internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b05 - plr-143822-02 date date legend parent sub purchaser target sellers date a company official tax professional plr-143822-02 dear this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election parent is requesting an extension to file a sec_338 election under sec_338 with respect to purchaser’s acquisition of the stock of target sometimes hereinafter referred to as the election additional information was received in a letter dated date the material information is summarized below parent is the common parent of a consolidated_group of corporations sub is a domestic wholly owned subsidiary of parent purchaser is a wholly owned foreign_subsidiary of sub target is a foreign_corporation on date a parent purchaser and target’s shareholders sellers entered into a purchase agreement for purchaser to acquire all of the target stock from sellers purchaser acquired all of the stock of target from sellers in exchange for parent common_stock pursuant to the purchase agreement it is represented that purchaser’s acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 prior to the acquisition target did not file a united_states income_tax return was not subject_to united_states income_taxation nor was required under sec_1_6012-2 to file a united_states income_tax return in addition target was not a controlled_foreign_corporation within the meaning of sec_957 a passive_foreign_investment_company for which an election under sec_1295 was in effect or a foreign_investment_company or a foreign_corporation the stock ownership of which is described in sec_552 purchaser is a controlled_foreign_corporation as defined in sec_957 and is not required under sec_1_6012-2 other than sec_1_6012-2 to file a united_states income_tax return for its taxable_year that includes the acquisition_date parent intended to file the election for various reasons a valid election was not filed after the due_date for the election it was discovered that a valid election had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for parent’s consolidated group’s taxable_year in which the acquisition occurred the taxable_year in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase plr-143822-02 under sec_301_9100-1 the commissioner has discretion to 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 except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338-2 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for parent to file the election provided parent acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the interests of the government will not be prejudiced if relief is granted see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that parent has shown that it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for parent to file the election with respect to the acquisition of the stock of target as described above within days of the date on this letter parent must file the election on form_8023 executed on or after the date on this letter in accordance with sec_1_338-2 and the instructions to the form a copy of this letter must be attached to form_8023 within days of the date on this letter all relevant parties must file or amend as applicable all returns and amended returns if any necessary to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year a copy of this plr-143822-02 letter and a copy of form_8023 must be attached to the returns the above extension of time is conditioned on the taxpayers' parent’s consolidated group’s and target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 we express no opinion as to whether the acquisition of the target stock qualifies as a qualified_stock_purchase under sec_338 or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer sincerely yours ken cohen senior technician reviewer branch office of associate chief_counsel corporate


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 w a s h i n g t o n d c date cc psi b05 conex-151923-10 o f f i c e o f t h e c h i e f c o u n s e l number release date uil --------------------- ------------------------ ------------------------- dear ------------- this letter responds to your email to the white house dated date regarding the application of sec_118 of the internal_revenue_code section dollar_figure of revproc_2010_1 2010_1_irb_1 provides that the internal_revenue_service may issue an information_letter the purpose of which is to call attention to a well-established interpretation or principle of tax law without applying it to a specific set of facts accordingly the following discussion is provided for general information purposes only and does not constitute a ruling revproc_2010_34 2010_41_irb_426 provides in part that the service will not challenge a corporation’s treatment of a grant to the corporation from the national telecommunications and information administration of the department of commerce under the broadband technology opportunities program for broadband infrastructure or comprehensive community infrastructure as a nonshareholder contribution to the capital of the corporation under sec_118 of the code if the corporation properly reduces the basis of its property under sec_362 and the regulations thereunder revproc_2010_34 also provides that it does not apply to noncorporate taxpayers a copy of revproc_2010_34 is enclosed sec_118 of the code provides that in the case of a corporation gross_income does not include a contribution_to_the_capital_of_the_taxpayer sec_1_118-1 of the income_tax regulations provides that sec_118 applies to contributions to capital made by a person other than a shareholder for example property contributed to a corporation by a governmental_unit for the purpose of enabling the corporation to expand its operating facilities sec_362 of the code requires a basis_reduction in a corporation's property when the corporation receives money from a nonshareholder as a contribution to its capital conex-151923-10 by their express statutory terms sec_118 and sec_362 apply only to corporate taxpayers there are no equivalent statutory provisions for limited_liability companies treated as partnerships therefore a limited_liability_company treated as a partnership is not allowed the exclusion under sec_118 and the reduction in basis under sec_362 is not applicable this letter has called your attention to certain general principles of the law it is intended for informational purposes only and does not constitute a ruling if you have any additional questions please contact our office at -------------------- sincerely s paul f handleman paul f handleman branch chief branch office of associate chief_counsel passthroughs special industries enclosure copy of revproc_2010_34


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 fip plr-132801-18 date date legend --------------------------------------------------------------- ------------------------------------------ --------------------------------------------------------------- -------------------------- -------------------------------------------------- ----------------------- ------------- -------------- ------------------- ------------------------ ------- --------------------------------------------------------- taxpayer operating partnership jv partner company a company b company c state a state b state c city year property ------------------------------------------------------------------------------------------------- program ----------------------------------------------------------------- office agency ------------------------------------------------------------------------- a ---------------------------------------------- ----------------------------------------------- -------------------------------------------------------------- ---- plr-132801-18 b c d e dear ---------------- ------------- -------------- ---------------- ---------- this letter responds to your letter dated date requesting a ruling on behalf of taxpayer that pursuant to sec_856 of the internal_revenue_code income from the grant as defined below is considered qualifying_income for purposes of taxpayer’s gross_income tests under sec_856 and c facts taxpayer is a state a corporation that has elected to be treated as a real_estate_investment_trust reit under sec_856 through taxpayer uses an accrual_method of accounting and the calendar_year as its taxable_year taxpayer and its subsidiaries are involved in the acquisition ownership redevelopment management and leasing of regional and community shopping centers located throughout the united_states taxpayer is the sole general_partner of and owns an a partnership_interest in operating partnership operating partnership is a state b limited_partnership that serves as taxpayer’s operating partnership and conducts substantially_all of taxpayer’s operations operating partnership owns substantially_all of the operating_assets of the business either directly or indirectly through other partnerships limited_liability companies subsidiary reits and taxable reit subsidiaries in year taxpayer along with jv partner a state c business_trust that has elected to be treated as a reit under sec_856 through formed joint ventures to develop certain regional shopping centers including property taxpayer and jv partner through other owned entities that are either disregarded or treated as tax partnerships indirectly own e interests in the following joint ventures that will develop property company a company b and company c collectively referred to as the owners the owners own the individual properties that comprise property which is constructed on land leased from city and currently under redevelopment the redevelopment of property will be funded by a grant through program the grant a program grant is administered by state c acting through office for the acquisition and construction of economic development projects with intended regional or multi-jurisdictional impact that are expected to substantially increase or maintain current levels of employment_tax revenues or other measures of economic activity generally in order to receive a program grant the applicant is required to apply for the plr-132801-18 grant which must be approved by the legislature and selected by the governor of state c the recipient of the grant is then required to enter into an agreement with agency and office property has been approved for a program grant as the owner of the underlying land on which property was built city is the recipient ie the grantee of the grant agency acting on behalf of city as the grantee will formalize a contract with state c acting through office that will set the responsibilities and obligations of the parties involved with the grant agency will then approve the grant payments to the various sub-grantees the owners as sub-grantees will enter into a subcontract with agency to be approved by office for the development of property pursuant to program agency as grantee will apply for periodic project payments to cover a portion of paid eligible and reimbursable project expenses including construction costs land acquisition costs and interest costs paid as a result of the use of interim or bridge financing for the project during construction the amounts received from the grant will then be used to subsidize the owners as sub-grantees and developers for the costs directly associated with the development of property agency was approved for the release of dollar_figureb in payments from the grant for funding the redevelopment of property of which dollar_figurec has been paid to other predecessor entities that predated the owners leaving dollar_figured outstanding to be paid to the owners as costs directly associated with the development of property are incurred taxpayer represents that property after the redevelopment will qualify as a real_estate asset for purposes of sec_856 and that substantially_all of the other income taxpayer derives from property will be qualifying_income for purposes of sec_856 and c taxpayer also represents that substantially_all of the grant payments will be for construction of real_property within the meaning of sec_1 of the income_tax regulations at property taxpayer further represents taxpayer intends to report its allocable share of the grant payments as gross_income under sec_61 and will take its share of the grant payments into account for the taxable_year in which such income is recognizable law and analysis sec_856 provides that in order for a corporation to qualify as a reit at least percent of the corporation’s gross_income excluding gross_income from prohibited_transactions must be derived from specified sources which include dividends interest rents_from_real_property gain from the sale_or_other_disposition of stock securities and real_property not described in sec_1221 abatements and refunds of taxes on real_property income and gain derived from foreclosure_property certain commitment_fees and gain from certain_sales or other dispositions of real_estate_assets plr-132801-18 sec_856 provides that in order for a corporation to qualify as a reit at least percent of the corporation's gross_income excluding gross_income from prohibited_transactions must be derived from rents_from_real_property interest on obligations secured_by mortgages on real_property or on interests_in_real_property gain from the sale_or_other_disposition of real_property not described in sec_1221 certain dividends or distributions on and gains from the sale or disposition of shares in other reits abatements and refunds of taxes on real_property income and gain derived from foreclosure_property certain commitment_fees gain from certain_sales or other dispositions of real_estate_assets and qualified_temporary_investment_income sec_856 provides that to the extent necessary to carry out the purposes of part ii of subchapter_m of the code the secretary is authorized to determine solely for purposes of such part i whether any item_of_income or gain that does not otherwise qualify under sec_856 or c may be considered as not constituting gross_income for purposes of sec_856 or c or ii whether any item_of_income or gain that otherwise constitutes gross_income not qualifying under sec_856 or c may be considered as gross_income that qualifies under sec_856 or c sec_1_856-3 of the regulations provides that a reit that is a partner in a partnership is deemed to own its proportionate share of each asset of the partnership and will be deemed to be entitled to the income of the partnership attributable to its share the legislative_history underlying the tax treatment of reits indicates that a central concern behind the gross_income restrictions is that a reit’s gross_income should largely be composed of passive_income for example h_r rep no 86th cong 2d sess pincite 1960_2_cb_819 pincite states o ne of the principal purposes of your committee in imposing restrictions on types of income of a qualifying real_estate_investment_trust is to be sure the bulk of its income is from passive_income sources and not from the active_conduct_of_a_trade_or_business income from the grant constitutes gross_income not listed as qualifying_income under sec_856 or c taxpayer represents that property after the redevelopment will qualify as a real_estate asset for purposes of sec_856 and that substantially_all of the other income taxpayer derives from property will be qualifying_income for purposes of sec_856 and c taxpayer will earn the grant payments for developing real_property in state c in accordance with program treating income from the grant as qualifying_income does not interfere with or impede the objectives of congress in enacting sec_856 and c accordingly pursuant to sec_856 it is appropriate for the secretary to determine that income from the grant is treated as qualifying_income for purposes of sec_856 and c plr-132801-18 conclusion we hereby rule that pursuant to sec_856 taxpayer’s income attributable to receipt of grant payments is considered qualifying_income for purposes of sec_856 and c this ruling’s application is limited to the facts representations code sections and regulations cited herein except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular no opinion is expressed with regard to whether taxpayer otherwise qualifies as a reit under subchapter_m of the code additionally no opinion is expressed regarding income from a sale of an interest in the grant this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the provisions of a power_of_attorney on file we are sending a copy of this ruling letter to your authorized representative the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely andrea m hoffenson_________________ andrea m hoffenson chief branch office of associate chief_counsel financial institutions products


department of the treasury internal_revenue_service washington d c march office_of_chief_counsel number release date uil internal_revenue_service national_office field_service_advice memorandum for from subject lon b smith acting associate chief_counsel financial institutions and products this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent disclosure statement field_service_advice is chief_counsel_advice and is open to public inspection pursuant to the provisions of sec_6110 the provisions of sec_6110 require the service to remove taxpayer identifying information and provide the taxpayer with notice of intention to disclose before it is made available for public inspection sec_6110 and i sec_6110 also authorizes the service to delete information from field_service_advice that is protected from disclosure under u s c sec_552 b and c before the document is provided to the taxpayer with notice of intention to disclose only the national_office function issuing the field_service_advice is authorized to make such deletions and to make the redacted document available for public inspection accordingly the examination appeals or counsel recipient of this document may not provide a copy of this unredacted document to the taxpayer or its representative the recipient of this document may share this unredacted document only with those persons whose official tax_administration duties with respect to the case and the issues discussed in the document require inspection or disclosure of the field_service_advice legend taxpayer state a x percent year year dollar_figureaaa dollar_figurebbb dollar_figureccc dollar_figurexxx dollar_figureyyy issue whether taxpayer is required to reduce the amount of its life_insurance_reserves under sec_807 of the internal_revenue_code by ceded reinsurance in cases where the reinsured risks are ceded on a yearly renewable term yrt basis and the amount of those life_insurance_reserves is based on the net surrender values of the reinsured contracts conclusion sec_1 sec_807 provides generally that the amount of the life_insurance_reserves with respect to an insurance_or_annuity_contract is the greater of the net_surrender_value of the contract or the federally prescribed reserve amount determined in accordance with sec_807 because yrt reinsurance is used to transfer only the mortality risk or morbidity risk on the reinsured contracts taxpayer’s yrt reinsurance treaties did not reduce its liability to policyholders for payment of their net surrender values in the event of lapse and surrender accordingly for purposes of making the net_surrender_value federally prescribed reserve comparison under sec_807 taxpayer is not required to reduce the net surrender values of the reinsured contracts by ceded reinsurance taxpayer’s deduction of life_insurance_reserves under sec_807 based on the net surrender values of the reinsured contracts together with the reductions claimed in determining of premiums under sec_803 by the amounts paid_or_incurred under the yrt reinsurance treaties does not involve a double deduction of the same item within the meaning of sec_811 or c taxpayer properly characterized the change in method of applying credits for ceded reinsurance when making the net_surrender_value federally prescribed reserve comparison under sec_807 as a change in basis subject_to the 10-year ratable adjustment rule_of sec_807 facts taxpayer is a life_insurance_company within the meaning of sec_816 which is subject_to the tax imposed by sec_801 taxpayer is organized under the laws of state a and is subject_to the regulatory supervision of the state a commissioner of insurance among its various life_insurance products taxpayer issues individual whole_life_insurance policies and other permanent insurance plans for which it purchases reinsurance on a yearly renewable term yrt basis taxpayer enters into these yrt reinsurance treaties for a variety of business reasons including limiting the amount of its underwriting risk on any individual life or pair of lives improving the underwriting classification of its prospective insureds and providing more competitive premium rates for a broad range of policyholders during the taxable years involved taxpayer had in force approximately different yrt reinsurance treaties which covered approximately x percent of the aggregate face_amount of coverage under taxpayer’s individual whole life policies and other permanent insurance plans under a yrt reinsurance treaty taxpayer purchases reinsurance with respect to its mortality risk during the following policy year on a particular insurance_policy or group of policies this mortality risk is referred to as the net amount_at_risk and is equal to the excess of the face_amount of the policy over taxpayer’s policy reserve at the end of the policy year accordingly if the insured were to die during a policy year for which a yrt treaty was in effect taxpayer would be responsible for the portion of the death_benefit reflected in the existing policy reserve and the yrt reinsurer would indemnify taxpayer for the excess of the face_amount of the policy over the policy reserve the reinsurance_premium that taxpayer pays to a yrt reinsurer is based on the net amount_at_risk on the reinsured policies during the following policy year and thus is not directly tied to the gross premiums that taxpayer collects from its policyholders on the underlying plan of insurance the reinsurance premiums are due as of the first day of each month each monthly reinsurance_premium represents the annual premium due for the reinsured portion of all policies with an anniversary date during that month this reinsurance_premium is due and payable to the yrt reinsurer regardless of the premium mode of the underlying policy if a reinsured policy were to terminate at some point during the policy year the reinsurer is released from liability with respect to the net amount of risk on that policy for the remainder of the policy year thus the unearned portion of the reinsurance_premium on that policy is returned to taxpayer by way of netting this amount against the monthly reinsurance_premium otherwise payable to the reinsurer for purposes of filing its naic annual_statement taxpayer reduces the aggregate amount of its statutory reserve liabilities by a credit for ceded reinsurance representing the value of the risks that have been reinsured with other insurance_companies for policies which are reinsured on a yrt basis taxpayer calculates the credit for ceded reinsurance by first determining the policy reserve that would be required in the absence of yrt reinsurance taxpayer then repeats this reserve calculation based on its actual retention after the reinsurance transaction the difference between these calculated reserves represents the unearned portion of the term_insurance benefit based on the premium payment assumptions reserve_method valuation interest rate and mortality assumptions used in calculating the statutory_reserves taxpayer reflects this difference as the credit for ceded reinsurance which reduces the amount of taxpayer’s statutory reserve liability for the reinsured policies reported on the annual_statement for purposes of determining the amount of life_insurance_reserves under sec_807 taken into account in computing its life_insurance taxable_income taxpayer calculates a credit for ceded reinsurance with respect to policies for which it has ceded risks on a yrt basis using a similar methodology except that taxpayer substitutes the valuation assumptions used in calculating the contract’s federally prescribed reserve under sec_807 when comparing the calculated reserves before and after the yrt transaction accordingly the unearned portion of the term_insurance benefit which is taken into account as the credit for ceded reinsurance for tax purposes is based on the premium payment assumptions and reserve factors that taxpayer uses in calculating the federally prescribed reserves for the reinsured policy under sec_807 that is the tax_reserve_method the higher of the applicable_federal_interest_rate or the prevailing_state_assumed_interest_rate and the prevailing commissioners standard mortality_table rather than taxpayer’s statutory reserving assumptions as a result of this difference in computational assumptions the credits for ceded reinsurance which taxpayer applies in determining the amount of its life_insurance_reserves under sec_807 may differ from the corresponding credits for ceded reinsurance reflected on taxpayer’s annual_statement for example the credit for ceded reinsurance used in calculating taxpayer’s life_insurance_reserves under sec_807 may be less than the credit_amount shown on taxpayer’s annual_statement if taxpayer has used a mean reserving assumption when calculating its statutory_reserves that is if taxpayer assumes that the premiums for a policy are prepaid at the beginning of each policy year when calculating the amount of the policy reserves regardless of the actual payment mode on the underlying policy this is because under sec_811 taxpayer is precluded from taking deferred and uncollected premium installments into account when computing its federally prescribed reserves under sec_807 to the extent that its right to receive those unpaid premiums has not accrued under federal tax accrual rules in addition the credits for ceded reinsurance may differ because the reserve computation rules of sec_807 require taxpayer to use different reserving methods valuation interest rates or mortality assumptions when calculating the federally prescribed reserves for a contract than the corresponding assumptions used in calculating the contract’s statutory_reserves during year taxpayer reviewed its method of applying credits for ceded reinsurance when determining the amount of its life_insurance_reserves under sec_807 for those policies for which taxpayer had ceded risks on a yrt basis taxpayer recognized that its current method of taking credits for ceded reinsurance into account did not differentiate whether the amount of life_insurance_reserves for a contract were based on the net_surrender_value or the federally prescribed reserve amount under sec_807 taxpayer also recognized that the amounts taken as credits for ceded reinsurance in determining the amount of a contract’s statutory_reserves as defined in sec_809 for purposes of the annual_statement cap under sec_807 were erroneously calculated based on the prescribed reserve assumptions used in determining the contract’s federally prescribed reserve under sec_807 rather than the valuation assumptions actually used in determining the credits for ceded reinsurance shown on taxpayer’s annual_statement accordingly at the end of year taxpayer modified its method of taking credits for ceded reinsurance into account for tax purposes under the new method taxpayer continued to apply a tax-based credit for ceded reinsurance in determining the amount of federally prescribed reserves for a contract under sec_807 however taxpayer made no offset for ceded reinsurance when determining the net surrender values of the contract taxpayer also modified its method of applying credits for ceded reinsurance when calculating the amount of statutory_reserves for purposes of the annual_statement cap under sec_807 so that those credits were calculated consistent with taxpayer’s statutory reserving assumptions apart from any amounts attributable to deferred and uncollected premiums which were not included in taxable_income rather than the assumptions used in calculating the federally prescribed reserves for the contract under sec_807 the following table illustrates the impact on the amounts taken into account as life_insurance_reserves under sec_807 for contracts for which taxpayer had ceded risks on a yrt basis as a result of taxpayer’s change in method of applying credits for ceded reinsurance reserve basis gross reserve federally prescribed reserve sec_807 dollar_figureaaa dollar_figurebbb dollar_figureccc net_surrender_value statutory reserve net reserve deduction under sec_807 old reinsurance offset dollar_figurexxx new reinsurance offset dollar_figurexxx dollar_figurexxx dollar_figurexxx dollar_figurebbb-dollar_figurexxx dollar_figureyyy dollar_figurebbb in filing its federal_income_tax return for year taxpayer treated the net increase in its life_insurance_reserves under sec_807 resulting from this modification as a change in basis within the meaning of sec_807 in accordance with sec_807 the increase in the amount of taxpayer’s life_insurance_reserves under sec_807 resulting from this change in basis did not affect taxpayer’s deduction for net increases in reserves during year but rather was deducted ratably over a 10-year period beginning in year you have requested our advice whether in accordance with sec_1_801-4 of the income_tax regulations taxpayer is required to reduce its life_insurance_reserves under sec_807 with respect to contracts for which taxpayer has ceded risks on a yrt basis by ceded reinsurance regardless of whether those reserves are based on the net surrender values or federally prescribed reserves of the reinsured contracts alternatively you have requested our advice whether taxpayer’s deduction of life_insurance_reserves under sec_807 based on the net surrender values of the reinsured contracts together with the reductions claimed in determining the amount of premiums under sec_803 for the amounts paid_or_incurred under the yrt reinsurance treaties represents a prohibited double deduction of the same item under sec_811 or law and analysis sec_803 provides that life_insurance_company gross_income is the sum of i premiums ii decreases in certain reserves and iii other_amounts generally included by a taxpayer in gross_income under sec_803 the amount of premiums is calculated based on the difference between a the gross_amount_of_premiums_and_other_consideration on insurance and annuity_contracts during the taxable_year less b return_premiums and premiums and other consideration arising out of indemnity_reinsurance sec_805 authorizes a deduction with respect to the net increase in certain reserves required by sec_807 to be taken into account under sec_807 the reserves to which this treatment applies include life_insurance_reserves as defined in sec_816 sec_807 provides that other than for purposes of sec_816 relating to qualification as a life_insurance_company the amount of the life_insurance_reserve with respect to any contract is the greater of i the net_surrender_value of the contract or ii the reserve determined under sec_807 in no event may the reserve for any contract exceed the amount taken into account with respect to that contract as of that time in determining the statutory_reserves reduced by any deferred and uncollected premiums taken into account in determining the statutory_reserves sec_807 flush language see also sec_809 and sec_811 sec_807 provides that the reserve for any contract must be determined using i the tax_reserve_method applicable to that type of contract ii the greater of the applicable_federal_interest_rate or the prevailing_state_assumed_interest_rate and iii the prevailing_commissioners’_standard_tables for morbidity or mortality adjusted as appropriate to reflect the risks such as substandard risks incurred under the contract which are not otherwise taken into account sec_807 provides generally that the net_surrender_value of an insurance_or_annuity_contract is determined with regard to any penalty or charge which would be imposed on surrender but without regard to any market_value adjustment on surrender sec_807 provides that if the basis for determining any item referred to in sec_807 as of the close of any taxable_year differs from the basis for determining that item as of the close of the preceding_taxable_year then so much of the difference between i the amount of the item at the close of the taxable_year computed on the new basis and ii the amount of the item at the close of the taxable_year computed on the old basis as is attributable to contracts issued before the taxable_year is taken into account ratably over taxable years either as an increase or decrease in taxable_income beginning with the year following the year_of_change sec_811 provides that a life_insurance_company is required to compute its taxable_income using an accrual_method of accounting or to the extent permitted by treasury regulations using a combination of an accrual_method of accounting with another method_of_accounting other than the cash_receipts_and_disbursements_method to the extent not inconsistent with federal_income_tax accounting rules and other federal tax rules applicable to life_insurance_companies all computations however are to be made in a manner consistent with the manner required for purposes of the annual_statement approved by the naic sec_811 provides that in computing life_insurance_company_taxable_income a reserve for an item is not recognized unless the gross_amount_of_premiums_and_other_consideration attributable to that item are required to be included in gross_income sec_811 and c further provide that the same item may not be counted more than once for reserve purposes or deducted either directly or as an increase in reserves more than once sec_1_801-4 of the income_tax regulations provides guidance with respect to the effect of reinsurance transactions on the amounts taken into account by an insurance_company as life_insurance_reserves for purposes of the definition in former sec_801 sec_1_801-4 provides in pertinent part that reserves held by the insurance_company with respect to the net value of risks reinsured in other solvent companies whether or not authorized are to be deducted from the company’s life_insurance_reserves for example if an ordinary policy with a reserve of dollar_figure is reinsured in another solvent company on a yearly renewable term basis and the reserve on such yearly renewable term policy is dollar_figure the reinsured company shall include dollar_figure dollar_figure minus dollar_figure in determining its life_insurance_reserves sec_1_801-4 interpreted the definition of life_insurance_reserves in former sec_801 which is now contained in sec_816 in general where a provision of prior_law was carried over to the new part i of subchapter_l as added by the tax_reform_act_of_1984 pub_l_no 98th cong 2d sess congress intended the new provision to be interpreted in a manner consistent with the prior_law provision see h_rep_no pt 98th cong 2d sess s prt no part i 98th cong 2d sess although the 1984_act carries over the historical definition of life_insurance_reserves as set forth in former sec_801 it substantially changed the impact of this definition on the amounts taken into account in computing life_insurance_company_taxable_income prior to the 1984_act the amount of life_insurance_reserves for which increases and decreases were recognized in computing taxable_income was based on the amount of the reserve liabilities reported on the insurance company’s annual_statement for state regulatory reporting purposes while sec_807 still includes life_insurance_reserves as defined in sec_816 among the deductible reserve items the legislative committee reports indicate that this cross-reference was intended merely to identify the type of reserve for which increases and decreases were taken into account and was not intended to superimpose the requirement of proper computation of state law reserves for allowing increases in these reserves to be recognized see s prt no part i pincite see also staff of joint_committee on taxation general explanation of the revenue provisions of the deficit_reduction_act_of_1984 98th cong 2d sess rather under the 1984_act the amount of the life reserves for which increases and decreases are recognized for tax purposes is prescribed regardless of the method employed by the insurance_company in its computation statutory_reserves for purposes of the naic annual_statement according to the legislative committee reports the prescribed rules for computing life_insurance_reserves were intended to allow insurance_companies to recognize at least the minimum reserve that most states would require to be set_aside for the contract but no more unless the net_surrender_value for the contract was a greater amount h_rep_no pincite s prt no pincite the rules for determining the amount of life_insurance_reserves under sec_807 require the insurance_company to make a comparison between the net_surrender_value of the contract the federally prescribed reserve for the contract and the statutory_reserves for the contract with an adjustment reserves attributable to deferred and uncollected premiums one effect of this comparison is that the net_surrender_value of the contract effectively functions as a floor on the amount of the insurance company’s life_insurance_reserve deduction conversely the amount of the annual_statement reserves for a contract effectively serves as a ceiling on the amount of the insurance company’s permitted reserve deduction when risks are ceded on a yrt basis the primary insurer purchases reinsurance on its net amount of risk on a particular policy or group of policies during the following policy year hence the name yearly renewable term this plan of reinsurance covers only the mortality or morbidity risk associated with the reinsured policy that is the ceding company retains its liability to policyholders in respect of their cash surrender values and thus continues to bear any lapse risk or investment risk associated with those cash values in this respect the yrt plan of reinsurance is different from a proportional reinsurance arrangement or coinsurance of life_insurance policies under a coinsurance treaty the reinsurance coverage is provided in the same form as that of the direct policy issued to the policyholder thus the reinsurer receives a proportionate share of the gross premiums on the underlying policies net of an annual expense allowance reflecting the ceding company’s current administrative expenses on the policies and assumes a proportionate share of the policy obligations including the risk of loss due to excessive mortality or morbidity lapses cash surrenders and investment risks inherent in the contract guarantees see tiller and tiller life health and annuity reinsurance 2d ed in view of the nature of the reinsured risks covered by a yrt treaty we believe the proper way to take ceded reinsurance into account in determining taxpayer’s life_insurance_reserves under sec_807 is to reduce the amounts taken into account as the federally prescribed reserves and the statutory_reserves to the extent the mortality risks have been ceded to the reinsurers however no reduction should apply with respect to the determination of the net surrender values because as noted above the yrt treaty does not reduce the ceding company’s liability to policyholders for payment of their cash surrender values in the event of lapse or surrender accordingly if a contract’s net_surrender_value is greater than the federally prescribed reserve amount reduced by the value of the mortality risks ceded to the reinsurer taxpayer is allowed under sec_807 to take into account the net_surrender_value as the life_insurance_reserves for the contract subject_to the rule in sec_807 that this reserve may not exceed the corresponding statutory reserve for the contract reduced by any reserves attributable to deferred and uncollected premiums we have also considered whether taxpayer’s new method of taking ceded reinsurance into account might be challenged as a double deduction under the prohibitions set forth in sec_811 or c your concern is that taxpayer has taken the amounts paid_or_incurred under the yrt treaties into account as a reduction of its premiums under sec_803 without sustaining a corresponding reduction in the amount of its life_insurance_reserves under sec_807 for the reinsured contracts you have asked our advice whether the no double counting provisions of sec_811 or may be applied to limit taxpayer’s life_insurance_reserve deductions in this situation we have examined the no double counting provisions of sec_811 and c in light of your concerns but have concluded that these provisions do not apply in the current situation these rules are intended to prevent a situation such as a manipulation of the definition of the reserve items in sec_807 that would allow the taxpayer to obtain a double deduction with respect to the same risks under these particular facts we do not believe that taxpayer’s reduction of its premiums under sec_803 by the amounts paid_or_incurred under its yrt treaties together with the deduction of life_insurance_reserves under sec_807 based on the net surrender values of the reinsured contracts represents a double deduction of the same risks the nature of the yrt reinsurance plan is that the ceding company has shifted its mortality risk during the following policy year but retains any lapse risk or investment risk associated with the cash surrender values of the contracts accordingly taxpayer retains the full liability to policyholders for payment of their net surrender values in the event of lapse or surrender of the reinsured contract similarly if the insured were to die during the policy year for which the yrt reinsurance treaty was in effect taxpayer would be required to fund that portion of the death_benefit attributable to the existing policy reserve thus the amounts that taxpayer takes into account as the life_insurance_reserves for the contracts under sec_807 do not reflect the same risks as those ceded to the reinsurers under the yrt treaties stated differently taxpayer’s life_insurance_reserves under sec_807 reflect its potential liability to policyholders with respect to death_benefits and cash surrender benefits whereas taxpayer’s payments to the yrt reinsurers represent the amounts that must be paid as consideration for other insurance_companies assuming the mortality risk during the following policy year finally we agree with taxpayer’s treatment of its change in method of applying credits for ceded reinsurance as a change in basis subject_to the 10-year ratable adjustment rule_of sec_807 revrul_94_74 1994_2_cb_157 provides generally that any change in manner of computing a life_insurance_reserve under sec_807 is subject_to the change in basis rules of sec_807 thus for example revrul_94_74 indicates that a change in method of determining the life_insurance_reserves for a contract to correct for an erroneous application of the prescribed computational rules of sec_807 is subject_to the 10-year ratable adjustment rule_of sec_807 in accordance with the rule set forth in sec_1_806-4 of the regulations as regards the statutory predecessor of sec_807 there is no requirement under sec_446 to obtain the commissioner’s advance consent to make the change the only adjustments to an insurance company’s reserve computations that revrul_94_74 excludes from the change in basis rules are those required to correct mathematical or posting errors in prior year reserve computations the general explanation of the revenue provisions of the deficit_reduction_act_of_1984 blue_book prepared by the staff of the joint_committee on taxation contains the following statement which is not included in the legislative committee reports underlying the act’s revisions to the life_insurance_reserve computational rules changes in the net_surrender_value of a contract are not subject_to the 10-year spread because apart from its use as a minimum in determining the amount of life_insurance tax_reserves the net surrender is not a reserve but a current_liability staff of joint_committee on taxation general explanation of the revenue provisions of the deficit_reduction_act_of_1984 taken in isolation this statement from the blue_book might imply that taxpayer’s revised computation of the net surrender values of those contracts for which risks had been ceded on a yrt basis might have been treated as the correction of a mathematical error rather than a change in basis under sec_807 prior to year however taxpayer had established a consistent computational method of applying credits for ceded reinsurance for purposes of determining the amount of its life_insurance_reserves under sec_807 moreover the change did not involve simply the correction of a mathematical or posting error but rather represented a refinement of the measure of taxpayer’s portion of the insured risks when determining the value of each of the reserve-type items referred to in sec_807 accordingly we believe that taxpayer correctly treated the change in method of applying credits for ceded reinsurance when making the net_surrender_value federally prescribed reserve comparison under sec_807 as a change in basis subject_to the 10-year ratable adjustment rule_of sec_807 -14-


internal_revenue_service number release date index number ---------------------------- --------------------------------------- -------------------- --------------------------- legend x ---------------------------- ----------------------- 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-108581-05 date date ---------- ------------------ d state dear ------------- submitted on behalf of x requesting relief under ' b of the internal_revenue_code this responds to the letter dated date and related correspondence facts x was incorporated on d under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d but the s election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a plr-108581-05 corporation s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to ' a or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under ' a effective d x has however established reasonable_cause for not making a timely election and is entitled to relief under ' b conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes


internal_revenue_service department of the treasury index number number release date washington dc person to contact telephone number refer reply to cc dom p si 1-plr-119684-98 date date legend x date this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on date the sole shareholder of x desired that x elect s_corporation treatment for x effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply x did not file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely david r haglund senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


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 b02 plr-142763-07 date march legend x ----------------------------------------- --------------------------------------- state ------------ date ----------------- dear ------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting that the internal_revenue_service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an entity classification election the information submitted states that x is a limited_liability_company formed on date under the laws of state x inadvertently failed to file a form_8832 entity classification election electing to treat x as a corporation for federal tax purposes effective date sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides that an eligible_entity with at least two members may elect to be classified as either an association and thus a corporation under sec_301_7701-2 or as a partnership and an eligible_entity with a single owner can plr-142763-07 elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election the effective date of the election can not be more than seventy-five days prior to the date the form is filed and can not be more than twelve months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x 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 corporation for u s income_tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-142763-07 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely william p o’shea associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court perry c krape petitioner v commissioner of internal revenue respondent docket no filed date stanley p kaplan for petitioner john t lortie for respondent memorandum opinion vasquez judge respondent moves the court to enter a decision in accordance with the parties’ stipulation of settled issues stipulation filed on date petitioner objects to the motion contending that respondent’s computation of his tax_liability erroneously bars the refund_or_credit of part of an overpayment of petitioner’s taxes we must decide whether to grant respondent’s motion for the reasons stated below we shall grant respondent’s motion background at the time he filed his petition petitioner resided in ft lauderdale florida on date petitioner filed form_4868 application_for automatic_extension of time to file u s individual_income_tax_return application_for extension with his application_for extension petitioner estimated that his income_tax_liability for was dollar_figure and submitted a payment of that amount on date petitioner delinquently filed a form_1040 u s individual_income_tax_return the delinquent_return for the tax_year showing a tax due of dollar_figure on line sec_59 and sec_65 of the delinquent_return petitioner erroneously entered dollar_figure of estimated_tax payments on line sec_66 and sec_67a of the delinquent_return petitioner entered an overpayment in the amount of dollar_figure and requested a refund of that amount on date pursuant to a request from respondent petitioner paid the difference between his actual estimated_tax payments for tax_year of dollar_figure and the tax_liability he reported on his return of dollar_figure amounting to dollar_figure plus interest on date respondent mailed petitioner a notice_of_deficiency determining unpaid taxes additions to tax and penalties for tax years and on date petitioner petitioned this court for a redetermination of the above-mentioned determination on date the parties filed a stipulation of settled issues the stipulation with the court the stipulation resolved substantially_all of the issues in the notice_of_deficiency particularly the parties now agree that petitioner has an overpayment_of_tax for tax_year in the amount of dollar_figure the parties also agree that petitioner is allowed a refund of dollar_figure of that overpayment representing the additional payment petitioner made on date the parties agree that the only issue that remains for our determination is whether petitioner is barred from recovering the remaining portion of the above-mentioned overpayment amounting to dollar_figure pursuant to sec_6512 discussion petitioner objects to respondent’s motion for entry of decision in accordance with the stipulation petitioner argues that the delinquent_return forms the basis of a claim_for_refund and that petitioner is therefore entitled to a refund_or_credit of the above-mentioned overpayment of dollar_figure pursuant to sec_6512 respondent contends that the delinquent unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure return does not constitute a claim_for_refund and that the court is therefore precluded from determining a credit or refund of the overpayment pursuant to sec_6512 if a notice_of_deficiency is issued to a taxpayer for a particular taxable_period and the taxpayer files a timely petition in this court claiming an overpayment for that taxable_period that overpayment may be refunded or credited only as provided in sec_6512 sec_6512 jackson v commissioner tcmemo_2002_44 sec_301_6512-1 proced admin regs with respect to a taxpayer’s claim to an overpayment in a proceeding before this court the requirements of sec_6512 are jurisdictional 516_us_235 116_tc_31 n petitioner bears the burden of proving that his claimed overpayments are refundable under sec_6512 rule a sec_6512 limits the court’s ability to order a credit or refund of an overpayment under sec_6512 if a notice_of_deficiency is mailed within years from the time the return was filed the court may order a credit or refund of an overpayment if the overpayment was made within the 3-year period immediately preceding the date of the mailing of the notice_of_deficiency plus the period of any extension of time for filing the return if the notice_of_deficiency was not mailed within years after the filing of the return the amount of the credit or refund may not exceed the amount of tax paid during the years immediately preceding the date the notice_of_deficiency was mailed see sec_6511 and b if sec_6512 applies as respondent contends it does the court lacks jurisdiction to determine a refund_or_credit of the overpayment at issue in this case the notice_of_deficiency was mailed on date and within years after petitioner filed the delinquent_return under respondent’s theory the look-back period consisting of years plus the period of the extension of time for filing that petitioner received for his tax_return extends back to date petitioner’s overpayment was made on date and therefore according to respondent falls outside the look-back period absent application of another provision respondent argues that the court lacks jurisdiction to determine a refund_or_credit of the overpayment in issue in this case however sec_6512 allows the court to determine a credit or refund of an overpayment in some situations in which a taxpayer has actually filed a claim for a refund before the notice_of_deficiency was issued in such a case the end of the look-back period is determined not by the date the notice_of_deficiency was mailed but by the date on which the claim_for_refund was filed as it relates to the case before us sec_6512 provides that the court may order refund_or_credit of the overpayment if the claim had not been disallowed before the notice_of_deficiency was mailed or if the claim had been disallowed before the notice_of_deficiency was mailed and a timely suit_for_refund could have been commenced as of the date the notice_of_deficiency was mailed sec_6512 and ii petitioner contends that he made an administrative claim_for_refund that was either not disallowed or if it was disallowed he could have commenced a timely suit_for_refund as of the date the notice_of_deficiency was mailed if as petitioner asserts the delinquent_return constitutes a claim_for_refund the court would have jurisdiction to order a refund_or_credit of the overpayment at issue as noted supra petitioner filed the delinquent_return on date regardless of whether the 3-year or the 2-year look-back period would apply petitioner’s overpayment on date falls within the look-back period under petitioner’s theory and the court would have jurisdiction to order refund_or_credit of the overpayment under certain circumstances a properly executed income_tax return may constitute a claim_for_refund_or_credit sec_301_6402-3 proced admin regs provides a properly executed individual_income_tax_return shall constitute a claim_for_refund_or_credit if it contains a statement setting forth the amount determined as an overpayment and advising whether such amount shall be refunded to the taxpayer or shall be applied as a credit against the taxpayer’s estimated income_tax for the taxable_year immediately succeeding the taxable_year for which such return is filed the delinquent_return does not meet the above criteria for a formal refund claim with respect to the overpayment at issue the delinquent_return makes no mention of the amount the parties now agree constitutes an overpayment and does not contain any statements regarding the basis for such overpayment petitioner also argues that the delinquent_return forms the basis for an informal refund claim as petitioner correctly notes in his objection to respondent’s motion it is well established that a writing which does not qualify as a formal refund claim nevertheless may toll the period of limitations applicable to refunds if the writing is delivered to the service before the expiration of the applicable_period of limitations the writing in conjunction with its surrounding circumstances adequately notifies the service that the taxpayer is claiming a refund and the basis therefor and either the service waives the defect by considering the refund claim on its merits or the taxpayer subsequently perfects the informal refund claim by filing a formal refund claim before the service rejects the informal refund claim jackson v commissioner supra and the cases cited therein the determination of whether an informal refund claim has been made depends on the particular circumstances of the case and the relevant question is whether the commissioner knew or should have known that a refund claim was being made turco v commissioner tcmemo_1997_564 a writing may constitute an informal refund claim if it gives notice fairly advising the commissioner of the nature of the taxpayer’s claim 314_us_186 the delinquent_return does not form the basis of an informal claim_for_refund the delinquent_return shows tax due of dollar_figure although the delinquent_return erroneously sought a refund of dollar_figure--an amount less than the refund of dollar_figure to which respondent has stipulated--the return does not give any notice of the overpayment amount petitioner now seeks or of any basis for such a claim moreover the circumstances surrounding petitioner’s filing of the delinquent_return indicate that the delinquent_return does not constitute a claim_for_refund as noted supra petitioner actually made an additional payment toward the amount of tax shown on the delinquent_return approximately months after petitioner filed the delinquent_return petitioner has not shown--or even alleged--that he maintained any protest to the payment of additional tax it need hardly be noted that petitioner’s voluntary payment of more tax shortly after filing the delinquent_return tends to indicate that he was not simultaneously pursuing a claim that he had already paid too much tax the delinquent_return did not give any notice of petitioner’s alleged claim_for_refund or the basis thereof and the circumstances surrounding the filing of that return do not alter that conclusion the delinquent_return therefore does not form the basis of a claim_for_refund and sec_6512 applies accordingly the court lacks jurisdiction to determine a refund_or_credit of the overpayment at issue we reject petitioner’s sole objection to respondent’s motion and we shall grant respondent’s motion to reflect the foregoing an appropriate order and decision will be entered


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh number release date date date legend b foundation c llc d project e religion f country g university h dollar amount j dollar amount m dollar amount n dollar amount p dollar amount dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures will not be taxable description of your request b a foundation and the sole member of c operates an educational grant program called d the purpose of d is to expose participants to leadership and career opportunities nurture those skills and encourage participants to consider a career as a professional in thee community while b will primarily fund d b may request that other donors enter into their original grant agreement with the recipient in providing additional funding you plan on operating in connection with b to become an additional donor party to the grant agreement in doing so you will provide grants to the original recipient and funds would be administered and monitored under the procedures established by described below you initially plan to invite anywhere from to college students who have demonstrated an affinity towards playing a leadership role in the e community and anticipate will seriously consider a career as a e communal professional to apply for d the first_phase of the program will involve recruitment during summer some distance learning during the fall semester of the first academic year and a scholarship and other funding for participants to spend the spring semester at a university in f currently anticipated to be g in addition to being a matriculated student program participants will participate in a number of additional educational activities which you expect to provide exclusively during the spring semester in f which may include weekly educational seminars which will expose participants toe educational content leadership skills role models and career guidance educational tours single and multiple day tours off consistent with the educational theme of the program opportunities to intern at educational institutions not-for-profit_organizations or other social service agencies in f planning sessions for the camp and campus projects the duration of the first_phase of your program will last for approximately two years thereafter you will commit to funding new participants and the participant number will be determined after an assessment regarding the success of the program's first year and available_resources it is anticipated that you will recruit a new cohort each year to participate in phase i of the program in connection with the spring semester in f you will award each participant a stipend to fully subsidize the cost of the tuition to attend their university on a financial needs basis you may also make scholarship funding available at the conclusion of phase i you will invite a number of participants who you believe are likely to pursue careers as e communal professionals either as a rabbi educator social worker or not for-profit manager to apply for a fellowship to graduate school you anticipate awarding a certain number of fellowships to deserving applicants to attend graduate school phase ii will last for the duration of the graduate program in which participants are matriculated students you anticipate focusing your recruiting efforts on the senior staff at certain summer camps that have substantial e educational programming and inviting such individuals to identify potential college age staff members who would be appropriate candidates to apply to your program your staff will then send promotional materials and an application to such senior camp staff and once potential applicants are identified you will send such materials directly to such college students program staff will also visit certain summer camps that have substantial e educational programming to recruit potential program participants and will market the program directly to college age staff at such camps letter catalog number 58222y in the event that your selection process does not yield enough candidates to meet the participant numbers you may broaden your process and recruit college students directly from nominations recommendations and referrals from other sources either by seeking individuals who have a track record of service within the e community or by virtue of the fact that such individuals are already scheduled to spend the spring semester abroad at an university in f you will provide such individuals with recruitment materials and an application that needs to be completed individuals will then interview with your staff while the participants are in f for the spring semester they will receive guidance on the development of an educational project that they will be responsible for implementing during the following summer and on their college campus during the following academic year you will underwrite the cost and will provide a mentor providing guidance on the development of this project you will also underwrite a budget expected on average to equal approximately j dollars to support implementation costs such amount will be dependent upon a budget the participant will submit for approval upon successful implementation during the summer you will pay a m dollars honorarium to the participant during the second year participants in good standing would be invited to an in person multi- day educational conference in the united_states you will underwrite all travel lodging and food expenses to enable participants to attend the conference program participants are also expected to implement an educational program on their college campus or in the local community during the second year of your program in connection with such project you will underwrite the cost of and provide a mentor to provide guidance on the development of this project expected on average to equal approximately h dollars to support implementation costs such amount will be dependent upon a budget that the participant would submit for your approval upon successful completion of this project during the second year of the program you will pay a j dollars honorarium to the participant selection for participation in phase i will be based in connection with the following parameters the level of engagement in e life of the applicant the level of the interest in pursuing a career as a e communal professional aptitudes of the applicant in a career as a communal e professional academic achievements strength of the letter of reference for such applicant interview and interpersonal skills as determined by your staff to obtain a fellowship during phase ii of d the participant must demonstrate to your staff superior leadership abilities a passion to serve and work in a professional capacity in a not-for-profit organization that serves thee community and superb academic capabilities demonstrated in their coursework at their f university and at their domestic college fellowship recipients are eligible for up to three years of support or the duration of the academic program if it is longer than three years fellowship recipients must be accepted into a graduate program and remain in good standing at the academic institution where they are studying in order to continue to receive your financial support letter catalog number 58222y phase ii participants will also participate in certain distance learning and may be asked to mentor future phase i participants phase ii participants may also be invited to an educational conference held in the united_states selection for participation in phase ii will be based on the level of promise and aptitudes that the phase i participants have demonstrated towards fulfilling the program objective - pursuing a successful career as a communal professional either as a rabbi cantor educator social worker or administrator for a not-for-profit organization only individuals who were participants in phase i will be considered for phase ii staff will consider the criteria referenced above including the ability and capacity of the participant to plan and implement a quality program of e content in either a camp or campus setting the n dollars tuition subsidy that each participant will receive is intended to match the tuition cost at their university in f for the spring semester additionally on a needs basis participants are eligible to apply for additional scholarship support if they can demonstrate to you that their families would be unable to afford the costs of attending your program in f the amount of such scholarship would directly relate to the anticipated actual costs of attending spring semester and the demonstrated financial needs of the participant additionally while in f during the spring semester you will pay for the costs of the educational programming and touring that is made available exclusively to program participants you will award certain participants with a fellowship up top dollars annually for up to three years to enable fellows to attend graduate school to study to become a rabbi cantor educator social worker or not-for-profit manager such fellowship awards may cover the costs of tuition housing and living_expenses and will be subject_to your discretion you anticipate staffing an advisory committee to inform shape and advise the development and implementation of the program you will identify knowledgeable educators with expertise and experience in the subject matter that will be the focus of your program your committee may also be tapped to identify alternative locations programs from which you will recruit prospective participants committee members may also have input on the recruitment process and selection criteria your selection committee will be comprised of your staff and an outside expert consultant knowledgeable in program implementation engaged by you to support the development and implementation of your program selection committee members will be individuals with knowledge and expertise in operating educational programs for college students and may or may not comprise members of the advisory committee your selection committee will also be responsible for identifying any relationships between potential applicants and disqualified persons ensuring that individuals with any such relationship s are not invited to participate in your program during phase i officers or other c representatives will regularly communicate with participants in the program to receive feedback on how the grant monies are being spent this will include reports on all aspects of the educational programming in the united letter catalog number 58222y states and f as well as the implementation of the two related projects in connection with phase ii of the project your staff will monitor and remain in regular communication with fellowship recipients and will monitor how grant monies are being spent in connection with phase ii of d c in its sole discretion may take any and all such reasonable and appropriate steps including possible legal action to compel compliance of use of funds for their intended purpose including requiring the return of all or any portion of funds remitted and the withholding of funds not previously remitted in connection with d potential participants who are related to whether by blood or through marriage or have any direct or indirect affiliation with d staff or any of your or c's directors officers or employees will be ineligible to participate no director officer_or_employee of you or c or any other person who is involved in the process of selecting applicants will be in a position to derive a private benefit directly or indirectly if certain participants are selected over others you will pre-screen any and all non-u s applicants using the treasury department's specially designated nationals and blocked persons list son the fbi's most wanted terrorists list the state department's terrorist exclusion list the u s bureau of industry and security's denied persons list unverified list and entity list and similar lists maintained by the united nations basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - a scholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or - a prize or award subject_to the provisions of section b if the recipient of the prize or award is selected from the general_public or - to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance letter catalog number 58222y the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 b you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter enclosures notice redacted letter sincerely director exempt_organizations letter catalog number 58222y