internal_revenue_service department of the treasury washington dc index number number release date person to contact telephone number refer reply to cc dom corp - plr-106932-99 date date re distributing controlled subsidiary shareholder a shareholder b shareholder c shareholder d state a date a business a business b a b c d e f g h i j k l m n o dear this letter is in reply to your letter dated date requesting rulings as to the federal_income_tax consequences of a proposed transaction additional information was submitted in letters dated june july september and date the information submitted for consideration is summarized below distributing is an accrual basis state a corporation and the common parent of a affiliated_group_of_corporations filing a consolidated federal_income_tax return distributing is indirectly engaged through its subsidiaries in various businesses including business a and business b distributing has outstanding a shares of voting common_stock which is owned by shareholder a d shareholder b e and shareholder c d distributing has outstanding b shares of voting preferred_stock and c shares of nonvoting preferred_stock which is owned by shareholder d distributing wholly owns controlled a state a corporation which is engaged in business a distributing owns all of the outstanding voting and nonvoting common_stock of subsidiary a state a corporation which is directly engaged in business a distributing also owns f of subsidiary’s outstanding nonvoting preferred_stock and siblings of shareholder d own the remaining n financial information has been received which indicates that distributing through subsidiary and controlled have each had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years serious fundamental differences of opinion have arisen between shareholder a and shareholder b concerning the operations and overall objectives of the business a activities conducted by subsidiary and controlled shareholder a who has a conservative management style manages the business a activities of subsidiary shareholder b who has a more risk taking management style manages the business a activities of controlled the taxpayers believe that the business a activities of subsidiary and controlled should be separated to avoid further conflicts arising from shareholder a and shareholder b’s different management styles and business philosophies accordingly the taxpayers have completed and will complete the following steps of a proposed transaction i ii subsidiary has distributed residential_real_property real_property to distributing with an adjusted_basis and fair_market_value of dollar_figureh distributing has transferred the following assets to controlled cash in the amount of dollar_figurei a promissory note note payable between distributing payor and controlled payee in the amount of dollar_figurej bearing interest at the rate of o per annum and due on date a real_property notes receivable and accrued interest receivable from shareholder b in the amount of dollar_figurek and dollar_figurel respectively and advances payable to distributing in the amount of dollar_figurem these transfers were made to equalize the fair_market_value of the stock of controlled with the fair_market_value of the shares of distributing common_stock owned by shareholder b prior to the distribution iii distributing will distribute all the outstanding controlled stock to shareholder b in exchange for all of shareholder b’s distributing stock no fractional shares of controlled stock will be issued in the distribution the following representations have been made with respect to the steps described in subparagraphs ii and iii above a the fair_market_value of the controlled stock to be received by shareholder b will be approximately equal to the fair_market_value of the distributing stock surrendered by shareholder b in the exchange b no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation c d e f g the five years of financial information submitted on behalf of subsidiary and controlled is representative of each corporation’s present operations and with regard to each corporation there have been no substantial operational changes since the date of the last financial statements submitted immediately after the distribution at least of the fair_market_value of the gross assets of distributing through subsidiary will consist of the stock and securities of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 of the internal_revenue_code following the distribution distributing through subsidiary and controlled will each continue the active_conduct of business a independently and with its separate employees the distribution of the stock of controlled is carried out for the following corporate business_purpose to avoid further conflicts arising from shareholder a and shareholder b’s different management styles and business philosophies the distribution of the stock of controlled is motivated in whole or substantial part by this corporate business_purpose there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in either distributing or controlled after the transaction there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business no liabilities will be assumed in the transaction and no assets are being transferred subject_to liabilities no property is being transferred between distributing and controlled in which an investment_tax_credit determined under sec_46 of the code has been or will be claimed with respect to any of such property h i j k l no income items such as accounts_receivable or any items resulting from a sale exchange or disposition that would have resulted in income to distributing or any items of expense will be transferred to controlled m there are no continuing planned or intended transactions between distributing and controlled following the distribution either directly or indirectly other than the continuing indebtedness described in note above n immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_32_irb_6 and as currently in effect sec_1_1502-13 as published by t d further distributing’s excess_loss_account with respect to the controlled stock will be included in income immediately before the distribution see sec_1_1502-19 o payments made in connection with all continuing transactions if any between the distributing and controlled corporations will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length p no two parties to the transaction are investment companies as defined in a f iii and iv q no distributing shareholder or shareholders will hold immediately after the distribution disqualified_stock with the meaning of sec_355 which constitutes a or greater interest in distributing or controlled r the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing or more of the total value of all classes of stock of either distributing or controlled based solely on the information submitted and on the representations set forth above we hold as follows the transfer by distributing to controlled of assets in exchange for controlled stock as described above followed by the distribution of controlled stock to shareholder b in exchange for all of his stock in distributing will constitute a reorganization within the meaning of sec_368 distributing and controlled are each a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized to distributing upon the transfer of assets to controlled in exchange for controlled stock sec_361 no gain_or_loss will be recognized by controlled on the receipt of the assets from distributing in constructive exchange for additional shares of controlled stock sec_1032 the basis of the assets received by controlled will be the same as the basis of such assets in the hands of distributing immediately prior to the transaction sec_362 the holding_period of each distributing asset received by controlled will include the period during which that asset was held by distributing sec_1223 no gain_or_loss will be recognized by distributing upon the distribution of all of the controlled stock to shareholder b in exchange for all of his stock in distributing as described above sec_361 no gain_or_loss will be recognized by and no amount will be included in the income of shareholder b upon receipt of the controlled stock sec_355 the basis of the controlled stock in the hands of shareholder b will be the same as the basis of the distributing stock exchange therefor sec_358 the holding_period of the controlled stock received by shareholder b will include the holding_period of the distributing stock exchanged therefor provided that the distributing stock is held as a capital_asset on the date of the distribution sec_1223 as provided in h proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 of the income_tax regulations subsidiary will recognize gain upon the distribution of real_property to distributing under sec_311 this gain will be taken into account when real_property leaves the distributing group upon the distribution of the controlled stock to shareholder b as described in iii above sec_1 f example a and c the basis of real_property will be the fair_market_value at the time it is distributed from subsidiary to distributing see sec_301 and sec_1_1502-13 example a no opinion is expressed about the tax treatment of the transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings this ruling is directed only to the taxpayer who requested it a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated pursuant to the power_of_attorney on file in this office a copy of this letter has been sent to your authorized representative sincerely yours assistant chief_counsel corporate by __________________________ mark s jennings senior technician reviewer branch


acknowledged significant advice may be disseminated office_of_chief_counsel internal_revenue_service memorandum cc dom it a wta-n-113036-97 rmweber acknowledged sca date sep to national director submission processing t s from assistant chief_counsel income_tax and accounting cc dom it a subject authority to deny employer identification numbers this is in response to your request for assistance regarding the service’s authority to deny employer identification numbers eins to certain taxpayers disclosure statement unless specifically marked acknowledged significant advice may be disseminated above this memorandum is not to be circulated or disseminated except as provided in paragraph v b of notice n this document may contain confidential information subject_to the attorney-client and deliberative_process privileges therefore this document shall not be disclosed beyond the office or individual s who originated the question discussed herein and are working the matter with the requisite need to know in no event shall it be disclosed to taxpayers or their representatives issue whether the service may refuse to issue an ein to a_trust that appears to be a potentially abusive trust as described in notice conclusion the service should not refuse to issue an ein to a_trust solely because the trust appears to be a potentially abusive trust under notice_97_24 however the service has the authority to refuse to issue an ein to any taxpayer if the service determines that the taxpayer has not fully or correctly completed the form ss-4 thus in the case of a potentially abusive trust the service may refuse to issue an ein or withdraw an ein issued under the tele-tin procedures if the service does not receive the requisite form ss-4 or the form ss-4 is submitted but is incorrect or incomplete facts the materials we reviewed indicate that certain taxpayers establish trusts that they describe as pure private non- associated common_law unincorporated business organization trusts pure trusts pure trust organizations business trusts unincorporated business organizations unincorporated business trusts and various combinations of these terms collectively referred to as ubo’s or abusive trusts these and similar trust arrangements have been identified as abusive in notice_97_24 because the arrangements purport to reduce or eliminate federal taxes in ways that are not permitted by federal tax laws the circumstances you describe further indicate that trustees for potentially abusive trusts primarily request eins for these entities through the tele-tin process some trustees request blocks of eins for numerous trusts certain service centers have delayed processing these requests pending headquarters’ advice regarding whether a request for an ein should be denied if an ein applicant claims that the entity is a ubo or is identified as a promoter of abusive trusts the materials we reviewed also illustrate that taxpayers involved in potentially abusive trust arrangements are sending numerous letters to service centers challenging the filing_requirements in cp575 ein notification letters the cp575 letter informs the taxpayer of the new ein and the filing requirement associated with that ein taxpayers are challenging the accuracy of the filing requirement claiming that their the rationale for denying a request for an ein as we understand it is two-fold issuing an ein could be viewed as service approval of the taxpayer’s choice of entity and filing obligation or lack thereof and from a compliance stand point denying the ein may stop these trusts from operating in the first place depending on an entity’s classification it may be required to file a form_1041 u s income_tax return for estates and trusts a form_1120 u s income_tax return for corporations or a form_1065 u s income_tax return for partnerships we understand that the filing requirement is input on the master_file at the time the ein is issued this information allows the service to send computerized notices to taxpayers who do not timely file the identified form particular trusts are not properly classified as trusts partnerships or corporations consequently the taxpayers are demanding that the entity filing requirement listed on the cp575 letter be deleted from their accounts certain taxpayers have made multiple demands the letters fail to mention whether or how the taxpayers or trustees intend to report the trusts’ income discussion sec_6011 provides in part that every person required to make a return or statement shall include therein the information required by the forms or regulations sec_6109 provides that when required by regulations prescribed by the secretary any person required under the authority of title_26 to make a return statement or other document must include in the return statement or other document the identifying number as may be prescribed for securing the proper identification of such person sec_6109 provides that for purposes of sec_6109 the secretary is authorized to require the information as may be necessary to assign an identifying number to any person sec_301_6109-1 and d of the regulations on procedure and administration require that nonindividuals including trusts partnerships or corporations required to furnish a taxpayer identifying number and certain individuals required to furnish a taxpayer identifying number use an ein sec_301_6109-1 of the regulations provides that if a_trust does not have a taxpayer_identification_number tin and the trustee furnishes the name and tin of the grantor or other person treated as the owner of the trust and the address of the trust to all payors pursuant to b i a the trustee need not obtain a tin for the trust until either a the first taxable_year of the trust in which all of the trust is no longer owned by the grantor or another person or b until the first taxable_year of the trust for which the trustee no longer reports pursuant to b i a if the trustee has not already obtained a tin for the trust the trustee must obtain an ein for the trust in order to report pursuant to a b i b or b i sec_301_6109-1 of the regulations provides that any person required to furnish an ein must apply for one if not done so previously on form ss-4 the form ss-4 together with any supplementary statement must be prepared and filed in accordance with the form accompanying instructions and relevant regulations and must set forth fully and clearly the requested data sec_301_7701-12 of the regulations defines an ein to mean a taxpayer identifying number of an individual or other person whether or not an employer which is assigned pursuant to sec_6011 or corresponding provisions of prior_law relating to employment_taxes or pursuant to sec_6109 and in which nine digits are separated by a hyphen as follows sec_6109 provides the service with broad authority to prescribe rules for using and assigning tins pursuant to this authority the service has published regulations providing that an ein is the required tin for certain individuals and nonindividuals including trusts partnerships and corporations see sec_301_6109-1 and d and a i of the regulations the regulations require a taxpayer to apply for an ein by filing a form ss-4 application_for employer_identification_number under the tele-tin process taxpayers are permitted to apply for an ein over the telephone and subsequently file a form ss-4 although sec_6109 does not preclude the service from refusing to issue an ein we recommend against taking such action in the case of potentially abusive trusts except in very limited circumstances first denying the ein prevents its use as a compliance tool the legislative_history indicates that sec_6109 was designed to improve enforcement and collection of internal revenue taxes by facilitating the expanded use of automatic data processing equipment by the internal_revenue_service and by enabling the service to match information returns filed with tax returns s rep no 87th cong 1st sess 1961_2_cb_475 taxpayer account numbers were deemed basic to a satisfactory identification system because use of such numbers would enable the service to develop a single file containing information regarding all of a taxpayer's tax transactions id thus the legislative_history of sec_6109 demonstrates that the use of tins was intended to enable the service to establish accurate taxpayer accounts this in turn enables the service to more effectively review all of a taxpayer's tax transactions and to verify a taxpayer's compliance with federal tax law depending on the method of reporting used by a trustee a grantor trust’s tin is either an ein or the social_security_number of the grantor or owner see sec_301_6109-1 of the regulations and the rules under subchapter_j of chapter accordingly eins should be issued in the case of potentially abusive trusts for precisely the reason that service centers seek to deny the numbers ie to enable the service to improve taxpayer compliance second at the time the taxpayer applies for an ein it is unlikely that the service has sufficient information to determine whether the taxpayer will use the trust in an abusive manner as discussed above most taxpayers involved in potentially abusive trusts apply for an ein through the tele-tin process as we understand that process the telephone analyst lacks the resources and training to determine whether the taxpayer has properly classified the entity or whether the caller is a promoter of abusive trusts further in some cases the service cannot determine if the trust is abusive until after it begins operations these recommendations should not be viewed as limiting the service’s authority to deny an ein if the ss-4 is incorrect or incomplete the service uses the form ss-4 to collect the information it deems necessary to assign an ein pursuant to sec_6011 and sec_6109 and the regulations thereunder to obtain an ein the taxpayer must fully and correctly provide all the data requested on the form ss-4 in the tele-tin process an ein is temporarily assigned over the telephone pending a properly filed form ss-4 if the taxpayer fails to fully or correctly complete the form ss-4 the service has the authority to deny the taxpayer's request for an ein in conclusion we believe the service should not refuse to issue an ein to a_trust solely because the trust appears to be a potentially abusive trust under notice_97_24 however the service has the authority to refuse to issue an ein to any taxpayer if the service determines that the taxpayer has not fully or correctly completed the form ss-4 thus in the case of a potentially abusive trust the service may refuse to issue an ein or withdraw an ein issued under the tele-tin procedures if the service does not receive the requisite form ss-4 or the form ss-4 is submitted but is incorrect or incomplete in addition to the question of the service's authority to deny a request for an ein the materials we reviewed raise two other issues regarding the process of applying for an ein what is the proper filing requirement for a ubo and whether the cp575 is legally and technically correct the first issue is currently under study in the office of the assistant chief_counsel passthroughs and special industries with regard to the second issue we recommend that all cp575 notices contain the same language and that headquarters approve and or develop this language we offer whatever assistance your office deems necessary to ensure the technical and legal accuracy of the cp575 we hope you find this information helpful if you need further information please contact rose weber pincite0 jody j brewster by ____ s _________________ rochelle l hodes assistant to the branch chief


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 fip b02 plr-159184-05 date date ------- -------------------------- -------------------------------------- ----------------------------- ------------- ----------------- legend trust fund ---------------------------------------------------- state v w x y z zz index dear ------------- ----------------------- --- --- ---- -- ----------------------------- -------------------------------------------------------- -------------------------------------------------------- this responds to the request dated date and supplemental plr-159184-05 correspondence dated date date date and date submitted by your authorized representative on behalf of fund fund requests that the internal_revenue_service rule that income and gain arising from the commodities-linked notes described in this letter will constitute qualifying_income to fund under sec_851 of the internal_revenue_code_of_1986 as amended the code facts fund is organized as a series of a business_trust trust under the laws of state trust is registered as an open-end investment_company under the investment_company act of u s c 80a-1 et seq as amended the act fund elects to be taxed as a regulated_investment_company ric under sec_851 of the code fund intends to invest in commodities-linked notes having the terms and conditions of the following two notes notes the first note note will be issued to fund at par_value of dollar_figurev its payout formula will be determined with reference to index its term will be one year and one day fund as holder of the note has the right to put the note to the issuer for redemption at any time before maturity in addition if on any day the index falls to a level that is equal to or more than w below the beginning index value the note will knockout and automatically redeem based on the closing index value of the next day the repayment obligation upon early redemption knockout or at maturity equals the face_amount of the note plus or minus the following adjustment to calculate the adjustment the face_amount of the note is multiplied by a a leverage factor of x and by b the percentage increase or decrease of index over the applicable_period the total is then adjusted to account for a coupon amount calculated at a y rate times the face_amount of the note for an annual fee amount of z basis points of the notional value leveraged face_amount of the note and for the reversal of an interest factor included in index the second note will be issued to fund at par_value of dollar_figurev its payout formula will be determined with reference to the performance of a specified basket of six month futures contracts with respect to all of the commodities in index with weightings of the different commodities similar to the weightings in index its term will be for six months fund as holder of the note has the right to put the note to the issuer at the calculated redemption price at any time before maturity in addition the repayment obligation upon early redemption knockout or at maturity is the greater of zz of the issue_price of the note and the face_amount of the note less an annual fee amount of z basis points of the notional value leveraged face_amount of the note the reversal of an interest factor included in the index plus a coupon amount calculated at a y rate times the face_amount of the note plus an amount calculated by multiplying a the face_amount of the note by b a leverage factor of x by c the percentage increase or fund makes the following representations with respect to these two notes the issuer of the notes will receive payment in full of the purchase_price of plr-159184-05 decrease of the value of the specified basket of commodities futures over the applicable_period the notes substantially contemporaneously with the delivery of the notes issuer of the notes in addition to the purchase_price paid for the notes whether as margin settlement payment or otherwise during the life of the notes or at maturity to-market margining requirements of the commodities exchange act u s c as amended cea and delivery or option on such a contract subject_to the cea the issuer of the notes is not subject by the terms of the instrument to mark- the notes are not marketed as a contract of sale of a commodity for future fund while holding the notes will not be required to make any payment to the law and analysis sec_851 of the code provides that a corporation shall not be considered a ric for any taxable_year unless it meets an income test the qualifying_income requirement under this test at least percent of its gross_income must be derived from certain enumerated sources sec_851 defines qualifying_income in relevant part as- dividends interest payments_with_respect_to_securities_loans as defined in sec_512 and gains from the sale_or_other_disposition of stock_or_securities as defined in sec_2 of the act or foreign_currencies or other income including but not limited to gains from options futures or forward contracts derived with respect to the ric’s business of investing in such stock securities or currencies sec_2 of the act defines the term security as- any note stock treasury_stock security future bond debenture evidence_of_indebtedness certificate of interest or participation in any profit-sharing agreement collateral-trust certificate preorganization certificate or subscription transferable share investment contract voting-trust certificate certificate of deposit for a security fractional undivided_interest in oil gas or other mineral rights any put call straddle option or privilege on any security including a certificate of deposit or on any group or index of securities including any interest therein or based on the value thereof or any put call straddle option or privilege entered into on a plr-159184-05 national securities exchange relating to foreign_currency or in general any interest or instrument commonly known as a security or any certificate of interest or participation in temporary or interim certificate for receipt for guarantee of or warrant or right to subscribe to or purchase any of the foregoing sec_2 of the cea provides that the cea is not applicable to a hybrid instrument that is predominantly a security sec_2 of the cea provides that a hybrid instrument shall be considered to be predominantly a security if- a the issuer of the hybrid instrument receives payment in full of the purchase_price of the hybrid instrument substantially contemporaneously with the delivery of the hybrid instrument b the purchaser or holder of the hybrid instrument is not required to make any payment to the issuer in addition to the purchase_price paid under subparagraph a whether as margin settlement payment or otherwise during the life of the hybrid instrument or at maturity c the issuer of the hybrid instrument is not subject by the terms of the instrument to mark-to-market margining requirements and d the hybrid instrument is not marketed as a contract of sale of a commodity for future delivery or option on such a contract subject_to the cea sec_2 of the cea provides in part that for purposes of sec_2 of the cea mark-to market margining requirements do not include the obligation of an issuer of a secured debt_instrument to increase the amount of collateral held in pledge for the benefit of the purchaser of the secured debt_instrument to secure the repayment obligations of the issuer under the secured debt_instrument conclusion based on the facts as represented we rule that income and gain arising from the notes constitute qualifying_income to fund under sec_851 of the code sincerely susan thompson baker susan thompson baker assistant to the branch chief branch office of the associate chief_counsel financial institutions products


internal_revenue_service number release date index number ------------------------------------ --------------------------------------------- ------------------------------ ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-127263-13 date date legend decedent ---------------------------------------------------------------- --------------------------------------------------- spouse ------------------------------------------------------ ------------------------------ will ------------------------------------------------------------------------ trust ---------------------------------------------------- ----------------------------------------- trust p ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ trust r -------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ trust ------------------------------------------------------------- --------------------------------------------------------------------------- trust ------------------------------------------------------------- --------------------------------------------------------------------------- x ---------------------------------------------------- ------------------ plr-127263-13 state state statute date date date date --------- -------------- ------------------------------------------------------------------- -------------------- -------------------------- -------------------------- ------------------------ dear ------------------- this letter responds to a letter dated date submitted by your personal representative and subsequent correspondence requesting rulings on the federal income and gift_tax consequences of the proposed division of an irrevocable_trust trust the facts submitted and the representations made are as follows decedent died on date pursuant to article iii of will trust was established for the benefit of spouse during spouse’s lifetime spouse is the trustee of trust and trust is governed by the laws of state spouse as executrix of decedent’s estate listed trust on part a of schedule m of form_706 united_states estate and generation-skipping tax_return and is deemed to have made the election to treat the trust property as qualified_terminable_interest_property qtip article iii paragraph b sec_1 of will provides that the trustee of trust must pay the net_income of trust in quarterly or more frequent installments to spouse during her lifetime article iii paragraph a provides that trust terminates upon the date of death of spouse trust does not provide for distributions of principal during spouse’s lifetime at spouse’s death the assets of trust are to be divided equally between trust p and trust r article ix of will grants the trustee of trust uncontrolled discretion to exercise all rights powers and authorities conferred under applicable state law in addition article ix provides that if future changes in the law expand trustee powers the trustee shall have the expanded powers under article ix of will the trustee of trust will have no authority to restrict spouse’s enjoyment of the trust income in a manner inconsistent with qualified_terminable_interest_property as presently defined in sec_2056 of the code plr-127263-13 spouse has represented that neither state law nor the provisions of trust will be interpreted as granting the trustee of trust or spouse the power to make distributions of trust’s principal during the life of spouse on date shares of x were transferred to trust x is a state corporation that elected to be taxed as a subchapter_s_corporation on date spouse as beneficiary of trust filed an election to treat trust as a qualified_subchapter_s_trust qsst effective date a date that is within two years of date statute provides that the trustee may unless specifically prohibited by the terms of the instrument establishing the trust divide a_trust into two or more separate trusts without a judicial proceeding if the result does not impair the rights of any beneficiary or adversely affect achievement of the purpose of the original trust spouse as trustee of trust proposes to exercise her trustee powers under the terms of trust and statute to divide trust into two new equal trusts trust and trust the assets of trust will be divided pro-rata between trust and trust spouse will continue as trustee of both trusts and will receive all of the distributions of income from each new trust during her lifetime after the death of spouse the assets of trust will be distributed to trust p and the assets of trust will be distributed to trust r spouse represents that the terms of trust and trust will be identical to those of trust except that the beneficiaries will differ as described above the trustee has requested the following rulings the division of trust into trust and trust will not cause any of those trusts to realize gain_or_loss under sec_61 or sec_1001 the adjusted bases of the assets received by trust and trust from trust will be the same as the adjusted bases of the assets held by trust immediately prior to the division pursuant to sec_1015 trust and trust will qualify as qssts as defined by sec_1361 the division of trust into two new trusts trust and trust will not constitute a disposition of all or any part of qualified_terminable_interest_property as defined in sec_2519 the division of trust into trust and trust will not cause any beneficiary of trust trust or trust to have made a gift under sec_2501 ruling sec_61 of the code provides that gross_income includes all income from whatever source derived sec_61 specifically includes gains derived from dealings in property plr-127263-13 sec_1001 provides that the gain realized from the sale_or_other_disposition of property is the excess of the amount_realized over the adjusted_basis provided in sec_1011 for determining gain and the loss realized is the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized under sec_1001 the entire amount of gain_or_loss realized must be recognized except as otherwise provided sec_1_1001-1 of the income_tax regulations provides that except as 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 499_us_554 concerns the issue of when a sale_or_exchange has taken place that results in the realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender's interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution the supreme court of the united_states in cottage savings u s pincite concluded that sec_1_1001-1 reasonably interprets sec_1001 and stated that an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different 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 cottage savings u s pincite 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 interests in the loans cottage savings u s pincite based upon the information submitted and representations made we conclude that the legal entitlements and interests of the beneficiaries of trust and trust will not differ materially in_kind or extent from their interests in trust accordingly the division of trust into trust and trust does not result in the recognition of gain_or_loss under sec_61 and sec_1001 by trust trust or trust ruling sec_1015 provides that if property was acquired by gift after date the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift except that if such basis adjusted for the period before the date of the gift as provided in sec_1016 is greater than the fair_market_value of the property at the time of the gift then for the purpose of determining loss the basis shall be such fair_market_value plr-127263-13 sec_1015 provides that if property was acquired by a transfer in trust other than a transfer in trust by gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer in this case based upon the facts submitted and the representations made and provided that all of trust's assets are divided pro-rata among the successor trusts we conclude that because neither sec_61 nor sec_1001 applies to the proposed transaction the basis of the assets for each of the successor trusts will be the same as trust's basis in the assets at the time of the transfer ruling sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1361 of the code provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of this chapter as owned by an individual who is a citizen or resident_of_the_united_states may be an s_corporation shareholder sec_1361 provides that in the case of a qualified_subchapter_s_trust with respect to which a beneficiary makes an election under paragraph d such trust shall be treated as a_trust described in sub sec_1361 and for purposes of sec_678 the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under paragraph d is made sec_1361 defines the term qualified_subchapter_s_trust as a_trust all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to one individual who is a citizen or resident_of_the_united_states in addition the terms of the trust must require that i during the lifetime of the current income_beneficiary there shall be only one income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of such beneficiary's death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to such beneficiary plr-127263-13 in this case based on the facts submitted and representations made we conclude that the creation of trust and trust is a modification of trust for federal_income_tax purposes and trust and trust are treated as a continuation of trust therefore a division of trust into trust and trust will not be treated as a distribution or a right to distribute principal for purposes of the application of sec_1361 further trust and trust will be treated as a continuation of trust for purposes of the qsst election made for trust provided that the qsst election for trust is otherwise valid and provided that trust and trust distribute their income currently to spouse during the life of spouse trust and trust will be treated as qssts after the division of trust ruling sec_4 and sec_2001 of the internal_revenue_code imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2056 provides that except as limited by sec_2056 the value of the taxable_estate is to be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse but only to the extent that such interest is included in determining the value of the gross_estate under sec_2056 a marital_deduction is not allowable for an interest in property passing to the surviving_spouse that is a terminable_interest an interest passing to the surviving_spouse is a terminable_interest if it will terminate or fail on the lapse of time or on the occurrence of an event or contingency or on the failure of an event or contingency to occur and on termination an interest in the property passes to someone other than the surviving_spouse sec_2056 allows an estate_tax_marital_deduction for qualified_terminable_interest_property under sec_2056 the term qualified_terminable_interest_property means property that passes from the decedent in which the surviving_spouse has a qualifying_income_interest_for_life and to which the qualified terminable_interest election under sec_2056 applies sec_2056 provides that the surviving_spouse has a qualifying_income_interest_for_life if the surviving_spouse is entitled to all the income from the property payable annually or at more frequent intervals and no person has a power to appoint any part of the property to any person other than the surviving_spouse during the surviving spouse's life sec_2501 imposes a tax for each calendar_year on the transfer of property by gift during such calendar_year by an individual resident or nonresident sec_2511 provides that subject_to certain limitations the gift_tax applies whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is real or personal tangible or intangible plr-127263-13 sec_2512 provides that if a gift is made in property the value thereof at the date of the gift will be considered the amount_of_the_gift sec_2512 provides that where property is transferred for less than adequate_and_full_consideration in money_or_money's_worth then the amount by which the value of the property exceeded the value of the consideration received shall be deemed a gift sec_25_2511-1 of the gift_tax regulations provides that the gift_tax applies to gifts indirectly made thus any transaction in which an interest in property is gratuitously passed or conferred upon another regardless of the means or device employed constitutes a gift subject_to tax sec_2519 provides that any disposition of all or part of a qualifying_income_interest_for_life in any property to which sec_2519 applies is treated as a transfer of all interests in the property other than the qualifying_income interest sec_2519 provides in part that sec_2519 applies to any property if a deduction was allowed with respect to the transfer of such property to the donor under sec_2056 sec_25_2519-1 provides that if a donee spouse makes a disposition of all or part of a qualifying_income_interest_for_life in any property for which a deduction was allowed under sec_2056 the donee spouse is treated for purposes of chapter sec_11 and sec_12 as transferring all interests in property other than the qualifying_income interest if the donee spouse makes a disposition of part of a qualifying_income_interest_for_life in trust corpus the spouse is treated under sec_2519 as making a transfer subject_to chapter sec_11 and sec_12 of the entire trust other than the qualifying_income_interest_for_life therefore the donee spouse is treated as making a gift under sec_2519 of the entire trust less the qualifying_income interest and is treated for purposes of sec_2036 as having transferred the entire trust corpus including that portion of the trust corpus from which the retained income_interest is payable a transfer of all or a portion of the income_interest of the spouse is a transfer by the spouse under sec_2511 pursuant to the terms of trust and pursuant to the deemed_election made by spouse as trustee the assets of trust are treated as qualified_terminable_interest_property under sec_2056 in this case after the division of trust into trust and trust spouse will continue to be entitled to all the income payable at least annually from the property in trust and trust accordingly spouse will continue to have a qualifying_income interest in trust and trust consequently based on the facts submitted and the representations made we conclude that the division of trust into trust and trust will not constitute a disposition of all or any part of the qualified_terminable_interest_property as defined in sec_2519 further the division of trust into trust and trust will not change the beneficial interests of the trust beneficiaries as stated above spouse will continue to have a plr-127263-13 qualifying_income interest in trust and trust and trust p and trust r will remain the principal beneficiaries of one-half of trust after spouse’s death as provided in the trust instrument trust p will be the principal beneficiary of trust after spouse’s death and trust r will be the principal beneficiary of trust after spouse’s death accordingly based upon the facts submitted and the representations made we conclude that the division of trust into trust and trust will not cause any beneficiary of trust trust or trust to have made a taxable gift_for federal gift_tax purposes under sec_2501 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the foregoing transactions under any other provisions of the code or regulations under a power_of_attorney on file with this office we are sending a copy of this letter to the trustee's authorized representatives this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely faith p colson faith p colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c feb cor-122603-98 uilc number release date memorandum for from subject chief branch office of the associate chief_counsel employee_benefits and exempt_organizations cc ebeo - railroad retirement act tax status attached for your information and appropriate action is a copy of a letter from the railroad retirement board concerning the status under the railroad retirement act and the railroad unemployment insurance act of we have reviewed the opinion of the railroad retirement board and based solely upon the information submitted concur in the conclusion that became an employer under the railroad retirement act and the railroad unemployment insurance act effective harry beker cc


id office uilc cca_2009051516120137 -------------- number release date from ------------------- sent friday date pm to ------------------- cc ----------- subject re tmp bankruptcy question --------- the tmp is responsible for forwarding the reports to the partners under sec_301_6223_g_-1 although we are not required to we may want to forward the reports to the partners ourselves if there is no functioning tmp ---------------------------------------------------------------------------------------------------------------- ----------------------


internal_revenue_service p o box cincinnati oh release number release date date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil v organization name w organization name x organization name y organization name z organization name 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_operating_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 won't be taxable description of your request your purpose is to support innovative thinking through work in the arts literature natural sciences and other fields of creative inquiry to accomplish this you offer residencies without a fee that provide the gift of time and space at your remote inspirational location to eligible applicants all residents are chosen through a national selection process by an external selection panel made up of arts and science professionals the grant program in which you are seeking approval will fund various kinds of financial support to offset other costs while the individuals are in your residency program these awards are to enable the residents of demonstrated capacity to produce creative research work in the visual literary performing arts or sciences and to devote him her to such work exclusively without concern for making a living you receive much of your funding from such entities as v w x y or z to name a few when you apply for grants you are requesting funding for your operations as well as other unique costs allowable and stipulated by each funder these stipulations vary from year to year funder to funder the number of grants awarded will be determined by the amount of funds designated to be available by your funders and allocated contingent upon the number of qualified and eligible recipients this number will be varying the amounts awarded will be determined by a rubric of need length of residency activities performed travel and other costs related to funds set_aside for determination per year being accepted for a residency is what makes individuals initially eligible to receive grants stipends from the granting organizations such as v w x y or z many grant scenarios are possible but they all require the recipient to be first accepted into your residency program you provided the following examples a y recently awarded you grant funding for this year and next one-half of the funds are to be made available to practicing visual artist currently producing works_of_art be a full time resident of a certain state for at least months prior to application deadline and remain a resident through the duration of the grant period be year of age or older at the time of the application provide evidence through appropriate documentation of a sustained level of commitment to his or her medium with seven or more years of active professional practice and not enrolled in a degree-seeking program either part-time or full-time at the time of the application or during the successive grant period e e b z is awarding you grant funding approximately of that grant is to be used as grants stipends limited to artists engaged in folk traditions such as basket weaving silver-smithing and saddle-making c in the future a grantor organization could award you a grant where part of the monies would be restricted grants stipends for scientists who participate in your residency program d likewise another grantor organization could make grants stipends available to residents meeting certain other criteria your executive director will determine which residents are eligible for the grant stipends provided by your funders based on the grantor organizations’ requirements grant stipends or awards will be made directly to the resident one-half is paid upon arrival for his her residency with the remainder paid at the completion of his her residency a final report must be submitted to you within days after the residency has been completed letter catalog number 58222y the final report is a signed narrative describing activities conducted and uses of funds in the event the recipient fails to complete the residency or the final report he she will not receive the second half of the payment you represent that you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes and take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees’ assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversion from occurring you will maintain case histories and document recipients of grants including names addresses amount of grants purpose of grants manner of selection and proof that they were not related to officers trustees or donors in addition when able you will compile photographic documentation publications and other materials to be used to augment this documentation of grantees and their products 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 e e e 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 - - - to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show a scholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or aprize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or toachieve 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 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 the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance letter catalog number 58222y e e e other conditions that apply to this determination e e e e e e 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 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary 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 sincerely jeffrey cooper director exempt_organizations rulings and agreements letter catalog number 58222y


t c memo united_states tax_court danielle n dubois-matthews petitioner v commissioner of internal revenue respondent docket no filed date danielle n dubois-matthews pro_se robert w mopsick for respondent memorandum opinion laro judge respondent moves the court to dismiss this case for lack of jurisdiction asserting that petitioner’s petition was not filed within the time prescribed by sec_6213 for the reasons stated below we shall grant respondent’s motion background on date respondent determined petitioner was liable for a deficiency of dollar_figure for and issued a notice_of_deficiency to petitioner’s last_known_address the notice_of_deficiency lists date as the last date to petition the court petitioner’s petition to redetermine respondent’s determination is dated date and was received and filed by the court on date in her petition petitioner states that she is aware that she missed the deadline for filing a petition with the court but she requests an extension petitioner resided in newark new jersey when the petition was filed discussion the jurisdiction of this court depends on the timely filing of a petition rule c sec_6213 requires that petitioner’s petition to redetermine the deficiency be filed with the court within days after the notice_of_deficiency was mailed the notice_of_determination was mailed to petitioner’s last_known_address by certified mail on date and the section references are to the internal_revenue_code and rule references are to the tax_court rules_of_practice and procedure applicable 90-day period expired on wednesday date the petition was filed on date days after the mailing of the notice_of_deficiency while petitioner acknowledges that she missed the deadline of date and requests an extension of that deadline we have no authority to grant that request to invoke our jurisdiction in this case petitioner was required to meet the filing_requirements of sec_6213 given that the petition was filed untimely we shall grant respondent’s motion to dismiss this case for lack of jurisdiction an appropriate order of dismissal will be entered


t c summary opinion united_states tax_court penelope felicia kent petitioner v commissioner of internal revenue respondent docket no 21883-07s filed date penelope felicia kent pro_se kristen i nygren for respondent ruwe judge this case was heard pursuant to the provisions of section of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to unless otherwise indicated all section references are to the internal_revenue_code in effect for the year at issue and all rule references are to the tax_court rules_of_practice and procedure be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax the issue for decision is whether petitioner is entitled to deduct certain expenses claimed on her schedule a itemized_deductions incurred in the pursuit of a doctorate degree from the college of education at argosy university background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference when the petition was filed petitioner resided in georgia petitioner earned a bachelor’s degree in health care management from clayton state university in petitioner continued her education and earned a master’s degree in counseling and psychology from clark atlanta university in petitioner has worked for a number of companies in the profession of human resources hr for at least the last years in late petitioner was offered and began employment with weyerhaeuser co weyerhaeuser as an hr generalist during petitioner continued her employment with weyerhaeuser as an hr generalist while employed at weyerhaeuser during petitioner attended argosy university and enrolled in the university’s doctorate of education program weyerhaeuser did not require petitioner to obtain any further education as a condition_of_employment rather petitioner testified it was her personal decision to pursue the degree because she saw it as an opportunity to move up in the corporate world and the economy during petitioner paid argosy university dollar_figure for tuition although petitioner lived in atlanta georgia she enrolled at the argosy university campus located in sarasota florida because the campus in atlanta did not offer the degree she wanted petitioner took half of her courses online and half of her courses at the argosy university campus located in sarasota on her timely filed federal_income_tax return petitioner claimed miscellaneous_itemized_deductions for vehicle business education and tax preparation expenses that she claimed related to her educational pursuit the parties have stipulated these expenses as follows expense amount vehicle dollar_figure business big_number educational big_number tax preparation total dollar_figure after application of the 2-percent floor in sec_67 petitioner’s claimed miscellaneous itemized_deduction related to her educational pursuit was dollar_figure in the notice_of_deficiency respondent disallowed petitioner’s claimed miscellaneous itemized_deduction respondent’s determination was made on the basis of petitioner’s alleged failure to establish that the dollar_figure in unreimbursed employee_expenses were ordinary and necessary to petitioner’s business petitioner timely filed a petition with this court discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct and the taxpayer bear sec_2 the record is unclear as to how petitioner’s claimed tax preparation expense of dollar_figure relates to her educational pursuit nevertheless the claimed deduction was disallowed by respondent and grouped collectively with petitioner’s other disallowed educational expenses ie her vehicle business and educational expenses because petitioner has not separately asserted entitlement to a deduction for a tax preparation expense for convenience we will continue to aggregate the claimed tax preparation expense with the other asserted educational expenses rather than deem the issue conceded by her under rule b the burden of proving that the determination is in error rule a 290_us_111 deductions are strictly a matter of legislative grace and petitioner bears the burden of proving entitlement to any deduction claimed 503_us_79 292_us_435 sec_162 generally allows as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business expenditures made by an individual for education are deductible as ordinary and necessary business_expenses if the education maintains or improves skills required by the individual in her employment or other trade_or_business sec_1_162-5 income_tax regs the general_rule under sec_1_162-5 income_tax regs however does not apply if the expenditures fall within either of two specified categories ie they are nondeductible expenditures if they are incurred to meet the minimum educational requirements for qualification in a taxpayer’s trade_or_business or they qualify the taxpayer for a new trade_or_business see 78_tc_550 sec_1_162-5 income_tax regs pursuant to sec_7491 the burden_of_proof as to factual matters shifts to the commissioner under certain circumstances petitioner however has neither alleged that sec_7491 is applicable nor established compliance with the requirements of sec_7491 and b petitioner’s claimed unreimbursed employee expense deduction is for expenditures related to her pursuit of a doctorate of education from argosy university petitioner has been employed in the hr profession for at least the last years petitioner claims that during while employed as an hr generalist by weyerhaeuser her professional duties were to train develop and educate other company employees petitioner asserts that a doctorate of education degree would improve her skills in these areas and position her for future opportunities within the hr profession petitioner also testified however that it was her intention to become a consultant after finishing her doctorate degree and further admitted having received offers for teaching positions at two universities once she had received her degree respondent does not dispute whether petitioner’s pursuit of a doctorate in education improves her skills in the hr profession respondent’s contention which petitioner has not refuted is that the doctorate of education degree program qualifies petitioner to enter into the new trades_or_businesses of consulting and teaching and that the duties and responsibilities of consulting and teaching are different in nature than those associated with the hr profession an individual who through education improves her skills in an existing trade_or_business may also become qualified for a new trade_or_business thompson v commissioner tcmemo_2007_174 if the education in question qualifies the taxpayer to perform significantly different tasks and activities than she could perform before the education then such education is deemed to qualify the taxpayer for a new trade_or_business robinson v commissioner supra pincite citing 73_tc_723 70_tc_1067 affd without published opinion 607_f2d_995 2d cir 62_tc_270 and 52_tc_1106 affd 443_f2d_29 9th cir the mere capacity to engage in a new trade_or_business is sufficient to disqualify the expenses for the deduction weiszmann v commissioner supra pincite petitioner by her own admission indicated that the skills and knowledge she has acquired and continues to acquire in pursuit of her doctorate degree in education will qualify her to enter into a new trade_or_business eg consulting and or teaching accordingly we find that petitioner’s unreimbursed employee_expenses claimed in were not ordinary and necessary expenses to petitioner’s trade_or_business in the hr profession it follows that petitioner has failed to carry her burden_of_proof and respondent’s determination is sustained to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court jeffery r simmons and patricia m simmons petitioners v commissioner of internal revenue respondent docket no filed date jeffery r simmons and patricia m simmons pro sese evan k like for respondent memorandum findings_of_fact and opinion ruwe judge respondent determined a dollar_figure deficiency in petitioners’ federal_income_tax and a dollar_figure accuracy-related_penalty under sec_6662 respondent concedes that petitioners are not liable for the accuracy- unless otherwise indicated all section references are to the internal_revenue_code in effect for the year at issue and all rule references are to the tax continued related penalty under sec_6662 the issues remaining for decision are whether petitioners had unreported income of dollar_figure from the sale of securities whether petitioners are entitled to an earned_income_credit eic and whether petitioners are entitled to an american opportunity_credit all numbers are rounded to the nearest dollar findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioners resided in ohio at the time they filed their petition during petitioners opened a trading account with td ameritrade td ameritrade account on date petitioners used their td ameritrade account to purchase big_number shares of taglikeme corp stock taglikeme stock for dollar_figure on date petitioners used their td ameritrade account to sell their taglikeme stock for dollar_figure petitioners also used their td ameritrade account to purchase and sell shares of stock in other corporations continued court rules_of_practice and procedure on date the date of trial petitioner patricia simmons appeared on behalf of petitioners and testified and signed the stipulation of facts during in the aggregate these purchases and sales of stocks other than taglikeme yielded losses of approximately dollar_figure petitioners timely filed their joint federal_income_tax return petitioners reported dollar_figure of wages salaries tips etc and dollar_figure of business income in addition petitioners claimed a dollar_figure eic and a dollar_figure american opportunity_credit petitioners did not report any income from the sale of securities on their tax_return on date respondent issued to petitioners a notice_of_deficiency for the taxable_year petitioners timely filed a petition disputing the determinations in the notice_of_deficiency opinion unreported income gross_income includes all income from whatever source derived including gains derived from dealings in property sec_61 a taxpayer must recognize gain on the sale of stock in an amount equal to the difference between the amount_realized and his or her basis sec_1001 sec_1012 there is no dispute that petitioners purchased big_number shares of taglikeme stock on date for dollar_figure and subsequently sold the shares on date for dollar_figure the difference between the amount_realized from the sale of the taglikeme stock dollar_figure and the cost_basis of the stock dollar_figure is includable in petitioners’ gross_income because petitioners also realized aggregate losses of dollar_figure from other stock transactions in they are entitled to apply the dollar_figure loss against their gain from the disposition of taglikeme stock see sec_1211 accordingly we hold that petitioners received dollar_figure in taxable_income resulting from stock transactions in their td ameritrade account earned_income_credit petitioners claimed a dollar_figure eic for sec_32 permits an eligible_individual an eic sec_32 disallows the eic for certain taxpayers and in pertinent part provides sec_32 denial of credit for individuals having excessive investment_income -- in general --no credit shall be allowed under subsection a for the taxable_year if the aggregate amount of disqualified_income of the taxpayer for the taxable_year exceeds dollar_figure disqualified_income --for purposes of paragraph the term disqualified_income means-- at trial ms simmons acknowledged that petitioners’ gain on the sale of taglikeme stock was includable in their gross_income however she testified that when they filed their tax_return petitioners were unaware that the gain was reportable as income d the capital_gain_net_income as defined in sec_1222 of the taxpayer for such taxable_year sec_32 provides for an inflation adjustment for the aggregate amount of disqualified_income specified in sec_32 is adjusted for inflation to dollar_figure see revproc_2011_52 2011_45_irb_701 the term capital_gain_net_income in sec_32 is defined in sec_1222 to mean the excess of the gains from sales or exchanges of capital assets over the losses from such sales or exchanges there is no dispute that petitioners’ shares of stock which they purchased and sold during are capital assets see sec_1221 pursuant to sec_32 petitioners’ disqualified_income for is dollar_figure which exceeds the dollar_figure threshold for entitlement to an eic accordingly petitioners are not entitled to an eic for american opportunity_credit respondent disallowed petitioners’ claimed american opportunity_credit for the american opportunity_credit is a modified version of the hope scholarship credit and is in effect for tax years to sec_25a the american opportunity_credit provides for a credit against tax equal to a percent of so much of the qualified_tuition_and_related_expenses paid_by the taxpayer during the taxable_year as does not exceed dollar_figure plus b percent of such expenses so paid as exceeds dollar_figure but does not exceed dollar_figure sec_25a the credit phases out for taxpayers whose modified_adjusted_gross_income exceeds dollar_figure or dollar_figure for married taxpayers filing joint returns sec_25a in addition up to of this credit may be refundable sec_25a petitioners did not introduce any evidence tending to show that they were entitled to the american opportunity_credit for accordingly we sustain respondent’s disallowance of the american opportunity_credit to reflect the foregoing decision will be entered for respondent as to the deficiency and for petitioners as to the accuracy- related penalty under sec_6662 the commissioner’s determinations in the notice_of_deficiency are generally presumed correct and taxpayers bear the burden of proving that the determinations are in error rule a 290_us_111


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 ita plr-140349-09 date march in re ----------------------------------- ---------------------------------------------------------------------------------------------------------------- legend act ------------------------------------------------------------------------------------------- agency --------------------------------------------------- agreement ------------------------------------------ b --------------------------- court ------------------------------------------------------------------------------ entity1 ---------------------------------------------------------- entity2 ----------------------------------- entity2 claimants ------------------- incident ------------------------------------------------------------------------------------------------------- ---- t -------------------------------------- z ------------------------------------------------ plr-140349-09 date -------------------- date ---------------------- year ------- year ------- year ------- f ----------------------- dollar_figureq dollar_figure----------------- dollar_figurer dollar_figure--------------- dollar_figuret dollar_figure------------------- dollar_figurev dollar_figure--------------------- w ----- dollar_figurey dollar_figure----------------- dear --------------- this is in reply to your request for a ruling that any payment the estate of b estate receives for the wrongful death of b is excludable from estate’s gross_income under sec_104 of the internal_revenue_code you are the personal representative of estate facts b was one of w individuals killed in incident in year the estates of those killed including estate and their survivors entered into a joint prosecution agreement jpa to pursue claims for damages against entity1 and its officials who were responsible for incident the jpa sets forth how the plaintiffs will divide any amounts they recover in litigation or settlement of their claims initial litigation the estates of those killed and their survivors initially sued entity1 in court in year the causes of action included claims for wrongful death and intentional infliction of emotional distress as the personal representative of estate you sought recovery for wrongful death and intentional infliction of emotional distress caused by the death of b in year court granted summary_judgment for plaintiffs on the issue of liability in year court awarded the plaintiffs an aggregate recovery_of dollar_figurev for plr-140349-09 compensatory_damages prejudgment_interest and punitive_damages estate was awarded an aggregate of dollar_figurey dollar_figurer against t and dollar_figureq against z legislative settlement subsequently on date entity2 passed the act to provide fair compensation to all entity2 claimants who have f claims for wrongful death and physical injury including claims for emotional distress against entity1 through a comprehensive settlement of those claims upon entity1’s payment to entity2 the act voided all prior court proceedings and judgments for f claims by entity2 claimants against entity1 or its officials and permanently precluded entity2 claimants from asserting f claims against entity1 or its officials on date entity1 and entity2 entered into the agreement to resolve all f claims against entity1 entity1 then transferred dollar_figuret to entity2 which will be paid to claimants covered by the agreement thus pursuant to the act court award of damages to the plaintiffs was voided and has been vacated agency has established procedures to compensate victims pursuant to the agreement as the personal representative of estate you must file a claim pursuant to these procedures to recover damages for claims of wrongful death based on the death of b you represent that any payment will not include interest or punitive_damages law and analysis sec_104 provides in general that gross_income does not include the amount of any damages received whether by suit or agreement on account of personal physical injuries or physical sickness sec_1_104-1 of the income_tax regulations provides that the term damages received whether by suit or agreement means an amount received through prosecution of a legal suit or action based upon tort or tort type rights or through a settlement agreement entered into in lieu of such prosecution section of the small_business job protection act of limits the exclusion_from_gross_income provided by sec_104 to amounts received on account of personal physical injuries or physical sickness subject_to one exception in h_r conf_rep no pincite congress expressed its intent concerning the treatment of wrongful death damages and emotional distress damages attributable to a physical injury d amages other than punitive_damages received on account of a claim of wrongful death continue to be excludable from taxable_income as under present law because all damages received on account of physical injury or physical sickness are excludable from gross_income the exclusion_from_gross_income applies to any damages received based on a claim of emotional distress that is attributable to physical injury or physical sickness plr-140349-09 the action estate brought in court and the claim estate files pursuant to agency procedures each seek recovery_of damages for wrongful death and intentional infliction of emotional distress attributable to a personal physical injury these claims are based in tort under sec_1_104-1 under the act any recovery_of compensatory_damages that estate receives pursuant to agency procedures is for the wrongful death of b this wrongful death recovery as adjusted by the jpa is received on account of a personal physical injury under sec_104 conclusion based strictly on the information submitted and the representations made we conclude that the amount estate receives pursuant to agency procedures as adjusted by the jpa for the wrongful death of b is excludable from estate’s gross_income under sec_104 we do not express or imply an opinion on the federal tax consequences of any aspect of these transactions other than those expressed in the conclusion above this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations that estate submitted under penalties of perjury 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 estate must attach to any income_tax return to which it is relevant a copy of this letter or if estate files its returns electronically a statement providing the date and control number of this letter_ruling in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to estate’s authorized representative sincerely michael j montemurro branch chief office of associate chief_counsel income_tax accounting cc


department of the treasury internal_revenue_service o o washington d c aug set epr ra me tax_exempt_and_government_entities_division uics legend taxpayer a individual b state t amount d ira x bank b county c date date month and you requested a waiver of the the following facts and representations have been submitted under penalty of perjury in support of the ruling requested in letters dated 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code taxpayer a’s primary residence is in state t and she maintained an individual_retirement_account ira ira x with bank b in said state on or about date taxpayer a entered into discussions with employees of bank b in order to transfer or roll over amount d from her ira x into another ira that would be set up to hold real_estate notes taxpayer a was advised that bank b could arrange such a transaction if she transferred amount d into a non-qualified checking account and then wrote a check from said checking account for the purpose of purchasing the realty note for her ira taxpayer a then signed a bank b traditional_ira distribution form believing that she was effectuating the transfer of amount d into another ira that would hold real_estate notes finally on or about date taxpayer a wrote a check to cover the purchase of the real_estate note which note was eventually bought and recorded in county c state t taxpayer a discovered that the realty note which she owned was not in an ira during month when she was in the process of completing her calendar_year federal_income_tax return taxpayer a’s accountant individual b subsequently discovered that although taxpayer a’s real_estate note was not held in an ira the interest thereon was being contributed to an ira individual b took corrective action with respect to the real_estate note interest but as of the date of this ruling_request the real_estate note remains outside of an ira based on the facts and representations you request that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount d because the failure to waive such requirement would be a hardship and against equity or good conscience with respect to your ruling_request sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - the entire amount received including money and any other_property is paid into i an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides in general that paragraph d does not apply to any amount required to be distributed under subsection a sec_408 of the code provides that the secretary may waive the 60-day - requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented by taxpayer a demonstrates a failure on the part of taxpayer a to accomplish her intended rollover because of her misplaced reliance on the advice of bank b personnel and bank b’s misunderstanding taxpayer a’s instructions with respect to the investment of amount d due to said misunderstanding bank b neither took appropriate steps to insure that amount d was contributed into an ira authorized to invest in and hold real_estate notes nor advised taxpayer a of the proper protocol with respect to setting up and maintaining an ira authorized to hold real_estate investments therefore pursuant to code sec_408 the service hereby waives the 60-day rollover requirement with respect to the withdrawal of amount d pursuant to this ruling zz letter taxpayer a is granted a period of days measured from the date of the issuance of this letter_ruling to make a rollover_contribution of an amount equal to amount d to another ira or iras described in code sec_408 provided all other requirements of code sec_408 except the 60-day requirement are met with respect to such ira contribution the contribution will be considered a rollover_contribution within the meaning of code sec_408 note that pursuant to code sec_408 this letter_ruling does not authorize the rollover of any amounts required to be distributed in accordance with code sec_401 made applicable to iras pursuant to code sec_408 no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact a at eee please address all correspondence to se t ep ra t3 manager sincerely yours technical group frances v sloan employee plang enclosures deleted copy of letter_ruling notice of intention to disclose