internal_revenue_service number release date index number ------------- --------------------------------------------------------- -------------------------------- ------------- ---------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc ita b01 plr-149707-10 date june ------------ legend taxpayer new parent taxpayer taxpayer taxpayer taxpayer group court investment fund business a -------------------------- ------------------------- -------------- ---------------------- ------------------------- ---------------------- ----------------------------------------------------------------------------------- ------------------------------------ ----------------------------------------------------------------------------------- ------------- ------------------------------------------------ ----------------------------------------------------------------------------------- ------------------------------- amount a amount b amount c prior indebtedne sec_1 ----------------------------------------------------------------------------------- ---------------- ---------------------------------------------------------------- ------------------------------------ ---------------------------------------- prior indebtedne sec_2 ----------------------------------------------------------------------------------- ---------------------------------------------------- prior indebtedne sec_3 ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- ---------------------------------------------------------------- plr-149707-10 exit facility a year date a date b date c dear ------------- ----------------------------------------------------------------------------------- ------------------------------------------------------ ------ ------- ------------------ ---------------------- -------------------------- this letter is in response to a letter dated date submitted on behalf of taxpayer requesting rulings on the application of sec_162 sec_165 and sec_263 of the internal_revenue_code to various amounts expended in a bankruptcy reorganization facts taxpayer was the parent of a consolidated_group of which taxpayer taxpayer taxpayer and taxpayer were members collectively group group filed consolidated tax returns on the calendar_year basis and used an accrual_method of accounting for federal_income_tax purposes group engaged in business a group was adversely affected by the economic downturn and on date a group filed voluntary petitions for bankruptcy under chapter of title of the united_states_code with the court contemporaneous with the filing of the bankruptcy petitions group filed a chapter plan the plan the bankruptcy proceeding including the sale of substantially_all of the assets of group and the liquidation of group will hereinafter be referred to as the transaction as of date a group had the following indebtedness outstanding prior indebtedne sec_1 prior indebtedne sec_2 and prior indebtedne sec_3 the investment fund was a creditor with respect to prior indebtedne sec_2 and a portion of prior indebtedne sec_3 in connection with the bankruptcy filing the court approved a debtor-in-possession financing facility the dip facility with a maximum borrowing capacity equal to amount a group was the borrower under the dip facility group retired prior indebtedne sec_1 with proceeds from the dip facility a the transaction following a court-approved auction in which the investment fund1 was the successful bidder for business a the court approved the plan and the asset purchase agreement agreement the plan and agreement went into effect on date b pursuant to the plan and the agreement i the investment fund capitalized new the investment_advisor of the investment fund did not manage or control any of the partners of the partnership that owned taxpayer before the commencement of the bankruptcy proceedings plr-149707-10 parent by contributing amount b ii new parent borrowed amount c under the exit facility iii new parent transferred amount b amount c and a of its common equity to group and assumed certain liabilities of group and iv group transferred substantially_all of its assets to new parent group then distributed the cash and the new parent’s equity to its creditors in cancellation of claims and liquidated on date c of the creditors that could elect under the plan to receive cash or new parent’s equity only the investment fund elected to receive equity as a creditor of and in exchange for its portion of prior indebtedne sec_2 thus after the transaction the investment fund held all of the equity of new parent which borrowed approximately amount c under the exit facility the existing equity holders of taxpayer did not receive any equity in new parent or rights to acquire such equity or cash or property in exchange for their equity interests in taxpayer in substance the investment fund acquired substantially_all of the assets of group for cash and the cancellation of its claims and directed the assets to be transferred to new parent taxpayer represents that this exchange of assets for new parent’s equity and cash constitutes a taxable_exchange the cash proceeds described above were used to i pay in full the dip facility on date b ii pay in full the portion of the prior indebtedne sec_2 not held by the investment fund iii pay in part the prior indebtedne sec_3 and iv pay certain transaction expenses taxpayer represents that group liquidated pursuant to the plan on date c b the transaction costs costs associated with the transaction collectively the transaction costs were incurred on behalf of and for the benefit of group taxpayer represents that the events that fixed the liability of group for the transaction costs occurred in year and that the amount of such liabilities can be determined with reasonable accuracy in year further taxpayer represents that none of the providers of services for which the transaction costs were incurred is a member of group and that the income reported by such service providers is not reported on the consolidated u s federal_income_tax return filed by taxpayer for group in addition taxpayer represents that none of the providers of services for which the transaction costs were incurred has a relationship with group specified in sec_267 taking into account the constructive stock ownership rules of sec_267 the transaction costs are comprised of four basic types of costs incurred in year to facilitate the transaction expenses that have been incurred in connection with the daily business operations conducted by group prior to date b operational expenses expenses_incurred as part of the sale of substantially_all of group’s assets to new parent hereafter referred to as the asset sale in exchange for cash and new parent’s equity as part of the plan asset sale expenses expenses_incurred to institute or administer the bankruptcy proceedings bankruptcy administrative expenses and expenses associated with group’s debt financing plr-149707-10 the debt financing expenses each of these categories of expenses is described in greater detail below operational expenses group conducted business operations in year until date b during this time period group conducted its business operations and incurred expenses prior to its liquidation on date c that it characterizes as operational expenses these expenses such as wages compensation payments for utilities and overhead expenses were incurred in the ordinary course of group’s daily business operations operational expenses also included costs related to the leasing of equipment and facilities used by group in conducting business a taxpayer represents that operational expenses were incurred in year within the meaning of sec_461 and that these expenses were regularly incurred by group taxpayer further represents that operational expenses were a common or frequent occurrence in operating group’s business and that none of the operational expenses_incurred in year produced an asset or benefit that extended beyond group’s liquidation on date c asset sale expenses taxpayer also requests a ruling on the asset sale expenses in the course of the transaction group sold substantially_all of its assets and incurred liabilities in effecting the asset sale these liabilities the asset sale expenses include amounts incurred in furthering the asset sale generally and not amounts for the bankruptcy proceeding more generally in particular asset sales expenses were amounts incurred for negotiating drafting and filing the agreements and documents that effectuated the asset sale including amounts for negotiating drafting and filing of the agreement with the court the asset sale expenses also include amounts incurred for services to resolve compensation matters that arose as a result of the asset sale and for accounting and legal services related to the negotiating and drafting of portions of the plan and the disclosure statement to the extent it related to the asset sale as well as other filings required to facilitate the sale of taxpayer’s assets in the transaction taxpayer represents that the sale of substantially_all of its assets constitutes a taxable_exchange that does not qualify as a tax-free reorganization within the meaning of sec_368 and that the parties to the transaction will treat the transfer as a taxable assets sale for federal_income_tax purposes bankruptcy administrative expenses group incurred amounts to institute or administer the bankruptcy proceedings bankruptcy administrative expenses these costs include expenses for the negotiation and drafting of the plan and other documents required by the bankruptcy plr-149707-10 proceedings as well as for the reconciliation of creditors’ claims and implementation of the automatic bankruptcy stay the bankruptcy administrative expenses were incurred on behalf of and for the direct benefit of group’s bankruptcy_estate taxpayer represents that with respect to claims asserted against group by certain creditors of group for professional fees and related costs under sec_503 and sec_506 of the bankruptcy code group made payments on such claims directly to the service providers with respect to which the claims arose taxpayer further represents that the bankruptcy administrative expenses include neither amounts to resolve tort liabilities nor the operational expenses described above debt financing expenses group obtained amount a in financing pursuant to the dip facility in connection with the dip facility group incurred borrowing costs including costs of negotiating the terms of and preparing filings related to the dip facility taxpayer refers to such expenses as the debt financing expenses the dip facility was fully retired on date b with distributions made from group under the plan requested ruling sec_1 operational expenses_incurred in year by group are deductible under sec_162 asset sale expenses_incurred in year by group are recoverable through the reduction of the amount_realized by group in the asset sale bankruptcy administrative expenses_incurred in year by group are deductible upon the complete_liquidation of group in year debt financing expenses_incurred in year by group are deductible upon the retirement of the dip facility in year law and analysis as noted above taxpayer requests rulings on the federal_income_tax treatment of four categories of expenses operational expenses asset sale expenses bankruptcy administrative expenses and debt financing expenses the treatment of each category of expenditure is considered below taxpayer did not specifically identify or quantify these expenses consequently we express no opinion on the determination of the amounts of expenditures or their classification further we express no opinion on whether any particular expenditure is appropriately allocated to a particular category or any category at all determining how particular items are allocated among the four categories of expenditures is a question to be determined upon examination plr-149707-10 operational expenses taxpayer first requests a ruling that its operational expenses_incurred in year are deductible under sec_162 sec_162 provides generally a deduction for ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business sec_1_162-1 provides that deductible business_expenses include ordinary and necessary expenditures directly connected with or pertaining to a taxpayer's trade_or_business in revrul_77_204 1977_1_cb_40 the service explained that the ordinary and necessary business_expenses incurred by a bankruptcy trustee in the operation of a taxpayer's business during the pendency of bankruptcy proceedings were deductible under sec_162 in the same manner and to the same extent they would have been if the bankruptcy proceeding had not been instituted see also sec_1_263_a_-5 based on taxpayer's representations group’s operational expenses are deductible by group under sec_162 asset sale expenses taxpayer next requests a ruling that the asset sale expenses reduce the amount_realized by taxpayer from the sale of taxpayer’s assets in the transaction the treatment of these amounts is governed by sec_263 which generally prohibits deductions for capital expenditures sec_1_263_a_-5 provides that a taxpayer must capitalize an amount incurred to facilitate an acquisition of assets that constitute a trade_or_business whether the taxpayer is the acquirer in or the target of the acquisition in this case the sale of taxpayer’s assets in the transaction constitutes the sale of a business consequently taxpayer must capitalize amounts incurred to facilitate the sale in accordance with sec_1_263_a_-5 sec_1_263_a_-5 provides that in the case of an acquisition merger or consolidation that is not described in sec_368 and that is treated as an acquisition of the assets of the target for federal_income_tax purposes the seller must treat an amount required to be capitalized as a reduction of the seller’s amount_realized on the disposition of assets in short any such amount is taken into account as an adjustment to the amount_realized under sec_1001 with respect to the asset taxpayer has represented that the sale of taxpayer’s assets in the transaction is not described in sec_368 is a taxable transaction and will be treated as a taxable assets sale for federal_income_tax purposes by the parties to the transaction accordingly under sec_1_263_a_-5 the asset sale expenses reduce the amount_realized by group from the sale of group’s assets in the transaction bankruptcy administrative expenses plr-149707-10 taxpayer’s third ruling_request focuses on the treatment of the bankruptcy administrative expenses that is on the treatment of amounts to administer the post- petition bankruptcy proceedings sec_1_263_a_-5 provides that an amount_paid to institute or administer a proceeding under chapter of the bankruptcy code by the taxpayer-debtor constitutes an amount_paid to facilitate a reorganization such amounts are capitalizable under sec_1_263_a_-5 which provides that amounts incurred to facilitate a restructuring recapitalization or reorganization of the capital structure of a business_entity must be capitalized group’s bankruptcy administrative expenses are amounts described in sec_1_263_a_-5 and are required to be capitalized under sec_1_263_a_-5 amounts required to be capitalized under sec_1_263_a_-5 are deductible under sec_165 when the transaction is abandoned see example sec_3 and of sec_1_263_a_-5 further a corporation is permitted a loss for unrecovered capital expenditures upon the corporation’s liquidation 146_f2d_177 7th cir 41_tc_646 acq 1964_2_cb_3 similarly group is entitled to a loss under sec_165 for its capitalized bankruptcy administration_expenses upon group’s liquidation in year debt financing expenses taxpayer’s last ruling_request is on the deductibility of the debt financing costs upon the retirement of the dip facility sec_1_263_a_-5 requires a taxpayer to capitalize amounts paid to facilitate certain changes in the capital structure of a business_entity including a borrowing without regard to whether the transaction is a single step or a series of steps or whether gain_or_loss is recognized sec_1_263_a_-5 defines a borrowing for purposes of sec_1_263_a_-5 as any issuance of debt sec_1_263_a_-5 provides that an amount is paid to facilitate a transaction described in sec_1_263_a_-5 if the amount is paid in the process of investigating or otherwise pursuing the transaction which is determined on the basis of all the facts and circumstances sec_1_263_a_-5 generally requires capitalization of an amount_paid to facilitate a restructuring recapitalization or reorganization of the capital structure of a business_entity sec_1_263_a_-5 provides that with certain exceptions an amount_paid to institute or administer a proceeding under chapter of the bankruptcy code by a taxpayer that is the debtor under the proceeding constitutes an amount_paid to facilitate a reorganization within the meaning of sec_1_263_a_-5 under sec_1_263_a_-5 however an amount_paid to facilitate a borrowing does not facilitate another transaction other than the borrowing described in sec_1_263_a_-5 see also in re 988_f2d_554 5th cir plr-149707-10 under sec_1_263_a_-5 and sec_1_446-5 amounts capitalized with respect to a borrowing under sec_1_263_a_-5 are treated solely for purposes of determining the amount deductible in each period as reducing the issue_price and thereby creating or increasing oid or reducing issuance premium if a loan is repaid prior to maturity any unamortized portion of the capitalized costs generally is deductible the unamortized portion may be deductible even if the loan is satisfied with proceeds of another loan from the same lender see 65_tc_640 acq on this issue 1981_2_cb_2 fn in certain circumstances the new loan is treated as an extension of the original loan and the capitalized costs of obtaining the first loan must be amortized over a period that includes the term of the second loan see eg 70_tc_240 rev’d on another issue 655_f2d_980 9th cir any of the debt financing expenses_incurred to facilitate within the meaning of sec_1_263_a_-5 group’s borrowing under the dip facility were required to be capitalized under sec_1_263_a_-5 and under sec_1_263_a_-5 did not facilitate any other transaction described in sec_1_263_a_-5 including the transaction upon the retirement of the dip facility in year the unamortized borrowing costs are not carried over to the exit facility which was incurred by a different taxpayer new parent therefore the amounts paid_by group in year to facilitate its borrowing under the dip facility were deductible upon the retirement of the dip facility in year conclusion sec_1 operational expenses_incurred by group in year are deductible under sec_162 asset sale expenses_incurred by group in year reduce the amount_realized by group in the asset sale in accordance with sec_1_263_a_-5 the capitalized bankruptcy administrative expenses_incurred by group during bankruptcy in year are deductible as losses under sec_165 debt financing expenses to facilitate group’s borrowing within the meaning of sec_1_263_a_-5 are deductible upon the retirement of the dip facility the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-149707-10 this ruling is directed only to 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 john p moriarty chief branch income_tax accounting cc


internal_revenue_service number release date index number ----------------------------------------- ------------------------------- --------------------------------- ------------------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ----------------- telephone number --------------------- refer reply to cc psi b01 plr-126281-14 date december x ------------------------------------------ -------------------------- d --------------------- state ---------- dear ----------------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts according to the information submitted x was incorporated under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d but the proper election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective 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 if the election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will plr-126281-14 not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not file a timely election to be treated as an s_corporation under sec_1362 effective d x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d if within days from the date of this letter x submits a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed or implied concerning whether x otherwise qualifies as an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-126281-14 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer’s authorized representative sincerely joy c spies joy c spies senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date date legend b foundation c llc d project e religion f country - g university h dollar amount j dollar amount m dollar amount n dollar amount p dollar amount - dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures will not be taxable description of your request b a foundation and the sole member of c operates an educational grant program called d the purpose of d is to expose participants to leadership and career opportunities nurture those skills and encourage participants to consider a career as a professional in the e community while b will primarily fund d b may request that other donors enter into their original grant agreement with the recipient in providing additional funding you plan on operating in connection with b to become an additional donor party to the grant agreement in doing so you will provide grants to the original recipient and funds would be administered and monitored under the procedures established by b described below you initially plan to invite anywhere from to college students who have demonstrated an affinity towards playing a leadership role in the e community and anticipate will seriously consider a career as a e communal professional to apply for d the first_phase of the program will involve recruitment during summer some distance learning during the fall semester of the first academic year and a scholarship and other funding for participants to spend the spring semester at a university in f currently anticipated to be g in addition to being a matriculated student program participants will participate in a number of additional educational activities which you expect to provide exclusively during the spring semester in f which may include e weekly educational seminars which will expose participants to e educational ‘content leadership skills role models and career guidance educational tours single and multiple day tours of f consistent with the educational theme of the program opportunities to intern at educational institutions not-for-profit_organizations or other social service agencies in f planning sessions for the camp and campus projects e e e the duration of the first_phase of your program will last for approximately two years thereafter you will commit to funding new participants and the participant number will be determined after an assessment regarding the success of the program's first year and available_resources it is anticipated that you will recruit a new cohort each year to participate in phase of the program in connection with the spring semester in f you will award each participant a stipend to fully subsidize the cost of the tuition to attend their university on a financial needs basis you may also make scholarship funding available at the conclusion of phase i you will invite a number of participants who you believe are likely to pursue careers as e communal professionals either as a rabbi educator social worker or not- for-profit manager to apply for a fellowship to graduate school you anticipate awarding a certain number of fellowships to deserving applicants to attend graduate school phase il will last for the duration of the graduate program in which participants are matriculated students you anticipate focusing your recruiting efforts on the senior staff at certain summer camps that have substantial e educational programming and inviting such individuals to identify potential college age staff members who would be appropriate candidates to apply to your program your staff will then send promotional materials and an application to such senior camp staff and once potential applicants are identified you will send such materials directly to such college students program staff will also visit certain summer camps that have substantial e educational programming to recruit potential program participants and will market the program directly to college age staff at such camps letter catalog number 58222y in the event that your selection process does not yield enough candidates to meet the participant numbers you may broaden your process and recruit college students directly from nominations recommendations and referrals from other sources either by seeking individuals who have a track record of service within the e community or by virtue of the fact that such individuals are already scheduled to spend the spring semester abroad at an university in f you will provide such individuals with recruitment materials and an application that needs to be completed individuals will then interview with your staff while the participants are in f for the spring semester they will receive guidance on the development of an educational project that they will be responsible for implementing during the following summer and on their college campus during the following academic year you will underwrite the cost and will provide a mentor providing guidance on the development of this project you will also underwrite a budget expected on average to equal approximately j dollars to support implementation costs such amount will be dependent upon a budget the participant will submit for approval upon successful implementation during the summer you will pay a m dollars honorarium to the participant during the second year participants in good standing would be invited to an in person multi- day educational conference in the united_states you will underwrite all travel lodging and food expenses to enable participants to attend the conference program participants are also expected to implement an educational program on their college campus or in the local community during the second year of your program in connection with such project you will underwrite the cost of and provide a mentor to provide guidance on the development of this project expected on average to equal approximately h dollars to support implementation costs such amount will be dependent upon a budget that the participant would submit for your approval upon successful completion of this project during the second year of the program you will pay aj dollars honorarium to the participant selection for participation in phase will be based in connection with the following parameters the level of engagement in e life of the applicant the level of the interest in pursuing a career as a e communal professional aptitudes of the applicant in a career as a communal e professional academic achievements strength of the letter of reference for such applicant interview and interpersonal skills as determined by your staff to obtain a fellowship during phase ii of d the participant must demonstrate to your staff superior leadership abilities a passion to serve and work in a professional capacity in a not-for-profit organization that serves the e community and superb academic capabilities demonstrated in their coursework at their f university and at their domestic college fellowship recipients are eligible for up to three years of support or the duration of the it is longer than three years fellowship recipients must be academic program if accepted into a graduate program and remain in good standing at the academic institution where they are studying in order to continue to receive your financial support letter catalog number 58222y phase ii participants will also participate in certain distance learning and may be asked to mentor future phase participants phase ii participants may also be invited to an educational conference held in the united_states selection for participation in phase ii will be based on the level of promise and aptitudes that the phase participants have demonstrated towards fulfilling the program objective - pursuing a successful career as a communal professional either as a rabbi cantor educator social worker or administrator for a not-for-profit organization only individuals who were participants in phase will be considered for phase ii staff will consider the criteria referenced above including the ability and capacity of the participant to plan and implement a quality program of e content in either a camp or campus setting the n dollars tuition subsidy that each participant will receive is intended to match the tuition cost at their university in f for the spring semester additionally on a needs basis participants are eligible to apply for additional scholarship support if they can demonstrate to you that their families would be unable to afford the costs of attending your program in f the amount of such scholarship would directly relate to the anticipated actual costs of attending spring semester and the demonstrated financial needs of the participant additionally while in f during the spring semester you will pay for the costs of the educational programming and touring that is made available exclusively to program participants you will award certain participants with a fellowship up to p dollars annually for up to three years to enable fellows to attend graduate school to study to become a rabbi cantor educator social worker or not-for-profit manager such fellowship awards may cover the costs of tuition housing and living_expenses and will be subject_to your discretion you anticipate staffing an advisory committee to inform shape and advise the development and implementation of the program you will identify knowledgeable educators with expertise and experience in the subject matter that will be the focus of your program your committee may also be tapped to identify alternative locations programs from which you will recruit prospective participants committee members may also have input on the recruitment process and selection criteria your selection committee will be comprised of your staff and an outside expert consultant knowledgeable in program implementation engaged by you to support the development and implementation of your program selection committee members will be individuals with knowledge and expertise in operating educational programs for college students and may or may not comprise members of the advisory committee your selection committee will also be responsible for identifying any relationships between potential applicants and disqualified persons ensuring that individuals with any such relationship s are not invited to participate in your program during phase l officers or other c representatives will regularly communicate with participants in the program to receive feedback on how the grant monies are being spent this will include reports on all aspects of the educational programming in the united letter catalog number 58222y states and f as well as the implementation of the two related projects in connection with phase i of the project your staff will monitor and remain in regular communication with fellowship recipients and will monitor how grant monies are being spent in connection with phase ii of d c in its sole discretion may take any and all such reasonable and appropriate steps including possible legal action to compel compliance of use of funds for their intended purpose including requiring the return of all or any portion of funds remitted and the withholding of funds not previously remitted in connection with d potential participants who are related to whether by blood or through marriage or have any direct or indirect affiliation with d staff or any of your or c’s directors officers or employees will be ineligible to participate no director officer_or_employee of you or c or any other person who is involved in the process of selecting applicants will be in a position to derive a private benefit directly or indirectly if certain participants are selected over others you will pre-screen any and all non-u s applicants using the treasury department’s specially designated nationals and blocked persons list sdn the fbi’s most wanted terrorists list the state department’s terrorist exclusion list the u s bureau of industry and security's denied persons list unverified list and entity list and similar lists maintained by the united nations basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure 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 or aprize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or 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 e the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance letter catalog number 58222y e 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 e e e e e e this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 b you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely director exempt_organizations enclosures notice redacted letter letter catalog number 58222y


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to plr-102428-99 cc dom p si date date legend company subsidiary state d1 d2 dear this letter responds to your letter dated date written on behalf of company requesting a ruling that company be granted an extension of time in which to elect to treat its subsidiary subsidiary as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code facts according to the information submitted subsidiary was incorporated under the laws of state on d1 on d2 subsidiary's two shareholders contributed all of subsidiary's stock to company so that subsidiary became a wholly owned subsidiary of company as of that date company maintains that on d2 and thereafter subsidiary qualified to be a qsub as defined by sec_1361 however the company failed to timely file the qsub election law and analysis sec_1361 defines the term qualified_subchapter_s_subsidiary as a domestic_corporation which is not an ineligible_corporation as defined in sec_1361 if an s_corporation holds percent of the stock of the corporation and that s plr-102428-99 corporation elects to treat the subsidiary as a qsub the statutory provision however does not provide guidance on the manner in which the qsub election is made or the effective date of the election on date the service published notice_97_4 1997_1_cb_351 providing a temporary procedure for making a qsub election under notice_97_4 a taxpayer makes a qsub election with respect to a subsidiary by filing a form_966 subject_to certain modifications with the appropriate service_center the election may be effective on the date the form_966 is filed or up to days prior to the filing of the form provided that the date is not before the parent’s first taxable_year beginning after date and that the subsidiary otherwise qualifies as a qsub for the entire period for which the retroactive election is in effect under sec_301_9100-1 of the procedure and administration regulations 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 code except subtitles e g h and i if the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting the relief will not prejudice the interests of the government sec_301 b defines the term regulatory election as including an election whose deadline is prescribed by a notice published in the internal_revenue_bulletin sec_301_9100-2 and provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections but does not apply to qsub elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusions in the present situation based on the facts and representations submitted the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result company is granted an extension of time of sixty days from the date of this letter to make an election to treat subsidiary as a qsub effective d2 the election should be made by following the procedure set forth in notice_97_4 and a copy of this letter should be attached to the election a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether company or subsidiary are valid s_corporations or whether subsidiary is a valid qsub for federal tax purposes plr-102428-99 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours paul f kugler assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court gustavo and veronica zeron petitioners v commissioner of internal revenue respondent docket no filed date lowell e mann for petitioners david a breen for respondent memorandum opinion wells judge the instant matter is before the court on petitioners’ motion for reasonable administrative and litigation cost sec_1 pursuant to rule and sec_7430 the issue we must 1although petitioners titled the instant motion motion for award of reasonable_administrative_costs the attached list of costs sought includes both administrative and litigation costs continued decide is whether petitioners were the prevailing_party for the reasons stated below we deny petitioners’ motion for reasonable costs background at the time of filing the petition in the instant case petitioners resided in west new york new jersey vanya tyrrell mrs tyrrell prepared petitioners’ form_1040 u s individual_income_tax_return tax_return on date respondent sent a letter to petitioners requesting that they submit documentation to support certain deductions claimed on their tax_return petitioners did not respond with the requested documentation instead petitioners’ attorney lowell e mann mr mann sent a letter on date protesting respondent’s proposed adjustments and requesting that the case be transferred to respondent’s appeals_office continued we treat petitioners’ motion as a motion for both administrative and litigation costs 2unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code as amended 3petitioners’ tax_return was one of approximately tax returns that were prepared by vanya tyrrell and chosen for examination by respondent’s correspondence examination unit all such cases involve similar unsubstantiated deductions lowell e mann represents the petitioners in all such cases and has filed virtually identical petitions for each such case because petitioners failed to submit the requested documentation substantiating the disputed deductions respondent determined a deficiency of dollar_figure and sent petitioners a notice_of_deficiency on date respondent advised petitioners by letter dated date that their case would be transferred to respondent’s appeals_office and on date respondent transferred the case to the appeals_office mr mann sent a letter to respondent on date requesting that respondent rescind the notice_of_deficiency that letter was not accompanied by documentation to support petitioners’ claimed deductions petitioners timely filed their petition in this court on date respondent filed his answer on date by notice dated date the instant case was placed on the date calendar in philadelphia pennsylvania on date ms tyrrell sent documentation to support the deductions in question to mr mann ms tyrrell faxed the documentation to respondent’s counsel the same day on date the parties filed a stipulation of settled issues at the call of the instant case from the philadelphia trial session calendar which indicated respondent’s full concession in the instant motion petitioners now seek dollar_figure in administrative and litigation costs discussion the prevailing_party in a tax_court proceeding may be entitled to recover administrative and litigation costs see sec_7430 rule however a taxpayer will not be treated as the prevailing_party if the commissioner’s position was substantially justified sec_7430 see 487_us_552 the fact that commissioner concedes is not determinative of the reasonableness of commissioner’s position 86_tc_962 the taxpayer bears the burden of proving the elements in sec_7430 required for an award of costs except that the taxpayer will not be treated as the prevailing_party if the commissioner establishes that the position of the commissioner was substantially justified see rule e the court determines the reasonableness of respondent’s position as of the time respondent took respondent’s position sec_7430 in the administrative_proceeding here respondent took his position as of the date of the notice of 4the elements of sec_7430 other than those in issue supra pp are not discussed deficiency sec_7430 in the judicial proceeding respondent took a position when respondent filed respondent’s answer sec_7430 huffman v commissioner 978_f2d_1139 9th cir affg in part revg in part on other grounds and remanding tcmemo_1991_144 respondent’s administrative and litigation positions are substantially justified if they have a reasonable basis in both law and fact 108_tc_430 in the instant case we conclude that respondent’s position was both reasonable and substantially justified in both the administrative and judicial proceedings petitioners failed to provide the requisite documentation until after respondent issued the notice_of_deficiency and filed an answer deductions are a matter of legislative grace and petitioners must prove they are entitled to the deductions rule a 292_us_435 in the absence of any proof of entitlement to the disputed deductions respondent was reasonable to maintain his position that the disputed deductions were not allowed prouty v commissioner tcmemo_2002_175 it was not until date that respondent received the documentation relating to the disputed deductions at which time respondent conceded the propriety of the deductions accordingly we hold that petitioners are not entitled to recover their administrative costs we have considered all of petitioners’ contentions and to the extent they are not addressed herein they are irrelevant moot or without merit to reflect the foregoing an appropriate order and decision will be entered 5respondent also contends that petitioners protracted the instant proceedings and are therefore ineligible for cost_recovery sec_7430 although we do not address that issue since we have disposed of the instant motion on other grounds we note that petitioners did not provide the required_documentation to support their claimed deductions until months after respondent requested it once in possession of the requested documentation respondent presumably would have conceded the deductions at any point in the administrative or litigation process as respondent ultimately did on the eve of trial just week after receiving the documentation consequently petitioners forced an administrative_proceeding and litigation instead of a brief exchange of correspondence 6this includes both arguments made in petitioners’ motion and subsequent memorandum of law


apr internal_revenue_service national_office technical_advice_memorandum ope ev t no third party contact sin taxpayer's name taxpayer's address employer_identification_number years involved date of conference legend x- y- a- b- issues whether the provision of services under plan b where the medical providers are compensated on either a discounted fee-for-service basis with no withholds or under a point of service arrangement is commerciai-type insurance as described in sec_501 of the code whether the provision of services under plan b is an insubstantial part of x’s activities and would be subject_to unrelated_business_income_tax whether the unrelated_business_income_tax would be calculated under subchapter_l rather than sec_511 facts x is a licensed ipa model hmo recognized as an organization described in sec_501 x arranges for comprehensive preventive and therapeutic health care services on a prepaid basis to subscribing individuals and groups x arranges for the delivery of health care services to its subscribers through agreements with independent health care providers who form a network 2g of contracted providers working in private offices and with hospitals within designated service areas x offers its subscribers a choice of two medical_plans when choosing their medical benefits no claim forms are submitted if an the a plan provides that subscribers utilize only an in-network primary care physician or physicians authorized by an in-network primary care physician subscribers are only responsible for a preset co-payment for each physician office visit emergency situation arises care may be provided by an out-of-network physician without authorization from the subscriber's in-network primary care physician the b plan contains a point of service pos option and is administered by y a taxable affiliate of x under plan b subscribers can utilize any physician either in network or out-of-network the pos option can also be used in emergency situations where the member is out of the service area however the subscriber is subject_to a co-payment based on the total physician charges if an unauthorized out-of-network physician is the number of subscribers enrolled in plan a makes it the predominant selected is insignificant compared plan offered by x the number of subscribers in plan b to x’s total health plan subscribers the physicians are compensated by x based upon the type of plan that the subscriber purchased if the subscriber is enrolled in plan a then the if the in-network physician sees physician is compensated on a capitated basis individuals enrolled in plan b then the physician is paid percent of the in- network charges with no withhold feature out-of-network physicians providing services to plan b enrollees receive percent of their typical charges a portion of which is paid_by the enrollees as a co-payment percent of the income or loss and is capped pincite percent of the premium x originally reported as ubi only premiums received from plan b x shares the income loss on plan b with y the risk sharing with y i sec_50 return was subsequently amended to include as ubi premiums stemming from plan b relating to out-of-network primary care physicians for non-authorized x’s return was amended a second time to exclude from ubi the total services premiums received from plan b revenue x’s law sec_501 of the code provides that an organization described in sec_501 shall be exempt only if no substantial part of its activities consists of providing commercial-type_insurance consequently where an organization’s activities resemble those of commercial insurers sec_501 would serve to deny exemption under sec_501 sec_501 of the code provides that a sec_501 or organization that provides commercial-type_insurance as an insubstantial part of its activities shall treat the activity as an unrelated_trade_or_business as defined in sec_513 and in lieu of the tax imposed by sec_511 with respect to such activity shall treat the organization as an insurance_company for purposes of applying subchapter_l with respect to that activity sec_501 of the code provides that commercial-type_insurance does not include incidental health insurance provided by a health_maintenance_organization of a kind customarily provided by such organizations the legislative_history of sec_501 of the code provides that commercial-type_insurance generally is any insurance of a type provided by commercial insurance_companies commercial-type_insurance does not include arrangements that are not treated as insurance in the absence of a sufficient risk shifting and risk_distribution for the arrangement to constitute insurance see 312_us_531 in reporting on technical corrections to sec_501 of the code that were made in the technical_and_miscellaneous_revenue_act_of_1988 tamra the conference committee stated the provision relating to organizations engaging in commercial-type_insurance activities did not alter the tax-exempt status of health maintenance organizations hmos provide physician services in a variety of practice settings primarily through physicians who are either employees or partners of the hmo or through contracts with individual physicians or one or more groups of physicians the conference committee clarifies that in addition to the general exemption for hmos organizations that provide supplemental hmo type services such as dental or vision services are not treated as providing commercial-type_insurance if they operate in the same manner as a health_maintenance_organization ’ revrul_68_27 1968_1_cb_315 concludes that an organization that issued medical service contracts to groups or individuals and furnished direct cs medical services to the subscribers by means of a salaried staff of medical personnel was held not to be an insurance_company in this revenue_ruling a medical clinic employed a staff of salaried physicians nurses and technicians to provide a major portion of the contracted medical services in the event the clinic had to treat a patient with an illness or injury the revenue_ruling concluded that any risk the clinic incurred was predominately a normal business risk the clinic's costs for its medical providers was fixed because the clinic paid its providers a salary as a result if a patient were to suffer a serious illness or injury the clinic would not incur any substantial additional costs thus the clinic's economic risk was fixed regardless of the presence or extent of any illness or injury in jordan superintendent of insurance v group health association 107_f2d_239 the u s court_of_appeals for the district of columbia held that an hmo was not an insurance_company in this case the hmo did not employ salaried physicians to provide medica services but paid contracted physicians a fixed annual compensation paid in monthly installments not specific fees for each treatment or case neither the internal_revenue_code nor the income_tax regulations define the term_insurance contract revrul_68_27 supra citing jordan defined an insurance_contract as one that must involve the element of shifting or assuming the risk of loss of the insured and must therefore be a contract under which the insurer is liable for a loss suffered by its insured case law has defined an insurance_contract as a contract whereby for an adequate_consideration one party under takes to indemnify another against loss from certain specific contingencies or perils it is contractual security against anticipated loss 199_f2d_508 cir see also 359_us_65 440_us_205 and 458_us_119 moreover case law has established that risk shifting and risk_distribution are the fundamental characteristics of a contract of insurance helvering v legierse supra in this case the supreme court stated that historically and commonly insurance involves risk-shifting and risk-distributing u s pincite finally the risk transferred must be a risk of economic loss the risk for which insurance coverage is provided is an insurance risk that is it must occur fortuitously and must result in an economic loss to the insurer 66_tc_1068 aff'd 572_f2d_1190 cert den 439_us_835 in this case the court_of_appeals stated cir cfc the common definition for insurance is an agreement to protect the insured against a direct or indirect economic loss arising from a defined contingency whereby the insurer undertakes no present duty_of performance but stands ready to assume the financial burden of any couch on insurance 2d as the tax_court covered loss below noted an insurance_contract contemplates a specified insurable hazard or risk with one party willing in exchange for the payment of premiums to agree to sustain economic loss resulting from the occurrence of the risk specified and another party with an insurable interest in the insurable risk essential features of insurance is this assumption of another's risk of economic loss it is important here to note that one of the couch on insurance 2d risk shifting occurs when a person facing the possibility of an economic loss transfers some or all of the financial consequences of the loss to the insurer revrul_88_72 1988_2_cb_31 clarified by revrul_89_61 1989_1_cb_75 rationale under sec_501 of the code an organization that otherwise qualifies for exemption under sec_501 or sec_501 is precluded from qualifying for exemption if a substantial part of its activities consists of providing commercial-type_insurance if the provision of commercial-type_insurance is an insubstantial part of an organization’s activities then sec_501 provides that the activity is from an unrelated_trade_or_business and tax shall be calculated under subchapter_l of the code relating to insurance_companies when individuals enroll in an hmo and directly or indirectly pay the hmo fixed premiums the hmo agrees that it will furnish health care services to treat their injuries and illnesses under this arrangement enrollees protect themselves against the risk that they would suffer economic loss from having to pay for health care services that are necessary because of injuries and ilinesses by enrolling in an hmo individuals shift their risk of economic loss to the hmo for an hmo that operates on a staff model basis the hmo assumes the financial risk associated with furnishing medical services since a staff model hmo pays physicians on a salaried basis it does not incur additional fees when its employed physicians treat its enrollees therefore the risk the hmo assumes is predominately a normal business risk of an organization engaged in furnishing medical services on a fixed-price basis rather than an insurance risk revrul_68_27 supra 2o on the other hand a non-staff model hmo that does not pay its health care providers on a fixed-price basis assumes a financial risk that is greater than a normal business risk associated with its obligation to furnish medical services to its enrollees therefore this obligation constitutes a contract of insurance an hmo that compensates its non-employee health care providers on a fixed fee basis is treated the same as a staff model hmo that pays its health care providers on a salaried basis because the hmo has transferred to its health care providers a substantial portion of its financial risk associated with its obligation to furnish medical services to its enrollees the remaining risk is only the normal business risk associated with operating the hmo for example an hmo that pays its contracted health care providers almost exclusively on fixed monthly fees based on the number of enrollees capitated fees transfers to these providers a substantial portion of its financial risk associated with its obligation to furnish medical services to its enrollees therefore the remaining risk is only the normal business risk associated with operating the hmo similarly an hmo that pays its contracted health care providers almost exclusively fees-for-service under a fee schedule that represents a meaningful discount from the physicians’ usual and customary charges discounted fee-for- service and withholds from these payments a significant percent of the fees otherwise payable pending compliance with periodic budget or utilization standards transfers to these providers in effect a substantial portion of its financial risk associated with its obligation to furnish medical services to its enrollees therefore the remaining risk is only the normal business risk associated ‘vith operating the hmo on the other hand when an hmo pays its contracted providers on a fee- for-service basis that is not discounted and where no significant portion of the fees has been withheld the hmo does not transfer to these providers its financial risk associated with its obligation to furnish medical services to its enrollees thus the hmo retains the financial risk associated with its obligation to furnish medical services to its enrollees the financial risk constitutes a contract of insurance a discounted fee arrangement even if the discount is meaningful without a significant withhold does not transfer financial risk to providers in return for accepting discounted fees the providers are assured a flow of patients from the hmo it is a common commercial practice for vendors of goods or providers of services to accept lower prices or fees in return for greater sales the health care providers are compensated based upon the type of plan purchased by an enrollee if a physician sees an enroliee who is a subscriber of the a plan then the physician is compensated by capitated fees if a physician off tk sees an enrollee of plan b then the in-network physician is paid on a discounted fee-for-service with no withhold and the out-of-network physician is paid pincite percent of his or her typical charges under the a plan a substantial amount of the financial risk associated with x's obligation to arrange for the provision of health care services to its enrollees is being shifted to the primary care providers the provision of services by the health care providers on a capitated basis shifts a substantial portion of risk to the health care providers because they have to provide the medical_care without receiving additional funds but x retains substantial financial risk associated with plan b because the physicians are on a fee-for-service basis while it retains financial risk to furnish medical services therefore the provision of services under the a policy would not be commercial-type_insurance as described in sec_501 but the provision of medical services under plan b would be commercial-type_insurance x has argued that the proceeds from the sale of the pos policies satisfy the exception to sec_501 because the pos product is incidental health insurance customarily provided by a health_maintenance_organization the sec_501 exception would not be applicable since the legislative_history of sec_501 does not include the point of service provisions as examples of the type of insurance that would satisfy this exception only dental and vision services are mentioned in the conference committee report on tamra even though plan b is commercial-type_insurance for purposes of sec_501 it is not a substantial part of x’s activities since it is an insubstantial portion of x’s total activities therefore under sec_501 of the code all income from plan b would be from an unrelated_trade_or_business and tax_liability will be calculated in accordance with the provisions set forth in subchapter_l conclusion the provision of services under plan b where the medica providers are compensated on either a discounted fee-for-service basis with no withhold or under a point of service arrangement is commercial-type_insurance as described in sec_501 of the code the provision of services under pian b is an insubstantial part of x’s activities and would be subject_to unrelated_business_income_tax the unrelated_business_income_tax would be calculated under subchapter_l rather than sec_511 a copy of the technical_advice_memorandum is to be given to x sec_6110 of the code provides that it may not be used or cited as precedent -end-


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-124042-15 date date legend decedent ---------------------------------------------------- ----------------------------- spouse date date -------------------- ----------------- ------------------------ dear -------------- this letter responds to your personal representative’s letter of date and subsequent correspondence requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date spouse relied on a qualified_tax professional to timely file a form_706 to make the portability election but such qualified_tax plr-124042-15 professional failed to do so the estate discovered its failure to elect portability after the due_date for making the election decedent’s estate represents that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of the decedent’s death and that during his lifetime decedent made no taxable_gifts decedent’s estate requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election plr-124042-15 once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means 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_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer 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 the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 plr-124042-15 and a in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date decedent’s estate represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed 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 if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void 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 plr-124042-15 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely leslie h finlow senior technician reviewer office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------- --------------------------- ----------------------------------- ty --------------- legend 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 br1 plr-127728-12 date date taxpayer ------------------------------------------------------ ----------------------------- rrsp ---------------------------------------------------------- ------------------------ rrsp ---------------------------------------------------------- ------------------------ year year year year year state tax years dear ----------------- ------- ------- ------- ------- ------- -------------- --------------- plr-127728-12 this is in reply to a letter dated date requesting an extension of time under sec_301_9100-3 for taxpayer to elect the provisions of revproc_2002_23 2002_1_cb_744 for tax years the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts taxpayer was born in canada while he lived and worked in canada he established rrsp and rrsp in year taxpayer’s employer moved him to state to work at a u s affiliate in year taxpayer applied for a green card and became a permanent u s resident in year in year taxpayer filed for divorce in state and the court ordered him to withdraw funds from his rrsp accounts sufficient to pay the attorneys fees and costs associated with the divorce proceeding taxpayer withdrew the funds paid the attorneys’ fees and costs and paid the related_income tax to canada in year while preparing his year u s income_tax return his tax advisor first informed him of the need to make an election for u s tax purposes to defer recognition of income on rrsp and rrsp the taxpayer made an estimated u s federal_income_tax payment taking into consideration the rrsp distribution and requested an extension of time to make the election under revproc_2002_23 pursuant to article viii of the u s -canada income_tax treaty the treaty taxpayer had timely filed all his u s returns beginning in year and at the time of this ruling_request the internal_revenue_service had not contacted him regarding the rrsp accounts ruling requested whether taxpayer may receive an extension of time under sec_301_9100-3 to elect the provisions of revproc_2002_23 2002_1_cb_744 for tax years law and analysis sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is plr-127728-12 prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides that requests for relief subject_to this section 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 in the present situation the election provided in revproc_2002_23 is a regulatory election within the meaning of sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayers an extension of time provided that taxpayers satisfy the standards set forth in sec_301_9100-3 based solely on the information submitted and representations made we conclude that taxpayer satisfies the standards of sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to make an election for tax years under revproc_2002_23 as provided in sec_301_9100-1 the granting of an extension of time is not a determination that taxpayers are otherwise eligible to make the above-described election pursuant to section dollar_figure of revproc_2002_23 the election once made cannot be revoked except with the consent of the commissioner for each open tax_year taxpayer must file form 1040x amended u s individual_income_tax_return and attach a form_8891 u s information_return for beneficiaries of certain canadian registered retirement plans for each rrsp for each subsequent tax_year through the tax_year in which the final distribution is made from an rrsp taxpayer must attach a form_8891 for the rrsp to his u s income_tax return except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this letter_ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter will be sent to your authorized representative plr-127728-12 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of this letter_ruling sincerely elizabeth u karzon chief branch cc intl br1 office of the associate chief_counsel international


id office uilc cca-922143-08 ---------------- number release date from ----------------------- sent monday date pm to -------------------- cc ----------------------------------------------------------------------------------- subject re need input not all of the stuff that came in using the old -9 hybrid to accrual change section can be shipped in under -52 -52 is a pull back of -9 the pull back is our reaction to the mess we were getting under -9 taxpayers can file for an overall change to accrual using -52 section dollar_figure and for item changes using -52 section to use either section the taxpayer must determine that it is using the cash_method either overall or for the specific item thus the less interesting cases that were coming in under -9 can still come in under -52 section ---------------


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 --------------------------------- ------------- telephone number --------------------- refer reply to cc psi b02 plr-115791-11 date date legend x a b_trust ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ------------------------ ----------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- state ------------- date1 ------------------ date2 -------------------------- date3 ---------------------- date4 ---------------------- dear------------------ this responds to a letter dated date submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code plr-115791-11 the information submitted states that x was incorporated under the laws of state and elected to be an s_corporation effective on date1 on date a the sole shareholder of x died on date a’s estate transferred all the shares of x to trust because the shares of x were transferred to trust pursuant to the terms of a’s will trust was a permitted s_corporation shareholder for the 2-year period beginning on date x represents that trust was intended to qualify as a qualified_subchapter_s_trust qsst under sec_1361 however b the beneficiary of trust did not timely file a qsst election on behalf of trust therefore x’s s_corporation_election terminated two years after date on date b reported b’s allocable share of trust income consistent with the treatment of trust as a qsst on all affected returns x represents that the circumstances resulting in the termination of x’s s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified under sec_1362 agrees to make the adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary for that period then notwithstanding the circumstances resulting in such termination the corporation shall be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we conclude that the termination of x’s s_corporation_election was inadvertent within the meaning of sec_1362 under the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter this ruling is conditioned on b the sole beneficiary of trust filing an appropriately completed qsst election for trust effective on date with the appropriate service_center the qsst election for trust must be filed within days following the date of this letter and a copy of this letter should be attached to such election plr-115791-11 this ruling 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 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 bradford r poston senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uniform issue list dear contact person identification_number contact number fax number employer_identification_number this is in response to the ruling_request dated date submitted by your authorized representative regarding whether your website constitutes a periodical for purposes of the unrelated_business_income_tax costs allocation rules of sec_1_512_a_-1 of the income_tax regulations facts you are an organization described in sec_501 of the code you are classified as a private_operating_foundation described in sec_4942 operated for educational_purposes for several years your primary activity has been publishing an educational magazine originally you published a print version every other month more recently to reduce costs and increase readership you discontinued the print version and now publish the content exclusively on your website free of charge the website includes essentially the same kind of content addressing the same or similar subjects that appeared in the print version of the magazine the website contains all of the material available in the former print version plus new features such as documentary videos that can only exist in an online form all past articles are archived and searchable on your website you represent that the website is updated regularly at least weekly it appears from recent posts on the website that it is updated ordinarily every business_day each article shows its publication_date although you receive grants and contributions you are supported in part by advertising revenues you employ and or contract with writers researchers a creative director and an editorial director to produce the editorial content of the website as you did for the print magazine you also incur expenses for website maintenance and overall administration law sec_511 of the code imposes a tax on the unrelated_business_taxable_income of exempt_organizations described in sec_501 sec_512 of the code defines the term 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 such trade_or_business both computed with the modifications provided in sec_512 sec_513 of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_purpose or function sec_513 of the code provides that the term trade_or_business includes any activity which is carried on for the production_of_income from the sale_of_goods or the performance of services sec_1_512_a_-1 of the regulations provides in pertinent part that in certain cases gross_income is derived from an unrelated_trade_or_business which exploits an exempt activity one example of such exploitation is the sale of advertising in a periodical of an exempt_organization which contains editorial material related to the accomplishment of the organization's exempt_purpose except as specified in subparagraph of this paragraph and paragraph f of this section in such cases expenses depreciation and similar items attributable to the conduct of the exempt_activities are not deductible in computing unrelated_business_taxable_income sec_1_512_a_-1 of the regulations provides in pertinent part that where unrelated_trade_or_business activity is of a kind carried on for profit by taxable organizations and where the exempt activity exploited by the business is a type of activity normally conducted by taxable organizations in pursuance of such business_expenses depreciation and similar items which are attributable to the exempt activity qualify as directly connected with the carrying on of the unrelated_trade_or_business activity sec_1_512_a_-1 of the regulations provides that under sec_513 and sec_1_513-1 amounts realized from the sale of advertising in a periodical constitute gross_income from an unrelated_trade_or_business activity involving the exploitation of an exempt activity namely the circulation and readership of the periodical developed through the production and distribution of the readership content of the periodical thus subject_to the limitations of paragraph d of this section where the circulation and readership of an exempt_organization periodical are utilized in connection with the sale of advertising in the periodical expenses depreciation and similar items of deductions attributable to the production and distribution of the editorial or readership content of the periodical shall qualify as items of deductions directly connected with the unrelated advertising activity subparagraphs through of this paragraph provide rules for determining the amount of unrelated_business_taxable_income attributable to the sale of advertising in exempt_organization periodicals sec_1_513-4 of the regulations provides rules for qualified sponsorship payments and excepts from such rules the income from the sale of advertising or acknowledgements in exempt_organization periodicals a periodical is defined as regularly scheduled and printed material published by or on behalf of an exempt_organization that is not related to and primarily distributed in connection with a specific event conducted by the organization for this purpose printed material includes material that is published electronically in sec_1_513-4 of the regulations example w a symphony orchestra maintains a web site containing pertinent information and its performance schedule the music shop makes a payment to w to fund a concert series and w posts a list of its sponsors on its web site including the music shop's name and internet address w's web site does not promote the music shop or advertise its merchandise the music shop's internet address appears as a hyperlink from w's web site to the music shop's web site w's posting of the music shop's name and internet address on its web site constitutes acknowledgment of the sponsorship the entire payment is a qualified_sponsorship_payment which is not income from an unrelated_trade_or_business in sec_1_513-4 of the regulations example x a health-based charity sponsors a year- long initiative to educate the public about a particular medical_condition a large pharmaceutical company manufactures a drug that is used in treating the medical_condition and provides funding for the initiative that helps x produce educational materials for distribution and post information on x's web site x's web site contains a hyperlink to the pharmaceutical company's web site on the pharmaceutical company's web site the statement appears x endorses the use of our drug and suggests that you ask your doctor for a prescription if you have this medical_condition x reviewed the endorsement before it was posted on the pharmaceutical company's web site and gave permission for the endorsement to appear the endorsement is advertising the fair_market_value of the advertising exceed sec_2 of the total_payment received from the pharmaceutical company therefore only the portion of the payment if any that x can demonstrate exceeds the fair_market_value of the advertising on the pharmaceutical company's web site is a qualified_sponsorship_payment analysis advertising income derived by exempt_organizations in connection their periodicals is subject_to the tax on unrelated_business_income as noted above rules for the determination of unrelated_business_taxable_income derived from the sale of advertising in exempt_organization periodicals are contained in sec_1_512_a_-1 of the regulations sec_1_513-4 of the regulations holds that the term periodical means regularly scheduled and printed material published by or on behalf of an exempt_organization that is not related to and primarily distributed in connection with a specific event conducted by the exempt_organization and for this purpose printed material includes material that is published electronically sec_1_513-4 example sec_11 and sec_12 the rules for qualified sponsorship payments rather than periodical advertising were applied to the exempt organization's website indicating that a website is ordinarily not regarded as a periodical treatment of your website as a periodical so that you may use your excess readership costs to offset your advertising income like commercial publications do in your case however you argue for in we agree your primary purpose and function is to publish educational information which you do on the website your prior print periodical has in effect moved onto the website the website is operated similarly to that of many newspapers and magazines with an online presence with new material published regularly and old content also readily available under the circumstances the website serves the function of a traditional periodical and should be treated as such ruling based on your representations we rule that your website meets the definition of the term periodical which appears at sec_1_513-4 of the regulations thus the website constitutes a periodical for purposes of the unrelated_business_income_tax cost allocation rules of sec_1_512_a_-1 this ruling is based on the understanding that there will be no material changes in the facts upon which it is based except as specifically ruled upon above no opinion is expressed concerning the federal_income_tax consequences of the transactions described above under any other provision of the code pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative a copy of this letter should be kept in your permanent records lf there are any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely theodore r lieber manager eo technical group