tcmemo_2009_283 united_states tax_court david l simmons petitioner v commissioner of internal revenue respondent docket no filed date david l simmons pro_se joel d mcmahan for respondent memorandum findings_of_fact and opinion wells judge respondent determined the following deficiencies in petitioner’s federal income taxes and additions to tax for the following taxable years additions to tax under i r c year deficiency sec_6651 sec_6651 sec_6654 dollar_figure dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number we must decide the following issues whether petitioner’s gross_income must be increased by dollar_figure dollar_figure dollar_figure dollar_figure and dollar_figure for taxable years and respectively whether petitioner’s gross_income must be increased by interest and dividend income of dollar_figure dollar_figure dollar_figure and dollar_figure for taxable years and respectively whether petitioner is liable for the fraudulent_failure_to_file additions to tax pursuant to sec_6651 f for taxable years through or in the alternative whether petitioner is liable for failure_to_file additions to tax pursuant to sec_6651 for taxable years through whether petitioner is liable for the failure to pay additions to tax pursuant to sec_6651 for taxable years through whether petitioner is liable for the failure to pay estimated_tax additions to tax pursuant to sec_6654 for taxable years through 1unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code as amended for the years in issue amounts are rounded to the nearest dollar findings_of_fact none of the facts have been stipulated because petitioner refused to agree to any stipulations petitioner resided in florida at the time the petition was filed petitioner lived in florida from until petitioner moved to tennessee in the fall of and lived there until the summer of when he moved back to florida petitioner is a licensed financial adviser who sells life_insurance health insurance annuities and other personal lines of insurance including property and casualty homeowners and automobile insurance petitioner’s licenses include certified asset protection consultant certified estate adviser life_insurance agent mortgage broker series serie sec_63 and serie sec_26 to obtain series and serie sec_63 licenses petitioner was required to study the income_tax consequences of individual investment activities including the taxation of mutual funds variable_annuity products variable life_insurance products retirement plans and deferred_compensation plans beginning with his taxable_year petitioner stopped filing form sec_1040 u s individual_income_tax_return petitioner failed to file federal_income_tax returns for his taxable years through during the early 1990s petitioner became involved with joseph sweet and david swanson in the sale and promotion of unincorporated business_trust organizations ubtos petitioner continued to sell ubtos after joseph sweet and david swanson had been enjoined from promoting ubtos united_states v swanson no 04-cv-00339-eak-tgw m d fla date final judgment and permanent injunction united_states v sweet aftr 2d m d fla petitioner used ubtos to hide his own income after his client edward tonitis was found liable for fraudulent_failure_to_file additions to tax because of his use of ubtos tonitis v commissioner tcmemo_2004_60 petitioner did not maintain a personal bank account but would deposit his personal income into a bank account opened in the name of one of the ubtos asserting that the use of a ubto was a way to shelter earnings from income_taxation the ubtos that petitioner used never filed tax returns petitioner repeatedly denied to the internal_revenue_service irs that he was liable for any_tax for the years in issue in correspondence he sent to the irs petitioner offered a variety of frivolous tax-protester type arguments claiming that he was not liable for federal_income_tax that he did not have the obligation to file a tax_return and that he was not a citizen of florida even while he lived in that state petitioner also engaged in other methods to conceal his income and avoid contact with the irs on irs forms petitioner used a fraudulent social_security_number driver’s license number and tax identification_number petitioner used a general delivery address and mail drop boxes to conceal his residential location from the irs in an effort to hide assets petitioner transferred funds between his domestic ubto accounts and an offshore bank account in the principality of andorra petitioner gave sales presentations on ubtos to potential clients of his insurance_business and to other individuals urging them to form ubtos petitioner instructed each such individual to notify employers not to issue the individual a form_w-2 wage and tax statement or pay the individual in the individual’s name but rather to pay the individual in the name of the ubto in order to escape taxation petitioner was reprimanded by the state bar of florida during for the unlicensed practice of law in connection with the sale of ubtos petitioner failed to maintain or to submit to the irs for examination books_and_records of his business dealings for each of the years in issue when the irs requested that information petitioner responded that he was not under any obligation to maintain records or to provide them to the irs to reconstruct petitioner’s income for the years in issue the irs subpoenaed petitioner’s bank records using the subpoenaed information the irs prepared summaries of petitioner’s bank accounts and used the information to prepare sec_6020 substitute returns for petitioner’s taxable years through petitioner deposited to his bank accounts dollar_figure during dollar_figure during dollar_figure during dollar_figure during and dollar_figure during petitioner earned interest and dividend income of dollar_figure for dollar_figure for dollar_figure for and dollar_figure for throughout the instant proceedings petitioner made frivolous arguments such as citizens working in the private sector do not owe income_tax irs employees lack the authority to issue a notice_of_deficiency and the united_states constitution was erroneously amended to allow for an income_tax opinion generally the commissioner’s determination_of_a_deficiency is presumed correct and the taxpayer has the burden of proving it incorrect rule a 290_us_111 the court_of_appeals for the eleventh circuit to which an appeal in this case would lie requires the commissioner to introduce some minimal evidence linking the taxpayer to the alleged income-producing activity before the presumption attaches 994_f2d_1542 11th cir affg tcmemo_1991_636 we conclude that respondent has sufficiently linked petitioner to an income-producing activity petitioner testified that during the years in issue he sold insurance products to clients additionally one of petitioner’s clients testified that petitioner sold her a ubto and advised her to use the ubto to avoid paying income_tax on her personal income furthermore respondent’s revenue_agent testified that she reconstructed petitioner’s income using petitioner’s bank records therefore petitioner has the burden of proving that respondent’s deficiency determination was incorrect blohm v commissioner supra petitioner has failed to provide credible_evidence that respondent’s deficiency determinations are incorrect petitioner has presented only frivolous arguments we conclude that the ubtos were sham trusts designed to obfuscate petitioner’s obligation to pay taxes and to frustrate the collection of his tax_liabilities by the irs petitioner’s contentions are tax- protester arguments that are without merit and so trivial that they do not warrant discussion see 737_f2d_1417 5th cir we perceive no need to refute these arguments with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit accordingly we hold that petitioner has not met his burden_of_proof with respect to respondent’s deficiency 2petitioner also admitted to earning income for the years in issue in his written responses to respondent’s requests for admission 3petitioner does not contend that sec_7491 should apply to shift the burden_of_proof to respondent nor did he establish that it should apply to the instant case determinations consequently we sustain respondent’s deficiency determinations for the taxable years in issue we next turn to whether petitioner is liable for fraud additions to tax pursuant to sec_6651 for the years in issue sec_6651 provides for an addition_to_tax of percent of the amount of tax required to be shown for each month the return is late up to percent in the aggregate if the failure_to_file is due to fraud in ascertaining whether petitioner’s failure_to_file was fraudulent pursuant to sec_6651 the court considers the same elements that are considered in imposing the fraud_penalty under sec_6663 and the additions to tax pursuant to former sec_6653 102_tc_632 rossman v commissioner tcmemo_2006_128 the commissioner has the burden of production with respect to the additions to tax and the burden_of_proof with respect to fraud sec_7454 sec_7491 to carry the burden_of_proof on the fraud penalties the commissioner must show by clear_and_convincing evidence both that the taxpayer underpaid his tax for each taxable_year in issue and that at least some part of the underpayment was due to fraud dileo v commissioner 4respondent argues in the alternative that petitioner is liable for failure_to_file additions to tax pursuant to sec_6651 because we find petitioner liable for the fraud additions to tax we decline to address that issue t c affd 959_f2d_16 2d cir 81_tc_640 the commissioner need not prove the precise amount of the underpayment resulting from fraud but only that there is some underpayment and that some part of it is attributable to fraud 466_f2d_11 5th cir 465_f2d_299 7th cir affg tcmemo_1970_274 to carry that burden the commissioner may not rely on the taxpayer’s failure to meet his burden of proving error in the commissioner’s determination as to the deficiencies dileo v commissioner supra pincite 78_tc_304 53_tc_96 respondent has established clearly and convincingly that petitioner failed to report certain receipts that were includable in his gross_income for the years in issue as stated above petitioner admitted to earning income during the years in issue see supra note accordingly we conclude that the record contains clear_and_convincing evidence of petitioner’s underpayment_of_tax during each of the years in issue as to fraudulent intent fraud is established by proving that a taxpayer intended to evade tax believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such tax clayton v commissioner supra pincite the existence of fraud is a question of fact that is resolved by examining the entire record 99_tc_202 fraud is not imputed or presumed but must be established by some independent evidence of fraudulent intent id fraudulent intent may be established by circumstantial evidence and reasonable inferences drawn from the record clayton v commissioner supra pincite circumstantial evidence that indicates fraud also known as badges_of_fraud includes but is not limited to understatement of income inadequate records failure_to_file tax returns implausible or inconsistent explanations of behavior concealing assets failure to cooperate with tax authorities filing false forms failure to make estimated_tax payments dealing in cash engaging in illegal activity and attempting to conceal illegal activity 796_f2d_303 9th cir affg tcmemo_1984_601 many of the foregoing badges_of_fraud are present in the instant case petitioner failed to file returns for taxable years through petitioner failed to cooperate with respondent’s requests for books_and_records and acted to conceal assets through mail drop boxes foreign bank accounts the use of ubtos and the use of a false social_security_number and petitioner participated in a ubto tax_evasion scheme that he promoted to others even after learning that other promoters had been enjoined from similar promotions additionally in connection with his promotion of ubtos petitioner gave advice and filed tax forms in an attempt to conceal his income and that of his clients petitioner’s continued involvement in sham trusts is evidence of his fraudulent intent see rossman v commissioner supra accordingly we hold that petitioner fraudulently underpaid his federal income taxes for the years in issue and is therefore liable for the additions to tax pursuant to sec_6651 determined by respondent we next turn to the issue of whether petitioner is liable for the failure to pay additions to tax pursuant to sec_6651 sec_6651 provides for an addition_to_tax for failure to pay the amount shown as tax on a return on or before the payment due_date the addition_to_tax is percent per month with an additional percent per month for each month the failure continues up to percent id in instances where the taxpayer fails to file a return the return prepared by the commissioner pursuant to sec_6020 shall be treated as the return filed by the taxpayer for the purpose of calculating the addition_to_tax pursuant to sec_6651 sec_6651 for a return to constitute a sec_6020 return it must be subscribed it must contain sufficient information from which to compute the taxpayer’s tax_liability and the return form and any attachments must purport to be a return spurlock v commissioner tcmemo_2003_124 respondent bears the burden of production under sec_7491 and petitioner bears the burden_of_proof see 116_tc_438 the record contains a substitute return for each of the years in issue the substitute returns are subscribed and include a sec_6020 certification form_4549 income_tax examination changes and form 886-a explanation of items those forms are sufficient to compute petitioner’s tax_liabilities for the years in issue and respondent has certified that they will be treated as returns because petitioner has not paid the amounts shown we uphold respondent’s determination of the failure to pay additions to tax against petitioner pursuant to sec_6651 for the years in issue we next turn to the issue of whether petitioner is liable for the failure to pay estimated_tax additions to tax pursuant to sec_6654 taxpayers are liable for an addition_to_tax for failure to pay estimated_taxes where prepayments of tax either through withholding or by making estimated quarterly payments during the year do not equal the lesser_of percent of the tax for the current taxable_year or percent of the tax shown for the previous taxable_year if a return was filed for the previous year sec_6654 an exception applies if the tax due for the year in issue is less than dollar_figure the individual had no tax_liability for the preceding year or a waiver applies sec_6654 respondent bears the burden of production to show that the taxpayer had an estimated_tax payment obligation which includes whether a return was filed for the preceding year see sec_7491 127_tc_200 affd 521_f3d_1289 10th cir petitioner bears the burden_of_proof see higbee v commissioner supra pincite the record shows that petitioner failed to file returns for his taxable years through and he was therefore required to make estimated_tax payments equal to percent of his tax for each of the years in issue petitioner made no estimated_tax payments and has failed to show that any exception applies accordingly we uphold respondent’s determination of the failure to pay estimated_tax additions to tax against petitioner for the years in issue as noted above petitioner maintained frivolous arguments throughout the instant proceedings pursuant to sec_6673 the court is authorized to impose a penalty not in excess of dollar_figure when it appears to the court that inter alia proceedings have been instituted or maintained by the taxpayer primarily for delay or that the position of the taxpayer in such proceedings is frivolous or groundless we take this opportunity to warn petitioner that should he institute or maintain any further frivolous or groundless positions in proceedings before this court we may impose a penalty upon him pursuant to sec_6673 the court has considered all other arguments made by the parties and to the extent we have not addressed them herein we consider them moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court michael andrew bigley petitioner v commissioner of internal revenue respondent docket no filed date michael andrew bigley pro_se christopher j sheldon for respondent memorandum opinion vasquez judge respondent determined a deficiency in and additions to petitioner’s federal_income_tax as follows additions to tax_deficiency sec_6651 sec_6651 sec_6654 dollar_figure dollar_figure dollar_figure dollar_figure the deficiency includes self-employment_tax of dollar_figure the issues remaining1 for decision are whether petitioner is liable for the deficiency in his federal_income_tax and whether he is liable for a sec_6673 penalty background the facts have been deemed stipulated under rule f and are so found the stipulations with accompanying exhibits are in the notice_of_deficiency respondent determined that petitioner received interest_income of dollar_figure it is deemed stipulated that petitioner received interest_income of dollar_figure from washington mutual see infra note 3--we treat this as a concession of the dollar_figure difference by respondent petitioner admits that his interest_income is gross_income subject_to federal_income_tax petitioner is deemed to have conceded the additions to tax under sec_6651 and and a because he did not assign error to them in his petition see rule b 123_tc_213 see also meeker v commissioner tcmemo_2005_146 petitioner failed to address respondent’s self-employment_tax determination other than to assert frivolous and groundless arguments accordingly application of self-employment_tax is computational unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure under rule f respondent moved the court to issue an order requiring petitioner to show cause why the facts and evidence set forth in respondent’s proposed stipulation of facts should not be accepted as established for purposes of this case the court granted respondent’s motion and ordered petitioner to file a response in compliance with rule f although petitioner filed a response the court found it evasive and not fairly directed to respondent’s proposed stipulation of facts and as a result granted respondent’s motion incorporated herein by this reference petitioner resided in arizona when he filed his petition during petitioner was an independent business owner of ameriplan corp independent business owners are direct marketing sales representatives of ameriplan corp and sell its provider access plans ie discount medical and related_services independent business owners receive payments based on their direct sales of provider access plans and on sales generated by other independent business owners recruited for that purpose in addition independent business owners receive incentive awards eg cash prizes or discounts for meeting certain goals in petitioner received nonemployee compensation of dollar_figure and incentive awards of dollar_figure from ameriplan corp during petitioner also worked for kla-tencor corp providing consulting services in he received nonemployee compensation of dollar_figure from kla-tencor corp each corporation issued to petitioner a form 1099-misc miscellaneous income reporting the nonemployee compensation it paid him in addition ameriplan corp reported the incentive awards it paid to petitioner as other income on a form 1099-misc petitioner admits that he received the forms 1099-misc petitioner submitted to respondent a form_1040 u s individual_income_tax_return and attached corrected forms 1099-misc that reflected nonemployee compensation of zero respondent did not accept petitioner’s form_1040 as filed because he determined that it was frivolous and invalid for processing purposes respondent prepared a substitute for return for petitioner for respondent determined that petitioner received nonemployee compensation of dollar_figure and dollar_figure from kla- tencor corp and ameriplan corp respectively incentive awards of dollar_figure from ameriplan corp and interest_income of dollar_figure respondent also determined that petitioner is liable for additions to tax under sec_6651 of dollar_figure sec_6651 of dollar_figure and sec_6654 of dollar_figure that petitioner is liable for self-employment_tax of dollar_figure and that petitioner is liable for a deficiency in federal_income_tax of dollar_figure respondent further determined that petitioner is subject_to a penalty under sec_6702 with respect to the form_1040 that he submitted to respondent petitioner has sent respondent volumes of correspondence therein petitioner asserts among other arguments that compensation_for labor is not taxable according to the irs code the substitute for return meets the requirements of sec_6020 the sec_6702 penalty is not before the court see sec_6703 or the supreme court he also alleges fraudulent and criminal acts by respondent’s employees respondent represents that he advised petitioner that petitioner’s arguments were frivolous and warned petitioner the court might impose a penalty under sec_6673 at trial the court also advised petitioner that his arguments were frivolous and warned him that the court might impose a penalty under sec_6673 if he continued to assert such arguments undeterred petitioner submitted a posttrial brief in which he asserts among other arguments that his earnings are not taxable_income because earnings are not profits or gains from some federally privileged activity and therefore he is not a taxpayer as defined by sec_7701 thereafter petitioner submitted a motion to dismiss the deficiency and penalties with prejudice motion to dismiss wherein he alleges fraud by respondent and the court’s complicity therein and asserts the same frivolous arguments about his income among other arguments petitioner also filed a pretrial memorandum and six other motions with the court that contain similar frivolous and groundless arguments and allegations of fraud discussion i deficiency in federal_income_tax since petitioner has failed to introduce credible_evidence and is deemed to have stipulated receipt of the items listed on the information returns ie forms 1099-misc sec_6201 and sec_7491 do not apply see rhodes v commissioner tcmemo_2005_184 sec_61 defines gross_income as all income from whatever source derived including compensation_for services in addition sec_74 provides that the term gross_income includes amounts received as prizes_and_awards petitioner is deemed to have stipulated that he received nonemployee compensation from kla-tencor corp and ameriplan corp and that he received the incentive awards from ameriplan corp he disputes however whether those items are gross_income petitioner advances shopworn arguments characteristic of tax-protester rhetoric that has been universally rejected by this and other courts see 848_f2d_1007 9th cir affg tcmemo_1987_225 784_f2d_1006 9th cir we shall not painstakingly address petitioner’s assertions with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit 737_f2d_1417 5th cir accordingly we sustain respondent’s deficiency determination ii sec_6673 penalty sec_6673 authorizes the court to impose a penalty not to exceed dollar_figure if the taxpayer took frivolous or groundless positions in the proceeding or instituted or maintained the proceeding primarily for delay petitioner was warned by respondent and the court that his arguments were frivolous and that if he continued to advance them he could be subject_to a penalty of up to dollar_figure even after receiving these repeated warnings he continued to advance frivolous and groundless arguments in his posttrial brief and motion to dismiss we conclude that petitioner’s position was frivolous and groundless and that he instituted and maintained these proceedings primarily for delay accordingly we shall grant respondent’s motion for a penalty and require petitioner to pay a penalty to the united_states pursuant to sec_6673 of dollar_figure we also warn petitioner that we will consider imposing a larger penalty if he returns to the court and advances frivolous or groundless arguments in the future or institutes or maintains any proceeding primarily for delay to reflect the foregoing an appropriate order and decision will be entered


tax_exempt_and_government_entities_division department of the treasury internal_revenue_service te_ge eo examinations commerce street dallas texas date number release date org address vil taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe an adjustment of your organization's exempt status is necessary if you do not agree with our position you may appeal your case the enclosed publication the examination process explains how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process if you request a conference we will forward your written_statement of protest to the appeals_office and they will contact you enclosed for your convenience an envelope is if you and appeals do not agree on some or all of the issues after your appeals_conference or if you do not request an appeals_conference you may file suit in united_states tax_court the united_states court of federal claims or united_states district_court after satisfying procedural and jurisdictional requirements as described in publication letter catalog number 34801v you may also request that we refer this matter for technical_advice as explained in publication exempt_organization appeal procedures for unagreed issues ifa determination_letter is issued to you based on technical_advice no further administrative appeal is available to you within the irs on the issue that was the subject of the technical_advice if we do not hear from you within days from the date of this letter we if you accept our findings please sign and return the enclosed form_6018 consent to proposed adverse action we will then send you a final letter modifying or revoking exempt status will process your case on the basis of the recommendations shown in the report of in that event you will be required to file examination and this letter will become final federal_income_tax returns for the tax period s shown above file these returns with the ogden service_center within days from the date of this letter unless a request for an extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns you 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 you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and letter catalog number 34801v thank you for your cooperation sincerely sunita b lough director eo examinations enclosures publication publication form_6018 report of examination envelope letter catalog number 34801v form 886a department of the treasury - internal_revenue_service explanation of items name of a schedule no or exhibit year period ended under sec_501 of the internal_revenue_code_of_1986 the articles of incorporation include of was incorporated in the facts the state development’s rules regarding what association can or cannot do this includes the primary purpose of the association in providing maintenance preservation and control of the residence lots or spaces and common area with in a certain tract_of_real_property the all owners are required to be members of the community is comprised of association and pay monthly dues of dollar_figure for a single lot and dollar_figure for a double lot the organization the organization also charges dollar_figure for an emergency fund charge charges a deposit of dollar_figure for gas and water usage the association also charges a small fee to clean property when the owner fails to follow the rules as noted in the association bylaws homes the bylaws the association has the power duty and responsibility of as stated in administering and enforcing the covenants conditions restrictions easements uses limitations obligations and all other provisions set forth in the declaration the bylaws of the associations and supplements and amendments the association has the right to establish make and enforce compliance with such reasonable rules and regulations as may be necessary for the operation use and occupancy of the properties with the right to amend same from time to time the association also has the right to construct manage maintain keep in good order condition and repair all of the common property and all items of common personal_property used by the owners in the enjoyment of the common property the association provides maintenance and improvements to the common areas in the development including the office building swimming pool play areas dumpster meters the association is responsible for maintaining the common areas to ensure and roads compliance with the city a residents are responsible for the upkeep of the the association normally does not maintain the exterior of the exterior of their homes member’s property but if a member fails to keep the property clean as noted in the declaration after several warning notices the member will be charged a fee and be billed at a feasible rate for the services the swimming pool and common areas are not open to the general_public for the following reasons the general_public can only utilize the pool it they are a guest to a member the member must accompany the nonmember or if a pool pass is provided only two nonmembers allowed per pool pass the association conducts meetings to discuss the safety and repairs of the common areas the association publishes a newsletter to inform form 886-a crev service_department of the treasury - internal revenue page -1- form 886a name of - explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service members of upcoming or proposed maintenance projects and to address any concerns voiced by residents the newsletters are distributed to the members the pool and play area’s is a benefit to members only the access to the park is considered private there are no security officers or gates just a gate around the swimming pool i did not notice a sign that said private property around the pool the association does pay for a security system to monitor the office building dumpster and the swimming pool the access to the community is private one way in and one way out the association’s receipts expenses are distributed as follows at least of the gross_income of the association for any taxable_year shall consist solely of amounts received as membership dues fees or assessments from unit owner at least of the expenditures of the associations for any taxable_year shall be for the acquisition construction management maintenance and care of association_property law sec_501 of the internal_revenue_code_of_1986 provides for exemption from federal_income_tax of civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare sec_1_501_c_4_-1 of the income_tax regulations provides that an organization is primarily engaged in is operated exclusively for the promotion of social welfare if it promoting in some way the common good and general welfare of the community ie for the purposes of bringing about civic betterment and social improvements in revrul_74_17 1974_1_cb_130 jan the service held that a organization formed by the unit owners of a condominium housing project to provide for the management maintenance and care of the common areas of the project as defined by state statute with membership assessments paid_by the unit owners does not qualify for exemption under sec_501 of the code in revrul_74_99 1974_1_cb_131 jan the service held that a homeowners_association to qualify for exemption under sec_501 of the code must serve a community which bears a reasonable recognizable relationship to an area ordinarily identified as governmental it must not conduct activities directed to the exterior maintenance of private residences and the common areas or facilities it owns and maintains must be for the use and enjoyment of the general_public in 305_f2d_814 it was held that a corporation that provided housing on a cooperative basis lacked the necessary requirements of an form 886-a rev service_department of the treasury - internal revenue page -2- form 886a name of a explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service organization described in sec_501 of the code the court held the operation to be a private self-help enterprise with only an incidental benefit to the community as a whole the court also held that the organization is operated primarily for the private benefit of members and any benefits to the community are not sufficient to meet the requirement of the regulation that the organization be operated primarily for the common good and general welfare of the people of the community government’s position based on the applicable law and facts the is not operating primarily for social welfare within the meaning of sec_501 if it restricts access by the general_public to its common areas such as recreational facilities streets sidewalks and green areas is operating primarily for the mutual benefit of its members the homeowner’s association toxpaver's position i se cs th revocation of its exempt status from as organization described in sec_501 the proposed effective date of the revocation ‘a the in code internal described revenue sec_501 it exemption as an organization is obvious that the facilities and common areas maintained by the association are not open to the general_public but rather restricted to or primarily for the benefit of its members this organization does not qualify for exemption under sec_501 of the internal is not promoting social welfare within the meaning of revenue code of because it the irc regulations since you will no longer be an exempt_organization you will be required to file federal_income_tax returns on form 1120-h u s income_tax return for homeowners associations forms 1120-h should be filed for years -n and subsequent years form 886-a crev service_department of the treasury - internal revenue page -3-


o f f i c e o f t h e c h i e f c o u n s e l 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 --------------- number release date genin-124120-18 uil ---------------------- ------------------------ -------------------------------- dear i am responding to your inquiry dated date regarding your dependent_care_assistance account your letter was referred to this office for response because the internal_revenue_service irs administers the federal tax laws regarding dependent_care_assistance plans the facts concerning your inquiry are not clear from the information you provided however it appears that your employer provides employees with a dependent_care_assistance plan that permits employees to elect between taxable and nontaxable benefits and to set_aside money for dependent care expenses on a pre-tax basis through salary reduction under a sec_125 cafeteria_plan cafeteria_plan it appears that you elected to reduce your salary by dollar_figure for the plan_year but did not timely submit documentation for the dependent care expenses_incurred in to your employer’s plan as a result the plan forfeited the dollar_figure you set_aside on a pre-tax basis for dependent care expenses in accordance with the rules applicable to these plans treasury regulations provide that a cafeteria_plan can designate a period during which participants may submit expenses including a deadline for submitting expenses but the regulations do not specify the length of the period the employer plan document should specify the deadline for submitting expenses the treasury regulations also require that this period apply to all participants on a uniform and consistent basis a cafeteria_plan must operate according to its written plan or the employees’ elections between taxable and nontaxable benefits under the plan are includible in the employees’ income for the specific rules applicable to your plan you may want to request the plan document from your employer genin-124120-18 i hope this information is helpful if you have questions regarding this letter please contact me at -------------------- -------------------- ------------------ or at sincerely denise trujillo branch chief health and welfare branch office of associate chief_counsel tax exempt and government entities


internal_revenue_service number release date index number ------------------------------------- ------------------------------------ ---------------------------------- ------------------------------------------------------ legend 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-116296-14 date september x ------------------------------------------------- -------------------------------------- country date date --------------------------- ------------------ -------------------------- dear ----------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x 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 according to the information submitted x was formed under the laws of country x represents that it is a foreign eligible_entity eligible to elect to be disregarded as a separate_entity for federal tax purposes x intended to elect to be treated as a disregarded_entity for federal tax purposes effective date however x inadvertently failed to timely file form_8832 entity classification election x represents that it acted in good_faith and reasonably further x represents that the interests of the government will not be prejudiced for all taxable years affected by the election including tax years up through date by granting the relief sought law and analysis plr-116296-14 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 eligible_entity can elect its classification for federal tax purposes 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 guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise sec_301_7701-3 provides that an entity classification election or change in entity classification must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_7701-3 states in part if an eligible_entity makes an election to change its classification the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election an election by a newly formed eligible_entity that is effective on the date of formation is not considered a change for purposes of this paragraph c iv sec_301_7701-3 provides that such an election must be signed by either a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organization documents to make the election and who represents to having such authorization under penalties of perjury sec_301 c iii provides in part if an election is made to change the classification of an entity each person who was an owner on the date that any transactions under sec_301_7701-3 are deemed to occur and who is not an owner at the time the election is filed must also sign the election 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 plr-116296-14 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 the granting relief will not prejudice the interests of the government conclusion 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 entity classification election with the appropriate service_center to elect to be treated as a disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on the owner of x filing within days of this letter all required returns for all open years consistent with the requested relief being effective date these returns must include but are not limited to forms information_return of u s persons with respect to foreign disregarded entities a copy of this letter should be attached to any such returns except as specifically set forth above 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 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely laura c fields laura c fields senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------ --------------------------- ------------------------------------ - department of the treasury washington dc person to contact -------------------- id no ------------- telephone number ------------------- refer reply to cc intl br1 - plr-171482-03 date june ------- ty ------- ------------------------ legend a -------------------------------------------- country b dear ---------------- this is in response to a letter dated date requesting a ruling that a’s loss of permanent resident status did not have for one of its principal purposes the avoidance of u s taxes under subtitles a or b of the code 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 request for a ruling it is subject_to verification on examination the information submitted for consideration is substantially as set forth below the united_states for employment reasons a will return with his wife to country b where he will be subject_to tax on his worldwide income within a year of receiving this ruling on the date of a's ruling_request his net_worth exceeded the applicable_amount set forth in sec_877 citizenship an individual who expatriates within the 10-year period immediately preceding the close of the taxable_year will be taxed under sec_877 and the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and a was born in and is a citizen of country b a became a permanent resident of sec_877 generally provides that a person who loses his or her u s a former citizen whose net_worth or average tax_liability exceeds these plr-171482-03 a provide special estate and gift_tax regimes for individuals who expatriate with a principal purpose to avoid u s taxes thresholds will not be presumed to have a principal purpose of tax_avoidance if that person is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of u s citizenship for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 a c former long-term_resident whose net_worth or average tax_liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax_avoidance if that former resident is described within certain categories and submits a complete and good_faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of u s taxes under notice_98_34 1998_2_cb_29 modifying notice_97_19 1997_1_cb_394 a notice_98_34 requires that certain information be submitted with a request for a ruling that an individual’s expatriation did not have for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_98_34 because he is a resident fully liable to income_tax in country b the country in which he was born a submitted all of the information required by notice_97_19 as modified by notice_98_34 we conclude based solely on the facts submitted and the representations made that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 accordingly a will not be presumed under sec_877 as having had as one of his principal purposes for expatriating the avoidance of u s taxes we further conclude that a will not be treated under sec_877 as having had as one of his principal purposes for expatriating the avoidance of u s taxes because the information submitted clearly establishes the lack of a principal purpose to avoid taxes under subtitle a or b of the code concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition no opinion is expressed as to a’s u s tax_liability for taxable periods prior to his expatriation or for taxable periods after his expatriation under sections of the code other than sec_877 sec_2107 and sec_2501 which a obtained the ruling whether or not a is otherwise required to file a return a copy of this letter must be attached to a’s u s income_tax return for the year in except as expressly provided herein no opinion is expressed or implied plr-171482-03 the code provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 of sincerely grace fleeman senior counsel office of office of associate chief_counsel international cc ---------------------------- ---------------------------------- -------------------------------- -------------------------------------------------------------------- ---------------------------------


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 b09 plr-135032-05 date date legend decedent ----------------------------- date date trust ----------------------- ----------------- ------------------------- ------------------------------------------------------------------------------------------------- this is in response to your representative’s letter dated date and ---------------------------- ---------------------------- ------------------ ------------ ------------------------------- child child date state court dear ---------- subsequent correspondence requesting rulings regarding the income gift and generation-skipping_transfer gst tax consequences of the proposed construction of a_trust agreement facts decedent’s will provides for a number of specific bequests and further provides that the residue of the estate is to pass to trust pursuant to the terms of the will trust was divided into two shares share a and share b one for the benefit of each of grantor’s children and their children date and date are prior to date the trustee represents that there have been no additions actual or constructive to trust after date decedent executed his last will and testament on date and died on date state law allows for the adjustment of a_trust income_interest to a total return share a is for the benefit child and her children the terms that govern share after child 1’s death the entire unitrust_amount will be paid to child 1’s surviving plr-135032-05 a provide that during child 1’s life child receive sec_2 of the net_income and her children receive of the income the trustee does not have the authority to invade corpus for the benefit of any beneficiary at child 1’s death all the income is payable to child 1’s surviving issue per stirpes if child and all of her issue die before the trust terminates the entire assets of share a are to be added to the assets of share b the terms that govern share b are identical to share a except that share b is to be held for the benefit of child and his children child died on date without issue according to the terms of decedent’s will share a and share b were combined as of child 2’s death unitrust_interest as a result of the enactment of the state statute the trustee and each of the beneficiaries will petition court to grant a modification to provide that until child 1’s death the trustee will pay of a percent unitrust_amount to child and of the unitrust_amount per stirpes to child 1’s then living issue issue per stirpes upon the death of the last surviving income_beneficiary the trustee will distribute all of the remaining assets of the trust as set forth under the terms of decedent’s will rulings requested under state law will not affect the gst tax exempt status of trust under sec_26 b will not be considered a sale exchange or other_disposition of property and will not cause trust or any of the beneficiaries to realize a gain_or_loss for purposes of sec_1001 and will not cause a transfer direct or indirect of property that will be subject_to the gift_tax imposed by sec_2501 ruling taxable_distribution taxable_termination and a direct_skip in this case trust is a gst_trust because it provides for distributions to more than one generation of beneficiaries below the grantor’s generation under b a of the tax_reform_act_of_1986 and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the generation-skipping_transfer_tax provisions do not apply the trustees have requested rulings that the proposed modification of trust sec_2611 defines the term generation-skipping_transfer to include a sec_2601 imposes a tax on every generation-skipping_transfer sec_26_2601-1 provides rules for determining when a modification plr-135032-05 to any generation-skipping_transfer under a_trust as defined in sec_2652 that was irrevocable on date but only to the extent that the transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 provides that any trust in existence on date is considered an irrevocable_trust except as provided in sec_26_2601-1 or c that relate to property includible in a grantor’s gross_estate under sec_2038 and sec_2042 in the present case trust is considered to have been irrevocable on date because neither sec_2038 nor sec_2042 applies judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided for otherwise the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy sec_26_2601-1 b or c by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or sec_26_2601-1 provides that a modification of the governing sec_26_2601-1 provides that for purposes of this section a sec_26_2601-1 example illustrates the application of paragraph plr-135032-05 person who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust b in that case grantor a resident of state x established an irrevocable_trust in for the benefit of grantor’s child a and a’s issue under the terms of the trust income is payable to a for life and upon a’s death the remainder is to pass to a’s issue per stirpes in state x amends its income and principal statute to define income as a unitrust_amount of percent of the fair_market_value of the trust assets valued annually for a_trust established prior to the statute provides that the new definition of income will apply only if all the beneficiaries who have an interest in the trust consent to change within two years after the effective date of the statute the statue provides specific procedures to establish the consent of the beneficiaries a and a’s issue consent to the change in the definition of income within the time period and in accordance with the procedures prescribed by the state statute the administration of the trust in accordance with the state statute defining income to be a percent unitrust_amount will not be considered to shift any beneficial_interest in the trust therefore the trust will not be subject_to the provisions of chapter of the internal_revenue_code further under these facts no trust_beneficiary will be treated as having made a gift_for federal gift_tax purposes and neither the trust nor any beneficiary will be treated as having made a taxable_exchange for federal_income_tax purposes similarly the conclusions in this example would be the same if the beneficiaries’ consent was not required or if the change in administration of the trust occurred because the situs of the trust was changed to state x from a state whose statute does not define income as a unitrust_amount or if the situs was changed to such a state from state x will not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification furthermore the proposed modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust see sec_26_2601-1 example accordingly proposed modification under state law will not cause trust to lose its status as exempt from the gst tax ruling in property sec_61 provides that gross_income includes gains derived from dealings in the present case proposed modification of trust in accordance with state law sec_1001 provides that the gain from the sale_or_other_disposition of sec_1_1001-1 of the income_tax regulations provides that except as an exchange of property results in the realization of gain_or_loss under sec_1001 if plr-135032-05 property is the excess of the amount_realized over the adjusted_basis provided in sec_1011 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss must be recognized except as otherwise provided otherwise provided in subtitle a of the code the gain_or_loss realized from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or as loss sustained the properties exchanged are materially different 499_us_554 properties exchanged are materially different if the properties embody legal entitlements different in_kind or extent or if the properties confer different rights and powers id pincite in cottage savings the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interest in the loans id pincite in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent id pincite authority to make the conversion under a state statute is not a sale_or_exchange of a materially different interest by any beneficiary accordingly based on the facts submitted and the representations made and provided the proposed conversion meets the requirements of the applicable_state_statute we conclude that no gain_or_loss will is recognized under sec_61 or sec_1001 by trust or any beneficiary of trust as a result of the proposed modifications ruling sec_2502 provides that the payment of the gift_tax is the liability of the donor sec_2511 provides that the tax imposed by sec_2501 shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible adequate_and_full_consideration in money or money’s worth the amount by which the value of the property exceeds the value of the consideration is deemed a gift in this case the proposed modification of trust by mere exercise of the trustee's sec_2501 imposes a tax on the transfer of property by gift by an individual sec_2512 provides that where property is transferred for less than except as expressly provided herein no opinion is expressed or implied in this case because the proposed modification of trust does not change the plr-135032-05 sec_25_2511-2 provides that the gift_tax is a primary and personal liability of the donor is an excise upon his act of making the transfer is measured by the value of the property passing from the donor and attaches regardless of the fact that the identity of the donee may not then be known or ascertainable interests of the beneficiaries no transfer of property will be deemed to occur see sec_26_2601-1 example accordingly we conclude that the proposed modification of trust under state law will not cause a transfer direct or indirect of property that will be subject_to the gift_tax imposed by sec_2501 concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination provides that it may not be used or cited as precedent being sent to the taxpayer’s representative pursuant to the power_of_attorney on file with this office a copy of this letter is this ruling is directed only to the taxpayer s requesting it sec_6110 the rulings contained in this letter are based upon information and sincerely james f hogan james f hogan senior technician reviewer branch passthroughs special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number 468a ------------------------- ------------------- ------------------------------------------- --------------------------- ---------------------------------- 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 b6 plr-111502-10 date july --------------------------------- re ---------------------------------------------------------- ----------------------------------------------------- --------------------------------------------------------------------------------- legend taxpayer ----------------------------------------------------------------------------------------------------------------- parent plant location independent study ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------- ----------------------------------------------------- ------------------- --------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ---------- ----------------------------------------------------------- method commission a commission b commission c group a group b group c group d amount ga amount gb amount gc amount gd amount t ------------------------------------------------- ---------------------------------------------------- ----------------------------------------------- ---------------------------------------------------------------- -------------------------- ----------------------------------------------- ------------------------ ---------------------- --------------- ----------- ------------- ------------- --------------- plr-111502-10 year a year b year c year d year e year f year g year h year i ba fv x y p a b c d st ad fund director ------- ------- ------- ------- ------- ------- ------- ------- ------- ------------------ --------------------- ------------ -------- ----- --- --- --- --- ----------------- ----------------- ------------------------------------------ --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- dear ------------------- this letter responds to your request dated date for an initial schedule of deduction amounts pursuant to sec_468a of the internal_revenue_code and sec_1_468a-8t of the temporary income_tax regulations and for a mandatory revised schedule of ruling amounts under sec_468a you were previously granted schedules of ruling amounts most recently on date taxpayer represents the facts and information relating to its request for rulings as follows taxpayer is a wholly-owned subsidiary of parent parent files a consolidated federal_income_tax return with its affiliated corporations including taxpayer taxpayer has a direct ownership_interest of p percent in plant the estimated base cost for decommissioning plant is based on an independent study and the proposed method of decommissioning the plant is method the original operating license for plant would have expired in year g the license has been extended to year h several public_utility commissions have established or approved rates for the furnishing or sale of electricity generated by plant including commission a plr-111502-10 commission b and commission c however no public_utility commission currently specifically authorizes taxpayer to currently include decommissioning costs in taxpayer’s cost of service for ratemaking purposes therefore the taxpayer has based the request for the revised schedule of ruling amounts on the independent study the estimated cost of dollar_figureba year a dollars was used as a base cost for decommissioning the plant the estimated cost of decommissioning the plant in future dollars is dollar_figurefv it is estimated that substantial decommissioning costs will first be incurred in year b and that decommissioning will be substantially complete at the end of year c the methodology used to convert the year a dollars to future dollars was by escalating the estimated costs at an inflation rate of x percent to the year of estimated expenditure the assumed after-tax rate of return to be earned by the amount collected for decommissioning is y percent the funding_period for the fund extends through year h the termination_date of the operating license regarding the request for a schedule of deduction amounts in a prior schedule of ruling amounts issued under sec_468a of the code as in effect prior to taxpayer represented that the funding_period for the plant extends from year f through year g and the level_funding limitation period for the plant extends from year f through year g the estimated period for which the fund will be in effect is a years year f through year g the estimated_useful_life of the plant is b years year e through year g thus percentage of the total estimated costs qualifying for deduction in the schedule of ruling amounts under prior_law was c percent sec_468a as amended by the energy tax incentives act of the act publaw_109_58 119_stat_594 allows an electing taxpayer to deduct payments made to a nuclear decommissioning reserve fund sec_468a limits the amount that may be paid into the nuclear decommissioning fund in any year to the ruling_amount applicable to that year prior to the changes made by the act the deduction was limited to the lesser_of the amount included in the utility’s cost of service for ratemaking purposes or the ruling_amount generally as a result only regulated utilities could take advantage of sec_468a the act amendment of sec_468a eliminated the cost-of-service limitation accordingly decommissioning costs of an unregulated nuclear power plant may now be funded by deductible contributions to a qualified nuclear decommissioning fund sec_468a provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund the total nuclear decommissioning cost of that nuclear power plant over the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or plr-111502-10 funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate prior to the changes made by the act deductible contributions were limited to the amount necessary for an electing taxpayer to fund the plant’s post-1983 nuclear decommissioning costs determined as if decommissioning costs accrued ratably over the estimated_useful_life of the plant provided that the taxpayer elected to establish a fund in prior_law also did not allow a taxpayer electing to establish a fund later than to contribute to that fund any amount in excess of that amount necessary to fund the ratable portion of the plant’s nuclear decommissioning costs beginning in the year the fund is established sec_468a now allows a taxpayer to contribute to a nuclear decommissioning fund the entire cost of decommissioning the plant including both the pre-1984 amount that was denied under the law prior to the act as well as any amount attributable to any year after in which a taxpayer had not established a fund under sec_468a sec_468a provides that the deduction for the contribution of the previously-excluded amount is allowed ratably over the remaining useful_life of the nuclear plant sec_468a provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of a taxable_year if the payment is made on account of such taxable_year and is made within 2½ months after the close of the tax_year this section applies to payments made pursuant to either a schedule of ruling amounts or a schedule of deduction amounts sec_1_468a-1t a provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1t b of the regulations is a taxpayer that has a qualifying interest in any portion of a nuclear power plant a qualifying interest is among other things a direct ownership_interest sec_1_468a-2t b provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year the limitation on the amount of cash payments for purposes of sec_1 468a- 2t b does not apply to any special transfer permitted under sec_1_468a-8t sec_1_468a-3t a provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund plr-111502-10 sec_1_468a-3t a provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on reasonable assumptions concerning the after-tax rate of return to be earned by the amounts collected for decommissioning the total estimated cost of decommissioning the nuclear plant and the frequency of contributions to a nuclear decommissioning fund for a taxable_year under sec_1_468a-3t a the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of that section sec_1_468a-3t a provides that the taxpayer bears the burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the regulations and that it is based on reasonable assumptions that section also provides additional guidance regarding how the service will determine whether a proposed schedule of ruling amounts is based on reasonable assumptions for example if a public_utility commission established or approved the currently applicable rates for the furnishing or sale by the taxpayer of electricity from the plant the taxpayer can generally satisfy this burden_of_proof by demonstrating that the schedule of ruling amounts is calculated using the assumptions used by the public_utility commission in its most recent order in addition a taxpayer that owns an interest in a deregulated nuclear plant may submit assumptions used by a public_utility commission that formerly had regulatory jurisdiction over the plant as support for the assumptions used in calculating the taxpayer’s proposed schedule of ruling amounts with the understanding that the assumptions used by the public_utility commission may be given less weight if they are out of date or were developed in a proceeding for a different taxpayer the use of other industry standards such as the assumptions underlying the taxpayer's most recent financial assurance filing with the nrc are described by the temporary regulations as an alternative means of demonstrating that the taxpayer has calculated its proposed schedule of ruling amounts on a reasonable basis sec_1_468a-3t a further provides that consistency with financial_accounting statements is not sufficient in the absence of other supporting evidence to meet the taxpayer’s burden_of_proof sec_1_468a-3t b provides that in general the ruling_amount for any_tax year in the funding_period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3t c the funding_period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the last day of the estimated_useful_life of the nuclear power plant to which the fund relates sec_1_468a-3t c provides rules for determining the estimated_useful_life of a nuclear plant for purposes of sec_468a in general under sec_1_468a-3t c i a if the plant was included in rate base for ratemaking purposes for a period prior to plr-111502-10 date the date used in the first such ratemaking proceeding as the estimated date on which the nuclear plant will no longer be included in the taxpayer’s rate base is the end of the estimated_useful_life of the nuclear plant sec_1_468a-3t c i b provides that if the nuclear plant is not described in sec_1_468a-3t c i a the last day of the estimated_useful_life of the nuclear plant is determined as of the date the plant is placed_in_service under sec_1_468a-3t c i c any reasonable method may be used in determining the estimated_useful_life of a nuclear power plant that is not described in sec_1_468a-3t c i a sec_1_468a-3t d provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant sec_1_468a-3t d provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3t e enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive a ruling_amount for any taxable_year sec_1_468a-3t f provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3t e the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year sec_1_468a-8t a provides that under the provisions of sec_468a as described above a taxpayer may make a special transfer of cash or property to the nuclear decommissioning fund this special transfer is not subject_to the sec_468a limitation the amount of the special transfer is the present_value of the pre-2005 nonqualifying percentage of the estimated future costs of decommissioning the nuclear plant that was disallowed under sec_468a prior to the act sec_1_468a-8t a defines the pre-2005 nonqualifying percentage as equal to percent reduced by the sum of the qualifying percentage used in determining the taxpayer’s last schedule of ruling amounts for the fund under sec_468a as it existed prior to the act and the percentage transferred in any previous special transfer sec_1_468a-8t a provides that the taxpayer is not required to transfer the entire amount eligible for the special transfer in one year but must take any prior special transfers into account in calculating the pre-2005 qualifying percentage further pursuant to sec_1_468a-8t c a taxpayer making a special transfer in more than one plr-111502-10 year must request a new schedule of deduction amounts in connection with each special transfer sec_1_468a-8t b provides that the deduction for the special transfer is allowed ratably over the remaining useful_life of the nuclear plant under sec_1 468a- 8t b iii the deduction for property contributed in a special transfer is limited to the lesser_of the fair_market_value of the property or the taxpayer’s basis in the property under sec_1_468a-8t b the taxpayer recognizes no gain_or_loss on the special transfer of property the taxpayer’s basis in the fund is not increased by reason of the special transfer of property and the fund’s basis in the property transferred in the special transfer is the same as the transferee’s basis in that property immediately prior to the special transfer sec_1_468a-8t c provides that taxpayer may not make a special transfer to a qualified nuclear decommissioning fund unless the taxpayer requests from the irs a schedule of deduction amounts in connection with such transfer a request for a schedule of deduction amounts may be made in connection with a request for a schedule of ruling amounts but in such case the calculations for both the schedule of ruling amounts and the schedule of deduction amounts must be separately_stated as stated above prior to the changes made by the act deductible contributions were limited to the lesser_of the amount necessary to fund the plant’s post-1983 nuclear decommissioning costs or the amount necessary to fund the plant’s decommissioning costs for that portion of the plant’s estimated_useful_life for which a fund had been established under that prior_law taxpayer was allowed to contribute c percent of the amounts necessary to fully decommission its share of the plant sec_468a allows a taxpayer to contribute to the nuclear decommissioning fund the pre- amount that was denied under the law prior to the act thus taxpayer is able to contribute the additional d percent of the amounts necessary to decommission its ownership share of plant we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we conclude that the taxpayer may make a special transfer of dollar_figurest in year i and may ratably deduct the amount contributed for the year i through year g tax years as set forth below schedule of deduction amounts year each year year i - year g deduction amount dollar_figuread the special transfer amount stated above is the maximum amount permitted to be transferred to the fund under sec_468a if taxpayer transfers a lesser amount to plr-111502-10 the fund the taxpayer may deduct that lesser amount ratably over the period of years described above further in the event that taxpayer transfers a lesser amount for year i in order to make an additional special transfer in a later year including a special transfer of the difference between the special transfer amount stated above and the lesser amount transferred in year i taxpayer must request a new schedule of deduction amounts and in that request must take the year i transfer into account and recalculate the pre-2005 qualifying percentage in such request we note that if taxpayer elects to make a special transfer of property for all or a portion of this special transfer the amount of the deduction is the lesser_of the fair_market_value of the property transferred or the basis of the property in the hands of the taxpayer immediately prior to the transfer in either event the deduction of the taxpayer with respect to the property is limited to the taxpayer’s basis in the property we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in sec_468a and the regulations thereunder based solely upon these representations of the facts we reach the following conclusions pursuant to sec_1_468a-3t a taxpayer has met its burden of demonstrating that the proposed schedule of ruling amounts is consistent with the principles of the code and regulations and is based on reasonable assumptions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1t b of the regulations taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3t d of the regulations the proposed schedule of ruling amounts was derived by following the assumptions contained in an independent decommissioning study that taxpayer has represented is a standard type study used in the industry based on that representation taxpayer has demonstrated pursuant to sec_1_468a-3t a that the proposed schedule of ruling amounts is based on reasonable assumptions and is consistent with the principles of sec_468a and the regulations thereunder the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the ruling_amount applicable to the fund as set forth under sec_1_468a-2t b of the regulations based solely on the determinations above we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code plr-111502-10 we have approved the following revised schedule of ruling amounts the mandatory review date for this matter remains the same approved schedule of ruling amounts year group a group b group c group d total amount ga amount gb amount gc amount gd amount t each year year a - year d if any of the events described in sec_1_468a-3t f occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above specifically no determination is made whether the independent decommissioning study conforms to industry standards and practices this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides 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 representatives we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7t a a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch passthroughs special industries