internal_revenue_service p o box cincinnati oh number release date department of the treasury employer_identification_number contact person - id number date date contact telephone number uil legend b program c program l program m program n program o program t dollars amount dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request your letter indicates that you will operate an educational grant program called the b your purpose is to create a network of global citizens who will represent a new kind of change agent able to traverse industries and cultures and approach global challenges from a myriad of perspectives the purpose of the b is to allow participation in your c program provide financial support structured guidance and mentoring to b fellows as they participate in hands-on educational training and events to learn about today’s global challenges and opportunities and carry out projects and initiatives that translate your global citizenship mission into action in this way the c program serves to give b fellows a window into the world and a worldwide platform to make a difference individuals are newly chosen to participate in the b fellowship as first or second year university students currently b fellows are selected from your six partner universities located around the world b fellows consist of junior and senior fellows junior fellows are recently selected b fellows in the process of participating in your two-and-a-half-year structured online and on-campus training program senior fellows ranging from recent college graduates to seasoned professionals are individuals who have successfully graduated from the junior fellows by fulfilling the online training program and associated requirements once they become b fellows students are able to apply for a portfolio of grant programs that comprise the c program at the present time you conduct four varieties of grant programs for b fellows the l m n and o grants at their core these programs aim to provide b fellows with opportunities to i experience new cultures and improve their ability to work across barriers of country nationality and society ii expand their global knowledge on a diverse range of topics iii gain new skills through hands-on educational activities including workshops and conferences iv put these skills to use in the real world in their careers communities and around the world and v actively engage with other b fellows on campus in other countries and online to make a positive impact locally and globally l grants cover accommodation travel meals visa medical and any other transportation_expenses associated with their attendance at l a multi-day educational workshop you host that brings together newly selected b fellows for their first in-person meeting the purpose of the l grants is to inspire them to embark on their change-maker journey build a shared understanding of global issues learn how to cooperate in virtual teams form bonds exchange knowledge across cultures and embrace the values of global citizenship m grants provided to junior b fellows cover accommodation meals visa medical and any other transportation_expenses associated with their attendance at a conference which is hosted by you and one of your partner universities this is a to day series of educational activities focused on global citizenship the purpose of the conference is to provide a forum for advocates practitioners and experts from across the globe to exchange tools and resources that enable solving global challenges you also award grants to cover the travel_expenses of senior fellows who wish to participate in the conference as mentors and or presenters n grants support junior and senior b fellows as they develop projects or organize workshops or campaigns that link greater global challenges to local circumstances and foster global awareness about similarities and differences in culture economics and societies by learning new languages attending relevant events interning at international organizations around the world or traveling to meet and experience the realities of a place the projects and activities supported by n grants typically range from to letter catalog number 58222y months and cover expenses related to the project including without limitation travel accommodation relevant project materials resources and necessary technology o grants support the participation of b fellows in high-profile international summits as well as local conferences and workshops which cover subjects of global relevance that they are passionate about so long as they are in line with your mission vision and purpose subjects may include but are not limited to community leadership social media literacy education and social business these recipients receive guidance support and mentoring as they prepare to undertake their respective opportunities in the form of pre-event briefings and the like o grants support undertakings of less than one year in duration and typically cover transportation lodging registration fees and other travel_expenses associated with attendance at the event to be eligible for your four grant programs an individual must first become a b fellow who are selected among first or second year university students enrolled in one of your partner universities once selected a b fellow can apply for your grant programs which are open to a broad pool of scholars who demonstrate the potential to be promoters of global citizenship and are understood to be exceptionally qualified to carry out your charitable purposes all current and new b fellows are eligible to apply for your grant programs b’s are intended to support students and professionals who are or show clear evidence of potential to become global citizens and who can and will promote global citizenship through global citizenship work and engagement with like-minded partner organizations accordingly the primary criteria for the selection of b fellows includes but is not limited to e e demonstrated knowledge about foreign cultures international issues global challenges and solutions intercultural experience a track record of active involvement in their societies including engagement in local initiatives with a connection to global topics personal initiative teamwork experience strong oral and written communication skills and an excellent academic record grant awardees will be chosen from the pool of current b fellows on the basis of the following selection criteria e new 6b fellows receive l grants if they demonstrate that they have successfully completed the required seven month on-campus and online training and activities prior to attendance including taking introductory sessions on relevant topics and making progress toward designing a tangible and meaningful project to address a global challenge with other b fellows the primary criteria for selecting senior b fellows for l grants includes but is not limited to exhibition of exemplary global citizenship competencies proposal of and clear commitment to implement a presentation or workshop for the l grants that is highly relevant to the themes and letter catalog number 58222y foci of the l grants and possession of a high level of expertise in the subject of the presentation or workshop e e e junior b fellows will receive m grants if they successfully establish that they have fulfilled the requirements indicative of being an active b fellow including but not limited to participating in campus and online activities and implementing an individual act of c the primary criteria for selecting senior b fellow for m grants includes but is not limited to exhibition of exemplary global citizenship competencies proposal of and clear commitment to implement a presentation or workshop for the m that is highly relevant to the themes and foci of the m and possession of a high level of expertise in the subject of the presentation or workshop tobe awarded n grants all b fellows will be required to meet rigorous selection criteria including but not limited to establishing that their proposed project or activity i would further your mission vision and core values ii is feasible to implement iii would have a sustained impact on a global challenge iv would enable the grantee to grow as a global citizen v would help the grantee broaden existing skills and gain new competencies and vi would build awareness for global citizenship b fellows are selected for an o grant on the basis of demonstrated personal commitment interest and expertise in the field or topic that forms the focus of the summit conference workshop or other event that a fellow proposes to attend the event-related field must be consistent with your mission vision and purpose information about your grant programs may be available through a number of outlets such as calls for applications on your website online portal available to b fellows newsletter and blog social media and direct solicitation of current b fellows by your staff information regarding how to apply to become a member of b fellows may be available through your website correspondence with administrators and counselors at your partner universities websites of the partnering universities and other websites and online education databases as part of the selection process for the b fellowship you enlist a selection committee composed of your staff and b fellows from diverse backgrounds likewise recipients of the l m n and o grants are chosen by this committee comprised of your staff and b fellows from different cultures traditions and parts of the world b fellows who serve as selection committee members are excluded from evaluating grant proposals in which they have an interest for example b fellows cannot participate in the scoring of their own grant proposals proposals on which they have collaborated or offered guidance or those of their immediate_family members you do not discriminate on the basis of race religion creed color sex age physical or mental disabilities sexual orientation or national origin all b fellowships and grants are required to be awarded on an objective and nondiscriminatory basis letter catalog number 58222y the exact quantity and amount of the grants awarded in a given year will depend on a number of factors including the quantity qualifications and particular needs of the applicants and will be determined at your discretion you anticipate in the coming year to award approximately total grants for an estimated total amount of t dollars no grants will be awarded to your founder creator officers board members or staff or their families or any disqualified_person with respect to you or for a purpose that is inconsistent with the purposes set forth in sec_170 of the code you represent you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees’ assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversions from occurring you represent that you will maintain all records relating to individual grants including information obtained to evaluate grantees identify whether a grantee is a disqualified_person establish the amount and purposes of each grant and establish that you undertook the supervision and investigation of grants described above basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - - - ascholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 ii or a prize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show e the grant procedure includes an objective and nondiscriminatory selection process letter catalog number 58222y the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don’t differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements letter catalog number 58222y


internal_revenue_service number release date index number --------------------------- --------------------------------- ---------------------------- in re ------------- tys -------------- tys -------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc intl b02 plr-123595-09 date date --------------------------- taxpayer ----------------------------- foreign_trust a --------------------------------------------------------------------------------- foreign_trust b -------------------------------------------------------------------------------------------------------------------- ------------------------ ----------------------------------------- --------------- ------------------- ------------------- ------- ------- ------- ------- --------------------- -------------------------- ----------------- --------------- ------------- ----------------------- --------------------------------- ---- trustee fc1 fc2 fc3 year year year year date date country x accountant a accountant b accounting firm c law firm d y dear ------------- this is in response to a letter dated date submitted by your authorized plr-123595-09 representative that requests the consent of the commissioner of the internal_revenue_service commissioner for taxpayer to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 with respect to taxpayer’s investment in fc2 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 facts taxpayer has been and continues to be a resident_alien within the meaning of code sec_7701 and therefore a u_s_person under code sec_7701 taxpayer is a named beneficiary in foreign_trust a which was established by taxpayer’s father a non-u s person until date foreign_trust a was a foreign grantor_trust for u s tax purposes treated as owned by taxpayer’s father pursuant to code sec_677 and sec_1_672_f_-3 on date foreign_trust a became a foreign non-grantor_trust at all times since its formation foreign_trust a has been administered and managed by trustees that have been non-u s persons trustee is the current trustee of foreign_trust a foreign_trust a is a beneficiary of a one-fifth separate share of foreign_trust b foreign_trust b indirectly owns percent of the stock of fc1 a corporation organized under the laws of country x fc1 owned a y percent interest in fc2 a corporation organized under the laws of country x until date when fc2 was merged into a related_entity fc3 as a result of its business activities fc2 had been a passive_foreign_investment_company pfic under code sec_1297 until it merged into fc3 on date both trustee and prior trustees of foreign_trust a have under their obligations to foreign_trust a refused to disclose to taxpayer information concerning the structure through which foreign_trust a holds assets and foreign_trust a’s trust documentation the statements and forms taxpayer received from trust a and trust b did not indicate that the trusts held shares in fc2 or that fc2 was a pfic for u s federal_income_tax purposes and of the consequences of such investment during the period year 1-year taxpayer did not receive beneficiary statements from the trusts and did not file income_tax returns because she did not otherwise plr-123595-09 have taxable_income during the period year 3-year taxpayer relied upon the advice of qualified_tax professionals including accountant a accountant b and accounting firm c however because taxpayer was unaware of the existence of fc2 and was not provided with sufficient information from the trustees of trust a to determine fc2’s existence the tax professionals were unaware of the existence of fc2 and were unable to determine that taxpayer indirectly owned shares in a pfic in year taxpayer engaged law firm d to assist her in certain estate_planning issues including with respect to her interests in trust a and trust b during the course of its representation of taxpayer law firm d discovered that taxpayer indirectly owned shares in fc2 and thus indirectly owned shares in a pfic taxpayer has submitted an affidavit signed and under penalties of perjury describing the events that led to the failure to make the qef election by the election due_date including the role of the trustee accountants and law firm taxpayer has also submitted affidavits of trustee accountant a accountant b accounting firm c and law firm d corroborating the representations made by taxpayer taxpayer represents that as of the date of this request_for_ruling the pfic status of fc2 has not been raised by the irs on audit for any of the taxable years at issue ruling requested taxpayer requests the consent of the commissioner to make a retroactive qef election with respect to fc2 for year under sec_1_1295-3 law code sec_1295 provides that a pfic will be treated as a qef with respect to a taxpayer if an election by the taxpayer under code sec_1295 applies to such pfic for the taxable_year and the pfic complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company under code sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic under sec_1_1295-3 a shareholder may request the consent of the plr-123595-09 commissioner to make a retroactive qef for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united_states government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1_1295-3 the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe the events that led to the failure to make a qef election by the election due_date the discovery of such failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on such professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made with taxpayer’s ruling_request we conclude that taxpayer has satisfied sec_1_1295-3 accordingly consent is granted to taxpayer to make a retroactive qef election with respect to fc2 for year provided that taxpayer complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election this private_letter_ruling is directed only to the taxpayer who requested it code sec_6110 provides that it may not be used or cited as precedent a copy of this ruling must be attached to any_tax return to which it is relevant plr-123595-09 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer’s first and second representatives sincerely jeffery g mitchell branch chief branch international cc


internal_revenue_service number release date index number - ------------------------------------ ------------------------------------ ---------------------------------------- ---------------------------------------------- department of the treasury washington dc person to contact ---------------------- -------- ------------- telephone number --------------------- refer reply to cc psi - plr-140760-05 date date ------------------------------------ legend x --------------------------------------------------- a d1 dear --------------------- ---------------------- ---------------------- ---------------------------- this letter responds a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 a x’s sole shareholder intended for x to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed any taxable_year after the date prescribed by sec_1362 for making such election for sec_1362 provides that if -- a an election under sec_1362 is made for except as specifically set forth above no opinion is expressed concerning the this ruling is directed only to the taxpayer who requested it sec_6110 plr-140760-05 such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective d1 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for d1 federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code provides that it may not be used or cited as precedent being sent to x’s authorized representative enclosures beverly katz senior technician reviewer branch associate chief_counsel passthroughs and special industries pursuant to a power_of_attorney on file with this office a copy of this letter is copy of this letter copy for sec_6110 purposes sincerely yours


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-126833-06 date date company date ------------------------------ ----------------------- ---------------------- dear ------------------------- this letter responds to a letter from your authorized representative dated date requesting an extension of time for company to elect under ' c of the procedure and administration regulations to be treated as an association_taxable_as_a_corporation you represent the following facts it was intended that company be treated as a corporation effective date however due to inadvertence company did not file form_8832 entity classification election facts law regulations sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity may elect its classification for federal tax purposes as provided in this section an eligible_entity with a single owner can elect to be classified as an association and thus a corporation under ' b or to be disregarded as an entity separate from its owner sec_301_7701-3 provides in general that unless it elects otherwise a domestic eligible_entity with a single owner is disregarded as an entity separate from its owner plr-126833-06 sec_301_7701-3 provides in general that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the applicable service_center sec_301_7701-3 provides that an election made under ' c i will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under ' c the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of ' requests for relief under ' will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based on the facts and representations submitted we conclude that company has satisfied the requirements of and consequently company is granted an extension of days from the date of this letter for electing under ' to be treated as an association_taxable_as_a_corporation effective date company must file form_8832 within the extension period with the appropriate service_center with a copy of this letter attached except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code 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 plr-126833-06 in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative this ruling is directed only to the taxpayer on whose behalf it was requested according to ' k of the internal_revenue_code this ruling may not be used or cited as precedent sincerely s enclosures copy of this letter copy for ' purposes heather c maloy associate chief_counsel passthroughs and special industries


uli sey hy department of the treasury internal_revenue_service washington d c contact person id number telephone number jt e0 b date may employer_identification_number legend w o o m dear sir or madam this is in response to a letter from your authorized representative requesting rulings on your behalf regarding the tax consequences associated with the reorganization of the operations of a tax-exempt integrated healthcare system you have stated that a is exempt from federal_income_tax under sec_501 of the internal_revenue_code and has operated a hospital under the sponsorship of a religious congregation a different religious congregation and its multi-tiered system b has recently assumed sponsorship of a member is a holding_company e within this structure a’s sole corporate you have stated that a recently entered into a joint operating_agreement with c another tax-exempt hospital located in its geographic area which resulted in the formation of d to oversee and direct the activities of and services of aand c dis exempt from federal_income_tax under sec_501 of the code you have stated that for various reasons a new campus was purchased for a and a new hospital facility has been constructed on that campus and is about to open in contemplation of this opening d concluded that significant efficiencies would result if the activities conducted on the campuses of a and c could be conducted within a single corporate entity d has proposed an alternative operating structure in contrast to an alternative corporate structure upon completion of the new a facility the facility and the equipment located therein will be leased to c which will then operate and control the business of the new a facility as well as the c facility c will be the provider of all services at both facilities you have stated that from a corporate standpoint a and c will continue to function in the same manner as they have done in the past under the coordinated oversight and direction of d a will continue to have its own board_of directors which will be appointed by e whereas a’s activities previously consisted of operating a hospital you have stated that its activities will now consist of owning and leasing a hospital facility in support of the overall charitable purposes of d you have requested the following rulings in connection with the transaction described above the proposed alternative operating structure including the lease by a to c of a’s assets will not adversely affect a’s tax-exempt status under sec_501 of the code under the proposed alternative operating structure a will continue to be classified as a nonprivate foundation but will be reclassified as a supporting_organization under sec_509 and the rental income to be received by a pursuant to the lease as well as any operating income to be allocated to a will not result in unrelated_business_taxable_income to a under sec_511 through sec_501 of the code provides an exemption from federal_income_tax for organizations described in sec_501 including organizations that are organized and operated exclusively for charitable educational or scientific purposes sec_1_501_c_3_-1 of the income_tax regulations provides that the term charitable is used in sec_501 of the code in its generally accepted legal sense revrul_69_545 1969_2_cb_117 acknowledges that the promotion of health is a charitable purpose within the meaning of sec_501 of the code revrul_78_41 1978_1_cb_148 provides in part that a_trust operated by an exempt hospital for the sole purpose of accumulating and holding funds to be used to satisfy malpractice claims against the hospital is operated exclusively for charitable purposes under sec_501 integral part of the hospital performing a function that the hospital could do directly it was held that the trust was operating as an sec_509 of the code provides that a supporting_organization of an organization described in sec_509 or sec_509 is not a private_foundation sec_509 of the code requires that a supporting_organization be organized and at all times thereafter operated exclusively for the benefit of to perform the functions of or to carry out the purposes of one or more specified organizations described in sec_509 or sec_509 of the code requires that a supporting_organization be operated supervised or controlled by or in connection with one or more organizations described in sec_509 or sec_509 of the code requires that a supporting_organization not be controlled directly or indirectly by one or more disqualified persons as defined in sec_4946 other than foundation managers and other than one or more organizations described in sec_509 or sec_1_509_a_-4 of the regulations states that sec_509 of the code sets forth three different types of relationships one of which must be met in order to meet the requirements of the subsection one of those requirements is operated supervised or controlled by one or more publicly supported organizations sec_1_509_a_-4 of the regulations provides that in the case of supporting organizations which are supervised or controlled by one or more publicly supported organizations the distinguishing feature is the presence of a substantial degree of direction by the publicly supported organizations over the policies programs and activities of the supporting_organization such as the fact that a majority of the officers directors or trustees of the supporting_organization are appointed or elected by the governing body officers acting in their official capacity or the membership of one or more publicly supported organizations sec_511 of the code imposes a tax on the unrelated_business_income of organizations described in sec_501 sec_512 defines unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions which are directly connected with the carrying on of the trade_or_business with certain modifications sec_513 defines unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of the organization for funds or the use it makes of the profits derived to the exercise of the organization's exempt purposes or functions sec_1_513-1 of the regulations provides in part that a trade_or_business is related to exempt purposes only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes and it is substantially related for the purposes of sec_513 only if the causal relationship is a substantial one thus for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of exempt purposes sec_514 requires unrelated_business_income attributable to debt-financed_property to be included within the calculation of an organization’s unrelated_business_taxable_income awill not adversely affect its tax exempt status under sec_501 of the code by the proposed transaction as it will perform essential services for d nonprivate foundation status under sec_509 of the code as it meets the requirements of sec_509 b and c the rental income to be received by a pursuant to the lease as well as operating income to be allocated to a will not result in unrelated_business_taxable_income to a a qualifies for accordingly based on all the facts and circumstances described above we rule the proposed alternative operating structure including the lease by a to c of a’s assets will not adversely affect a’s tax-exempt status under sec_501 of the code under the proposed alternative operating structure a will continue to be classified as a nonprivate foundation but will be reclassified as a supporting_organization under sec_509 and the rental income to be received by a pursuant to the lease as well as any operating income to be allocated to a will not result in unrelated_business_taxable_income to a under sec_511 through these rulings are based on the understanding that there will be no material changes in the facts upon which they are based these rulings do not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described please keep a copy of these rulings in your permanent records sincerely signed marvin friedlander marvin friedlander manager exempt_organizations technical group


t c memo united_states tax_court sidney dishal and anna dishal petitioners v commissioner of internal revenue respondent docket no filed date dan l shehi for petitioners jeremy l mcpherson for respondent memorandum opinion parr judge this matter is before the court on petitioners' motion for award of reasonable_litigation_costs pursuant to sec_7430' and rule ‘all section references are to the internal_revenue_code as amended and in effect and all rule references are to the tax_court rules_of_practice and procedure unless otherwise continued petitioners moved the court for an award of litigation costs only accordingly all costs claimed by petitioners are in connection with the filing of the petition and thereafter neither party requested a hearing the relevant facts are taken from the record see rule a general background the petition in the underlying case was filed on date respondent's answer was filed on date a trial was held on date in san francisco california the sole issue at trial was whether petitioners engaged in their horse breeding and horse racing activities with the objective of making a profit within the meaning of sec_183 we filed our memorandum findings_of_fact and opinion on date holding that decision would be entered for petitioners see dishal v commissioner tcmemo_1998_397 respondent concedes that petitioners filed a timely motion for award of reasonable_litigation_costs substantially prevailed with respect both to the amount in controversy and to the most significant issue presented in the proceeding met the net_worth requirements and have not unreasonably protracted the court proceedings discussion t continued indicated sec_7430 provides for the award of reasonable administrative and litigation costs to a taxpayer in an administrative or court_proceeding brought against the united_states involving the determination of any_tax interest or penalty pursuant to the internal_revenue_code an award of administrative or litigation costs may be made where the taxpayer is the prevailing_party exhausted available administrative remedies ’ and did not unreasonably protract the administrative or judicial proceeding see sec_7430 and b prevailing_party to be a prevailing_party a taxpayer must substantially prevail with respect to either the amount in controversy or the most significant issue or set of issues presented and meet the net_worth requirements of u s c sec d b see sec_7430 a and a taxpayer will not be treated as a prevailing_party however if the united_states establishes that its position was substantially justified see sec_7430 b as we stated earlier respondent concedes that petitioners substantially prevailed and met the net_worth requirements the this requirement does not apply to an award for reasonable_administrative_costs see sec_7430 parties primarily dispute however whether respondent's position in the judicial proceeding was substantially justified petitioners contend that respondent's position in the judicial proceeding was not substantially justified respondent asserts that it was reasonable to argue that petitioners did not engage in their horse breeding and horse racing activities for profit we agree with respondent for the reasons set forth below we shall deny petitioners' motion for award of reasonable_litigation_costs position_of_the_united_states the position taken by the united_states for purposes of litigation costs is the position_of_the_united_states ina judicial proceeding see sec_7430 a respondent took a position in the judicial proceeding herein on the date respondent's answer was filed--date see huffman v commissioner 978_f2d_1139 9th cir affg in part and revg in part tcmemo_1991_144 substantial justification the commissioner's position is substantially justified if that position could satisfy a reasonable person and if it has a reasonable basis in both fact and law see 487_us_552 106_tc_76 we examine the facts known to the commissioner at the time the position was taken see 94_tc_685 the fact that the commissioner eventually loses or concedes a case is not determinative of whether a taxpayer is entitled to reasonable litigation and administrative costs see 92_tc_760 judicial proceeding we now consider whether respondent's position in the judicial proceeding was substantially justified the sole issue involved in the judicial proceeding was whether petitioners engaged in their horse breeding and horse racing activities for profit within the meaning of sec_183 respondent's position in the judicial proceeding was that petitioners did not engage in their horse breeding and horse racing activities with the primary purpose of making a profit whether a taxpayer is engaged in an activity with the requisite profit objective is determined from all the facts and circumstances e g 91_tc_371 88_tc_464 72_tc_411 affd without published opinion 647_f2d_170 9th cir sec_1_183-2 and b income_tax regs more weight is given to objective facts than to the taxpayer's mere statement of his or her intent e g 78_tc_642 affd without opinion 702_f2d_1205 d c cir sec_1_183-2 income_tax regs the regulations promulgated under sec_183 list the following nine factors that should normally be taken into account in determining whether an activity is engaged in for profit the manner in which the taxpayer carried on the activity the expertise of the taxpayer or his advisers the time and effort expended by the taxpayer in carrying on the activity the expectation that assets used in the activity may appreciate in value the success of the taxpayer in carrying on other similar or dissimilar activities the taxpayer's history of income or loss with respect to the activity the amount of occasional profits if any which are earned the financial status of the taxpayer and the extent to which elements of personal pleasure or recreation are involved see sec_1_183-2 income_tax regs the list of factors in the regulations is not exclusive and other factors may be considered in determining whether an activity is engaged in for profit these factors are not merely a counting device where the number of factors for or against the taxpayer is determinative but rather all facts and circumstances must be taken into account and more weight may be given to some factors than others cf 70_tc_715 affd on another issue 615_f2d_578 2d cir not all factors are applicable in every case and no one factor is controlling see 86_tc_360 72_tc_28 sec_1_183-2 income_tax regs petitioners state that at the time the notice_of_deficiency was issued there was no reasonable factual basis to support respondent's determination that petitioners did not engage in the business of horse racing and breeding with an intent to make a profit we disagree cases involving sec_183 are almost entirely factual in nature and require a weighing of factors all of which may be reasonably interpreted differently see brennan v commissioner tcmemo_1997_60 eldridge v commissioner tcmemo_1996_44 harrison v commissioner tcmemo_1995_ leaphart v commissioner tcmemo_1993_502 affd without published opinion 31_f3d_1172 3d cir jasienski v commissioner tcmemo_1993_449 in the underlying case we were required to weigh carefully all the facts and circumstances and consider each of the factors listed in the regulations promulgated under sec_183 although we agreed with petitioners in the underlying case there were certain factors present that were indicative of an activity_not_engaged_in_for_profit notwithstanding our conclusion that petitioners did have the requisite profit objective the presence respondent's position in the administrative_proceeding was the same as in the judicial proceeding this is immaterial however since petitioners do not seek administrative costs of these factors leads us to decide that respondent's position had a reasonable basis in both law and fact see pierce v underwood u s pincite accordingly we hold that respondent's position was substantially justified and that petitioners are not entitled to litigation costs under sec_7430 based on this holding we need not consider respondent's alternative arguments that petitioners did not exhaust their administrative remedies and that the amount of the costs claimed 1s not reasonable petitioners’ motion will therefore be denied an appropriate order and decision will be entered