internal_revenue_service number release date index number -------------------------- ---------------------------------- ------------------------------- --------------------------------- in re ------------------------------------------------ ---------------- ---------------------------------------- --------------------------------------- ---------------- 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 tege eb qp2 plr-165227-03 date date this is in response to your letter of date and subsequent entity a ---------------------------------------------------------------- state s ------------- dear ---------------- correspondence requesting a ruling on the federal_income_tax consequences of entity a’s model deferred_compensation plan the plan which entity a represented to be a state s public instrumentality described in sec_457 intends to be an eligible_deferred_compensation_plan under sec_457 of the internal_revenue_code_of_1986 as well as a_trust which a has established pursuant to a_trust agreement to hold the assets of the plan any state or local governmental entity in state s that adopts the plan and trust agreement will be an employer under the plan the plan and trust will be administered by entity a under the plan an employee may elect to defer compensation he would have received for service rendered to his employer in any taxable_year until severance_from_employment with such employer attainment of age ½ or the occurrence of an unforeseeable_emergency the election to defer compensation must be made prior to the beginning of the month for which the compensation is deferred by a participant in any taxable_year the plan also provides for a catch-up contribution for amounts deferred in one or more of the participant’s last three taxable years ending before he with certain limitations a participant or his beneficiary may elect the time and plr-165227-03 attains normal_retirement_age under the plan the amounts that may be deferred are within the limitations set out in sec_457 of the code manner in which his deferred amounts will be distributed the election must be made prior to the date any such amounts become available to the participant or the beneficiary if the participant or his beneficiary fails to make a timely election concerning distribution of the deferred amounts he shall receive them on the date and in the manner prescribed by the plan the plan provides that the time and manner of benefit payout must meet the distribution_requirements of sec_401 and sec_457 of the code the plan provides that amounts of compensation deferred thereunder are to be transferred to and invested in a_trust described in sec_457 of the code for the exclusive benefit of the participants and their beneficiaries within an administratively reasonable_time period the rights of any participant or beneficiary to payments pursuant to the plan are generally nonassignable and not subject_to pledge transfer or encumbrance sec_457 of the code provides rules for the deferral of compensation by an individual participating in an eligible_deferred_compensation_plan as defined in sec_457 eligible governmental deferred_compensation plan any amount of compensation deferred under the plan and any income attributable to the amounts so deferred shall be includible in gross_income only for the taxable_year in which such compensation or other income is paid or otherwise made available to the participant or beneficiary plan must meet the distribution_requirements of sec_457 d eligible_plan the plan must have distribution_requirements providing that under the plan amounts will not be made available to participants or beneficiaries earlier than i the calendar_year or in which the participant attains age ½ ii when the participant has a severance_from_employment with the employer or iii when the participant is faced with an unforeseeable_emergency as determined under treasury regulations governmental employer shall not be treated as an eligible_deferred_compensation_plan unless all assets and rights purchased with such deferred_compensation amounts and all income attributable to such amounts property or rights of the plan are held in trust for the exclusive benefit of participants and their beneficiaries sec_457 sec_457 of the code prescribes that an eligible deferred_compensation sec_457 of the code provides that in the case of a participant in an sec_457 of the code provides that for a sec_457 plan to be an sec_457 g of the code provides that a plan maintained by an eligible plr-165227-03 provides that a_trust described in sec_457 shall be treated as an organization exempt from tax under sec_501 follows based upon the provisions of the plan summarized above we conclude a sec_1 the plan is an eligible_deferred_compensation_plan as described in sec_457 of the internal_revenue_code_of_1986 as amended by egtrra and the treasury regulations thereunder amounts of compensation deferred in accordance with the plan including any income attributable to the deferred_compensation will be includible under sec_457 in the recipient’s gross_income for the taxable_year or years in which amounts are paid to a participant or beneficiary in accordance with the terms of the plan the trust agreement established with respect to the plan under sec_457 is treated under sec_457 as an organization_exempt_from_taxation under sec_501 except as specifically ruled upon above no opinion is expressed as to the federal_income_tax consequences of the plan under any other provision of the code if the plan is significantly modified this ruling will not necessarily remain applicable this ruling is directed only to entity a and applies only to the plan and trust submitted on date as revised by amendments dated date sec_6110 of the code provides that it may not be used or cited as precedent sincerely robert d patchell chief qualified_plans branch employee_benefits tax exempt government entities cc copy of letter for sec_6110 purposes


t c memo united_states tax_court marc eric vidmar petitioner v commissioner of internal revenue respondent docket no filed date marc eric vidmar pro_se john m tkacik jr for respondent memorandum findings_of_fact and opinion armen special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 unless otherwise indicated all section references are to the internal_revenue_code in effect for the taxable years in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies in petitioner's federal income taxes for the taxable years and in the amounts of dollar_figure and dollar_figure respectively the issues for decision are as follows whether petitioner is entitled to a dependency_exemption for apollonia shaia johnson we hold that he is whether petitioner is entitled to head-of-household filing_status we hold that he is whether petitioner is entitled to the earned_income_credit in the amounts claimed by petitioner we hold that he is findings_of_fact some of the facts have been stipulated and they are so found petitioner resided in cleveland heights ohio at the time that his petition was filed with the court petitioner was not married during the years in issue he is the father of apollonia shaia johnson apollonia apollonia was born in date petitioner and apollonia's mother jacqueline johnson jacqueline have never been married to each other petitioner and jacqueline lived together from sometime before apollonia's birth in to in jacqueline moved to california taking apollonia with her however sometime in jacqueline sent apollonia to live with petitioner apollonia has been living with petitioner since that time throughout the years in issue petitioner provided all financial support for apollonia on his income_tax returns for and petitioner reported gross_income in the amounts of dollar_figure and dollar_figure respectively for both years in issue petitioner claimed a dependency_exemption for apollonia and head-of--household filing_status in addition petitioner claimed the earned_income_credit in the amounts of dollar_figure and dollar_figure for and respectively in this regard petitioner attached schedule eic to his return for each year indicating thereon that he was basing his claim for the credit on apollonia in the notice_of_deficiency respondent disallowed the dependency_exemption claimed by petitioner for apollonia for both years in issue respondent also determined that petitioner was not entitled to head-of-household filing_status rather respondent determined that petitioner's filing_status was that of a single individual finally respondent determined that petitioner was only entitled to an earned_income_credit in the amount of dollar_figure for and that petitioner was not entitled to any earned_income_credit for opinion we begin with the dependency_exemption issue a taxpayer is allowed as a deduction an exemption for each gualifying dependent see sec_151 a dependent is defined as an individual who is either related to the taxpayer in one of the ways enumerated in sec_152 a through or is a member of the taxpayer's household and who receives over half of his or her support from the taxpayer see sec_152 a son or a daughter of a taxpayer may qualify as a dependent see sec_152 as we have found petitioner provided all of the support for his daughter apollonia during the years in issue and is therefore entitled to a dependency_exemption for her for each of those years we now turn to the filing_status issue in order to qualify for head-of-household filing_status petitioner must satisfy the requirements of sec_2 pursuant to that section and as relevant herein an individual gualifies as a head_of_household if the individual is not married at the close of the taxable_year and maintains as his home a household that constitutes for more than one-half of the taxable_year the principal_place_of_abode of a son or daughter of the taxpayer see sec_2 a a taxpayer is considered as maintaining a household only if over half of the cost of maintaining the household during the taxable_year is furnished by the taxpayer see sec_2 petitioner was not married at the close of either or further petitioner furnished all of the cost of maintaining the requisite household for his daughter apollonia petitioner therefore qualifies for head-of-household filing_status for both years in issue finally we turn to the earned_income_credit issue in the case of an eligible_individual sec_32 allows an earned_income_credit against the individual's income_tax_liability as relevant herein an eligible_individual is defined as an individual who has a qualifying_child for the taxable_year sec_32 a respondent claims that during the years in issue apollonia was not a qualifying_child we disagree apollonia qualifies as a qualifying_child pursuant to the requirements set forth in sec_32 a through iii in this regard apollonia is petitioner's daughter and satisfies the relationship_test see sec_32 a b further apollonia resided with petitioner throughout the years in issue and satisfies the residency test see sec_32 a finally apollonia was under years of age during both years in issue and satisfies the age_test see sec_32 a c i in view of the foregoing petitioner is entitled to the earned_income_credit based on one qualifying_child as claimed on his returns for the years in issue to reflect our disposition of the disputed issues decision will be entered for petitioner


e seite ra department of the treasury internal_revenue_service washington d c feb tax_exempt_and_government_entities_division uniform issue list legend taxpayer ira b bank c account d dear amount financial_institution e this is in response to a request for a private_letter_ruling dated date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he received a distribution of amount from ira b taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to the care for his step-son s deteriorating medical_condition which impaired taxpayer a’s ability to manage his financial affairs taxpayer a further represents that amount has not been used for any other purpose taxpayer a maintained ira b an individual_retirement_account ira under sec_408 of the code with bank c ira b was invested in a certificate of deposit that was set to mature on date on date seeking a higher rate of return taxpayer a took a distribution of amount from ira b the funds were deposited into his checking account account d with financial_institution e taxpayer a intended to roll this amount into another ira and during the entire 60-day rollover period taxpayer was pre-occupied with his step-son’s mental health issues the step-son who resides with taxpayer a and his spouse refused to seek proper treatment which resulted in numerous mental health situations the ruling_request is accompanied by a psychological evaluation of his step-son that provides a detailed description of his condition and symptoms in dealing with his step-son’s mental illness on a basis taxpayer a failed to complete the intended rollover during the 60-day rollover period which ended on date on date taxpayer realized he missed his rollover deadline prior to based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to amount sec_408 of the code provides that except as otherwise provided in sec_408 of the code 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 provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 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 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 of the code does not apply to any amount described in sec_408 of the code 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 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary 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 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a timely rollover of amount was due to his care for his step-son and his step-son’s worsening medical_condition which impaired taxpayer a’s ability to manage his financial affairs and complete the rollover during the 60-day rollover period therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b taxpayer a is granted a period of days from the issuance of this letter_ruling to transfer an amount not to exceed amount into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please contact if you wish to inquire about d at or sincerely yours manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice cc


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-161046-04 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities ----------------------------------------------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business ceased to be an employer under the railroad retirement act and the railroad unemployment insurance act effective ------------------- ----------------------------------------------------- --------------------------------------------- ------------------------------------- ----------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that ----------------------------------------------------------------ceased to be an employer under the railroad_retirement_tax_act effective ------------------- please note that on ---- ----------------- we concurred with the rrb that --------------------- with respect to its operation of the former ---------------------------- became an employer under the rrta on -------------------------- please take the appropriate action regarding this business _____________________________ janine cook


internal_revenue_service number release date index numbers ----------------------------------------------- ----------------------------------- --------------------------------------- ------------------------------------------- -------------------------------------------- department of the treasury washington dc person to contact ------------------ id no ----------------- telephone number --------------------- refer reply to cc fip b03 - plr-154213-09 date date legend legend company a ----------------------------------------- company b ------------------------------------------------------------- company c ----------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- state x ------------- accounting firm ---------------------------------------- law firm ---------------------------------------------------------- date --------------------------- date --------------------- date ------------- year ------- dear ----- ----------- this responds to a letter dated date on behalf of company b and company c requesting an extension of time under sec_301_9100-1 of the procedure and plr-154213-09 administration regulations to make an election under sec_856 of the internal_revenue_code to treat company c as a taxable_reit_subsidiary of company b effective as of date facts company a is an investment firm whose principal activity is investing in commercial properties company a owns all of the common_stock of company b company b was formed as a corporation on date under the laws of state x and elected to be treated as a real_estate_investment_trust reit for federal_income_tax purposes beginning with its year tax_year company c a wholly-owned subsidiary of company b was incorporated under the laws of state x on date both company b and company c are calendar_year taxpayers and they use accrual_method of accounting at the time of the formation of company c its tax advisor accounting firm advised both company b and company c to file form_8875 taxable_reit_subsidiary election jointly electing to treat company c as a taxable_reit_subsidiary of company b under sec_856 company b and company c agreed with this advice law firm provided legal advice on various state x corporate law issues to company b and company c and prepared all the documents in connection with the formation of company b and company c law firm believed however that company b and company c would be preparing the form_8875 while company b and company c believed that law firm had prepared the form the failure_to_file form_8875 was discovered on date in connection with performing due diligence relating to an offering of stock by company a immediately upon discovering the failure_to_file accounting firm was notified and it prepared the request for an extension to file the election company b and company c represent that they have both treated company c as a taxable_reit_subsidiary of company b beginning with the year tax_year company b and company c also make the following additional representations the request for relief was filed by company b and company c before the failure to make regulatory elections was discovered by the service granting the relief requested will not result in company b and company c having a lower tax_liability in the aggregate for all years to which the regulatory election applies than they would have had if the election had been timely made taking into account the time_value_of_money company b and company c did not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of the code at the time they requested relief and the new position requires or permits a regulatory election for which relief is requested plr-154213-09 being fully informed of the required regulatory election and related tax consequences company b and company c did not choose to not file the election law and analysis the ticket to work and work incentives improvement act of p l included a change for tax years beginning after date to the reit provisions of sec_856 this change allows a reit to form a taxable_reit_subsidiary that can perform activities that otherwise would result in impermissible_tenant_service_income the election under sec_856 is made on form_8875 taxable_reit_subsidiary election officers of both the reit and the taxable_reit_subsidiary must jointly sign the form which is filed with the irs service_center in ogden ut sec_856 of the code provides that a reit and a corporation other than a reit may jointly elect to treat such corporation as a taxable_reit_subsidiary to be eligible for treatment as a taxable_reit_subsidiary sec_856 provides that the reit must directly or indirectly own stock in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition sec_856 specifically provides that the election and any revocation thereof may be made without the consent of the secretary in announcement i r b the service announced the availability of new form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for tax years beginning after for eligible entities to elect treatment as a taxable_reit_subsidiary the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the tax_year however the effective date of the election depends upon when the form_8875 is filed the instructions further provide that the effective date on the form cannot be more than months and days prior to the date of filing the election or months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service sec_301_9100-1 of the regulations provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin 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 plr-154213-09 sec_301_9100-3 through c i sets forth rules that the internal_revenue_service generally will use to determine whether under the particular facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money conclusion based on the information submitted and representations made we conclude that company b and company c have satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to treat company c as a taxable_reit_subsidiary of company b effective as of date company b and company c have days from the date of this letter to make the intended election this ruling is limited to the timeliness of the filing of the form_8875 this ruling’s application is limited to the facts representations code sections and regulations cited herein except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular no opinion is expressed with regard to whether company b qualifies as a reit or whether company c otherwise qualifies as a taxable_reit_subsidiary under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of company b and company c is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect 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 rulings it is subject_to verification on examination plr-154213-09 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely alice m bennett chief branch office of associate chief_counsel financial institutions products enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------------------------------------- ---------------------------------------------------- ------------------------------------------------------------ - ------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc intl b02 plr-118267-13 date date legend ----------------------- ------------------------------- ----------------------------------------------------- ----------------------- taxpayer country x company a --------------------------------------------------- group b company c --------------------------------------------------- group d company e ----------------------------------------------- company f ---------------------------------------------- company g ------------------------------------------------------- branch h date year date year date ---------------------------------------------------------------------------- ---------------------------- ------- ------------------------ ------- ------------------------ dear ------------ this in response to a letter dated date submitted on behalf of taxpayer by its authorized representative requesting an extension of time under treas reg plr-118267-13 sec_301_9100-3 to make the election provided by sec_953 sec_953 election to be treated as a domestic_corporation for u s tax purposes for taxpayer’s taxable_year ending december year 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 this ruling it is subject_to verification on examination taxpayer was incorporated in country x on date by company a an entity not affiliated with or owned directly or indirectly by group b for the taxable_year ending on december year taxpayer purportedly made a sec_953 election pursuant to notice_89_79 1989_2_cb_392 to be treated as a domestic_corporation for u s federal tax purposes on date company a was acquired by company c a u s_corporation that was not affiliated with group b at the time of the acquisition company a was merged or liquidated out of existence within group d in year company e became the new owner of taxpayer within group d on date as part of a larger spin off transaction taxpayer and company e were indirectly acquired by company f a member of the consolidated_group b as a result of the spin off taxpayer and company e became part of the group b consolidated_return group for all of its taxable years since its incorporation in year taxpayer has filed its u s federal_income_tax returns as either a member of consolidated_group or on a separate company basis consistent with having made a sec_953 election however taxpayer has been unable to find a signed copy of its year sec_953 election and has determined that it should request a private_letter_ruling under sec_301 to affirm its original election or to make a late election effective as year the year of its incorporation taxpayer has represented in its affidavit that the request for relief was submitted before the failure_to_file the sec_953 election was discovered by the irs taxpayer has filed all u s federal_income_tax returns since year as if a valid sec_953 election had been made taxpayer intended at all times since year to make the election based on its belief that the sec_953 election had been made taxpayer has represented itself to third parties as a domestic_corporation for all u s federal tax purposes and u s financial reporting purposes taxpayer has represented that it does not seek to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time that it requested relief taking into account any qualified_amended_return filed within the meaning of sec_1_6664-2 and the new position requires or permits a regulatory election for which relief is requested plr-118267-13 the substantive and procedural rules for making a sec_953 election are contained in notice_89_79 1989_2_cb_392 and revproc_2003_47 2003_2_cb_55 respectively these rules provide that the election must be filed by the due_date prescribed in sec_6072 including extensions for the u s income_tax return that is due if the election becomes effective sec_4 revproc_2003_47 in addition an electing_corporation must use the calendar_year as its annual_accounting_period for u s tax purposes unless it joins in the filing of a consolidated_return and adopts the parent corporation's tax_year sec_1 notice_89_79 the sec_953 election was not filed by the due_date of the return for the year taxable_year and thus was not a timely election sec_301_9100-1 provides in relevant part that the commissioner in his discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-3 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 the subtitles of the code except subtitles e g h and i sec_301_9100-1 provides than an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides that requests for extensions of time for regulatory elections will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that except as provided in sec_301_9100-3 through iii a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i ii iii iv requests relief under this section before the failure to make the regulatory election is discovered by the internal_revenue_service failed to make the election because intervening events beyond the taxpayer's control failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election reasonably relied on the written advice of the internal_revenue_service or plr-118267-13 v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election however sec_301_9100-3 provides that a taxpayer is deemed not to have acted reasonably and in good_faith if the taxpayer seeks to alter a return position for which an accuracy- related penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested or if the taxpayer was informed in all material respects of the required election and related tax consequences but chose not to file the election furthermore a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer uses hindsight in requesting relief sec_301_9100-3 provides in pertinent part that the commissioner will grant a reasonable extension of time to make a regulatory election only when the interests of the government will not be prejudiced by granting the relief based solely on the facts and information submitted we conclude that taxpayer satisfies sec_301_9100-3 with respect to the election under sec_953 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to make the election provided by sec_953 in accordance with the rules set forth in notice_89_79 and revproc_2003_47 to be treated as a domestic_corporation for u s tax purposes effective for taxpayer’s short taxable_year ending on date the granting of an extension of time is not a determination that taxpayer is otherwise eligible to make the sec_953 election sec_301_9100-1 the taxpayer should attach a copy of this letter to its sec_953 election this ruling does not address any issues pursuant to sec_367 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-118267-13 pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representatives sincerely jeffery g mitchell branch chief cc intl b02 international


department of the treasury internal_revenue_service commerce street dallas tx tax_exempt_and_government_entities_division date date person to contact number release date legend org organization name xx date address address org address certified mail dear badge number contact telephone number contact address employer_identification_number this is a final notice of adverse determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective january 20xx the following reason s you are not organized and operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you are not and have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 rather your activities further a substantial nonexempt commercial purpose and serve private rather than public interests contributions to your organization are no longer deductible effective january 20xx since your exempt status has been revoked you are required to file form_1120 u s_corporation income_tax return for all years beginning on or after january 20xx income_tax returns for subsequent years are to be filed with the appropriate service_center identified in the instructions for those returns it is further determined that your failure_to_file a written appeal constitutes a failure to exhaust your available administrative remedies however if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment to secure a petition form write to the following address please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in 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 this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above nanette m downing director eo examinations enclosures publication sincerely department of the treasury internal_revenue_service te_ge eo n high street room columbus oh tax_exempt_and_government_entities_division date date org address taxpayer_identification_number form tax years 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 revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings please sign and return the enclosed form_6018 consent to proposed action - sec_7428 if you have already given us a signed form_6018 you need not repeat this process we will issue a final revocation letter lf you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding 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 will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter 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 if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing director eo examinations enclosures publication publication report of examination schedule number or exhibit form 886-a rev date explanation of items december 20xx-xx orgt corporation tax identification_number year period ended name of taxpayer issue whether the org qualifies for exemption under sec_501 of the internal_revenue_code facts exhibit a provides copies of the internal_revenue_service correspondence requesting that org file the forms for the tax periods ending december 20xx through 20xx the forms w-3 filed by org revealed that you paid wages in the amount of dollar_figure dollar_figure and dollar_figure in the years ending december 20xx through 20xx respectively accordingly your gross_receipts appear to be sufficient to require the filing of the form_990 on january 20xx president stated in a phone conversation that the organization went out of business in the 20xx tax_year there currently are no records available to file the delinquent forms for the due to mismanagement by the previous director periods ending december 20xx through 20xx president described that since the organization became defunct in 20xx he would agree to a revocation of exempt status and declined a closing conference law sec_6001 of the code provides that every person liable for any_tax imposed by the code or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 of the code provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6001-1 of the regulations in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 of the code and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 of the regulations states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_1_6033-1 of the regulations provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax conclusion it is the irs's position that the org failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under c of the internal_revenue_code accordingly the organization's exempt status is revoked effective january 20xx form_1120 returns should be filed for the tax periods after january 20xx publish no irs gov department of the treasury-interna revenue service form 886-a catalog number 20810w page


internal_revenue_service number release date index number ------------------------------------------------------------ ----------------- ----------------------------------------------------------- -------------------------------------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi plr-114668-18 date date ---------------------------------------------------------------------------------- x --------------------------------------------------- country date ---------- --------------------------- dear -------------- this letter 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 make an election under sec_301_7701-3 to be classified as a partnership for federal tax purposes facts the information submitted states that x was formed on date under the laws of country x represents that as of date x was a foreign_entity eligible to elect to be classified as a partnership for federal tax purposes however x inadvertently failed to timely file a form_8832 entity classification election electing to be classified as a partnership effective date law and analysis sec_301_7701-3 provides in part that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a plr-114668-18 partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides in part that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that except as provided in sec_301_7701-3 and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides in part that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code 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 sec_301_9100-3 provides that a request for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government plr-114668-18 conclusion based solely on the information submitted and representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be classified as a partnership effective date a copy of this letter should be attached to the form_8832 this ruling is contingent on x and its owners filing within days from the date of this letter any required returns including amended returns consistent with the requested relief being effective on date to the extent appropriate these returns or amended returns must include but are not limited to forms return of u s persons with respect to certain foreign_partnerships such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns or amended returns we express no opinion concerning the assessment of any interest additions to tax additional_amounts or penalties for failure_to_file a timely income_tax or information_return with respect to any taxable_year that may be affected by this ruling for example we express no opinion as to whether a taxpayer is entitled to relief from any penalty on the basis that the taxpayer had reasonable_cause for failure_to_file timely any income_tax or information returns except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representatives plr-114668-18 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs and special industries by ______________________________ mary beth carchia senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------------------- ---------------- --------------------- ----------------------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------- id no ------------- ----------------------------------------------------- telephone number -------------------- refer reply to cc psi b07 plr-162876-04 date date ------------------------------------------- ---------------------- ------------------ ------- -------------------------- legend legend corporation a b c dear ------------------ this letter responds to a letter from your authorized representative dated date requesting permission for corporation to revoke its election under sec_41 of the internal_revenue_code the represented facts are as follows corporation is an accrual_method taxpayer with each taxable_year ending on a in b corporation elected to utilize the alternative_incremental_research_credit airc rules under sec_41 to compute the credit_for_increasing_research_activities research_credit before the due_date of its return including extensions for the taxable_year ending on c_corporation submitted a request to revoke its election to determine its research_credit under the airc rules of sec_41 for qualified_research_expenses paid_or_incurred on or after the taxable_year ending on c and all subsequent years for taxable years beginning after date taxpayers may elect to determine their research_credit under the airc rules of sec_41 sec_41 provides that any election under sec_41 shall apply for the taxable_year in which made and all succeeding taxable years unless revoked with the consent of the secretary based solely on the facts submitted and representations made we grant permission for corporation to revoke its election to determine its research_credit under the airc rules of sec_41 for qualified_research_expenses paid_or_incurred during the taxable_year plr-162876-04 ending on c_corporation should compute the research_credit for the taxable_year ending on c and all succeeding taxable years using the general_rule of sec_41 provided that corporation does not make a new election to determine its research_credit under the airc rules of sec_41 in a later year except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter further we express or imply no opinion concerning expenditures corporation treated as qualified_research_expenses this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant 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 sincerely s brenda m stewart senior counsel branch passthroughs special industries cc


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc intl br3 postf-148879-01 uilc 861-dollar_figure internal_revenue_service national_office legal advice memorandum for cc lm rfph stp associate area_counsel lmsb from subject chief cc intl br3 allocation and apportionment of research_and_experimentation r e expenses duty_of_consistency and estoppel this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend b agreement x y z issues are dividends_paid by b’s controlled_foreign_corporations cfcs in the relevant product category properly excluded from the class_of_gross_income to which r e expenses are allocated if the cfcs paying the dividends also pay royalties to b because the internal_revenue_service service took the position on audit in a previous cycle that dividend income received from royalty-paying cfcs should be excluded from the relevant class_of_gross_income in determining disc or fsc postf-148879-01 benefits is the service equitably and or collaterally estopped for the years at issue from including dividend income from royalty-paying cfcs in the class_of_gross_income to which r e expense is allocated for purposes of computing the foreign_tax_credit_limitation conclusion sec_1 b must include both dividends and royalties from cfcs that are connected with the relevant product category in the class_of_gross_income to which r e expense is allocated the position taken by the service with respect to the exclusion of dividend income from the relevant class_of_gross_income for disc fsc purposes in the prior tax years does not contain the elements of any form of estoppel and does not preclude the service from taking the correct position on issue facts b is a large multinational corporation that incurs significant amounts of r e expenses a portion of which is allocated and apportioned to its foreign_source_income for purposes of computing the foreign_tax_credit_limitation b controls a large number of cfcs located in various parts of the world the cfcs are involved in all of b’s businesses and each cfc generally manufactures and sells all of b’s products in a given market b and its cfcs produce income in a number of different product categories classified in the standard industrial classification manual sic code product categories the cfcs do not resell a significant amount of products purchased from unrelated parties being the owner of a vast array of intangible_property b has entered into what it calls agreements with its cfcs and charges a license fee based upon the use of its technical know-how the standard or model agreement calls for payment of a royalty of a fixed percentage of the net selling_price of each licensed product locally manufactured by the cfc for the cfc’s use of b’s technology patents trademarks and similar_property b has no cost-sharing_arrangements with any cfc within the meaning of sec_1_861-17 and sec_1_482-7 for and b first determined the amount of legally-mandated r e expenses to be allocated under sec_1_861-17 next b apportioned percent of its remaining r e expenses to u s source income in accordance with the exclusive geographic apportionment rule_of sec_1_861-17 b used the optional_gross_income_method under sec_1_861-17 to apportion its remaining r e expenses to u s and foreign_source_income b apportioned total r e expenses of dollar_figurex dollar_figurey and dollar_figurez to foreign_source_income for the and tax years respectively postf-148879-01 b treats all license fee payments from its cfcs as royalty income for book and tax purposes each cfc prepares a tax information package tip that has a spreadsheet that shows how the cfc arrived at its license fee expense the tip is primarily used for purposes of the foreign_tax_credit determinations and preparation of forms for the three years under consideration b made adjustments to foreign source gross_income in the relevant sic code product categories by backing out the dividends_paid by b’s cfcs that had also paid license fees to b the service proposes to adjust the class_of_gross_income and the gross_income apportionment ratio determined under sec_1_861-17 to include the dividends from the royalty-paying cfcs b’s position concerning the exclusion of those dividends from foreign source gross_income was consistent with a proposed service position taken on a previous audit of b’s domestic_international_sales_corporation disc during the audit cycle and of b’s foreign_sales_corporation fsc during the audit cycle at that time the examining agent argued that r e expense should be allocated exclusively to gross_income from sales and royalties and that dividends should not be included in the class of income to which r e expense was allocated where a royalty had also been paid the effect of this position was to decrease combined taxable_income and the allowable disc fsc commission b asserted that under sec_1_861-8 the r e regulation in effect for and dividends should be included in combined taxable_income for purposes of determining disc fsc benefits b requested and received appeals_office consideration for all unagreed issues including this one the issue became moot when b switched from the gross_income_method to the sales_method for those taxable years for purposes of apportioning r e expenses in determining the disc fsc commission allocation and apportionment of r e expenses law and analysis to determine the allowable_amount of foreign taxes creditable under sec_901 a taxpayer must determine its foreign_tax_credit_limitation under sec_904 sec_904 provides that the total amount of the credit taken under sec_901 shall not exceed the same proportion of the tax against which such credit is taken which the taxpayer’s taxable_income_from_sources_without_the_united_states but not in excess of the taxpayer’s entire taxable_income bears to his entire taxable_income for the same taxable_year taxable_income_from_sources_without_the_united_states is defined in sec_862 as foreign source gross_income less the expenses losses and other deductions properly apportioned or allocated thereto and a ratable part of any expenses losses or other deductions which cannot definitely be allocated to some item or class_of_gross_income postf-148879-01 the regulations under sec_861 provide specific guidance on how to allocate and apportion expenses losses and other deductions in determining taxable_income from within and without the united_states under sec_861 sec_862 and sec_863 as well as in determining taxable_income from specific activities under other sections of the code referred to as operative sections sec_1_861-8 requires taxpayers to the extent necessary to determine taxable_income from a specific source or activity required by an operative code section to allocate deductions to a class_of_gross_income and to apportion deductions within the class between statutory and residual groupings of gross_income sec_1_861-8 operative code sections include the geographic sourcing_rules of sec_861 sec_862 and sec_863 of the code as applicable for purposes of sec_904 limitation sec_1_861-8 for this purpose the statutory_grouping is foreign source taxable_income and the residual_grouping is u s source taxable_income sec_1_861-17 specifically addresses the allocation and apportionment of research expenses under sec_1_861-17 and expenditures_for r e that a taxpayer deducts under sec_174 ordinarily shall be considered deductions that are definitely related to all income reasonably connected with the relevant broad three-digit sic code product category or categories of the taxpayer and therefore allocable to all items of gross_income as a class including income from sales royalties and dividends related to such product category or categories sec_1_861-17 provides a limited exception permitting a direct allocation of r e that is undertaken solely to meet legal requirements imposed by a political entity and that cannot reasonably be expected to generate amounts of gross_income beyond de_minimis amounts outside a single geographic source to gross_income within that geographic source as a class legally-mandated r e after the r e expenses other than legally-mandated r e are allocated to the proper class_of_gross_income in the sic code product category they must be further apportioned between u s and foreign_source_income in that class for purposes of determining the foreign_tax_credit_limitation sec_1 b provides that a portion of r e expenses attributable to research activities conducted in the united_states is apportioned directly to u s source income and a portion of r e expenses attributable to research activities conducted outside the united_states is allocated to foreign_source_income exclusive geographic apportionment the remaining qualified r e expenditures may be apportioned on the basis of either gross_income under sec_1_861-17 or sales under sec_1_861-17 for purposes of determining the apportionment ratio under the sales_method sales by both controlled and uncontrolled parties of products involving intangibles licensed or purchased from the taxpayer are included if the seller can reasonably be expected to benefit directly or indirectly from the research expense connected postf-148879-01 with the product category sec_1_861-17 and sec_1_861-17 provides that if a controlled_corporation enters into a cost- sharing arrangement in accordance with sec_1_482-7 for the purpose of developing intangible_property then that corporation shall not reasonably be expected to benefit from the taxpayer’s share of the r e expense in this case the controlled corporation’s sales in the relevant product category are not taken into account in determining the apportionment ratio under the sales_method example of sec_1_861-17 example illustrates the application of the r e allocation and apportionment rules to royalties from controlled foreign subsidiaries and to dividends from subsidiaries with cost-sharing_arrangements with their parent the example provides in relevant part that x is a manufacturer and distributor of small gasoline engines for lawn mowers a product within the sic code category for engines and turbines y and z controlled foreign subsidiaries of x also manufacture and sell these engines abroad and pay royalties to x x has an arm’s length cost-sharing arrangement with its controlled foreign_subsidiary c to share the funding of all of x’s research activity in x incurs dollar_figure of non- legally-mandated r e expense and performs an additional dollar_figure of research on gasoline engines that is funded by the cost-sharing arrangement with c example concludes that the dollar_figure in non-legally-mandated r e expenses_incurred by x is definitely related to all gasoline engines and is therefore allocable to the class_of_gross_income to which the engines give rise gross_income from sales of gasoline engines in the united_states royalties from y and royalties from z no part of the dollar_figure research expense is allocable to dividends from c because c has already paid through its cost-sharing arrangement for research activity performed by x which may benefit c b argues that the royalties paid_by its cfcs are essentially similar to the cost- sharing arrangement described in example in paying for the benefits it may derive from the research so that dividends from those cfcs should similarly be excluded from the class_of_gross_income to which b’s r e expense is allocated b’s argument overlooks an essential difference between a cost-sharing arrangement and a royalty arrangement a cost-sharing agreement involves a sharing of intangible_development_costs in proportion to anticipated benefits in contrast a royalty payment is compensation_for the use of existing intangible_property b’s royalty income constitutes payment for_the_use_of its developed intangibles not a sharing of its sec_174 r e expenses thus no portion of the royalties paid_by the cfcs is in payment for the research activity conducted by b in the year the royalties are paid a portion of b’s currently deductible r e expense is properly allocable to both dividends and royalties paid with respect to existing intangibles that contributed to the cfcs’ production_of_income in the relevant sic code product category because the earnings_and_profits available for distribution after postf-148879-01 the cfc deducts royalty and other expenses have not been reduced by any portion of the current r e expense a cost-sharing arrangement differs from a royalty in that rather than paying for_the_use_of existing property the payor shares the costs and risks of developing intangible_property in return for a specified interest in any intangible_property that may be produced r e cost-sharing_payments are not income to the recipient but reduce the amount of deductible r e expense of the recipient subject_to allocation the r e cost-sharing payment is deductible by the payor sec_1 h because a cfc in a cost-sharing arrangement directly incurs and deducts a portion of the sec_174 r e expenses the cfc’s share of those r e expenses has already reduced its earnings available for distribution as a dividend so that no further allocation of the parent corporation’s share of the currently deductible r e expense is made to dividends_paid by the cfc in that year b and its cfcs are not parties to a cost-sharing arrangement and neither b nor the examining agent have suggested that b’s license agreements should be characterized in substance as cost-sharing_arrangements which would have the effect of reducing b’s foreign source royalty income and deductible r e expense instead the cfcs compensate b for_the_use_of b’s intangibles by making royalty payments dividends from the royalty-paying cfcs are income reasonably connected with b’s appropriate sic code product categories and must be included in the class_of_gross_income to which r e is allocated and apportioned under sec_1_861-17 duty_of_consistency and estoppel arguments law and analysis b has advanced the argument that the service should be equitably and or collaterally estopped from asserting that dividends must be included in the class_of_gross_income to which r e is allocated and apportioned because that position is contrary to the position taken by the service with respect to the determination of disc fsc benefits in the and audit cycles alleging reliance b states that the service should be estopped from acting contrary to its prior position b has cited or alluded to three theories as support for its claim - the duty_of_consistency or quasi-estoppel equitable_estoppel and collateral_estoppel duty_of_consistency and equitable_estoppel in the present case neither the duty_of_consistency nor the doctrine_of equitable_estoppel applies to the service the duty_of_consistency which is a modified form of equitable_estoppel has been narrowly tailored to apply to taxpayers’ actions in cases arising under federal tax laws see 532_f2d_809 2d cir 495_f2d_211 8th cir 103_tc_525 aff’d 100_f3d_778 10th cir 72_tc_807 aff’d 656_f2d_483 9th cir where a taxpayer made a representation or reported an item for tax purposes in one year and the service acquiesced in or relied on the representation or report for that year the duty_of_consistency prohibits the taxpayer from changing that representation or report in a later year if the service is prevented from recalculating or assessing tax_liability stemming from the earlier year due to the expiration of statutes of limitation lefever t c pincite as the duty_of_consistency has been almost exclusively applied to taxpayers the theory more often asserted against the service is that of equitable_estoppel which prevents any party from profiting from an action that induced reliance by another party the elements of estoppel are as follows there must be a false representation or wrongful misleading silence the error must be in a statement of fact and not in an opinion or a statement of law the person claiming the benefits of estoppel must be ignorant of the true facts and he must be adversely affected by the acts or statements of the person against whom an estoppel is claimed emerson v commissioner 67_tc_612 however the law is clear that the commissioner is not estopped from taking an alternate position in a subsequent tax_year where the agent acted beyond his authority or made a mistake of law in the prior tax_year even where there has been detrimental reliance by the taxpayer 465_us_330 381_us_68 emerson t c pincite in addition the supreme court has stated that it is well settled that the government may not be estopped on the same terms as any other litigant 467_us_51 when estoppel is asserted against the government some courts of appeal have required additional elements to be proven by petitioners 1_f3d_932 9th cir the aggrieved party must demonstrate affirmative conduct going beyond mere negligence and must also show that the government’s act will cause a serious injustice and that the imposition of estoppel will not unduly harm the public interest these additional elements serve as threshold issues that must be satisfied before examining the traditional elements of estoppel id in cases involving the service federal courts have said that estoppel including the duty_of_consistency is to be applied against the service only with restraint and caution shuster v commissioner 312_f2d_311 9th cir emerson t c pincite this restraint is based on the premise that the policy of the estoppel doctrine is outweighed by the need for efficient collection of public revenue by the commissioner schuster f 2d pincite a court will apply estoppel to prevent the government from correcting a mistake of law only where the equitable interest of the party asserting estoppel against the service is considered ‘compelling’ and postf-148879-01 the loss which it would sustain is ‘unwarrantable’ and ‘unconscionable ’ emerson t c pincite quoting schuster f 2d pincite b advances the argument that the position of the examining agent in prior tax years as expressed solely through proposed adjustments that were rendered moot in appeals because b changed its apportionment methodology equitably estops the service from assuming a different position for the present tax years such a claim cannot be a duty_of_consistency matter as the necessary elements are not present and even if they were this theory does not apply to the service nor does this claim satisfy the basic elements of equitable_estoppel as the service position in the prior tax years involved an interpretation of law this case does not satisfy the additional threshold elements of estoppel that apply to those who would estop the government finally this case presents less compelling facts than other cases where estoppel claims have failed against the service the factual situation in the instant case can be compared to those in frische v commissioner tcmemo_2000_237 80_tcm_143 and emerson 67_tc_612 two cases in which the tax_court declined to apply equitable_estoppel to bar the service from correcting a mistake of law in frische the petitioner asserted that the service should be estopped from disallowing certain recurring expenses for the years and where petitioner had been audited for five prior tax years and the same expenses were allowed in a final resolution tcmemo_2000_237 t c m cch pincite in emerson the petitioner asked that the service be estopped from pleading that certain property should be included in petitioner’s gross_estate because the service had signed a formal settlement with petitioner three years earlier treating such property as having been gifted to petitioner’s children t c pincite the taxpayer’s position in the present case is even weaker than that of the unsuccessful litigants since the prior position was never incorporated in any formal administrative conclusion signed settlement or other final resolution of the prior cycles collateral_estoppel unlike duty_of_consistency and equitable_estoppel theories collateral_estoppel does not require the court to analyze notions of fairness reliance or other possibly subjective considerations collateral_estoppel requires only an objective analysis of prior legal proceedings of one party involving the same or similar issues generally under collateral_estoppel if the disputed issue has been actually litigated on the merits it may not be relitigated 530_us_392 333_us_591 as there was no judicial resolution or even settlement of the disputed issues in this matter in earlier tax years collateral_estoppel is inapplicable postf-148879-01 despite the absence of any judicial resolution of the and audit cycles b argues that the agent’s analysis of the disc fsc allocation issue in prior years should bar the service from taking a different position for subsequent tax years on the foreign_tax_credit_limitation issue this argument is contrary to well- settled case law confirming that each taxable_year stands on its own and collateral_estoppel does not prevent the commissioner or the taxpayer from taking a different position in other years sunnen u s pincite e ach year is the origin of a new liability and of a separate cause of action but if the later proceeding is concerned with a similar or unlike claim relating to a different tax_year the prior judgment acts as a collateral_estoppel only as to those matters in the second proceeding which were actually presented and determined in the first suit 783_f2d_69 7th cir 713_f2d_347 8th cir it is settled that even if the commissioner erroneously may have accepted the tax treatment of certain items in previous years he is not precluded from correcting that error in a subsequent year these cases confirm that the service when deciding an issue for an open tax_year is not bound by a position taken on that same issue for a prior tax_year especially where there is a correction of a legal error b’s claims that the service should be so constrained fails for several reasons first there was no formal judicial or administrative decision made on the allocation of r e expenses in the earlier tax years rather the service advanced a proposal that was rendered moot by b’s election to change its apportionment methodology from the gross_income_method to the sales_method second the sole expression of a position by the service on the allocation issue in the prior tax years comes from a proposed_adjustment by the examining agent third the proposals made by the agent regarding the prior tax years were based on an erroneous interpretation of relevant law fourth the service’s current position reflects the correct interpretation of the applicable law without anything more conclusive and authoritative than a proposed_adjustment b cannot say that the allocation issue was actually presented and determined with finality in the earlier audit cycles nor can b seek to prevent the service from correcting a prior mistake of law on the grounds of collateral_estoppel please call if you have any further questions barbara a felker chief branch associate chief_counsel international


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc psi plr-113433-00 date date number release date index number x company1 company2 dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting rulings under sec_29 of the internal_revenue_code facts the facts as represented by x and x’s authorized representative are as follows company is a limited_liability_company with x as its sole member company is disregarded as an entity separate from x company is a limited_partnership predominately owned for federal_income_tax purposes by x company and company each have an identical facility designed to produce synthetic_fuel from coal initially each facility produced a solid synthetic_fuel from coal using the following process coal was crushed to a uniform size feedstock and conveyed to a high speed mixer designed to homogenize the material prior to the application of the binder material the sized homogenized feedstock material was then mixed in a high speed paddle type blender with water and the binder material to produce a rather gummy mixture the gummy mixture was subjected to pressures up to pounds per square inch by passing through a hydraulically driven roll type briquetter the initial binder used was a straight run asphalt material that was purchased and trucked to the facilities where it was stored in heated tanks the original production process independently added water and binder to the coal before the mixture of fines water and binder entered the briquetter you now mix the water and binder together with a small amount of soap to form an emulsion which is then mixed with the coal you further propose that from time to time one of two plr-113433-00 alternative substances will be used in place of the emulsion the feedstock coal the modified binder and the two alternative substances meet the requirements of revproc_2001_30 2001_19_irb_1163 and revproc_2001_34 2001_22_irb_1293 you have represented that the modification of the binder or the use of the alternative substances does not increase the production output of either facility the production output is the amount of qualified_fuel including the production of a briquetted fuel product that can reasonably be expected to be actually produced by each facility using the prevailing practices in the industry regarding the performance of maintenance with regard to the various pieces of equipment in the facility reasonable allowances for shutdowns for repairs and or replacement of parts etc x has had an expert conduct numerous tests and has submitted expert reports on fuel produced from coal using the process as modified and the alternative substances by the preponderance of these tests' results x and x's authorized representative represent that there is a significant chemical difference between the fuel produced in each case and the coal from which the fuel was made the original site of the facilities is not large enough to accommodate the storage of the coal input the facilities were designed to be relocated although relocation of the facilities will involve the replacement of concrete pads and certain items of equipment that could not physically or economically be relocated to a new site the other equipment including major components such as the pan feeder crusher mixer blender emulsifier briquetter hydraulic power units and binder pumps will be incorporated into the relocated facilities following relocation of the facilities the fair_market_value of the equipment from each original facility that is included in a relocated facility will exceed percent of the fair_market_value of the total equipment in the relocated facility ruling requests and sec_29 defines qualified_fuels to include liquid gaseous or solid synthetic fuels produced from coal including lignite including such fuels when used as feedstocks in revrul_86_100 1986_2_cb_3 the internal_revenue_service ruled that the definition of the term synthetic_fuel under sec_48 and its regulations are relevant to the interpretation of the term under sec_29 former sec_48 provided a credit for the cost of equipment used for converting an alternate_substance into a synthetic liquid gaseous or solid fuel revrul_86_100 notes that both sec_29 and former sec_48 contain almost identical language and have the same overall congressional intent namely to encourage energy conservation and aid development of domestic energy production under sec_1_48-9 of the plr-113433-00 income_tax regulations a synthetic_fuel differs significantly in chemical composition as opposed to physical composition from the alternate_substance used to produce it coal is an alternate_substance under sec_1_48-9 the feedstock coal the modified binder and the two alternative substances meet the requirements of revproc_2001_30 2001_19_irb_1163 and i r b based on the representations of x and x’s authorized representative including the preponderance of the test results we agree that the fuel to be produced in the facilities using the modified process on the coal will result in a significant chemical change in coal transforming the coal into a solid synthetic_fuel from coal because x company is disregarded as an entity separate from x and company will each own and operate a facility we conclude that x and company will each be entitled to the sec_29 credit for their production of the qualified_fuel from their own facility provided the fuel is sold to an unrelated_person ruling_request sec_7701 provides that taxpayer means any person subject_to any internal revenue tax generally under sec_7701 the term person includes an individual a_trust estate partnership_association company or corporation sec_702 provides that each partner determines the partner’s income_tax by taking into account separately the partner’s distributive_share of the partnership’s other items of income gain loss deduction or credit to the extent provided by regulations prescribed by the secretary sec_1_702-1 provides that the distributive_share is determined as provided in sec_704 and sec_1_704-1 sec_704 provides that a partner’s distributive_share of income gain loss deduction or credit is except as otherwise provided in chapter of subtitle a of title_26 determined by the partnership_agreement sec_704 provides that a partner’s distributive_share of income gain loss deduction or credit or item thereof is determined in accordance with the partners interest in the partnership determined by taking into account all facts and circumstances if the partnership_agreement does not provide as to the partner’s distributive_share of income gain loss deduction or credit or item thereof or the allocation to a partner under the agreement of income gain loss deduction or credit or item thereof does not have substantial economic_effect sec_1_704-1 provides that allocations of tax_credits and tax_credit recapture except for sec_38 property are not reflected by adjustments to the partners’ capital accounts thus these allocations cannot have economic_effect under sec_1 b ii b and the tax_credits and tax_credit recapture must be allocated in plr-113433-00 accordance with the partners’ interests in the partnership as of the time the tax_credit or credit recapture arises if a partnership expenditure whether or not deductible that gives rise to a tax_credit in a partnership_tax_year also gives rise to valid allocations of partnership loss or deduction or other downward capital_account adjustments for the year then the partners’ interests in the partnership with respect to such credit or the cost giving rise to it are in the same proportion as the partners’ respective distributive shares of the loss or deduction and adjustments see sec_1_704-1 example identical principles apply in determining the partners’ interests in the partnership with respect to tax_credits that arise from receipts of the partnership whether or not taxable based on the information submitted and the representations made we conclude that the sec_29 credit attributable to company may be allocated to the partners of company in accordance with the partners’ interests in company when the credit arises for the sec_29 credit a partner’s interest in company is determined based on a valid allocation of the receipts from the sale of the sec_29 qualified_fuel ruling_request to qualify for the sec_29 credit the facility must have been placed_in_service before date pursuant to a binding written contract in effect before date while sec_29 does not define placed_in_service the term has been defined for purposes of the deduction for depreciation and the investment_tax_credit property is placed_in_service in the taxable_year the property is placed in a condition or state of readiness and availability for a specifically assigned function sec_1_167_a_-11 and sec_1_46-3 of the income_tax regulations placed_in_service has consistently been construed as having the same meaning for purposes of the deduction for depreciation and the investment_tax_credit see revrul_76_256 1976_2_cb_46 when property is placed_in_service is a factual determination and we express no opinion on when the facility was placed_in_service revrul_94_31 1994_1_cb_16 concerns sec_45 which provides a credit for electricity produced from certain renewable resources including wind the credit is based on the amount of electricity produced_by_the_taxpayer at a qualified_facility during the 10-year period beginning on the date the facility was originally placed_in_service and sold by the taxpayer to an unrelated_person during the taxable_year revrul_94_31 holds that for purposes of sec_45 a facility qualifies as originally placed_in_service even though it contains some used_property provided the fair_market_value of the used_property is not more than percent of the facility's total value the cost of the new property plus the value of the used_property revrul_94_31 concerns a factual context similar to the present situation consistent with the holding in revrul_94_31 the relocation of the facility after date will not prevent the relocated facility from continuing to be treated as originally plr-113433-00 placed_in_service prior to date for purposes of sec_29 provided the fair_market_value of the used_property is more than percent of the relocated facility’s total fair_market_value at the time of the relocation conclusions accordingly based on the representations of x and x’s authorized representative we conclude as follows each facility with use of the modified process including the two alternative substances will produce a qualified_fuel within the meaning of sec_29 the production of the qualified_fuel from company 1’s facility will be attributable solely to x entitling x to the sec_29 credit for the production of the qualified_fuel from the facility that is sold to an unrelated_person the production of the qualified_fuel from company 2’s facility will be attributable solely to company entitling company to the sec_29 credit for the production of the qualified_fuel from the facility that is sold to an unrelated_person the sec_29 credit that is attributable to company may be allocated to the partners of company according to their ownership_interest in company at the time that the credit arises for purposes of this allocation a partner’s interest in company is determined by reference to a valid allocation of that partner’s share in the gross_receipts from sale of the qualified_fuel if a facility was placed_in_service prior to date within the meaning of sec_29 relocation of the facility after date will not result in a new placed_in_service_date for the facility for purposes of sec_29 provided the fair_market_value of the used_property that is the property originally placed_in_service prior to date is more than percent of the relocated facility’s total fair_market_value at the time of the relocation except as specifically ruled upon above we express no opinion concerning the federal_income_tax consequences of the transaction described above specifically we express no opinion on when the facility was placed_in_service for purposes of sec_29 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling may be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in this ruling see section dollar_figure of revproc_2000_1 2000_1_irb_4 however when the criteria in section dollar_figure of revproc_2000_1 are satisfied a ruling plr-113433-00 is not revoked or modified retroactively except in rare or unusual circumstances in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours joseph h makurath senior technician branch office of associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes