is actually your primary purpose this is evidenced by the fact that you conduct fundraisers to raise funds to conduct the pulling event the overwhelming majority of your expenses are for the conduct of the pulling event anda very small percentage of your gross revenue is used for charitable purposes if there are any funds left after the expenses of the pulling event have been paid you do not meet the requirements of sec_1_501_c_3_-1 of the regulations because your earnings inure to the benefit of private individuals more specifically the transfer of assets and liabilities from your predecessor llc to you resulted in private benefit to the owners of the llc the llc was liable for a loan in which approximately of assets dollar_figure __ to you the burden of the llc and therefore its owners was relieved this shows that your earnings substantially benefit private individuals was still owed by transferring this debt and only approximately dollar_figure you do not meet the requirements of sec_1_501_c_3_-1 of the regulations by using your funds to pay off the transferred loan your earnings substantially benefitted the owners of your predecessor llc since the owners of the llc are also insiders to you this private benefit constitutes inurement you are not like the organization described in revrul_67_149 because your financial support to other charitable organizations is incidental to your primary purpose of conducting a nationally recognized pulling event unlike the organization in the ruling that simply collected contributions and donated them to various charities the facts show that you entire reason for forming was to conduct the annual pulling event not to raise catalog number 47630w letter cg _ money for other charities your conduct of an annual truck and tractor pull is similar to the festival rodeo activities _of the organization described in revrul_68_224 like this organization your pulling event provides recreation for the community publicizes the community and attracts persons to it and promotes community growth as the ruling states these activities promote the common good and general welfare of the people of the community and bring about civic betterments and social improvements these activities are not exclusively charitable and educational and therefore are not exempt under section c of the code the organization in the ruling was granted exemption under sec_501 not c of the code however unlike the organization in the ruling the community benefit you provide is incidental to your primary purpose of promoting organizing and operating a truck and tractor pull event even if benefitting the community was your primary purpose exemption would not be allowed under any section of the code due to the fact that you are operating in a commercial manner and your earnings inure to the benefit of individuals you are similar to the second organization described in revrul_76_441 by assuming the liabilities of the predecessor which exceeded assets transferred the predecessor's members who also serve as your volunteers benefitted from the conversion like the organization described in the ruling this transfer served private interests as explained in better business bureau of washington d c inc v united_states the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number and importance of truly exempt purposes even though you do have some charitable activities consisting of contributing funds to charitable organizations and providing scholarships you are not exclusively charitable as explained above your primary purpose is to conduct an annual truck and tractor pull forrecreational purposes and to bring people to the community also your transfer of - liabilities created inurement these facts show that you not only have a single non- exempt_purpose but you have two non-exempt purposes - similar to the organization in b s w group inc v commissioner you are operating in a commercial manner the facts show that the majority of your revenue is derived from ticket sales gate sales concession sales and beer sales the conduct of your annual pulling event is similar to any other commercial event in which tickets and concessions are sold to the general_public at a market rate also the facts show that you advertise and market the event in the same manner as any other commercial event there are many similar entities that conduct the same activities for profit at commercial venues in fact you operated the same activities as a for-profit entity prior to converting to a non- profit letter cg catalog number 47630w orange county aaricultural society inc v c lr is applicable in your situation truck - and tractor pulling is similar to stock car racing being that both are motorsports in which prize money is awarded as quoted in an article you are an elite pull fashioned after the nascar races since your time and funds are devoted almost entirely to organizing promoting and conducting the annual tractor pull event you have not shown ‘that you are operated exclusively for charitable purposes as described in sec_501 of the code applicant's position you ‘contend that your exempt_purpose is community betterment for h and that the pulling event is merely a fundraiser to accomplish this purpose you stated economic development’ is not a primary function of the organization as such is only tangential to the extent the fundraising activity showcases h and to the extent the event increases traffic and activity local and area business are benefited by increased sales you assert that your activities are analogous to charitable golf events and your fundraising activity allows the organization to fulfill its charitable purposes by dedicating all of the event's profits to be used for charitable purposes you have contributed funds to local organizations such as local fire and rescue youth groups public schools and scholarships besides contributions donated to local organizations and scholarships awarded to graduating seniors you note that nearly dollar_figure you and your predecessor for tax years through consisted of park and track improvements including the construction improvement and or purchase of guard rails announcer’s stand track lighting roadway spectator tent security barrier fencing etc ‘was contributed to h collectively by the contributions _ you contend that your tractor pull event furthers charitable purposes based on the following factors - you make substantial improvements to the h’s park - through the substantial improvements you work cooperatively with the h - you will continue to make improvements to the park as well as provide other_benefits to h _- without you h would be unable to make the improvements -- catalog number 47630w aside from the annual tractor-pull weekend event the improvements may be used by the community year round letter cg - you established scholarships and expect to increase scholarship awards after h improvements are reduced your activities are conducted entirely by volunteers - by demonstrating that the community is strong and vibrant the interest of h has been advanced you encourage and enhance community volunteerism you worked cooperatively with h to gain regional and national recognition the increase in consumer activity during the event generates sales_tax revenue - - - you benefit the local and area economy and - you do not accumulate income service response to applicant’s position economically benefitting the community is not your primary purpose the facts show that your primary purpose is to organize promote and conduct an annual truck and tractor pull event any benefit to the community is an incidental biproduct of conducting the recreational pulling event in a commercial manner even if your primary purpose were to economically benefit the community you have not shown that you are located within an economically depressed area or that your activities target an economically disadvantaged group also you are not relieving the poor lessening the burdens of government or furthering any other exclusively charitable purpose - even though the predecessor and you made improvements on a city-owned park this is not your primary purpose in fact these improvements were only made so you can adequately conduct your annual truck and tractor pull event also the overwhelming majority of the improvements were made by your predecessor not you we do not dispute the charitable aspect of contributing funds to other charitable organizations however this charitable activity is incidental to your primary purpose of conducting a nationally-recognized truck and tractor pull based on all of the facts and circumstances it is obvious your primary purpose is to conduct a large-scale truck and tractor pull event that will provide recreation to the community in a commercial manner any benefit to the community or other charitable activities that you conduct is merely incidental to this primary purpose even if your activities were found to be conducted in a charitable manner you still would not qualify for exemption based on the fact that your earnings inure to the benefit of your members who were the owners of your predecessor catalog number 47630w letter cg conclusion your activities of organizing promoting and conducting an annual pulling event are not exclusively charitable or educational also the manner in which the activity is conducted is indistinguishable from a commercial business therefore you do not meet the operational_test under sec_501 secondly private benefit and inurement resulted when your predecessor's assets and liabilities were transferred to you accordingly you are not exempt under sec_501 of the code you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power of attomey form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs letter cg catalog number 47630w if we do not hear from you within days we will issue a final adverse if you do not intend to protest this determination you do not need to take any further action determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to internal_revenue_service eo determinations quality assurance p o box room cincinnati oh deliver to internal_revenue_service eo determinations quality assurance main street room cincinnati oh you may fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois g lerner director exempt_organizations enclosure publication cc thomas b donner letter cg catalog number 47630w


internal_revenue_service number release date index number ----------------- ------------------------------ ---------------------------------------------------- ------------------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------ telephone number --------------------- refer reply to cc psi b01 plr-130295-08 date date legend x --------------------------------------------------- ------------------- --------------------------------------------------------------------- -------------------------------------------- ------------------------ --------------------------------------------------------------------- -------------------------------------------- ------------------------ ----------------------------------------------------------------- -------------------------------------------- ------------------------ ------------- ------------------- ----------------- --------------------- ---------------------- trust trust trust state date date date date dear --------------- plr-130295-08 this responds to a letter dated date submitted on behalf of x by x's authorized representative requesting inadvertent s_corporation_election termination relief under sec_1362 of the internal_revenue_code in addition your letter seeks relief allowing trust a_trust b and trust c to file late elections to be treated as electing small_business trusts esbts facts the information submitted states that x was incorporated in state on date and made an election to be treated as an s_corporation effective date on date shares of x stock were transferred to trust trust and trust each of trust trust and trust is represented as being eligible to be an esbt as of date however the trustees of trust trust and trust failed to make esbt elections for the trusts therefore x's s_corporation_election terminated on date when trust trust and trust became shareholders this was not discovered until date x represents that the failure_to_file the esbt elections for trust trust and trust and the consequent termination of x's election to be an s_corporation was inadvertent unintended and not the result of tax_avoidance or retroactive tax planning x and each person who is or was a shareholder of x agree to make any adjustments consistent with the treatment of x as an s_corporation and consistent with the treatment of trust trust and trust as esbts as may be required by the secretary with respect to the period specified by sec_1362 law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that for purposes of subchapter_s a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that for the purposes of sec_1362 an esbt is a permitted shareholder of a small_business_corporation sec_1362 provides that an election under sec_1362 terminates whenever at any time on or after the 1st day of the 1st taxable_year for which a plr-130295-08 corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1361 defines an esbt sec_1361 provides that except as provided in sec_1362 the term electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1_1361-1 of the income_tax regulations provides that the trustee of an esbt must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of sec_1_1361-1 sec_1_1361-1 provides that the trustee of an esbt must file the esbt election within the time requirements prescribed in sec_1_1361-1 for filing a qsst election generally within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation the termination is effective on and after the day of the termination sec_1362 provides in part 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 b was terminated under sec_1362 or the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation is a small_business_corporation 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 such ineffectiveness plr-130295-08 or termination the corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the representations made and the information submitted we conclude that x's s election terminated on date when shares of the stock of x were transferred to trust trust and trust we further conclude however that the termination was an inadvertent termination within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation as of date and thereafter provided that the trustees of trust trust and trust file esbt elections for the trusts and provided that x's s election is not otherwise terminated under sec_1362 the trustees of trust trust and trust must file esbt elections pursuant to the procedures set forth in sec_1_1361-1 m with the appropriate service_center within days of the date of this letter a copy of this letter should be attached to the esbt elections this ruling is contingent on x and all of its shareholders treating x as having been an s_corporation for the period beginning date and thereafter accordingly in determining their respective income_tax all the shareholders of x must include their pro- rata share of the separately_stated items of income including tax-exempt_income loss deduction or credit and nonseparately computed items of income and loss of x as provided in sec_1366 make adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 this ruling is also contingent on trust trust and trust filing amended returns consistent with the treatment of these trusts as esbts if x or its shareholders fail to treat themselves as described above this ruling is null and void except as specifically ruled upon above we express or imply no opinion as to the federal tax consequences of the facts of the facts described above under any other provision of the code in particular we express or imply no opinion concerning whether x is otherwise eligible to be an s_corporation or whether trust trust and or trust are eligible esbts under sec_1361 e this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-130295-08 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representative sincerely david r haglund david r haglund senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index numbers -------------------- ------------------------------- ----------------------------------------- ----------------------- ------------------------------------------------------ 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-117416-10 date date legend --------------------- company ----------------------------------------------------------- country date ---------------------- -------------------------- dear ------------- this letter responds to a letter dated date submitted on behalf of company requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts company was formed under the laws of country on date company represents that it is a foreign_entity eligible to elect to be treated as a disregarded_entity for federal tax purposes company intended to be treated as a disregarded_entity effective date however due to inadvertence company failed to file form_8832 entity classification election electing to treat company as a disregarded_entity effective date law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an plr-117416-10 eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301 b i a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer plr-117416-10 acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied consequently company is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center to elect to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it according to sec_6110 of the code this ruling may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to company’s authorized representatives sincerely associate chief_counsel passthroughs special industries s by _______________________________________ mary beth carchia senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes cc


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date uil 1400i conex-107109-08 the honorable mary l landrieu united_states senator fannin street suite shreveport la attention ----------------- dear senator landrieu i am responding to your letter dated date on behalf of your constituent --- ----------------------------- --------------is constructing the -------------------------------------------------------- a commercial_revitalization_deduction crd under sec_1400i of the internal_revenue_code is available for such revitalizations in the commercial revitalization agency for ------ ------------- made a carryover allocation of a crd to --------------------------- to obtain the tax benefits of this crd ----------------------------is required_by_law to place the property in service no later than the end of the second calendar_year following the year in which the allocation was made thus ----------------------------must place the property in service by date to obtain the tax benefits of the crd --------------states that the project is more than one year behind schedule and he asks for a to month extension of the carryover allocation as we discussed by telephone with -----------------------of your staff the authority for allocating a crd rests with the --------------commercial revitalization agency and not with the internal_revenue_service --------------should contact the ------------- commercial revitalization agency to apply for a new crd allocation from that agency i am enclosing a copy of revproc_2003_38 which provides the time and manner for state revitalization agencies to make crd allocations we have considered whether there is any_action the internal_revenue_service can take conex-107109-08 to remedy ---------------problem including extending the date deadline by which ----------------------------must place the property in service unfortunately because this 2-year placed-in-service date requirement for a carryover allocation is statutory we lack the authority to extend it if you have any questions please contact me at ----- --------------or ---------------------at -- ------ ------------- sincerely george j blaine george j blaine associate chief_counsel income_tax and accounting enclosure


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-112155-12 date date legend company --------------------------------------------------------------------------------------------- ----------------------- shareholder --------------------------------------------------------------------------------------------- ------------------------- state date --------------- ---------------------- dear ----------------- this letter responds to a letter dated date and subsequent correspondence written on behalf of company requesting a ruling under sec_1362 of the internal_revenue_code code facts company incorporated in state on date company’s shareholder intended for company to be an s_corporation effective date however company’s form_2553 election by a small_business_corporation was not timely filed company requests a ruling that it will be recognized as an s_corporation effective date plr-112155-12 law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable year- a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if- a a small_business_corporation makes an election under sec_1362 for any taxable_year and b the election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then the election is treated as made for the following taxable_year sec_1362 provides that if- a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply conclusion based solely on the facts submitted and the representations made we conclude that company has established reasonable_cause for failing to make an s_corporation_election in a timely manner thus we conclude that company is eligible for relief under sec_1362 accordingly if company makes an election to be an s_corporation effective date by filing a completed form_2553 with the appropriate service_center within days from the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether company is otherwise eligible to be an s_corporation for federal tax purposes plr-112155-12 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 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely mary beth carchia senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes


office_of_chief_counsel department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c date uil ------------------------------------------- ----------------------------------------- -------------------------------- attention ---- --------------- dear ------------------ this letter is in response to your inquiry dated -------------------- on behalf of your constituent ----- ------------------- ------------ requested information on the current tax treatment of on-premises athletic_facilities provided by an employer to his employees under sec_132 of the internal_revenue_code the code -------------said that providing special tax treatment for athletic_facilities that are on an employer’s premises creates an inequity because the same tax treatment is not available for independently operated athletic_facilities the law provides for an exclusion_from_gross_income of the value of certain fringe_benefits and in particular the value of any on-premises_athletic_facility provided by an employer to its employees code sec_132 the term athletic facility means any gym or other athletic facility such as a pool tennis court or golf course an employee can exclude the value of an athletic facility from his or her gross_income if three criteria are satisfied the facility must be located on the premises owned or leased by the employer it does not have to be on the employer’s business_premises if the employer leases the facility the exclusion is available eve n if the employer is not a named lessee on the lease so long as the employer pays a reasonable rent the employer must operate the facility either through its own employees or by contract with another to operate the facility substantially_all use of the facility during the calendar_year must be by employees their spouses and dependent_children the exclusion does not apply to an athletic facility for residential use for example a resort with accompanying athletic_facilities such as tennis courts pool and gym would not qualify for this exclusion if it is reasonable to believe that the employee will be able to exclude the benefit from gross_income under code sec_132 at the time a fringe benefit is provided the benefit is also excluded from wages for purposes of federal_insurance_contributions_act fica and federal_unemployment_tax_act futa taxes and for purposes of federal_income_tax withholding when the congress enacted the exclusion for employer-provided athletic_facilities as part of the deficit_reduction_act_of_1984 p l the legislative_history specifically noted that the exclusion does not apply to the providing of memberships in a country club or similar facility unless the facility itself is owned and operated by the employer and satisfies the employee-use and other requirements for the exclusion thus where no exclusion is available under this provision the fair_market_value of such country club membership is includible in the income of the employee who is provided with the membership h_r rep no part ii pincite any change to these rules would require congressional legislation i hope this information is helpful if you have any questions or wish to discuss this matter further please contact me or --------------------of my staff at --------------------- sincerely lynne camillo chief employment_tax branch office of the assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities


t c summary opinion united_states tax_court natarajan palaniappan and s dandamudi petitioners v commissioner of internal revenue respondent docket no 24802-08s filed date natarajan palaniappan and s dandamudi pro sese alicia e elliott for respondent dean 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 pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year at issue and rule references are to the tax_court rules_of_practice and procedure respondent determined for a deficiency in petitioners’ federal_income_tax of dollar_figure an addition_to_tax of dollar_figure under sec_6651 for failure_to_file timely and an accuracy- related penalty of dollar_figure under sec_6662 petitioner s dandamudi did not sign the stipulation of facts nor did she appear for trial respondent orally moved to dismiss her for failure to properly prosecute her case an appropriate order granting respondent’s motion will be issued respondent concedes that petitioners are entitled to a moving_expense_deduction of dollar_figure and a home mortgage interest_deduction of dollar_figure petitioner natarajan palaniappan petitioner concedes that his joint federal_income_tax return was not timely filed within the filing period as extended by respondent respondent concedes that petitioners are not liable for the accuracy-related_penalty under sec_6662 the items remaining for decision are whether petitioners are entitled to itemized_deductions in an amount in excess of the standard_deduction and failed to file timely due to reasonable_cause and not due to willful neglect 1the court will dismiss s dandamudi for failure to properly prosecute and will enter a decision against her consistent with the decision entered against natarajan palaniappan background some of the facts have been stipulated and are so found the stipulation of facts and the exhibits received in evidence are incorporated herein by reference petitioner resided in alaska2 when the petition was filed petitioner was employed as a finance director during the year at issue and ms dandamudi was not employed outside of the home among the items claimed on petitioners’ schedule a itemized_deductions were medical and dental expenses of dollar_figure in excess of the 5-percent floor and home mortgage interest of dollar_figure that included dollar_figure paid to a mr chandrasekhar in india respondent disallowed both itemized_deductions in their entirety discussion generally the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer has the burden of proving that those determinations are erroneous see rule a 290_us_111 in some cases the burden_of_proof with respect to relevant factual issues may shift to the commissioner under sec_7491 petitioner 2petitioner filed an amended_return while residing in arizona 3the schedule a lists home mortgage interest reported on form_1098 mortgage interest statement of dollar_figure and dollar_figure paid to mr chandrasekhar a total of dollar_figure there is no explanation for the discrepancy did not argue or present evidence that he satisfied the requirements of sec_7491 therefore the burden_of_proof does not shift to respondent medical_expenses under sec_213 individuals are allowed to deduct the expenses paid for the medical_care of the taxpayer the taxpayer’s spouse or a dependent to the extent the expenses exceed percent of adjusted_gross_income and are not_compensated_for_by_insurance_or_otherwise the term medical_care includes amounts paid for the diagnosis cure mitigation treatment or prevention of disease or for insurance covering the diagnosis cure mitigation treatment or prevention of disease sec_213 a taxpayer must substantiate claims for deductible medical_expenses by furnishing the name and address of each person to whom payment for medical_expenses was made and the amount and date of the payment sec_1_213-1 income_tax regs when the commissioner so requests claims must be substantiated by a statement or invoice from the service provider showing the service provided to or for whom rendered and the amount and date of payment id where a taxpayer fails to provide adequate substantiation the court may uphold the commissioner’s determination denying a deduction for medical and dental expenses see davis v commissioner tcmemo_2006_272 hunter v commissioner tcmemo_2000_249 nwachukwu v commissioner tcmemo_2000_27 petitioner offered as evidence of medical_expenses a handwritten list prepared by ms dandamudi for each month of showing items of the most general description some of the entries included medical test hospital room hospital tips home health medicine injection dental lab test and similar items beside each item is an amount in indian rupees petitioner also presented a faxed copy of a date computer printed letter purporting to be from ms dandamudi’s attending physician in india in the letter the doctor gives a general description of ms dandamudi’s medical_condition in and an overall estimate of what she must have paid in for treatment from himself a private duty nurse and home healthcare service acute care rehabilitation diagnostic imaging lab work medicines and the services of several other attending physicians the letter represents that everything was paid for in cash for which no records were retained the overall cost estimate is alleged to be based on his decades of experience in diagnosing her illness petitioner was unable to produce a single receipt statement invoice canceled check or other item of documentary_evidence for the payment of any medical expense aside from the hospital and physician’s name on the letter offered by petitioner the name of no service provider pharmacy laboratory or hospital was provided because petitioners have failed to provide any proper substantiation to support their claimed deduction for medical and dental expenses the court finds that no estimate of any amounts of petitioners’ deduction can be made under 39_f2d_540 2d cir in order for the court to estimate the amount of an expense there must be some basis upon which an estimate may be made 85_tc_731 without such a basis an allowance would amount to unguided largesse 245_f2d_559 5th cir the court sustains respondent’s disallowance of petitioners’ claimed deduction for medical and dental expenses see sec_6001 sec_1_6001-1 e income_tax regs home mortgage interest sec_163 allows a deduction for interest_paid or accrued within the taxable_year on indebtedness individuals are allowed a deduction for qualified_residence_interest sec_163 qualified_residence_interest includes interest_paid on indebtedness incurred to acquire a qualified_residence of the taxpayer that is secured_by the qualified_residence or on home_equity_indebtedness certain indebtedness secured_by a qualified_residence id debt is secured_by a qualified_residence if there is an instrument that in the event of default subjects the residence to satisfaction of the debt in the same way as would a mortgage or deed_of_trust sec_1_163-10t temporary income_tax regs fed reg date home_equity_indebtedness is limited in amount to the fair_market_value of the qualified_residence reduced by any acquisition_indebtedness and may not exceed dollar_figure sec_163 respondent argues that petitioners have failed to provide adequate substantiation for their claimed home mortgage interest_deduction petitioner attempted to prove his claim with a copy of a document purporting to be a promissory note in favor of i k chandrasekhar for lakh sec_4 of indian rupees with an attached payment schedule by the terms of the note principal and interest are guaranteed by petitioner’s father petitioner also produced a copy of a letter ostensibly from mr chandrasekhar’s india-based attorney stating that mr palaniappian natarajan has met his sic all his obligations principal and interest per mortgage amortization schedule attached to the loan document for all these years petitioner produced no evidence of the fair_market_value of his house or the amount if any of acquisition_indebtedness to 4a lakh is equal to big_number webster’s 10th new collegiate dictionary which it may be subject petitioner produced no evidence of the actual payment of any interest on the note no notice of a security_interest was filed in the united_states with respect to the loan to petitioner by mr chandrasekhar because the loan from mr chandrasekhar was not a debt secured_by an instrument that in the event of default subjected the property to satisfaction of the debt in the same way as would a mortgage or deed_of_trust it was not a debt secured_by a qualified_residence therefore the debt was not acquisition or home_equity_indebtedness for which petitioner may deduct interest respondent’s determination that petitioners are not entitled to deduct home mortgage interest with respect to the loan from mr chandrasekhar is sustained addition_to_tax under sec_6651 respondent bears the burden of production with respect to the addition_to_tax see sec_7491 to meet this burden respondent must produce evidence sufficient to establish that it is appropriate to impose the addition_to_tax see 116_tc_438 petitioner agrees that petitioners requested and were granted an extension of time to file their federal_income_tax return until date petitioner agrees that petitioners failed to file their federal_income_tax return until date respondent has met his burden of production under sec_7491 with respect to imposing the addition_to_tax under sec_6651 it is petitioners’ burden to prove that they had reasonable_cause and lacked willful neglect in not filing the return timely see 469_us_241 higbee v commissioner supra pincite sec_301_6651-1 proced admin regs because petitioners failed to offer any evidence of reasonable_cause and lack of willful neglect for their failure_to_file timely respondent’s determination that they are liable for the addition_to_tax under sec_6651 is sustained to reflect the foregoing will be issued and decision an appropriate order will be entered under rule